ASIC fines ASX Limited $1.05 million for more than 8,400 transparency errors
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The Australian Securities and Investments Commission (ASIC) recently fined ASX Limited, which operates the Australian Securities Exchange. The company failed to provide adequate pre-trade transparency on its trading platform, and after a thorough investigation, ASIC found that ASX had breached the Market Integrity Rules. As a result, the regulator fined the firm with a $1.05 million penalty.
ASX Limited has paid a $1,050,000 penalty for an order information transparency failure, the first time ASIC has issued an infringement notice to a market operator https://t.co/JoxiAoVKMi#markets pic.twitter.com/JbXk305U6z
— ASIC Media (@asicmedia) March 6, 2024
ASX Limited failed to detect and resolve transparency issues
According to ASIC, ASX breached Market Integrity Rules on 8,417 occasions in a period between April 2019 and December 2022. The breaches were made simply by not ensuring order information was available on its trading system.
According to local laws, market operators are required to disclose details of trades, including order volume, price, and alike. This is necessary to ensure price formation, and liquidity, and allow investors to assess investment opportunities.
ASX Limited failed to do so, and the issue reportedly stemmed from a flawed system configuration. The incorrect configuration resulted in some of the equity market products being exempt from pre-trade transparency, which is required by trading rules.
ASIC said that the company failed to identify and resolve the issue despite the fact that it was alerted of it by a market participant at least two times before December 2022. Even so, ASIC acknowledged that ASX took steps to fix the issue once it became aware of it. Despite this, ASIC’s Chairman, Joe Longo, stressed that it is important to maintain the confidence in market operators.
Commenting on the matter, he said: “Technology and operational resilience for market operators is a strategic enforcement priority. ASIC will continue to take action to ensure that market operators and market participants have robust systems, controls and technological infrastructure in place to support Australia’s capital markets.”
ASX Limited did not engage in intentional misconduct
According to ASIC’s investigation of the issue, the circumstances surrounding the flawed system configuration suggest that ASX Limited was careless, rather than attempting intentional misconduct. Even so, the regulator considered the consequences of the problem, and it decided that ASX’s failure to detect the issue and resolve it required a higher penalty.
Even so, the infringement notice and payment of the penalty do not constitute ASX’s admission of guilt or liability.
Meanwhile, ASIC also recently made significant progress in battling investment scams and intentional financial misconduct in Australian financial market. Since it increased its scam detection capabilities last July, the regulator managed to shut down nearly 3,500 fraudulent investment sites.
It has taken decisive action against a firm known as Prospero Markets, which was implicated in a massive $229 million money-laundering operation. Prospero is known for offering derivatives and FX contracts to wholesale and retail clients alike. Now, it faces accusations of violating the Australian Financial Services License conditions and the Corporate Act.
