Supporting market integrity
Good governance is a significant driver of shareholder value. ASX is committed to maintaining and promoting high standards of corporate governance for ourselves and for the 2,200 plus entities listed on our exchange.
Market integrity creates investor confidence, which is vital to the long-term success of any market place. A market's integrity reflects how effectively it helps provide equal and timely access to information. It also reflects its ability to operate in a fair, orderly and transparent manner.
ASX plays an important role in supporting the integrity of our markets, alongside regulators, the media, investors, financial intermediaries and professional service providers, such as proxy advisers, lawyers and accountants.
ASX undertakes a broad range of activities to support the integrity of our equity and derivatives markets. For our equity market, this includes ASX's listing rules and the ASX Corporate Governance Principles and Recommendations. ASX's listing rules are complemented by ASX's participant rules, which outline the requirements of becoming a participant within ASX's markets or a user of our facilities.
ASX is playing an important role in supporting a smooth and orderly transition to a low carbon economy by fulfilling our purpose as a marketplace for capital to be allocated and risk to be assessed and priced.
Company reporting and disclosure is central to how capital is allocated and risk priced. ASX supports and promotes disclosure of material risks, including climate change risks, so that investors can make informed decisions when allocating capital.
In 2019, ASX endorsed the TCFD framework as best practice disclosure for those companies that have a material exposure to climate change risks. This endorsement has two important outcomes. For companies, it encourages self-assessment of their climate change exposure, which can have significant implications for their ability to create long-term value. For investors, it allows meaningful comparison across companies, sectors and segments of the listed market.
As is the case for any business, innovation is fundamental to ASX’s ability to deliver sustainable growth. However, from our position at the heart of Australia’s financial markets, we have the added privilege and responsibility of supporting and encouraging innovation across our industry for the benefit of all Australians.
At ASX, innovation takes various shapes and forms. Whether it’s through customers leveraging our infrastructure to drive efficiency or build new products; the development of our own products and services in new asset classes; or the promotion of technology as a sector growing in importance in the Australian economy. Innovation at ASX seeks to make business easier for our customers and our industry more efficient.
ASX continued to support the evolution of Australia’s technology industry with the launch of the S&P/ASX All Technology Index (All Tech Index) in early 2020.
Developed in partnership with S&P, the new index recognises the critical mass of technology companies now listed on ASX. The All Tech Index provides investors with an opportunity to see how the sector is tracking and gives them a benchmark to measure its performance.
At its launch in February 2020, it had 46 constituents with a combined market capitalisation of over $100 billion. It featured domestic and international companies, including from the United States, New Zealand and Ireland, which saw the opportunity to list and grow on ASX. Reflecting this growth, at its June 2020 rebalance, the number of constituents had increased to 50, with a total value of $110 billion.
The All Tech Index provides investors with exposure to this high growth and exciting sector. It also adds to the profile and attractiveness of Australia’s financial market.
Globally we have been at the forefront of the digitisation of financial services for many decades – delivering customers the time and cost benefits that come from evolving manual, paper-based processes into electronic processes that can complete multiple steps in rapid sequence.
In FY20, we continued our work on a range of digitisation projects that will simplify the costly and time consuming back office processes for the benefit of our customers and industry. For example, our project to replace CHESS will increase the opportunity for our customers to digitise their workflows and create efficiencies. Also, our corporate actions straight-through-processing initiative will reduce average processing times from almost half-an-hour to seconds.
Digitisation creates opportunities for innovation. We believe our DLT Solutions infrastructure, an extension of our CHESS replacement work, will enable customers to develop new products and services that will play an important role in the vibrancy and growth of our industry well into the future.
ASX convenes the ASX Corporate Governance Council. The Council was established in 2002 and is an independent body that brings together various business, shareholder and industry groups. ASX nominates the Chair (currently Elizabeth Johnstone), contributes one member to the Council and provides executive support.
The ASX Corporate Governance Council publishes a principles-based framework for corporate governance practices – the Corporate Governance Principles and Recommendations – that serves as a relevant and practical guide for listed entities, investors and the wider Australian community.
ASX’s listing rules require that listed entities disclose the extent to which they have followed the recommendations set by the Council during the relevant reporting period. Where companies have not followed a recommendation, they must provide an explanation (‘if not, why not’ reporting). These reporting requirements bring transparency to the corporate governance practices of listed companies which in turn enables investors to make informed investment decisions.
The ASX Corporate Governance Council's Corporate Governance Principles and Recommendations were introduced in 2003. A second edition was published in 2007 and a third in 2014.
In February 2019, the Council released a fourth edition of the Principles and Recommendations to ensure they continue to reflect local and international expectations about good corporate governance. The new edition included changes to address culture and values issues, and expanded recommendations and commentary on gender diversity and environmental and social risks, especially risks associated with climate change.
In October 2019, ASX released a major package of listing rule changes, and new and updated guidance notes. The changes were designed to improve disclosures to the market, make the listing rules easier to understand and comply with, and enable ASX to be monitor and enforce compliance with the listing rules.
The changes took into account feedback received through an extensive public consultation process and were received positively.
ASX undertook a national roadshow providing an opportunity for listing rule users to learn about the changes and ask questions. The roadshow was held in each major capital city, and attended by more than a thousand people representing issuers, financial intermediaries and professional advisers.
ASX is a partner exchange in the United Nations’ Sustainable Stock Exchange (SSE) initiative. The SSE is a peer-to-peer learning platform for exploring how exchanges, in collaboration with investors, regulators and companies, can enhance corporate transparency on ESG issues and encourage sustainable development.
ASX proudly supports International Women’s Day by participating in SSE’s global ‘ringing the bell for gender equality’ initiative. For the fifth year in a row, ASX was the first of the 75 participating exchanges to ring the bell in celebration of International Women’s Day. The bell ringing took place at an event hosted by ASX and 100 Women in Finance, Sydney branch, which brought together senior female leaders in the investment management industry to share their experiences and advice with future leaders.
