ASX’s TPG blunder to cost more than reputation
The question “how did it happen?” is expected be asked as part of an ASIC-led inquiry that is already under way and is looking at the ASX’s governance and risk management.
Even so, ASIC chairman Joe Longo isn’t waiting around. This week he sent a please explain note to Lofthouse over the TPG error and how to stop it happening again.
The ASX was pointing to just $3.4m worth of TPG shares erroneously traded and then unwound, after it incorrectly named the telco as leading a $650m buyout of tech group Infomedia.
However, there’s untold impact on secondary trading, including derivatives and programmatic trading, which would have amplified the damage.
The exchange pointed to “human error”, but the nagging suspicion among brokers is an automated announcements platform made the mistake and no one was able to catch it or undo it in time. This then becomes a bigger question around technology. The ASX needs to come clean if this was the case.
It undermined TPG’s efforts earlier this week to show it was now a disciplined telco with a commitment to pay down debt to fix the balance sheet. TPG chief executive Inaki Berroeta is furious about what happened and is reviewing his options. There’s also the potential for litigation funders to test a class action on behalf of TPG’s shareholders, while ASX also has explaining to do to its own investors. AustralianSuper and UniSuper combined hold a near-20 per cent stake in ASX.
As The Australian highlighted this week, the ASX’s own goal follows a string of missteps and outages, including the disastrous multi-year effort at upgrading its core clearing and settlements platform. All these add to questions as to whether it should be considered competent to operate critical financial infrastructure.
The ASX now faces more internal soul-searching, while it answers questions from a panel made up of staff from ASIC, the RBA, APRA and the ACCC over whether it’s up to the job.
This inquiry was launched in June, and at the time the ASX was put on notice that it had to prioritise “the safe and efficient operation” of its market infrastructure.
ASX’s best hopes of keeping expense growth contained to 8-11 per cent this financial year have since been blown away with an additional bill of between $25m and $35m through additional staffing, lawyers and other costs. To put this in context, National Australia Bank spent about $40m to prepare for the Hayne financial services royal commission and ANZ a similar amount.
The outcome of the ASIC-led inquiry, which is scheduled to be finalised by the end of March, could be a critical turning point in the future of ASX.
Still, it’s the prospect of real competition coming to ASX’s plum listing business just as the IPO market is recovering that has its own investors worried. Chicago’s Cboe has all but been given the regulatory green light to set up its listing business here, with formal approval expected in coming months. Cboe is a highly experienced operator, and stockbrokers using its venues offshore, including in the former BATS venue in Europe, have highlighted how advanced the trading technology is and their willingness to work banks and traders to plug them into their network. Contrast this with years of bad blood between stockbrokers and the ASX over the high cost of converting over to a blockchain-led trading system that never arrived.
ASX’s CHESS changeover will need perfect execution, with the first phase (and least complex) of the CHESS upgrade focused on the market clearing, scheduled to go live from the June quarter next year. Based on the ASX’s recent track record, that’s going to be a big ask.
johnstone@theaustralian.com.au
More Coverage
Interest rates in focus at home, the US; National Storage bid lands
Helen Lofthouse’s ASX might be in damage control over its embarrassing and potentially costly TPG mix-up, but the pain of its regulatory run-ins are now quickly adding up.