How ASX manages conflicts

ASX goes to considerable lengths to manage potential conflicts between its commercial and supervisory interests.  It is in ASX’s long-term business interests to ensure that it manages potential conflicts so that confidence in the markets is maintained.

The general nature of the conflicts are described in the ASX Commercial and Supervisory Conflict of Interest Policy (PDF 35KB), which also summarises how they are handled and establishes specific standards of conduct for staff.

The measures currently in place to manage conflicts include:

Separate supervision of ASX as a listed entity

ASX (as a listed company) does not supervise itself – it is supervised by ASIC, which is the designated listing authority for oversight of ASX’s own listing.  This avoids conflict of interest by removing the relevant supervisory activity from ASX.

Separation of commercial and supervisory activities

Physical and procedural structures (such as information barriers and Codes of Conduct) separate commercial activities from supervisory activities, quarantine supervision decision-making and prevent any suggestion of improper influence by the commercial areas of ASX on supervisory decisions.

New supervisory structure

The ASX Board recognises that it is in ASX's long-term business interests to ensure that it manages potential conflicts so that confidence in the markets is maintained at all times.  To enhance this confidence, the following additional measures  were introduced on 1 July 2006:

  • The operational supervisory functions of ASX have been placed in a separate subsidiary. The four operational elements of ASX Markets Supervision (ASXMS) – Issuers, Participants, Futures & Prudential Risk and Enforcement – have been placed into a separate subsidiary company which oversees supervisory and enforcement operations relating to the Operating Rules. Supervision continues to report to the Chief Supervision Officer (CSO) (formerly Group Executive Market Supervision) but the CSO now reports to a separate subsidiary board and not to the CEO of ASX. All supervisory decisions are made by the CSO which, in effect, confirms the former practice where the Group Executive Market Supervision was responsible for making all operational supervisory decisions.
  • The new subsidiary company has three directors drawn from the ASX Board (including the Chairman) and two external directors. The CSO continues to chair the ASX Corporate Governance Council and the internal and external oversight currently provided by ASIC and Licence Compliance continues.
  • The responsibility for the administration of the peer review and appeal tribunals (the Disciplinary Tribunals) also has been transferred to the subsidiary company.

Establishment of ASX Markets Supervision Education and Research Program

As a part of its supervisory responsibilities towards participants in ASX’s electronic trading, clearing and settlement systems, ASX Markets Supervision operates Disciplinary Tribunals which have the power to fine participants or reach a negotiated settlement.

In order to continue to address the perception that there is a conflict between the commercial and supervisory operations of ASX, ASXMS announced in June 2007 that the proceeds of fines and settlements relating to matters before its Disciplinary Tribunals (less certain expenses of taking matters before the tribunals), would go towards education and research, following which it established the ASX Markets Supervision Education and Research Program.  Fines and settlements from 1 January 2007 are directed towards the program.

Information on the New Supervisory Structure - Media Release - 15 December 2005 (PDF 212KB)

New Supervisory Structure - Media Release - 29 June 2006 (PDF 209KB)

Amendments to ASX Supervisory Processes and Powers - Public Consultation Paper - December 2006 (PDF 388KB)

ASX Markets Supervision - "Looking Forward" - Presentation 1 June 2007 (PDF 618KB)