S&P Global downgrades ASX after Australian regulator finds governance, risk failures

The downgrade ‌underlines ASX's slide into a string of high-profile missteps, from multiple trading outages and the aborted CHESS replacement programme to a 2024 settlement breakdown.

These setbacks have led to regulatory criticism of weak governance, inadequate risk controls and a culture seen as prioritising short-term returns over the integrity of critical market systems.

The ⁠Australian Securities and Investments Commission (ASIC) had previously warned that ASX was placing undue emphasis on shareholder returns at the expense of maintaining and upgrading critical market infrastructure.

S&P warned of a further ratings downgrade if its view of ASX's risk controls and practices, especially in clearinghouse risk management and associated financial safeguards, deteriorates in the next two years.

The ratings agency said the most likely path to an upgrade would be the completion of the governance and risk management upgrade programme, which it sees as unlikely ‌in ⁠the next two years.

In its response to the downgrade, ASX said it was "committed to addressing the ASIC Inquiry's interim and final reports by implementing our Commitments Plan".

After a 10-month inquiry, the ASIC said in its final report published earlier this month that ASX was found ⁠to have adopted short-term "tactical solutions" to solving problems rather than addressing the cause of its issues, which mainly centred on technology.

S&P, however, revised its outlook for ASX to "stable" from "negative", saying the ⁠company would retain its dominant market position over the next two years and remain an integral component of the Australian financial market infrastructure.

 It downgraded the long-term issue ⁠rating on ASX debt to "A+" from "AA-".

Shares of ASX rose as much as 1.3% in early trading, outperforming the broader Australian benchmark S&P/ASX 200, which was up 0.2%.