ASX faces growing regulatory bill over CHESS problems amid mixed earnings

The market operator is hoping continued volatility drives revenues in the coming year amid mixed interim earnings results.

ASX has posted an interim profit of $243.5m, amid growing regulatory bill over CHESS problems. Picture: John Feder/The Australian

Market operator Australian Securities Exchange has assured investors its technology transformation remains on track, amid a jump in regulatory expenses as the market operator battles ageing infrastructure.

Ruling off its first half results on Thursday, the ASX booked a 5.6 per cent rise in statutory profit to $243.5m, falling short of analyst expectations. Analyst consensus estimates had dialled in expectation as ASX would deliver a $245.9m statutory profit.

On an underlying basis, ASX profits came in ahead of consensus estimates, with the ASX pointing to growth from its markets, technology & data, and securities & payments divisions.

This all saw ASX operating revenue lift 5.9 per cent to $541.9m.

But ASX’s looming move to a new stomping ground in Sydney’s Martin Place, away from the exchange’s historical home on Bridge Street, also saw the market operator book a $10m charge in the period.

ASX chief executive Helen Lofthouse said the ASX earnings from its listings business had remained stable in the half.

She pointed to the ASX’s two years of progress in a five-year transformation plan, which sees it seek to replace its ageing CHESS technology.

“We know there is much more to do as we continue building a new era for ASX,” she said.

ASX CEO Helen Lofthouse at its AGM. Picture: Max Mason-Hubers

ASX told investors the market operator was seeing an increase in listings and new capital quoted in the first half of 2025, which was expected to continue with the $32bn listing of Chemist Warehouse and Sigma Healthcare, due to trade from Thursday, a sign of the times.

ASX also noted the market’s 8 per cent lift in cash value was driving increased trading and speculation, which would drive revenues for the markets business.

Futures and options volumes are also up 19 per cent over the seven months to January, with ASX noting the current market was supporting further speculative trading.

The ASX’s regulatory problems are mounting for the market operator, with the Australian Securities & Investments Commission now considering a second probe into the exchange after already filing a case over failures.

ASX revealed its regulatory expenses have jumped from $1.1m in the last half to more than $7.3m in the latest reporting period.

ASIC is suing ASX over its disclosures to investors over its failed CHESS project.

But ASIC is now also investigating the ASX over a market outage late last year, which saw the exchange unable to settle trades, forcing trading to be called to a halt.

Ms Lofthouse said the CHESS incident near the Christmas period “does not impact our overall strategy, including our technology modernisation program”.

UBS analyst Kieren Chidgey previously warned the ASX offered “little value appeal” amid “ongoing execution and regulatory risks surrounding its CHESS replacement”.

The ASX has launched a multi-year project to replace its ageing CHESS technology stack, selecting Indian consultancy Tata to rebuild the system.

The ASX warned late last year its initial estimates for a $125m price tag to implement the TCS BaNCS platform had exploded and was now likely to cost as much as $445m.

ASX revealed it spent $82.5m on capital expenditure in the half, falling short of analyst expectations, amid UBS expectations of an $88m budget.

But the exchange reconfirmed its guidance it was likely to spend $160-180m on capital expenditure between 2025 and 2027 before reducing.

Shares in the ASX have lagged the broader market, down 5.92 per cent over 12 months.

ASX shares have slumped more than 28.3 per cent since July 2022.

ASX declared a $1.11 dividend, up 9.9 per cent and ahead of estimates.

This sees ASX pay out 85 per cent of its earnings, fully franked.

Shares in ASX last traded at $63.10.

Originally published as ASX faces growing regulatory bill over CHESS problems amid mixed earnings