Australia’s Securities and Investments Commission (ASIC) recently made headlines by filing a lawsuit against the Australia Securities Exchange (ASX) Ltd. The lawsuit alleges that ASX made misleading statements about its blockchain trade settlement project. According to ASIC’s statement, ASX falsely claimed in February 2022 that the project was “on track” for an April 2023 launch and that it was “progressing” when, in reality, it was not.
ASIC argued that these statements were deceptive since the project was not meeting its milestones and was ultimately canceled. The ASX’s blockchain initiative was intended to replace the Clearing House Electronic Subregister System (CHESS). However, ASIC noted that it was halted in November 2022 due to design challenges, and ASX incurred costs of AUD250 million (over $165 million). This delay and eventual cancellation resulted in substantial losses for the ASX and its market participants.
ASIC Chair Joe Longo expressed disappointment in ASX’s failure, stating that it undermined market integrity and reflected poorly on the ASX board and senior executives. Longo highlighted the importance of accurate information for market participants and emphasized the wide-reaching consequences of ASX’s missteps. He mentioned that companies and market participants rely on ASX’s statements to make informed decisions and investments, and when the ASX falls short, it has significant implications across the market.
In response to ASIC’s allegations, ASX CEO Helen Lofthouse acknowledged the seriousness of the situation and stated that the company was reviewing the claims. Lofthouse emphasized ASX’s critical role in Australia’s financial markets and its commitment to delivering for customers. She mentioned that ASX has made significant progress as an organization over the past two years and is dedicated to moving forward.
ASIC revealed that ASX had previously paid penalties amounting to AUD1,050,000 (over $660 million) in March for non-compliance with market integrity rules. As part of the lawsuit, ASIC is seeking declarations, pecuniary penalties, an adverse publicity order, and costs against ASX. The outcome of the lawsuit will shed light on the accountability and responsibility of ASX in providing accurate and transparent information to market participants.