The report covers the first full year of operation, the 2001/2002 financial year. A full copy of the report is available on ASXSR's website www.asxsr.com.au, and on www.asx.com.au.
ASXSR Chairman Mr David Hoare reported that ASXSR Board of Directors conceived its role "as part of the ASX response to general concerns that the demutualisation of the Exchange might possibly impair the operating standards with which ASX discharges its statutory responsibilities for supervising the market".
"As a result of our findings, based on the information and material sought and received from ASX, ASXSR is of the opinion that for the 12 months ended 30 June 2002, the ASX Group met appropriate standards in the conduct of its supervisory activities and conducted its supervisory activities ethically and responsibly."
ASXSR was provided unhindered access to the staff and files of ASX, as well as being satisfactorily resourced.
ASX Managing Director and CEO Mr Richard Humphry, said he welcomed ASXSR's report and findings, and accepted the constructive recommendations of ASXSR in the instances where it believed market supervision procedures could be improved. "This is a process that was originally set in train long before the current debate on corporate governance standards, market supervision arrangements and the reconsideration of market rules by many exchanges worldwide," he said.
"When ASX first moved to implement this structure in November 2000, I noted that exchanges and regulators around the world were grappling with these issues, and that it was advisable ASX moved to set a structure in place that could anticipate and address potential concerns.
"Since then ASX has undergone a parliamentary committee inquiry, rigorous and thorough examination by ASXSR and considerable scrutiny by interested parties and those involved in the market. Our commitment to, and performance of, a successful market operation and supervision has been widely and overwhelmingly acknowledged."
The ASXSR report concluded that during the twelve months to 30 June 2002, as a result of the various reviews undertaken by ASXSR during 2001/2002:
- appropriate standards were met by the ASX Group in the conduct of its supervisory activities;
- the level of funding and resourcing devoted by the ASX Group to its supervisory activities was adequate;
- subject to the fact that ASXSR has not yet had the opportunity to complete its review of the CHESS and Derivatives Market Control policies and procedures, the ASX policies and procedures of those areas in the ASX Group with supervisory functions was adequate to support the ASX Group in complying with its specific statutory obligations as an authorised market operator and clearing and settlement facilitator under the Corporations Act;
- ASX conducted its supervisory activities ethically and responsibly;
- ASX had in place and maintained appropriate controls and arrangements for dealing with potential and actual commercial and employee conflicts of interest;
- ASX companies department's handling of the supervision of listed entities having a special identified conflict was satisfactory.
- A number of the MOUs agreed between ASX and ASIC are now well out-of-date and work should commence on their review.
There was an element of unevenness across ASX departments in relation to the policies and procedures. Although this was in part due to the different supervisory functions performed, it was also due to separate departmental development of these policies and procedures. As a result, some ASX departments should refine their procedures. - Similarly, there was unevenness across ASX in terms of documenting compliance programs, although the system did work effectively. It would be helpful if ASX placed at the front of its group-wide compliance plan a strategic overview. Supervisory departments, particularly core supervisory departments, should document a similar concept for their own areas of responsibility.
