ASE Annual Report 2016 | Quarterlytics

FY2016 Annual Report · ASE

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ASX Limited Annual Report

2016

The Annual General
Meeting of ASX Limited will
be held in the ASX Auditorium,
lower ground floor, 18 Bridge
Street, Sydney, on Wednesday
28 September 2016 at 10am
(Australian Eastern
Standard Time)

Who we are
ASX operates at the heart of Australia’s financial markets.
It is among the world’s top 10 exchange groups and is the
global leader in A$ and NZ$ financial markets.

We are a fully integrated exchange
across multiple asset classes –
equities, fixed income, commodities
and energy.

We service retail, institutional and
corporate customers directly and
through Australian and international
intermediaries.

We provide services that allow our
customers to invest, trade and manage
risk. These include listings, trading cash
and derivatives, post-trade services,
and information and technical services.

We operate and invest in the infrastruc-
ture that promotes the stability and
development of Australia’s financial
markets and is critical for the efficient
functioning of the nation’s economy
and position in the Asia Pacific region.

We advocate for regulations that
support end-investors, promote the
growth and integrity of the market,
and strengthen Australia’s global
competitiveness.

More information about ASX can be found at
www.asx.com.au

Contents

02 / Letter from the Chairman and the CEO

04 / ASX Limited Board

07 / Corporate governance

12 / Regulatory environment and market structure

13 / Customer engagement

14 / Environment, social and governance

17 / Remuneration report

26 / Operating and financial review

34 / Directors’ report

37 / Statutory report – Financial statements

69 / Key financial ratios

70 / Transaction levels and statistics

73 / Shareholder information

75 / Directory

ASX Limited ABN 98 008 624 691

Financial highlights

Profit after tax

$MILLION

• Statutory profit after tax $426.2 million, up 7.1%

• Underlying profit after tax $426.2 million, up 5.7% driven by revenue growth

2
9
3
3

2
6
4
3

2
8
4
3

2
3
8
3

8
7
9
3

2
3
0
4

2
6
2
4

610.4

617.4

658.3

700.7

746.3

FY12

FY13

FY14

FY15

FY16

FY12

FY13

FY14

FY15

FY16

Earnings per share

CENTS

• EPS 220.4 cents per share, up 7.1%

• Underlying EPS 220.4 cents per share, up 5.8%

6
0
9
1

6
4
9
1

5
5
9
1

5
8
9
1

7
5
0
2

4
8
0
2

4
0
2
2

• Statutory profit • Underlying profit

Dividends per share

CENTS

• Final dividend 99.0 cents per share fully franked, up 4.1%

• Total FY16 dividends 198.1 cents per share, up 5.7%

• Payout ratio 90% of underlying profit after tax

85.1

82.3

89.9

95.1

99.0

92.8

87.9

88.2

92.3

99.1

FY12

FY13

FY14

FY15

FY16

FY12

FY13

FY14

FY15

FY16

• Reported EPS • Underlying EPS

• Interim • Final

Operating revenue$MILLION •Segment operating revenue $746.3 million, up 6.5%Letter from
the Chairman
and the CEO

Rick Holliday-Smith
Chairman

Dominic Stevens
Managing Director
and CEO

Dear fellow shareholder,

On behalf of the Board of ASX Limited (ASX), we
are pleased to present our 2016 Annual Report.

The last 12 months has been a period of achieve-
ment for ASX. We continued to invest in inno-
vation, improved our service to customers and
strengthened our competitiveness. It was also
a period for reflection, with July 2016 being the
tenth anniversary of the successful merger with
the Sydney Futures Exchange, which created one
of the world’s first multi-asset class, vertically inte-
grated exchanges. Today, ASX operates at the heart
of Australia’s financial markets, with a business
well-positioned for future opportunities.

New Managing Director and CEO

On 1 August 2016, ASX welcomed Dominic Stevens
as the company’s Managing Director and CEO.
Dominic is an experienced and highly-regarded
financial services leader, ideally qualified to build
on ASX’s achievements. Having served on the ASX
Board for almost three years, he has a deep under-
standing of the challenges and opportunities ahead
of ASX, as well as the complex global regulatory
environment in which we operate.

Dominic has been involved in financial markets for
most of his adult life. As a student he visited the
trading pits of the futures exchange to record price
data for his university thesis. Financial markets,
technology and strategy have been the keystones
of his career.

This is an exciting time for ASX. We look forward
to working with all of our stakeholders under new
leadership and with new energy for the future.

Our thanks go to ASX’s executive team and all the
staff for their focus and support during the months
we were searching for a new CEO. The business
continued to perform well in this interim period,
and we acknowledge the management of Deputy
CEO, Peter Hiom and Group General Counsel,
Amanda Harkness. Our customers and sharehold-
ers can be assured they are being well-served.

We would also like to acknowledge the work of our
previous CEO, Elmer Funke Kupper, who resigned
on 21 March 2016 after almost four-and-a-half
years in the role. Elmer was a strong, popular and
energetic leader, who helped create a more glob-
ally competitive, externally focused and innova-
tive company, which is committed to investing in
the infrastructure critical to Australia’s financial
marketplace. We thank him for his stewardship.

Financial performance

ASX’s financial performance in 2016 was strong,
with activity growth in all major areas, driven by
continuing volatility in interest rate and equity
markets, and robust secondary capital raisings. The
company reported underlying net profit after tax of
$426.2 million, up 5.7% on the previous year, and a
rise in statutory profit after tax of 7.1%. Underlying
profit excludes a restructuring charge booked in
the previous year.

Operating revenue on a segment basis rose 6.5%
to $746.3 million, with gains in each of ASX’s four
key businesses – Listings and Issuer Services,
Trading Services, Equity Post-Trade Services, and
Derivatives and OTC Markets. ASX restructured
its activities into these groups during the year and
recruited fresh skills to ensure the right focus and
leadership for each business.

Operating expenses increased by 6.5% to $170.6
million and includes an accelerated investment in
post-trade services and CEO transition arrange-
ments. Capital expenditure was $50.2 million.

Total dividends announced for FY16 were 198.1
cents per share, up 5.7%. We continued to pay out
90% of our underlying profit in dividends. More
detail on ASX’s financial performance can be found
in the Operating and Financial Review on pages
26 to 33.

In 2016, ASX made good progress on its key busi-
ness initiatives.

Global leader in A$ and NZ$ financial
markets

In equities, we continued to invest in execution
services that help end-investors navigate a frag-
mented marketplace of multiple exchanges and
dark pools. Innovations such as the Centre Point
mid-point matching system, give customers more
choice and control, and helped ASX achieve a
market share of on-market trading of approxi-
mately 89%.

In derivatives, the investments ASX has made in
recent years provide Australia with an attractive
and globally competitive suite of products and
clearing services. These include interest rate swap
OTC clearing, which reached record activity levels
in the period. We continue to enhance this service
to attract liquidity from a broader range of market
users.

Strong listings franchise

Key to the attractiveness of ASX as a venue on
which to raise capital, invest and build long-term
wealth, is the reputation of the listings market
for quality and integrity. In 2016, ASX introduced
new governance arrangements for its listings busi-
ness to give the ASX Board stronger oversight of
ASX’s brand and reputation. We also proposed new
admission requirements to provide the market with
enhanced guidance about the standards expected
of an ASX-listed company. A market of high quality
is valuable to all its users.

The deep listings franchise is at the core of the suite
of ASX’s investment options for investors. During
the period, ASX received regulatory approval to
simplify the dual listing of New Zealand companies
and continued to build a reputation as the tech-
nology exchange of the Asian time zone. Overall,
there were 124 new listings and $78.6 billion of
capital raised on ASX in FY16.

ASX Annual Report 2016 | Letter from the Chairman and the CEO

On behalf of the Board, we thank all ASX employ-
ees for their high standards and professionalism
throughout the year, and are grateful to our share-
holders for your support.

ASX is in good shape. We are investing in the future
and have every reason to be optimistic about 2017.

Rick Holliday-Smith
Chairman

Dominic Stevens
Managing Director and CEO

ASX is working to increase the asset classes avail-
able to investors through its platforms. These
include corporate and government bonds, managed
funds through the mFund settlement service, and
exchange-traded products, which grew in FY16 to
176 listed products totalling $22.5 billion.

We believe the potential of the technology to
improve efficiency and take costs and complexity
out of the system is genuine. But we also know
that proving it will take time, resources and hard
work. We are optimistic and in the early stages of
a journey that may take three to five years.

World-class, globally connected
infrastructure

ASX is investing heavily in its critical infrastructure.
During the period, we opened an office and estab-
lished a technology hub in Hong Kong to connect
our growing Asian customer base to Australia’s
financial markets community. ASX now has points
of presence in the US, Europe and Asia, broadening
the distribution of ASX’s products and providing
global access to ASX markets.

Our technology transformation is continuing, with
a new trading platform for futures expected to be
implemented in February 2017. ASX is working
closely with customers to ensure the delivery of
a high-quality platform and a smooth transition
for the whole market. We are also investing in the
technology that supports our equity and deriv-
atives markets, including upgrades of our risk
management and clearing systems.

ASX and our partner Digital Asset Holdings (DAH)
have been leading global assessments of how
distributed ledger technology or ‘blockchain’ could
be applied to financial markets. Blockchain has the
potential to provide a secure, audit trail of transac-
tions; a chain of title that cannot be altered and that
can be distributed to those who are permissioned
to access to it. This creates a ‘single source of truth’
upon which everyone can rely.

Over the next year, ASX and DAH will be collabo-
rating with intermediaries, issuers, investors and
other industry stakeholders, including Government
and regulators, to understand the benefits and
implications of deploying this technology in ASX’s
equity post-trade environment. Any new system
must meet the highest regulatory and operational
standards before implementation.

Outstanding customer experience

T+2 settlement of sharemarket trades was intro-
duced in March 2016. The reduction in the settle-
ment period from three to two days has provided
efficiencies for the market, reduced systemic risk
and kept Australia at the forefront of global best
practice. Investors are receiving their cash or shares
sooner and ASX’s customers have seen their cash
market margin requirements decline.

The success of T+2 was underpinned by the close
cooperation between ASX and its customers. This
cooperation reflects ASX’s efforts to improve its
customer service in recent years, including via the
dozen customer forums operating across the busi-
ness and upgrades to ASX Online, the main digital
portal through which customers interact with ASX.
It is also reflected in the 24-hour Customer Support
Centre opened in early 2015, which integrates ASX’s
operations, technology and market surveillance
teams to provide prompt, informed and seamless
assistance to customers.

Regulations that support growth and
end-investors

Australia has been well-served by the regulatory
settings put in place in recent years. These include
measures to help prevent investors from being
materially disadvantaged by market fragmenta-
tion and the domestic location requirements for
critically important infrastructure. Such initiatives
support end-investors and strengthen Australia’s
global competitive position.

ASX welcomed the further clarity provided in March
2016 when the Treasurer announced that Australia’s
regulatory agencies will not recommend approval
of any equity clearing licence applications until the
conditions that support the Government’s policy
for safe and effective competition are established.
The Treasurer said this is expected to take at least
18 months and is intended to ensure competition
does not compromise financial stability or the fair
and effective functioning of the market.

Employer of choice in financial markets

ASX invests in the skills base of its people to remain
attractive to the brightest talent and maintain its
global competitiveness. In FY16, we continued to
refresh our ranks with executives from outside the
exchange industry and those with international
financial market expertise.

Our annual staff survey showed an increase in staff
engagement and alignment with ASX’s long-term
strategy. This improvement follows a multi-year
investment in customers, products, services and
capabilities.

In FY16, 51% of ASX employees took up an offer
to acquire $1,000 worth of ASX shares. This was a
solid endorsement of the company’s strategy and
performance. The high participation was acknowl-
edged by Employee Ownership Australia and New
Zealand, which awarded ASX ‘Best New Employee
Share Plan’ for 2016.

Board renewal

On 1 August 2016, ASX appointed Melinda Conrad
as a non-executive director. Melinda brings strategy
and marketing skills and insights to the Board from
her experience in retail, healthcare and financial
services. We look forward to introducing Melinda
to shareholders next month when she stands for
election at ASX’s Annual General Meeting on 28
September 2016.

ASX Annual Report 2016 | Letter from the Chairman and the CEO

ASX Limited
Board

Rick
Holliday-Smith

Independent* Chairman

BA (Hons), FAICD

Dominic
Stevens

Yasmin
Allen

Managing Director and CEO, Executive Director

Independent, Non-Executive Director

BCom (Hons)

BCom, FAICD

Mr Holliday-Smith has served as Chairman of ASX
since March 2012 and as a director since July 2006.
He was previously Chairman of SFE Corporation
Limited from 1998 until 2006.

Mr Stevens was appointed Managing Director and
CEO of ASX Limited on 1 August 2016. He was an
independent non-executive director of ASX from
December 2013 until his appointment as CEO.

Ms Allen was appointed a director of ASX on 9
February 2015. She is a member of the Audit and
Risk Committee.

Mr Stevens is also a director of ASX’s clearing and
settlement licensees, and their intermediate hold-
ing companies.

Ms Allen is also a director of ASX Clear (Futures) Pty
Limited and Austraclear Limited, the ASX clearing
and settlement licensees for Australia’s derivatives,
OTC and debt markets, and their intermediate hold-
ing companies.

Mr Stevens has close to 30 years’ experience
in financial markets. He was CEO of Challenger
Limited from 2008 to 2012, before which he was
the company’s Deputy CEO and head of capital,
risk and strategy.

Ms Allen has extensive financial services, strat-
egy and corporate governance experience, gained
during a career of over 20 years in finance and
investment banking.

Prior to Challenger, he held senior positions during
a long career at Bankers Trust Australia, where he
had responsibility for the Australian derivatives and
global metals and agricultural commodity deriva-
tives businesses. He was a director of SocietyOne
Holdings Pty Limited between November 2014
and August 2016.

She was formerly a vice president at Deutsche
Bank, a director at ANZ Investment Bank and an
associate director at HSBC Group.

Ms Allen was appointed a director of Cochlear
Limited in August 2010 and Santos Limited in
October 2014. She was a director of Insurance
Australia Group Limited between November 2004
and September 2015.

Ms Allen is a director of the George Institute for
Global Health and the National Portrait Gallery.

Mr Holliday-Smith is Chairman of ASX Compliance,
the Nomination Committee and the intermediate
holding companies of the ASX Group clearing and
settlement facility licensees. He is also a member of
the Audit and Risk, and Remuneration Committees.

Mr Holliday-Smith has global executive and leader-
ship experience in capital markets and derivatives,
and a background in venture capital activities.

His previous roles include CEO of futures and
options trading firm Chicago Research and Trading
(CRT), President responsible for global trading
and sales at Nations Bank-CRT (a predecessor
of Bank of America), both based in Chicago, and
Managing Director of Hong Kong Bank Limited
(a wholly owned merchant banking subsidiary of
HSBC Bank), based in London.

Mr Holliday-Smith was appointed Chairman of
Cochlear Limited in July 2010, having joined the
Board in March 2005. He has been a director of
Servcorp Limited since October 1999 and is a
Member of the Macquarie University Faculty of
Business and Economics Advisory Board.

*Independent as at 17 August 2016. Further details
of the Board’s assessment of Mr Holliday-Smith’s
independence are set out on page 7 of this report.

ASX Annual Report 2016 | ASX Limited Board

Melinda
Conrad

Dr Ken
Henry AC

Peter
Marriott

Heather
Ridout AO

Independent, Non-Executive Director

MBA, FAICD

BCom (Hons), PhD, DB h.c, FASSA

BEc (Hons) FCA, MAICD

BEc (Hons)

Ms Conrad was appointed a director of ASX on 1
August 2016.

Dr Henry was appointed a director of ASX in
February 2013. He is a member of the Audit and
Risk Committee.

Mr Marriott was appointed a director of ASX and
Chair of the Audit and Risk Committee in July 2009.

She has over 20 years’ experience in business
strategy and marketing, and brings skills and
insights as an executive and director from a range
of industries, including retail, financial services
and healthcare.

Dr Henry is a director of ASX Clear Pty Limited and
ASX Settlement Pty Limited, the ASX clearing and
settlement licensees for Australia’s equity markets,
and their intermediate holding companies.

He is Chairman of Austraclear Limited, the securi-
ties settlement facility licensee for Australia’s debt
markets, and a director of each of the other ASX
clearing and settlement facility licensees and their
intermediate holding companies.

Mrs Ridout was appointed a director of ASX in
August 2012. She is currently a director of ASX
Compliance, Chair of the Remuneration Committee,
and a member of the Nomination Committee.

Mrs Ridout is a company director with a long
history as a leading figure in the public policy
debate in Australia.

Ms Conrad has been a strategy and marketing
adviser, an executive with Colgate-Palmolive, and
founded and managed a retail business.

Dr Henry has extensive experience as an econo-
mist in Australia and overseas, and has worked
as a senior policy adviser to successive Australian
governments.

Mr Marriott has spent over 30 years in senior
management roles in the finance industry, span-
ning international banking, finance and auditing.

She was appointed a director of OFX Group Limited
(formerly OzForex Group) in September 2013 and
Reject Shop Limited in August 2011, and was previ-
ously a director of David Jones Limited (July 2013
- August 2014) and APN News and Media Limited
(January 2012 - February 2013).

Ms Conrad is also a director of the Centre for
Independent Studies and the George Institute for
Global Health.

Dr Henry served as the Secretary of the Federal
Department of the Treasury from 2001 to 2011. He
is Chairman of the Sir Roland Wilson Foundation at
the Australian National University (ANU), Governor
of the Committee for Economic Development of
Australia (CEDA), and a member of the Advisory
Board of the John Grill Centre for Project Leadership
at the University of Sydney.

Dr Henry has been Chairman of National Australia
Bank Limited since December 2015, having joined
the Board in November 2011.

Mr Marriott was Chief Financial Officer of Australia
and New Zealand Banking Group Limited (ANZ)
from 1997 to May 2012. He also spent two years
as Group Head of Risk Management. Prior to his
career at ANZ, he was a partner of KPMG Peat
Marwick specialising in the banking and finance,
and information technology sectors.

Mr Marriott was appointed a director of Westpac
Banking Corporation in June 2013.

Mrs Ridout was formerly Chief Executive of the
Australian Industry Group, a major national
employer organisation representing a cross-section
of industry including manufacturing, construction,
defence, ICT and labour hire, until April 2012.

Mrs Ridout is a member of the Board of the
Reserve Bank and was appointed Chair of the
AustralianSuper Trustee Board in May 2013,
having joined the Board in 2007. She has also been
a director of Sims Metal Management Limited since
September 2011 and a director of the Australian
Chamber Orchestra since December 2012.

Mrs Ridout is a member of the ASIC External
Advisory Panel.

Mrs Ridout’s previous appointments include
member of the Henry Tax Review panel, board
member of Infrastructure Australia and the
Australian Workforce and Productivity Agency,
and a member of the Climate Change Authority and
the Prime Minister’s Taskforce on Manufacturing.

ASX Annual Report 2016 | ASX Limited Board

Damian
Roche

Peter
Warne

Independent, Non-Executive Director

BCom

BA, FAICD

Mr Roche was appointed a director of ASX in
August 2014.

Mr Roche is also a director of ASX Compliance,
and ASX Clear (Futures) Pty Limited and
Austraclear Limited, the ASX Group clearing and
settlement licensees for Australia’s derivatives,
OTC and debt markets, and their intermediate
holding companies.

Mr Roche has 20 years’ experience in global invest-
ment banks, with extensive cross-asset class
expertise spanning the equities, fixed income and
commodities markets, with a specific focus on the
Asia Pacific region, including Australia.

Mr Roche was a member of the global Corporate
and Investment Bank Operating Committee for
J.P. Morgan. His most recent role was as Head
of Markets and Investor Services Sales and
Distribution for Asia Pacific, based in Hong Kong.

Mr Warne was appointed a director of ASX in
July 2006. He was previously a director of SFE
Corporation Limited from 2000 to 2006. He is
also a member of the Audit and Risk, Nomination
and Remuneration Committees.

Mr Warne is Chairman of ASX Clear (Futures) Pty
Limited, the ASX clearing and settlement licen-
see for Australia’s derivatives and OTC markets,
a director of Austraclear Limited, the securities
settlement facility licensee for Australia’s debt and
OTC markets, and a director of their intermediate
holding companies.

Mr Warne has over 30 years’ experience in financial
markets and brings a deep practical and technical
understanding of debt, equities and derivatives
markets, and risk management.

Mr Warne is a director of Securities Exchanges
Guarantee Corporation and NSW Treasury
Corporation. He is also an Adjunct Professor at
the University of Sydney Business School, and a
member of the Macquarie University Faculty of
Business and Economics Advisory Board.

Mr Warne has been Chairman of Macquarie Bank
Limited and Macquarie Group Limited since April
2016, having served as a director since July 2007.

He has also been Chairman of Australian Leisure
and Entertainment Property Management Limited
since September 2003 and OFX Group Limited
(formerly OzForex Group) since September 2013.
He was previously Deputy Chairman of Crowe
Horwath Australasia Limited between May 2007
and January 2014.

Board composition

Board skills matrix

• At the date of this report, there are nine direc-
tors, whose names, skills and experience are
detailed on pages 4 to 6

• Mr Dominic Stevens was appointed Managing

Director and CEO (CEO) on 1 August 2016

• Mr Elmer Funke Kupper resigned as CEO on 21

March 2016

• Ms Melinda Conrad was appointed to the

Board on 1 August 2016

• Ms Jillian Segal retired from the Board on 1

September 2015

• The Board is committed to maintaining the

diversity of the Board and at least 33% female
representation

Board renewal and succession planning

The Board regularly reviews its composition and
succession plans.

The skills and experience of the Board reflect
ASX’s role as the provider of critical infrastructure
to Australia’s financial markets and its leading
position in the Asia Pacific region.

Board succession renewal planning also extends to
the clearing and settlement and ASX Compliance
boards.

The Board uses the skills matrix below to guide its
assessment of the skills and experience of current
non-executive directors, and to identify any gaps
in the collective skills of the Board.

Category
Executive
leadership

Explanation
Successful career as a senior
executive or CEO

Strategy

Financial
acumen

Risk and
compliance

Define strategic objectives,
constructively question business plans
and implement strategy

Accounting and reporting, corporate
finance and internal controls, includ-
ing assessing quality of financial
controls

Forward-looking, able to identify
the key risks to the organisation and
monitor effectiveness of risk manage-
ment frameworks and practices

Public policy

Public and regulatory policy, including
impact on markets and corporations

Information/
Technology/
Digital

Use and governance of critical infor-
mation technology infrastructure,
digital disruption and information
monetisation

Business
development

People and
change
management

Commercial and business experience,
including development of product,
service or customer management
strategies, and innovation

Overseeing and assessing senior
management, remuneration frame-
works, strategic human resource
management and organisational
change

Corporate
governance

Knowledge, experience and commit-
ment to the highest standards of
governance

International
exchange
experience

International financial markets or
exchange groups, including post-trade
services and relationships with finan-
cial market participants

Financial
services
experience

Broking, funds management, super-
annuation and/or investment banking
activities

The Board considers that individually and collec-
tively, the directors have an appropriate mix of
skills, experience and expertise.

ASX Annual Report 2016 | ASX Limited Board

Corporate
governance

ASX’s corporate governance framework

Accordingly, the Board treated Mr Holliday-Smith
as if he was not independent during this period.

Board of directors

ASX’s governance arrangements have been
consistent with the third edition of the ASX
Corporate Governance Council’s Corporate
Governance Principles and Recommendations
(Principles) throughout the reporting period,
except in respect of the interim arrangements
during the search for a new CEO, which are
described below.

This statement, including details of the ASX
Limited Board on pages 4 to 6, is current as at 18
August 2016 and has been approved by the Board.

More information on ASX’s corporate governance
is available on ASX’s website.

CEO appointment

Mr Dominic Stevens commenced as Managing
Director and CEO (CEO) of ASX Limited on 1 August
2016.

The Board’s search for a new CEO was led by
the Chairman and supported by an external firm.
Mr Stevens’ appointment was recommended by
the Nomination Committee and approved by the
Board.

Mr Stevens was not involved in the Board’s
processes.

Interim arrangements and Chairman
independence

During the period before a new CEO was
appointed, Mr Peter Hiom (Deputy CEO) and
Ms Amanda Harkness (Group General Counsel)
managed the business under the oversight of the
Chairman, Mr Rick Holliday-Smith. The Chairman
did not perform any day-to-day management or
operational functions.

The Board is aware that even though he did not
have any executive responsibilities, a perception
could exist that these interim arrangements
impacted on Mr Holliday-Smith’s independence.

Arrangements were put in place so that the
Chairman’s closer oversight of, and engagement
with, ASX management was properly addressed
and explained. This framework was documented
in amendments to ASX’s charters.

A Board sub-committee comprising the chairs of
the Audit and Risk and Remuneration Committees,
and one other non-executive director, provided
guidance to the Chairman and oversaw the oper-
ation of the interim arrangements.

As the Listing Rules provide that only non-exec-
utives can be members of ASX’s Audit and Risk,
and Remuneration Committees, Mr Holliday-
Smith resigned as a member of those committees,
attending meetings in the interim period as an
observer only.

Mr Holliday-Smith has not received, and will not
be paid, any amounts other than his pre-existing
Chairman’s fee for the services he performed up
to 1 August 2016.

Board assessment of interim
arrangements

Mr Holliday-Smith has been assessed by the Board
to be an independent and non-executive director
as at 17 August 2016. He was also assessed as
an independent and non-executive prior to the
resignation of the former CEO in March 2016.

The Board determined it was appropriate for
Mr Holliday-Smith to remain Chairman of ASX
Limited and the Nomination Committee until a
new CEO was appointed, notwithstanding that
he was being treated as if he was not regarded
as independent. This was because the Board
believed he should continue to be Chairman
of the Board as it undertook to identify and
appoint ASX’s new CEO and progress its Board
renewal program.

Role and responsibilities of the Board
• Accountable for the performance of the ASX Group

• Oversees the conduct of the ASX Group,

consistent with its licence obligations and
public policy objectives of financial market
integrity and financial system stability

• Reviews and approves the corporate strategy,

annual budget and financial plans

• Monitors financial performance

• Appoints and assesses the performance of the
CEO, and oversees executive succession plans

• Oversees the effectiveness of Management
processes and approves major corporate
initiatives

• Monitors ASX’s culture

• Oversees the process for identifying signifi-

cant risks facing ASX and control, monitoring
and reporting mechanisms

• Enhances and protects the reputation of ASX

• Reports to and communicates with

shareholders

• Reviews earnings and other forecasts

The responsibilities of the Board are detailed in
the Board Charter. The Board’s conduct is also
governed by ASX’s constitution.

Delegation to committees, subsidiary boards
and Management
• The Board has established the Audit and Risk,
Nomination and Remuneration Committees to
assist it to discharge its duties

• Day-to-day management and operations are

delegated to Management

• ASX Compliance monitors and enforces

compliance with the ASX Operating Rules
under the oversight of the ASX Compliance board

• The clearing and settlement (CS) boards focus

on risk management and oversight of the
clearing and settlement operations

ASX Annual Report 2016 | Corporate governance

Responsibilities of the Chairman

• Independent and non-executive. An Executive
Chairman may be appointed for a limited time
in exceptional circumstances

• The CEO may not be or become Chairman

• Leads the Board in its duties to ASX

• Facilitates effective Board meeting discussion

• Contact point for senior external stakeholders,
including shareholders, regulators and media

• Oversees processes and procedures to evalu-
ate the performance of the Board, its commit-
tees and individual directors

During the period until a new CEO was appointed:

• Continued as Chairman of Nomination

Committee, ASX Compliance and CS licensee
holding companies

• No day-to-day operational functions, responsi-

bilities or powers

Performance reviews
The performance of the Board, its committees
and individual directors are reviewed each year. In
FY16, the Board commissioned an external review
to evaluate its performance and processes.

The Chairman holds discussions with individual
directors when evaluating their performance.
These evaluations took place in respect of FY16.
The Board takes this evaluation into consideration
when recommending directors for election.

Director induction and training
New directors receive a letter of appointment. This
outlines ASX’s expectations about director time
commitment, compliance with ASX policies and
regulatory requirements. An induction process is
coordinated by Company Secretariat.

The Board keeps up-to-date with relevant market
and industry developments through regular brief-
ings at Board meetings, Board workshops, meet-
ings with customers and site visits.

• Oversight of the two executives managing

ASX’s business.

Director independence

Director appointment and election

Before appointing a director, ASX undertakes
comprehensive reference checks including educa-
tion, employment, character, criminal history and
bankruptcy. It is also a condition of appointment
that any new director is not a disqualified person.
Directors make an annual declaration to this effect.

Directors are generally elected for three years.
Retiring directors are not automatically re-ap-
pointed. Any director (except the CEO) who has
been appointed during the year must stand for
election at the next Annual General Meeting (AGM).

The ASX Board Policy on Independence requires
that a majority of directors are independent. It
includes guidelines for assessing the materiality
of directors’ relationships that may affect their
independence.

There is no limit on director tenure. Mr Holliday-
Smith and Mr Peter Warne have been directors of
ASX Limited for 10 years. The Board reviewed and
determined that their tenure has not impacted on
their independence. This review noted the deep
expertise, judgement, industry knowledge and
understanding of the ASX Group’s operations
brought by each director.

Dr Ken Henry will retire by rotation and is standing
for re-election supported by the other directors.
Ms Conrad will stand for election at the 2016 AGM.

Each of ASX’s non-executive directors has been
assessed as independent. Further details of the
Board’s approach to Mr Holliday-Smith’s independ-
ence is set out on page 7.

Director attendance at meetings

Details of director attendance at meetings up to 30
June 2016 are set out below. Provided there is no
conflict of interests, directors are also invited, and

frequently attend, meetings of Board committees
of which they are not members. Board meetings
held on short notice have been noted separately.

Director name
Rick Holliday-Smith
(Chairman)2
Yasmin Allen

Ken Henry
Peter Marriott3
Heather Ridout

Damian Roche

Dominic Stevens

Peter Warne
Elmer Funke Kupper4
Jillian Segal5

Scheduled
Board meetings

Short-notice
Board meetings1

Audit and Risk
Committee

Nomination
Committee

Remuneration
Committee

Held Attended Held Attended Held Attended Held Attended Held Attended

1 Meetings held on short notice.
2 Resigned from Audit and Risk and Remuneration Committees on 4 May 2016.
3 Joined Remuneration Committee on 18 May 2016.
4 Resigned 21 March 2016.
5 Retired 1 September 2015.

Access to information, Management and
advice

Conflict and information handling
arrangements

Directors have access to Management to request
information. Directors are entitled, with the
approval of the Chairman, to obtain independent
professional advice relating to their role as an ASX
director at ASX’s expense.

Director shareholding policy and
remuneration

Board policy is that non-executive directors should
accumulate at least 5,000 ASX shares (12,000 for
the Chairman) within three years of their appoint-
ment. All continuing directors have achieved the
guideline. New directors have three years from the
date of their appointment to achieve the guideline.

ASX has put in place a comprehensive set of
Conflict Handling Arrangements to address the
potential for actual and perceived conflicts. These
encompass:

• governance arrangements, including ASX

self-listing

• customers, competitors and supplier

arrangements

- licence obligations including the ‘review

party’ framework

- information handling standards.

The Australian Securities and Investments
Commission (ASIC) is ASX’s listing authority.
ASIC monitors ASX Limited’s compliance with the
Listing Rules.

Mr Stevens ceased to be independent following
his appointment as CEO.

ASX’s remuneration framework is described in
detail in the remuneration report, which starts
on page 17.

ASX Annual Report 2016 | Corporate governance

Board committees

Audit and Risk Committee

Committee Membership

Board oversight of ASX listings business

The ASX Board has established three committees:

• Audit and Risk Committee

• Nomination Committee

• Remuneration Committee.

Each committee is chaired by an independent
director.

Each committee’s charter sets out its role, respon-
sibilities, composition and structure. Charters are
reviewed annually.

Reports and minutes from committees are provided
to the ASX Board.

• Integrity of ASX Limited’s consolidated

financial reports

• Adequacy of ASX’s corporate reporting process

• Systems of risk management, internal control
and legal compliance (except matters specifi-
cally overseen by ASX subsidiaries)

• Internal audit oversight

• External audit liaison and monitoring of

performance and effectiveness

• Receive audit reports and approve the

audit plan

• Review external auditor independence,

including considering the level of non-audit
work carried out by the external auditor

The Board approved a number of changes to
committee membership during the year. Their
composition during the year, and to the date of
this report, are set out on this page.

• Monitor ASX’s risk culture

Nomination Committee

Audit and Risk Committee
• Mr Peter Marriott (Chair)

• Ms Yasmin Allen (from 1 July 2015)

• Dr Ken Henry (from 1 July 2015)

• Mr Rick Holliday-Smith (except 4 May –

17 August 2016)

• Mr Dominic Stevens (up to 1 August 2016)

• Mr Peter Warne

• Ms Jillian Segal (retired 1 September 2015)

Nomination Committee
• Mr Rick Holliday-Smith (Chair)

• Mrs Heather Ridout

• Mr Peter Warne

• Ms Jillian Segal (retired 1 September 2015)

ASX has established reporting lines between the
committees and subsidiary boards such that:

• Review process for nomination and selection

of ASX Group directors and CEO

• Identify desirable director competencies and

Remuneration Committee
• Mrs Heather Ridout (Chair)

• Mr Rick Holliday-Smith (except 4 May –

17 August 2016)

• Mr Peter Warne

• Mr Peter Marriott (from 18 May – 17 August

2016)

• Ms Jillian Segal (retired 1 September 2015)

• Board committees report to ASX subsidiary

experience

boards on relevant matters

• ASX subsidiary boards report to the Board and

Board committees on relevant matters.

• Review director performance and the process

for reviewing contributions

• Review ASX Group director succession plans

and induction programs

• Set and review Board gender diversity

strategies

Remuneration Committee

• Remuneration for ASX Group staff and

non-executive directors

• Incentive framework for CEO and senior

executives

• Achievement against gender diversity

objectives, including remuneration equality

• Compliance of remuneration arrangements
with Financial Stability Standards and other
regulatory requirements

ASX implemented new governance arrangements
and proposed new admission requirements for its
listings business in FY16. Mr Holliday-Smith and Mr
Roche joined the ASX Compliance board in February
2016, at which time Mr Holliday-Smith became
Chairman. These changes support the maintenance
of ASX’s high listing standards. They reflect the
evolution of global financial markets and that the
attractiveness of ASX’s listings franchise is built
on four foundations:

• strength of the Australian economy and invest-

ment environment

• trust in the regulatory environment admin-
istered by ASX and Australia’s regulatory
agencies

• quality of the ASX brand

• integrity of ASX’s listing rules framework.

These arrangements give the ASX Limited Board
stronger oversight of ASX’s brand and reputation.
The ASX Board reviews and provides guidance
on the type of entities that should be permitted
to list on ASX. ASX’s discretion to admit entities
is exercised by an executive management Policy
and Listings Standards Committee. In FY16, ASX’s
discretion to refuse to admit entities was strength-
ened by the removal of an appeal right to the ASX
Appeals Tribunal.

These initiatives were implemented so that ASX’s
listings standards remain fit for purpose. An ASIC
assessment completed in FY16 concluded that
ASX had met its obligations in respect of its listing
standards.

ASX Annual Report 2016 | Corporate governance

The ASX Limited Board receives input from the ASX
Compliance board and management on:

The CS boards’ charter sets out further details
regarding their functions and governance.

• trends in financial markets, and global

standards for admission requirements and
compliance

• processes for admission to the ASX Official List

• matters that could impact on the strategy,

brand or licence obligations of the ASX Group,
including key and emerging risks

• monitoring and enforcement of ASX’s

Operating Rules, including the Listing Rules

• ASX’s conflict handling practices.

The ASX Compliance board charter sets out further
details regarding its function and governance as
part of the ASX Group’s governance arrangements.

A majority of ASX Compliance directors are inde-
pendent non-executives. The biographies of the
ASX Compliance board directors are available on
ASX’s website.

Robust controls and procedures in the form of
Information Handling Standards are in place
to manage commercially sensitive information
provided to ASX by other licensed listing and trad-
ing venues.

ASX clearing and settlement subsidiaries

ASX has four subsidiary companies that hold CS
licences required to operate clearing and settle-
ment facilities, and two intermediate holding
companies. The CS boards focus on risk manage-
ment and oversight of the operations of the CS
subsidiaries.

The ASX Board relies on these boards to provide
oversight of the management accounts of the CS
subsidiaries, the management of clearing and
settlement risk, and compliance with the Financial
Stability Standards determined by the Reserve
Bank of Australia (RBA).

ASX Clear and ASX Settlement are the sole provid-
ers of clearing and settlement arrangements for
Australia’s cash equities markets. The boards of
ASX Clear and ASX Settlement each have three
directors who do not sit on the ASX Limited Board.
These directors meet separately, constituted as
the board of ASX Clear and ASX Settlement, to
determine matters that require consideration
of commercially sensitive information if another
market operator or listing venue is obtaining
services from, or access to, ASX’s clearing and
settlement facilities. These boards also oversee
Management’s handling of commercially sensitive
information and the provision of services, or access
to, other market operators and listing venues.
ASX Limited directors do not attend or receive
copies of papers or minutes for such meetings.
Management attendance is limited to employees
given permission by the relevant market operator
or listing venue.

All directors, other than ASX’s CEO are independent
non-executives. The biographies of the CS board
directors are available on ASX’s website.

Management

Role and responsibilities of the CEO
The Board delegates day-to-day management of
the ASX Group to the CEO.

In the interim period until the appointment of Mr
Stevens as CEO, responsibility for the overall oper-
ational and business management of ASX was with
the Deputy CEO and Group General Counsel. These
executives were responsible for managing ASX’s
reputation and profit performance in accordance
with the strategy, plans and policies approved by
the Board, under oversight from the Chairman.
These interim arrangements have ceased.

Senior Management
The senior executives, or Key Management
Personnel (KMP), of ASX are listed on page 20 of
the remuneration report.

Roles and responsibilities are defined in specific
position descriptions.

The biographies of ASX’s senior executives are
available on ASX’s website.

Management performance and
remuneration

• The Board assesses KMP performance on an

annual basis

• KMP are assessed against Group and individual

performance targets

• KMP are not present when their performance

and remuneration are discussed

• Further details regarding KMP performance

and remuneration are set out in the remunera-
tion report which commences on page 17

• A performance evaluation for KMP took place

in FY16 in accordance with this process

Company secretaries
The Board is responsible for the appointment
of company secretaries. The ASX Group General
Counsel and Company Secretary is accountable
directly to the Board, through the Chairman, on
all matters to do with the proper functioning of
the Board. Details of ASX’s company secretaries
are contained on page 34.

Trading by ASX Group directors and
employees

ASX’s Group Dealing Rules restrict dealing in secu-
rities by ASX directors and employees. These were
reviewed in FY16. Derivatives and hedging arrange-
ments for unvested ASX securities, or vested ASX
securities subject to holding locks, are prohibited.

Risk management

Effective risk management is key to achieving
and maintaining ASX’s operational and strategic
objectives. The Board is responsible for approving
and reviewing the ASX Group risk management
strategy, policy and framework. This is designed to
identify, assess and manage key strategic, opera-
tional and emerging risks. The active identification
of risks and implementation of mitigation meas-
ures are responsibilities of Management. Risks are
formally reviewed at an executive risk workshop
that is part of the preparation of ASX’s three-year
strategic plan. Ongoing monitoring and reporting
to the Audit and Risk Committee and the Board
occurs throughout the year.

Material business risks are described in the
Operating and Financial Review, which also
outlines the Group’s activities, performance,
financial position and main business strategies.
ASX’s management of economic, environmental
and social sustainability risks is discussed in the
environment, social and governance section of this
report on pages 14 to 16.

The Audit and Risk Committee reviews ASX’s
enterprise risk management framework annually
and receives regular reports on enterprise risks,
technology and cyber security, internal audit, regu-
latory assurance and external audit. It also receives
reports from the CS and ASX Compliance boards,
as well as half-yearly Management certifications.
This process was followed in FY16.

The CS boards review and provide oversight of
risk management processes, internal controls and
compliance systems in respect of the management
of clearing and settlement risks (including clear-
ing counterparty credit risk, treasury investment
risk and liquidity risk of ASX Clear and ASX Clear
(Futures), and the settlement risks within ASX
Settlement), as well as the ASX Group’s compliance
with the RBA’s Financial Stability Standards.

Cyber resilience is integral to effective risk manage-
ment at ASX. The Audit and Risk Committee
receives regular updates on ASX’s cyber security

ASX Annual Report 2016 | Corporate governance

strategy, including controls, threat assessments,
data analytics, mitigation, random testing, staff
awareness, training and assurance. Internal policies,
procedures and standards are updated on a regular
and dynamic basis, as required. Establishment of
an integrated cross-functional team was agreed
during the year to enhance coordination and
management of ASX’s cyber and physical security
functions. ASX Management works closely with
relevant cyber security agencies. ASIC conducted
a review of ASX’s cyber resilience during the year.
It concluded that ASX had met its obligations for
management of cyber resilience.

Management has established an Enterprise
Risk Management Committee to oversee ASX’s
enterprise risk management framework, approve
risk policies, monitor framework execution and
coordinate general risk matters consistent with
the Board’s risk appetite. A periodic external
assessment of ASX’s enterprise risk management
framework took place during the year. One of the
outcomes was the creation of a management
Business Risk Committee comprising key first and
second level risk managers to provide greater focus
on operational risks. Internal control systems and
procedures are reviewed by the internal auditor.
The General Manager Internal Audit reports to
the Audit and Risk Committee, ASX Compliance
board, CS boards, and the CEO (and Group General
Counsel during the interim period until a CEO was
appointed) for functional audit purposes, and to the
Chief Risk Officer for administrative purposes. The
Audit and Risk Committee approves the remuner-
ation of the General Manager Internal Audit. The
internal audit function is independent of external
audit, and has full and free access to the Audit and
Risk Committee, ASX employees and ASX records.
The Audit and Risk Committee determines internal
audit’s scope and budget each year, and monitors
Management’s response to internal audit reviews.
The Internal Audit charter is available online.

Regulatory Assurance also provides an assur-
ance function. It conducts oversight of the Group
by mapping the compliance framework for key
obligations, overseeing ASX’s conflict handling
arrangements, providing training to the business
so that key Australian and international obligations
are understood and complied with, undertaking
compliance reviews, and reporting to regulators.
The General Manager Regulatory Assurance has a
direct reporting line to the chairs of the Audit and
Risk Committee, ASX Compliance board, and the
CS boards for key licence obligations and conflict
handling arrangements, and to the Group General
Counsel for functional purposes.

When considering the Audit and Risk Committee’s
review of half-year and full-year financial state-
ments, the ASX Board customarily receives a
statement from the CEO and the Chief Financial
Officer (CFO) consistent with the requirements
of the Corporations Act 2001. It also receives a
statement from the CEO and Chief Risk Officer
that ASX’s risk management and internal control
systems are operating effectively for material
business risks. For the FY16 financial statements,
these statements were provided by the Deputy
CEO and Group General Counsel (who were the
ASX employees performing the chief executive
function to the end of the reporting period),
together with the CFO or Chief Risk Officer,
as applicable.

Continuous disclosure

ASX’s Listing Rule 3.1 Policy sets out how ASX
complies with its disclosure obligations. This policy
was reviewed in FY16 and determined to continue
to be fit for purpose.

Code of Conduct

ASX’s Code of Conduct and Anti-Bribery and
Corruption, Whistleblower Protection and Fraud
Control policies promote ethical and responsible
decision-making by all directors and employees of
the ASX Group. A Gift and Entertainment Policy for
employees and directors requires reporting of all
gifts above a specified threshold. The Audit and Risk
Committee receives periodic reports. Employees
are required to act with high standards of honesty,
integrity, fairness and equity in all aspects of their
employment. There are formal escalation and griev-
ance procedures. All forms of facilitation payments
are forbidden.

The Whistleblower Protection Policy supports
employees who report non-compliant or suspi-
cious and unethical conduct by other employees.
This formalises ASX’s commitment to protect the
confidentiality and position of employees wishing
to raise matters that affect the integrity of ASX.

Staff attestations of compliance and understanding
with these policies were provided in FY16. The
Audit and Risk Committee receives regular reports
on these matters.

Diversity

ASX’s Diversity Policy describes how ASX promotes
diversity in the workforce. The diversity objectives
adopted by the Board, and performance in FY16,
are set out on page 15.

Shareholder engagement

ASX’s Shareholder Communications Policy sets
out ASX’s aim to:

• communicate with shareholders concisely,

accurately and in plain language

• deal with shareholders fairly, transparently

and openly.

All market sensitive disclosure, including any
earnings or other guidance, is first made available
on the ASX Market Announcements Platform. ASX

does not selectively brief or provide forecasts to
analysts or investors.

ASX uses a number of channels and technologies,
including webcasting and social media, to commu-
nicate widely and promptly. It enables shareholders
to participate in shareholder meetings, and deals
with shareholder enquiries respectfully and quickly.

Annual General Meeting

ASX’s AGM will be held on Wednesday 28
September 2016 at 10am Australian Eastern
Standard Time, in the ASX Auditorium, lower
ground floor, Exchange Square, 18 Bridge Street,
Sydney. Further details about ASX’s 2016 AGM are
provided on page 74.

Payments to political parties

ASX actively engages with government and politi-
cal decision-makers about the role ASX performs,
the investments it is making to build world-class
infrastructure, and the globally competitive and
dynamic market environment in which it operates.

ASX has a responsibility to the market and its
shareholders, customers and staff to support
well-informed government decisions through
proactively and clearly communicating its position
on matters of public policy and the opportunities
and challenges facing the business.

During FY16, ASX paid $100,000 in membership
fees to each of the Liberal Party Australian Business
Network and the Federal Labor Business Forum.
ASX’s membership of these business networks
provides an opportunity to engage with a wide
cross-section of policy and business decision-mak-
ers. No other payments to political parties were
made during FY16.

All payments to political parties are disclosed by
ASX and must be approved by the CEO and the
Group General Counsel in line with the policy and
limits set by the Board.

ASX Annual Report 2016 | Corporate governance

Regulatory
environment
and market
structure

ASX operates in a highly regulated, globally
competitive environment. International capital
markets are increasingly connected, and regula-
tors around the world are implementing global
standards to achieve systemic stability. Australia’s
regulatory settings are recognised as consistent
with international standards.

Australia’s regulatory environment

ASX’s ability to connect customers to interna-
tional liquidity is supported by the work of the
two government agencies that oversee ASX’s oper-
ations: the Australian Securities and Investments
Commission (ASIC) and the Reserve Bank of
Australia (RBA).

ASIC is responsible for the supervision of real-time
trading on Australia’s domestic markets and sets
market integrity rules to govern whole-of-market
activity. ASIC annually assesses the compliance of
ASX’s market and clearing and settlement facility
licensees with their licence obligations. The latest
ASIC Market Assessment Report concluded that
ASX met its obligations.

The RBA is responsible for assessing whether
licensed clearing and settlement facilities have
complied with the Financial Stability Standards
(FSS) and have done all other things necessary
to reduce systemic risk. RBA annually assesses
whether ASX is complying with the FSS. The latest
RBA Assessment concluded that ASX observed or
broadly observed all relevant requirements.

The RBA is the chair and ASIC is a member of the
Council of Financial Regulators (CFR). CFR is the
coordinating body for Australia’s financial regu-
latory agencies.

The Treasurer endorsed the recommendations of
the CFR regarding competition in equities clearing.
The recommendations provide for the develop-
ment and implementation of ‘minimum conditions’
to support the Government’s policy for safe and
effective competition. These are intended to ensure
competition does not compromise financial stability
or the fair and effective functioning of the market,
including through location requirements for critical
market infrastructure.

The Treasurer also endorsed CFR setting out regu-
latory expectations for ASX’s conduct in operating
its cash equities clearing and settlement facilities
while it remains the sole provider of these services.
CFR is expected to release these regulatory expec-
tations in FY17. They relate to key governance,
pricing and access matters. ASX will update its
Code of Practice for Clearing and Settlement of
Cash Equities in Australia to align with the CFR’s
regulatory expectations.

Consistency with global standards

ASX complies with the FSS, as well as the global
Principles for Financial Market Infrastructures
(PFMIs). ASX’s compliance with the FSS and
PFMIs is set out in the Principles for FMI Disclosure
Framework document. This is updated periodically.

ASX’s clearing houses operate to a ‘Cover 2’ stand-
ard for credit and liquidity risk. Sufficient capital is
held to withstand the default of their two largest
participants under extreme but plausible market
conditions. ASX Limited and ASX’s clearing houses
each have a long-term credit rating of AA- from
Standard & Poor’s.

Recovery and resolution

Clearing market structure

In March 2016, the Treasurer announced that regu-
latory arrangements would be developed over the
next 18 months for safe and effective competition
in equities clearing. The current equities clearing
market structure will remain until those regulatory
arrangements are implemented.

ASX has implemented recovery rules for its clearing
houses that comply with domestic and international
standards. The rules were implemented following
extensive consultation with market participants,
customers and regulators between October 2014
and April 2016. Recovery rules set out how ASX
would use loss allocation and replenishment tools
to address losses or liquidity shortfalls following

clearing participant default or non-default loss
events, as soon as practicable, including within
one business day.

In November 2015, the CFR responded to feed-
back on its Resolution Regime for Financial Market
Infrastructure consultation. Resolution refers to
the ability of a public authority to take control of
a distressed central counterparty to return it to
viability or facilitate its orderly wind-down. CFR
has indicated that draft legislation to establish an
Australian resolution regime is expected in FY17,
subject to Parliament’s legislative program. ASX
supports the early implementation of this regime.

International clearing standards

An important outcome of international regulatory
harmonisation has been the requirement that key
over-the-counter (OTC) derivatives transactions by
the largest dealers be centrally cleared.

Australia
Mandated centralised clearing of interest rate
derivatives denominated in A$, US$, euros, British
pounds and Japanese yen between OTC derivatives
dealers in Australia came into effect in April 2016.
This reduces the cost for Australian market partic-
ipants to access global markets.

Europe and US
ASX, the RBA and ASIC have worked with the regu-
lators where ASX’s key international customers
are based to allow those clients to use ASX’s OTC
markets to clear their transactions in Australia.

ASX’s futures and equity clearing houses were
among the first group of international clearing
houses to be formally recognised as a ‘Third
Country CCP’ by the European Securities and
Markets Authority (ESMA).

ASX’s futures clearing house was the first interna-
tional clearing house to be exempt from registra-
tion as a ‘Derivatives Clearing Organization’ by the
US Commodity Futures Trading Commission (CFTC).

ASX Annual Report 2016 | Regulatory environment and market structure

Customer
engagement

ASX operates at the heart of Australia’s financial
markets. Local and international intermediaries
and banks, settlement participants, market data
vendors and other market operators rely on ASX to
provide financial market infrastructure every day.
Together, ASX and its customers service over 2,200
listed companies and other issuers, institutional
investors, asset managers, superannuation funds,
wealth managers and millions of retail investors.

A similar process underpinned the transition to a
T+2 settlement cycle in March 2016. The reduc-
tion in the settlement period from three to two
days was the culmination of an extensive two-year
program, involving over 100 parties in Australia
and New Zealand. The new arrangement has
provided efficiencies for the market, with cash
market margin requirements for ASX participants
declining by up to 30%.

Improving the customer experience

Seeking feedback and consultation

Feedback from ASX’s annual customer survey
acknowledged that ASX was making good progress,
but further work is required to:

• deepen engagement with and better under-

stand their business

• reduce their costs

• improve service delivery

• increase communication.
This feedback has been incorporated into ASX’s
plans and activities.

ASX employees have customer-related goals and
targets, with the main customer-facing functions
led by a member of ASX’s Executive Committee.

ASX’s 24-hour Customer Support Centre provides
end-to-end customer service across the exchange’s
technology, operations, clearing risk and market
surveillance activities. The Centre has improved
ASX’s customer responsiveness and reduced the
time taken to resolve operational issues expe-
rienced by customers. In addition, a Technical
Account Management team provides dedicated
change management and service support.

ASX uses forums, public consultations and an
annual survey to obtain feedback from customers.

Supporting issuers and investors

There are customer forums across all of ASX’s
businesses, which discuss market developments,
provide feedback on service delivery, and help
prioritise investment in products and services.

Maintaining the attractiveness of the Australian
market to list and raise capital is a fundamental
objective of ASX.

ASX’s Code of Practice for Clearing and Settlement
of Cash Equities in Australia formalises the involve-
ment of ASX’s customers in the operation and
development of Australia’s cash equities clearing
and settlement infrastructure.

ASX has international offices in Chicago, Hong Kong
and London. Its on-the-ground presence in these
major financial centres allows ASX to better under-
stand and service its growing offshore client base.

In FY16, the Business Committee established under
the Code contributed to the implementation of T+2
settlement, the discontinuation of non-settlement
days and the roadmap for the development of
post-trade services infrastructure.

In May 2016, ASX replaced ASX Online, its B2B digi-
tal platform for market participants and technical
services customers. The new portal has simplified
interaction with ASX, improving day-to-day opera-
tional activities and enhancing the user experience.

Working closely with our customers

ASX is collaborating closely with its customers
as it upgrades its core technology applications.
These include a new futures trading platform and
the assessment of distributed ledger technology
as a possible replacement for CHESS. The involve-
ment of industry is critical to de-risking the change
process for customers and ensuring a smooth tran-
sition for the whole market.

Customer input also informs ASX’s product devel-
opment. New derivatives products introduced in
FY16 following user feedback include 20 year bond
futures, mini-SPI futures, eastern Australia wheat
futures and TORESS options.

In FY16, ASX conducted public consultations on
topics such as liquidity risk management, trade
cancellations, reverse takeovers and new listing
admission requirements. These help ASX to under-
stand the views of its customers and balance the
interests of its many and diverse stakeholders.

In FY16, ASX consulted on proposals to update the
admission requirements for listing to maintain the
quality of ASX as a world-class listing venue. The
changes included increasing the financial thresh-
olds, introducing a 20% minimum free float, and
adjusting the shareholder spread tests.

ASX had constructive stakeholder engagement on
the proposals and is giving careful consideration
to the feedback, including the potential impact on
particular industries. It expects to respond to the
feedback and publish the new listing admission
requirements by October 2016.

In 2016, the ASX Evolve program continued to
bring companies and investors closer together.
The program funds research coverage for small
and mid-cap companies, publishes the Listed@ASX
magazine for the investor relations and adviser
community, and hosts the International Spotlight
Series that showcases ASX-listed companies to
institutional investors in Asia and North America.

ASX recognises that confident and informed inves-
tors are the lifeblood of a vibrant and liquid finan-
cial market. ASX’s investor education initiatives are
described in the next section of this report.

ASX Annual Report 2016 | Customer engagement

Environment,
social and
governance

Environment, social and governance (ESG) risks
are monitored as part of the Board’s oversight of
ASX’s enterprise risk management framework.
They reflect ASX’s focus on the long-term sustain-
ability of its business. This section describes how
ASX addresses these risks, and provides transpar-
ency on the management of ASX’s environmental
footprint. Economic risks are addressed in the
Operating and Financial Review.

Investor education

Promoting informed investing supports ASX’s
business. According to the most recent Australian
Share Ownership Study, 36% of adult Australians
participate in the sharemarket directly through
shares and other listed investments, or indirectly
through managed funds or self-managed super.
Share ownership is the preferred asset class for
personal investments and Australia continues to
have one of the highest levels of share ownership
in the world.

ASX provides access to free tools and resources to
explain the potential rewards and risks of investing.
These include online courses on shares, bonds
and hybrids, exchange-traded products, instal-
ment warrants, options, futures and Australian
Government bonds. ASX’s YouTube channel features
presentations from finance industry experts. ASX’s
monthly Investor Update e-newsletter covers
topics ranging from investment basics to strategies
relevant to more experienced investors, and has
over 220,000 subscribers. Face-to-face events in
capital cities focus on ASX products and services,
and connect investors with finance professionals.

The ASX Sharemarket Game provides an oppor-
tunity for the general public and secondary school
students to become familiar with the mechanics of
share trading. The Game is linked to the live market,
which connects students to real-world events. Over
68,000 students from 900 schools, and 57,000
members of the public, played the Game last year.

ASX people

ASX aims to build and retain a highly motivated
team of professionals with the best available skills
and experience.

The Remuneration Committee oversees and
receives periodic reports about ASX’s human capi-
tal policies and programs. In addition, the Executive
Committee regularly reviews talent and leadership
programs, performance management and reward
processes, succession planning outcomes, diver-
sity strategy progress, and staff alignment and
engagement results.

Culture
Management and the Board review the core set
of values and behaviours that reflect ASX’s brand
and culture. An annual survey measures staff
alignment, engagement and commitment to ASX
values and behaviours. Results are reviewed by
the Remuneration Committee, and the clearing
and settlement and ASX Compliance boards. ASX’s
internal audit and regulatory assurance functions
provide periodic feedback on risk and compliance
consciousness.

ASX staff alignment and engagement increased in
FY16. Alignment is in the top quartile and engage-
ment is at the top of the second quartile of ASX’s
peer group.

Remuneration
ASX’s market positioning for fixed remuneration
is the median to upper quartile. All employees are
entitled to participate in a short-term incentive
(STI) plan, subject to performance. During the year,
an offer to all ASX employees to acquire ASX shares
under an $1,000 General Employee Share Plan was
accepted by 51% of ASX staff.

ASX’s remuneration report on page 17 describes
ASX’s approach to senior executive remuneration.

Training and retention
Staff can access learning and development
programs at all levels of the organisation. These
programs are reviewed periodically to remain
contemporary and aligned to organisational goals.
ASX partners with the Macquarie Graduate School
of Management to support emerging female lead-
ers in their MBA studies.

Voluntary turnover was 12.0% in FY16.

Recognition
Recognition at ASX is supported through programs
that focus on excellence in the behaviours critical
to the company’s long-term success.

Workplace health and safety
ASX’s FY16 lost-time injury frequency rate (the
number of lost-time injuries per 1 million hours
worked) was less than 0.1. This is significantly below
FY15 and industry benchmarks.

ASX is committed to the health and safety of all
employees, visitors and contractors. Employees
are encouraged to adopt behaviours that identify
and then remove or control potential causes of
workplace risk, injury and illness.

The Audit and Risk Committee receives quarterly
updates on ASX’s compliance with workplace,
health and safety (WHS) laws, standards and codes
of practice. WHS performance is audited periodi-
cally by an independent third party.

ASX Wellbeing
ASX Wellbeing supports staff to balance work,
personal and family life.

A range of wellbeing initiatives are offered to staff
on a subsidised basis, including yoga, pilates, medi-
tation, lunchtime sport and a walking club. The ASX
Social Committee coordinates company-funded
social activities and events throughout the year.

ASX Annual Report 2016 | Environment, social and governance

Diversity and inclusion

ASX supports an inclusive and diverse work envi-
ronment where employees have equal access
to career opportunities, training and benefits.
Employees are treated with fairness and respect,
and are not judged by gender, age, ethnicity, race,
cultural background, religion, sexual orientation,
disability, or caring responsibilities.

ASX strives to make the most of its available talent
by eliminating barriers to career development and
progression for women in the organisation.

Gender equality is a business priority and ASX is
committed to supporting the equal participation
of men and women in the workforce.

ASX supports marriage equality.

Gender equality targets
ASX has made good progress towards its gender
diversity targets. The overall organisational target
of 40% has been met. The current target of 40% at
all senior management levels continues for FY17.

Female representation in ASX as at 30 June 2016:

ASX level
Board of directors

Group Executives

Executive Committee

Management Executive

Managers/Team Leaders

Professional/technical

Administrative

FY16
221
25

% women

FY15
30

Target
33.3

50+

40+

43
Entire organisation
1 Female directors 33.3% as at 1 August 2016.

Definitions
Group Executives: direct reports to the CEO
Executive Committee: all Group Executives and Executive
General Managers
Management Executive: executives two layers below
the CEO
Managers/Team Leaders: executives three layers below
the CEO
Entire organisation: includes casual staff and excludes
non-executive directors and independent contractors
Note: all data is non-cumulative and is calculated on the
number of employees in each level.

Accountability for gender diversity
Executive leaders are accountable to deliver gender
equality through targets in their STI plans. These
targets include staff survey results and diversity.

ASX requires a gender balanced shortlist when
recruiting for all roles.

Gender pay equality
ASX is committed to addressing pay equality
through ongoing monitoring, analysis, communi-
cation and improvement where required. Annual
remuneration recommendations and performance
outcomes are analysed to prevent gender pay
inequality. A dedicated budget for FY16 addressed
a number of pay equity gaps.

Building leadership capability
Staff are supported through career management,
retention and development plans. An employee-led
networking initiative has implemented programs
to increase networking events, create informal
learning and development opportunities, and
ensure that employees on parental leave remain
connected to the workplace.

ASX participates in the Chief Executive Women
Leaders Development Program, which provides
individual coaching for participants.

In FY16, one of ASX’s senior executives won a schol-
arship sponsored by Chief Executive Women to
attend the Women’s Leadership Forum at Harvard
Business School. The judges commended the
efforts of ASX to provide opportunities for the
diversity of its employees to advance and develop
their talents.

Supporting working families
All employees have the opportunity to work flexi-
bly. A recent staff survey indicated that 46% of staff
work in a flexible capacity, with higher engagement
and alignment for those employees. Staff may also
purchase up to an additional two weeks leave.

ASX’s parental leave policy provides 16-weeks paid
primary carer parental leave, with secondary carer
paid leave of four weeks. Superannuation contri-
butions continue during paternity leave.

ASX is accredited as a Breastfeeding Friendly
Workplace by the Australian Breastfeeding
Association.

Prevention of harassment and discrimination
ASX addresses discrimination and harass-
ment through prevention and online training.
On commencement of employment, all ASX
staff complete online equal employment oppor-
tunity training in line with the ASX Diversity
and Inclusion Policy.

ASX has processes in place to monitor and address
discrimination, and staff must complete online
training periodically.

WGEA report
ASX is recognised as an Employer of Choice for
Gender Equality by the Federal Government’s
Workplace Gender Equality Agency (WGEA). It
lodged its WGEA Annual Report in May 2016.

Ethics and integrity

ASX’s Code of Conduct and Anti-Bribery and
Corruption, Fraud Control, and Whistleblower
Protection policies promote ethical and respon-
sible decision-making by all ASX directors and
employees. ASX employees certify they understand
and comply with these policies. Periodic training
is provided on these policies, as well as on those
promoting Equal Employment Opportunity, diver-
sity and dealing rules.

Further details are set out on page 11 of the corpo-
rate governance section of this report.

ASX in the community

ASX assists its employees to become active
supporters of worthwhile causes and participate
in community programs outside the workplace. This
includes providing paid volunteering leave. ASX’s
community programs allow employees to support
causes and charities of their choice. ASX matches
employee donations to these charity partners, with
$153,104 donated to 59 charities in FY16.

ASX ThomsonReuters Charity Foundation
The ASX ThomsonReuters Charity Foundation
supports Australian children’s and medical research
charities by organising fundraising events for finan-
cial markets participants. Over $1.6 million was
raised and distributed to 30 charities in FY16. The
Foundation’s eight-person board includes three
ASX representatives.

ASX fulfils the company secretariat and finance
functions for the Foundation, and many ASX
employees volunteer to assist with the fund rais-
ing activities.

ShareGift Australia
ASX has supported ShareGift Australia since 2007
and promotes the charity on CHESS statements
sent to investors. ShareGift Australia allows share-
holders to sell shares free of brokerage costs and
donate the proceeds to charity. ASX reimburses
all ASX exchange fees on these transactions. ASX
encourages its shareholders to support ShareGift
Australia by enclosing a Share Sale Donation Form
each year with the year-end dividend. ShareGift
Australia has donated over $1.35 million to almost
450 charities.

Anzac Centenary Public Fund
ASX is contributing $1 million to the Anzac
Centenary Public Fund. The Fund, established by
the Australian Government, receives donations
to commemorate the centenary of Australia’s
involvement in the First World War and a Century
of Service. Projects honour and improve under-
standing of the service and sacrifice of Australia’s
servicemen and women, past and present, in
defending Australia’s values and freedoms.

ASX Annual Report 2016 | Environment, social and governance

Environment

ASX is a service-based organisation that does
not extract physical or natural resources and is
not involved in the manufacture or transport of
products. ASX’s environmental footprint is small
and arises from the energy used by its three offices
and two data centres, and also from consumables,
primarily paper. ASX’s environmental risks are not
significant.

Electricity usage
ASX has implemented a number of initiatives to
address direct and indirect emissions in its busi-
ness. ASX’s energy consumption has increased
slightly over the last three years, reflecting
increased headcount and activity levels during
the period.

More than half of ASX’s energy usage is in the
Australian Liquidity Centre (ALC, ASX’s primary
data centre). The ALC supports the equipment
and systems of customers who co-locate with ASX
instead of in their own or other facilities. Growth in
this business (and its energy consumption) reflects
the ALC’s position as the premier community of
financial markets infrastructure in Australia.
The number of hosted IT cabinets in the ALC has
increased from 117 to 231 over the last three years.

Environmental impact
Greenhouse gas (GHG) emissions
Scope 1 – diesel and gas

Scope 2 – electricity

GHG emissions by activity
Scope 1 – diesel and gas combustion

Scope 2 – electricity (data centre hosting)
– electricity (remainder ASX’s business)

Scope 3 – travel (business travel and commuting)
– paper usage (office)
– paper usage (CHESS statements and notifications)

Paper usage
Office use

CHESS statements and notifications

Paper usage
ASX’s paper usage (excluding CHESS statements
and notifications) has decreased by more than 40%
over the last three years. Management continues
to implement initiatives that reduce paper usage
in ASX’s business and the financial market overall.

Suppliers
Material suppliers must comply with a Supplier
Code of Conduct, which includes minimum require-
ments across key ESG areas. ESG considerations
are included in all material procurement tenders.

Assessment of ASX’s ESG practices
ASX participates in the following external assess-
ments of its ESG practices:

• Carbon Disclosure Project - provides trans-

parency on ASX’s emissions, waste, and water
usage

• FTSE4Good Index Series - identifies companies

that have met stringent social and environ-
mental criteria.

ASX’s ESG practices have also been assessed by
MSCI ESG research.

Unit
t CO2-e1
t CO2-e

Unit
t CO2-e

t CO2-e

t CO2-e
t CO2-e
t CO2-e

Unit
tonnes

tonnes

2014
100

12,250

2014
100

7,963
4,288

956
23
129

2014
12

2015
29

13,011

2015
29

8,457
4,554

986
16
146

2015
8

2016
11

14,440

2016
11

10,108
4,332

1,021
02
02

2016
7

1 Tonnes of carbon dioxide equivalent.
2 GHG emissions reported inclusive of carbon offset. ASX commenced using 100% carbon neutral paper in 2015.

ASX Annual Report 2016 | Environment, social and governance

Environmental targets

ASX Corporate Governance Council

Environmental risks are monitored, assessed and
managed as part of ASX’s risk management frame-
work. ASX’s approach to managing these risks
includes: measuring the impact of its activities,
minimising consumption of materials, recycling
and re-using consumables, and supporting aware-
ness of environmental issues. The Environment
Committee oversees ASX’s environmental
impact-reduction activities.

FY16 initiatives
• Launched ASX Environment Committee

Newsletter

• Implemented paperless supplier invoice

process

• Simplified new shareholder communications

• Upgraded recycling programs, including batter-

ies, phones and coffee pods

• Reduced paper CO2 emissions through use of

carbon neutral paper

The ASX Corporate Governance Council publishes
a principles-based framework for corporate
governance practices – the Corporate Governance
Principles and Recommendations – that serves as
a relevant and practical guide for listed entities,
investors and the wider Australian Community.

The Council brings together 21 business, investment
and shareholder groups. As the convenor, ASX
nominates the chair (currently Mr Alan Cameron
AO), contributes one member of the Council and
provides executive support.

ASX requires listed entities to disclose the extent to
which they have followed the recommendations set
by the Council during the relevant reporting period.
Where companies have not followed a recommen-
dation, they must provide an explanation (‘if not,
why not’ reporting). These reporting requirements
provide for transparency of the corporate govern-
ance practices of listed companies, which enables
investors to make informed investment decisions.

FY17 initiatives/targets
Management will implement FY17 targets for
controllable consumption of paper (excluding
CHESS statements and notifications) and energy
(excluding ASX’s data centre hosting) using metrics
that reflect variability in ASX’s business. These
targets and reporting will be included in ASX’s
FY17 Annual Report.

Management and a cross-divisional Environment
Committee will continue to identify other initia-
tives in FY17.

ESG guidance to issuers

The Council has contributed to a significant
improvement in public reporting and awareness
of ESG matters by listed entities. The Corporate
Knights and Aviva survey of sustainability disclo-
sures by international listed companies rated
sustainability disclosures by Australian public
companies the third highest in the world.

The third edition of the Principles released in March
2014 required listed entities to include details in
their Annual Report of how they manage their
material economic, environmental, social sustain-
ability and governance risks.

While ASX does not prescribe specific ESG bench-
marks, it has commissioned independent research
that serves as a resource for listed entities on good
practice, disclosure expectations and benchmark-
ing. This research has led to a greater action on, and
improved disclosure of, diversity and sustainability
risks facing listed entities.

Remuneration
report

This report outlines ASX’s remuneration frame-
work and the outcomes for the year ended 30
June 2016 (FY16) for the ASX Limited Board and
the Key Management Personnel (KMP) responsible
for planning, directing and controlling the activities
of the ASX Group.

Remuneration philosophy

ASX’s remuneration framework rewards behav-
iours and results that contribute towards the deliv-
ery of the ASX strategy. The framework is based
on the following key principles:

• link rewards to the achievement of the strategy

and the creation of shareholder value

• apply rigorous performance measures to ‘at

risk’ remuneration

• assess and reward performance on both finan-

cial and non-financial measures

• provide competitive remuneration that is

designed to attract, motivate and retain talent
and promote diversity

• promote sound and effective risk management

and market integrity.

Role of Remuneration Committee

The Remuneration Committee oversees ASX’s
executive remuneration framework and monitors
remuneration outcomes to take account of the
interests of shareholders, and ASX’s commitment
to maintaining sound and effective risk manage-
ment, and the integrity of its markets.

The Board approves, and reviews on an annual
basis, the remuneration of ASX’s KMP on the
recommendation of the Remuneration Committee.

Advice to Remuneration Committee

The Remuneration Committee operates inde-
pendently of ASX management and may engage
remuneration advisors directly. No remuneration
advisors were engaged in FY16.

Input is received from a number of subsidiary
boards and committees regarding the performance
and remuneration of certain KMP:

• ASX’s clearing and settlement boards regard-
ing the Group Executive, Operations and Chief
Risk Officer

• ASX Compliance board regarding the Chief

Compliance Officer

• Audit and Risk Committee regarding the Chief

Financial Officer.

Remuneration of Mr Dominic Stevens

Mr Dominic Stevens commenced as Managing
Director and CEO of ASX on 1 August 2016. A
summary of his remuneration arrangements was
released to the market on that day.

Mr Stevens’ FY17 remuneration comprises a mix
of 40% fixed, 40% short-term incentive (STI) and
20% long-term incentive (LTI):

Component
Fixed

STI

LTI

Amount
$2,000,000

$2,000,000 (target)
Maximum 150% of target
40% cash
30% deferred in equity for two
years
30% deferred in equity for four
years

$1,000,000
ASX share price (face value)

Total (at target)

$5,000,000

Mr Stevens’ CEO remuneration is consistent with
ASX’s executive remuneration policy outlined in this
report. Sixty percent of his overall remuneration is
at risk. Over 70% of this at risk remuneration will
be deferred into either equity (STI) or performance
rights (LTI). Mr Stevens’ grant of LTI will be submit-
ted for shareholder approval at the 2016 AGM.

The non-executive directors consider that Mr
Stevens’ remuneration package (including the
proposed grant under the LTI plan) is reasonable
and appropriate having regard to the circumstances
of the Company and Mr Stevens’ responsibilities
as CEO.

Arrangements following Mr Elmer Funke
Kupper’s resignation

Mr Elmer Funke Kupper resigned as CEO of ASX
on 21 March 2016.

The Board considered his contribution and ASX’s
performance in FY16 prior to accepting his resig-
nation. Mr Funke Kupper received on cessation of
his employment:

• payment in lieu of six-month notice period

• pro-rata cash component of his FY16 STI.
The deferred component of his FY16 STI
was forfeited

• his statutory entitlements.

Mr Funke Kupper was subsequently paid his
deferred STI from FY14 on 1 July 2016 in full,
after the Board decided not to clawback any of
this payment. He remains eligible to receive his
deferred STI from FY15 on 1 July 2017, subject to
ASX’s Clawback Policy.

The Board determined that these STI awards, which
were for performance in FY14 and FY15, should not
automatically be forfeited given the circumstances
of Mr Funke Kupper’s resignation.

Mr Funke Kupper’s 80,362 LTI performance rights
lapsed. The Board had a discretion to permit any
performance rights to be retained by Mr Funke
Kupper. This was not exercised.

Mr Peter Hiom and Ms Amanda Harkness were
appointed to lead the organisation after the
resignation of Mr Funke Kupper, in addition to
their existing roles. All other Group Executives
reported to Mr Hiom or Ms Harkness during the
interim period. Mr Hiom and Ms Harkness received
a one-off additional payment of $250,000 in recog-
nition of these additional responsibilities.

ASX Annual Report 2016 | Remuneration report

ASX Group remuneration

Fixed remuneration

Calculation of STI award
KMP STI is calculated using the formula illustrated below:

The remuneration arrangements for all staff are
made up of a fixed remuneration component and
a variable component. The variable component
for all staff is ‘at risk’ subject to performance, and
delivered through the STI plan and an LTI plan for
the CEO and Deputy CEO.

The relative weighting of fixed and variable compo-
nents (remuneration mix) will vary with role level,
complexity and market practice. The remunera-
tion mix is expressed as a percentage of the total
reward which equates to 100%.

STI deferral into equity is in place for all KMP. The
deferral arrangements set out in this report apply
to the CEO, Group Executives, Executive General
Managers and General Managers. They represent
approximately 6.7% of ASX headcount.

The FY16 remuneration mix for KMP for on target
performance was:

CEO and
Deputy CEO

Other KMP

Fixed

Variable (at risk)

STI*

40%

25-
40%

LTI

20%

40%

60-
75%

* The remuneration mix is for on-target performance
(100%). For above target performance, STI can be up
to 150% of target STI.

Fixed remuneration comprises cash salary, super-
annuation and other salary sacrificed benefits.

Fixed remuneration is reviewed on an annual basis
against comparable market data. ASX market posi-
tioning is the median to upper quartile, depend-
ing on individual performance. Increases are not
automatic and are subject to a minimum level of
individual performance.

Variable remuneration

The STI plan provides variable remuneration to
drive the achievement of ASX’s strategy and perfor-
mance objectives during the year. All employees
are eligible to participate.

Employees set individual goals and targets across
six scorecard areas: strategic priorities, custom-
ers and growth, people and culture, operational
excellence, regulatory focus, and financial results.
Employees in the operations, clearing and settle-
ment, and compliance functions have goals that
promote sound and effective risk management
and market integrity. Individual goals and targets
support ASX’s strategic goals. Managers have
regular conversations with team members about
their development and progress against individual
goals and targets.

STI awards are based on the performance of the
ASX Group against the objectives set by the Board,
and individual performance against the goals and
targets in the individual scorecards, as assessed
by each individual’s manager and senior executive.

ASX Annual Report 2016 | Remuneration report

Target STI in
$

Target reward model

On-target STI as
% of total reward

Group
incentive
pool %

Individual
performance
rating %

Determines the
available pool

Differentiated based
on 1-5 rating scale

Behaviours as ‘gate’

Financial and
non-ﬁnancial
performance

STI award in $
equity deferral

Recommendation

Incentives are at
Board discretion

Individual goals linked
to ASX strategy

60% award deferred
into equity for KMP

Satisfactory performance against the ASX lead-
ership behaviours must be achieved to be eligible
for an STI award.

The performance of each KMP is assessed by the
Remuneration Committee and the Board.

STI deferral and vesting
A percentage of STI awards for senior executives
is automatically deferred into equity:

KMP and
Executive General
Managers
(% of award)

General Managers
(% of award)

40%

30%

50%

N/A

STI award
Cash
payment
upfront

Deferred in
equity for
two years

Deferred in
equity for
four years

Target STI
KMP target STI was increased in FY16 to recognise
the lower upfront cash payment and longer vesting
period under the STI deferral arrangements.

Group incentive pool
The Board makes an assessment of the Group’s
performance split evenly between financial objec-
tives and non-financial and strategic objectives.
The assessment for FY16 is set out on page 19 of
this report.

Based on that assessment, the Board approves a
Group incentive pool percentage that is applied to
the target Group pool. For example, if the target
STI pool for executives is $10.0 million and the
Board determines that the Group’s performance
was below target and awards 80% of the pool,
the Group STI pool available for distribution to
executives would be $8.0 million.

Individual performance
Individual performance determines the amount
of STI awarded. Up to 150% of target STI can be
awarded for exceptional performance. The mini-
mum award is nil.

FY16 Group performance and
remuneration outcomes

This section summarises the Board’s assessment
of ASX’s FY16 performance and remuneration
outcomes.

Fixed remuneration outcomes

• Fixed remuneration increases from 1 July 2016

across the ASX Group averaged 2%

STI outcomes reflect company performance

• The Group met its objectives for FY16
• STI outcomes for Executives ranged from 90% to

110% of target STI and were, on average, at target

EPS portion of FY14 LTI was not met

• The 70% earnings per shares (EPS) portion of the

FY14 LTI award was not met

• The 30% total shareholder return (TSR) portion
of the FY14 LTI award will be determined at the
September 2016 vesting date

In assessing STI financial performance, the Board
takes into consideration the market conditions in
the businesses directly exposed to market activity
levels. This means that incentives may be awarded
even when market conditions lead to a fall in reve-
nue or earnings, provided other objectives are met.

Board assessment of ASX’s FY16 performance against objectives

Financial objectives – 50%

Revenue growth

Performance
Revenue increased 6.5%

Net profit after tax (NPAT)

Underlying NPAT up 5.7%. Statutory NPAT up 7.1%

Earnings per share (EPS)

Underlying EPS up 5.8%

Dividends per share (DPS)

Full-year dividend per share 198.1 cents, up 5.7%. Payout ratio 90%

Non-financial objectives – 50%

Customers and growth
Build strong partnerships with clients
and a customer-focused culture

Performance
Strengthened engagement with customers and delivered tangible benefits
• Launched 20 year bond contract and other derivatives products
• Continued growth in OTC clearing services with $2.7 trillion cleared and record levels in June 2016
• Implemented T+2 settlement that provides efficiencies for investors and market participants
• Launched new online portal for participants and technical services customers
• Opened an office in Hong Kong and improved distribution of the ASX derivatives market
• Established customer experience team - customer survey indicates improving service delivery and

strategic alignment, with more work to do

Strategic investment in Digital Asset Holdings to develop distributed ledger technology and build an
understanding of the potential benefits and implications for Australia’s financial markets

Board
assessment

At target

Board
assessment

At target

Technical and operational performance
Deliver world-class trading and post-
trade infrastructure to Australia’s
financial markets

Solid operational performance and reliability
• Critical systems availability met the 99.8% and 99.95% ASX benchmarks. Two unrelated ‘severity one’

issues in one day

• Third party clearing and settlement services met all agreed service levels
• Progressed ASX’s technology investment program
• New trading platform for futures live-date deferred to February 2017, focus on new services to support

OTC clearing and distributed ledger technology

At target –
de-risking
of technology
strategy

Regulatory compliance and risk
management
Maintain ASX’s position as one of the
highest quality and best regulated
exchange groups

Significant progress towards meeting the highest standards
• Positive regulatory reviews with no major issues raised
• AA- (long-term) credit rating from Standard & Poor’s maintained
• Progress towards meeting the Financial Stability Standards
• Compliance with European and US rules
• Reviewed risk management processes following BBY default and recommended changes to legislation
• Established an IT governance team with a focus on IT security
• Upgrading risk management systems to consolidate technology and improve capabilities
• Updated governance arrangements for ASX Compliance and ASX’s listings business

Government announced that existing cash equities clearing market structure will remain for at least
18 months

People and culture
Build a strong performance culture with
a highly engaged team

Positive progress, with stable staff survey results
• Alignment continues in top quartile and engagement close to top quartile
• Progress against diversity targets of 40% at all senior management levels
• Workplace health and safety - lost-time injury frequency rate less than 0.1

Stakeholder engagement
Be recognised as a positive contributor
to Australia’s economic future

• Continued engagement with end-investors, listed companies and the superannuation sector
• Provided input into domestic and international regulatory processes

At target

At target –
diversity slightly
behind target

At target

ASX Annual Report 2016 | Remuneration report

Long-term incentive overview

The purpose of the LTI plan is to recognise perfor-
mance and behaviours that deliver substantial
long-term shareholder value.

Only the CEO and Deputy CEO participate in ASX’s
LTI plan. The former CEO’s LTI was forfeited upon
his resignation. ASX will submit Mr Stevens’ FY17
LTI grant for shareholder approval at the 2016 AGM.

The LTI is a grant of performance rights over ASX
ordinary shares, which will vest if ASX achieves
performance hurdles determined by the Board.

ASX’s LTI has a four-year performance period.
The number of performance rights is allocated
based on the volume weighted average price of
ASX shares (face value) on the 10 business days
preceding the grant date. No dividends are paid
on the performance rights. There is no retesting.
Half of the performance rights have an earnings
per share (EPS) and half have a total shareholder
return (TSR) performance condition.

Executive service agreements

EPS LTI component
EPS is calculated by dividing the underlying profit
after tax attributable to members of ASX for the
relevant reporting period (profit after tax adjusted
for the after-tax effect of any significant items) by
the weighted average number of ordinary shares of
ASX. Significant items are revenues and expenses
associated with specific events considered appro-
priate by the directors to be excluded in order to
arrive at underlying earnings. Exclusion of these
items would be clearly identified and explained if
such action changed any vesting outcome.

TSR LTI component
TSR is calculated as the movement in share price
and dividends received, assuming re-investment
of dividends. TSR is measured against a peer group
determined by the Board at the time of the offer
based on the ASX 100, excluding property trusts.

Ranking of TSR (4 years)

Performance
< 51st percentile

% of equity to vest
0%

51st percentile

25%

51st – 76th
percentile

25% to 100% straight line
pro-rata vesting

Compound annual growth in EPS (4 years)

>76th percentile

100%

Performance
< 5.1% (pa)

5.1%

5.1% - 10.0%

% of equity to vest
0%

50%

50% to 100% straight line
pro-rata vesting

>10%

100%

EPS performance is measured over a four-year
period using the most recent financial year end
prior to the granting of the award as the base year,
and the final financial year in the performance
period as the end year.

Accounting treatment of LTI
The fair value of the performance rights for the EPS
awards is calculated using the share price at market
close on the grant date, less the present value of the
expected dividends over the performance period.

The fair value of performance rights for the TSR
awards is calculated at grant date by an independ-
ent valuer using a Black-Scholes option valuation
model and Monte Carlo simulation. Details of the
awards, including inputs to the valuation model,
are summarised in the following table:

Grant year
Share price at grant
date

FY16

FY15

FY14

$37.88

$36.45

$34.70

Volatility (pa)

16%

14%

20%

Discount rate (risk
free rate) (pa)

1.94%

2.87%

2.81%

Dividend yield (pa)

4.75%

5.0%

5.1%

Fair value of perfor-
mance rights (EPS
awards)

Fair value of perfor-
mance rights (TSR
awards)

Weighted average
AASB 2 share-based
payment fair value

$31.32

$31.37

$29.78

$15.36

$17.94

$13.57

$23.34

$27.34

$24.91

Treatment of STI and LTI on departure

All deferred or unearned STI is forfeited in the
event of resignation (unless approved by ASX) or
dismissal due to misconduct or poor performance.
Treatment of STI on departure for other reasons
is based on the discretion of the Board (for the
CEO) or CEO.

Performance rights (LTI) will lapse immediately in
the event of resignation (unless approved by ASX)
or dismissal due to misconduct or poor perfor-
mance, unless the Board determines in its discre-
tion that the participant ceased employment for
a qualifying reason. This includes pursuit of other
company-approved initiatives, death, serious illness
or accident. Where LTI does not lapse immedi-
ately, the Board may determine in its discretion
the proportion of shares that are forfeited.

The peer group may change as a result of specific
events such as mergers and acquisitions, delist-
ing and financial failure. There are guidelines for
adjusting the peer group following such events.

Past LTI grants
Shares relating to grants of performance rights that
have vested are allocated from a surplus pool of
unvested LTI offers within a special purpose trust
and released as shares to the employee. Shares
allocated under the LTI plans rank equally with
other shares on issue at the time those shares
are allocated.

Grant year

Grant date

Participation

Performance
measure

EPS vesting
commences at

FY16
30
September
2015

FY15
23
September
2014

FY14
25
September
2013

50% EPS
50% TSR

70% EPS
30% TSR

5.1%
compound
growth

8.1%
compound
growth

TSR vesting
commences at

51st
percentile

Vesting period

4 years

3 years

Vesting date

Dividends paid

Retesting

1
October
2019

24
September
2017

26
September
2016

Each KMP has an ongoing service contract. The contracts do not provide for any termination payments,
other than payment in lieu of notice and any statutory entitlements. The key terms are:

Name
D J Stevens

R Aziz

Position held
Managing Director and CEO

Chief Financial Officer

A J Bardwell

Chief Risk Officer

Contract
effective date
1 August 2016

19 July 2010

L A Green

Group Executive Human Resources

3 August 2015

A J Harkness

P D Hiom

T J Hogben

K A Lewis

Group General Counsel and
Company Secretary, Group
Executive Corporate Affairs

Deputy CEO

Group Executive Operations

Chief Compliance Officer

10 September
2007

1 July 2015

1 April 2010

19 July 2010

T Thurman
E Funke Kupper1 Former Managing Director and CEO 6 October 2011

Chief Information Officer

17 December 2014

Minimum notice periods (months)

Executive
6

ASX
12

Poor
performance
3
12
12
32

32
12
6

1 E Funke Kupper resigned 21 March 2016.
2 The notice period for termination for poor performance requires an initial written notice of one month.

ASX Annual Report 2016 | Remuneration report

There have been no increases to ASX Limited
Board and committee fees since January 2014. A
change to the composition of ASX’s committees
and subsidiary boards increased the total amount
paid to some directors in FY16 compared to FY15.

Chairman fees
Mr Holliday-Smith has not received, and will not
be paid, any amounts other than his pre-existing
Chairman’s fee for the services he performed up
to 1 August 2016.

The CEO will forfeit any STI or LTI if ASX determines
that such action is necessary to protect the financial
soundness of ASX or where adverse outcomes
have arisen that reduce the original assessment
of the performance generating the provision of
the benefit.

Clawback Policy and Board discretion

The Clawback Policy permits the Board to clawback
some or all of an executive’s proposed perfor-
mance-based remuneration if the Board considers
that such remuneration would be an ‘inappropriate
benefit’. This includes any STI or LTI award and
other performance-based component of remuner-
ation that has not yet been paid or vested with-
out restrictions to an executive. The Board has
absolute discretion to determine what constitutes
an ‘inappropriate benefit’ and how to apply the
clawback, subject to compliance with the law and
the conditions set out in the policy. This discretion
can be applied at any time.

The Board may adjust LTI outcomes by up to 20%,
or more if outcomes have been materially impacted
by changes to dividend policy, capital structure,
gearing or corporate structure.

Company performance

This discretion has not been applied in the current
year or prior years. The Board will exercise such
discretion in a manner that is consistent with
supporting sound and effective risk management,
protecting ASX’s long-term stability and aligned
with creation of long-term shareholder value. If
this discretion was applied in any year, it would
be clearly disclosed and explained.

Non-executive director remuneration

The Remuneration Committee reviews and recom-
mends to the Board the remuneration for non-ex-
ecutive directors.

Fees are broadly aligned to the top quartile of the
marketplace so that:

• ASX non-executive directors are remunerated
fairly for their services, recognising the work-
load, and level of skill and experience required
for the role

• ASX can attract and retain talented non-execu-

tive directors

• fees are in line with market practice.

Remuneration structure
Non-executive director remuneration includes:

• Board fee

• committee (including subsidiary board) fees

• superannuation.

Board, committee and subsidiary board fees have
regard to the responsibilities of each position. Fees
are determined by the Board within the aggregate
amount approved by shareholders. Non-executive
directors have no entitlement to any perfor-
mance-based remuneration or participation in
any share-based incentive schemes. ASX does not
have a non-executive director retirement scheme.

Director fees
The maximum aggregate amount that may be paid
to all ASX non-executive directors in their capacity
as members of the ASX Board and its committees,
and as directors of subsidiary boards, is $2.8 million
per annum. This was approved by shareholders
at the 2012 AGM. The amount paid in FY16 was
$2.4 million.

The Board reviews its fees regularly in line with
ASX’s objectives for non-executive remuneration.
The next review will take place in November 2016.

ASX’s financial performance over the five-year period ending FY16 is shown in the graphs below.

Net proﬁt after tax ($million)

Earnings per share (EPS) (cents)

Dividends per share (cents)

ASX share price ($ at end of ﬁnancial year)

2
3
8
3

8
7
9
3

2
3
0
4

2
6
2
4

2
9
3
3

2
6
4
3

2
8
4
3

6
0
9
1

6
4
9
1

5
5
9
1

5
8
9
1

7
5
0
2

4
8
0
2

4
0
2
2

85.1

82.3

89.9

95.1

99.0

33.07

29.36

92.8

87.9

88.2

92.3

99.1

45.76

39.90

35.64

FY12

FY13

FY14

FY15

FY16

Statutory proﬁt

Underlying proﬁt

FY12
Reported EPS

FY13

FY14

FY15

FY16

FY12

FY13

FY14

FY15

FY16

FY12

FY13

FY14

FY15

FY16

Underlying EPS

Interim

Final

ASX Annual Report 2016 | Remuneration report

Statutory remuneration of
Group Executive KMP

The remuneration table below has been prepared in
accordance with accounting standards as required
by the Corporations Act 2001. The accounting
standards only require the disclosure of the
expense or cost to the company in the finan-
cial years presented, which may result in only

a portion of cash remuneration being disclosed
where payments are deferred to future financial
years. In addition, the accounting standards require
share-based payments expense to be calculated
using the grant date fair value of the shares rather
than current market prices.

Current
R Aziz
Chief Financial Officer

A J Bardwell
Chief Risk Officer

L A Green
Group Executive Human Resources
(commenced 3 August 2015)

A J Harkness
Group General Counsel and Company Secretary,
Group Executive Corporate Affairs

P D Hiom
Deputy CEO

T J Hogben
Group Executive Operations

K A Lewis
Chief Compliance Officer

T Thurman
Chief Information Officer

Former
E Funke Kupper
Managing Director and CEO
(resigned 21 March 2016)

A J Mostyn
Group Executive Human Resources
(resigned 30 June 2015)

Total

2016
2015

2016

2016
2015

Short-term

Post-employment

Long-term

Year

Salary

STI

Non-
monetary

Other1

Superannuation
benefits

Deferred STI

Other2

Share-based
payments3

Total

Performance-
related4

430,692
431,217

604,765
606,217

120,000
110,000

75,200
77,500

-
-

292,616

70,000

6,838

150,000

680,692
681,217

962,205
787,702

455,692
456,217

680,692
681,217

558,981
532,166

206,000
170,000

400,000
600,000

140,000
117,500

150,800
135,000

160,000
170,000

1,253,097
1,731,217

525,000
750,000

250,000
-

-
-

18,487
18,515

-
-

21,711
49,293

-
-

19,308
18,783

18,988

19,308
18,783

105,000
100,000

73,750
60,000

160,000
145,000

200,000
175,000

117,500
108,750

142,500
145,000

163,750
146,250

7,059
7,068

-
-

11,347
11,355

15,894
13,066

7,596
7,605

-
-

927
-

-
-

682,059
667,068

773,950
762,500

538,442

1,327,347
1,026,355

110,577
260,979

1,976,471
1,874,045

-
-

740,096
708,855

993,300
980,000

923,750
916,492

(614,713)
260,979

3,543,452
3,473,479

865,346
-

14,722
18,783

1,500,000
712,500

33.0%
31.5%

19.2%
18.0%

13.0%

27.6%
30.7%

36.0%
55.3%

34.8%
31.9%

29.5%
28.6%

35.0%
34.5%

39.8%
49.6%

24.0%

33.1%
40.0%

2015

356,217

62,500

18,783

57,500

5,834

500,834

2016
2015

5,919,432
6,263,387

1,847,000
2,192,500

47,036
67,808

1,515,346
-

168,866
169,047

2,462,500
1,650,000

41,896
44,928

(503,209)
521,958

11,498,867
10,909,628

1 Reflects one-off payments made during the year.
2 Reflects accrued long service leave entitlements.
3 Reflects annual share-based payments expense for performance rights issued and shares purchased under the employee share scheme. The expense is calculated using the fair value of performance rights or shares at grant date, less any write-

back for performance rights lapsed as a result of non-market hurdles not attained.

4 Reflects the percentage of total remuneration that is performance-related (STI, deferred STI and shared-based payments relating to performance rights).

ASX Annual Report 2016 | Remuneration report

Remuneration received or available in the
financial year

The remuneration table below has been provided
as additional non-statutory information to assist
in understanding the total value of remuneration
received by Group Executive KMP in the current
and prior financial years.

Current

R Aziz
Chief Financial Officer

A J Bardwell
Chief Risk Officer

L A Green
Group Executive Human Resources
(commenced 3 August 2015)

A J Harkness
Group General Counsel and Company Secretary,
Group Executive Corporate Affairs

P D Hiom
Deputy CEO

T J Hogben
Group Executive Operations

K A Lewis
Chief Compliance Officer

T Thurman
Chief Information Officer

Former

E Funke Kupper
Managing Director and CEO
(resigned 21 March 2016)

Year

2016
2015

2016

2016
2015

Other remuneration

STI awarded and
paid in FY162

Total payments
applicable to FY16

Deferred STI
award3

Deferred share-
based awards4

Total remuneration
received in FY165

Previous year awards
that vested in FY16

Total fixed
remuneration
for FY161

450,000
450,000

625,000
625,000

-
-

318,442

150,000

700,000
700,000

1,000,000
825,000

475,000
475,000

700,000
700,000

600,000
600,000

250,000
-

-
-

d=a+b+c

120,000
110,000

75,200
77,500

70,000

206,000
170,000

400,000
600,000

140,000
117,500

150,800
135,000

160,000
170,000

570,000
560,000

700,200
702,500

538,442

1,156,000
870,000

1,650,000
1,425,000

615,000
592,500

850,800
835,000

760,000
770,000

100,000
100,000

70,000
50,000

150,000
140,000

175,000
175,000

117,500
100,000

150,000
140,000

157,500
135,000

-
-

g=d+e+f

670,000
660,000

770,200
752,500

538,442

1,306,000
1,010,000

1,825,000
1,600,000

732,500
692,500

1,000,800
975,000

917,500
905,000

3,408,165
3,175,000

490,000

1,267,819
1,750,000

865,346
-

525,000
750,000

2,658,165
2,500,000

750,000
675,000

A J Mostyn
Group Executive Human Resources
(resigned 30 June 2015)
1 Fixed remuneration comprises salary, superannuation, non-monetary benefits and share-based payments that have been salary sacrificed.
2 The portion of STI awarded in FY16 in cash. The remaining portion of STI in respect of FY16 but deferred for two and four years, is shown in the Group Executive KMP STI allocations for FY16 table on page 24.
3 This relates to the payment of the cash-based STI awarded in July 2014 (2015: July 2013) and deferred for two years.
4 No deferred share-based awards vested in FY16.
5 The STI and deferred award payments shown as being received in the financial year were made shortly after the conclusion of the financial year.

375,000

437,500

62,500

52,500

2015

ASX Annual Report 2016 | Remuneration report

Group Executive KMP STI allocations for FY16

Value of Group Executive KMP LTI allocations for FY16

Total STI awarded1

STI portion
deferred2

The following table shows the minimum and maximum values of performance rights that may be
received by Group Executive KMP as remuneration in future financial years:

Current
R Aziz

A J Bardwell

L A Green

A J Harkness

P D Hiom

T J Hogben

K A Lewis

T Thurman

Former
E Funke Kupper3
(resigned 21 March 2016)

STI target

300,000

209,000

175,000

467,000

300,000

188,000

175,000

515,000

1,000,000

317,000

377,000

400,000

350,000

377,000

400,000

100%

90%

100%

110%

100%

110%

100%

180,000

112,800

105,000

309,000

600,000

210,000

226,200

240,000

1,750,000

525,000

40%

1 Total STI award including cash payment and deferred component.
2 This represents the value of the STI award that is deferred until 1 July 2018 and 1 July 2020. The deferred STI awards

are subject to continued satisfactory performance during the deferral period.

3 Total STI awarded is pro-rated to reflect the portion of the year served prior to resignation. The deferred component

of FY16 STI was forfeited.

Group Executive KMP LTI allocations for FY16

The following table shows the movement during the financial year in the number of performance-related
rights over issued ordinary shares in ASX held directly, indirectly or beneficially by the Group Executive
KMP, including their personally related parties:

Grant date:
Vesting date:

25 September 2013
26 September 2016

23 September 2014
24 September 2017

30 September 2015
1 October 2019

Min $1

Max $2

Min $1

Max $2

Min $1

Max $2, 3

Current

P D Hiom

Former

E Funke Kupper
(resigned 21 March 2016)

749,990

749,991

304,377

1 Since the performance rights are issued at zero exercise price, their minimum total value is nil, on the basis that they

will not vest if the applicable performance/vesting conditions are not met.

2 The amounts represent the maximum fair value for future years of the performance rights yet to vest, as at their grant

date. The maximum total value is the number of rights issued multiplied by the weighted average fair value.

3 The fair value per share of the FY16 grant is $23.34.

No other KMP had performance-related rights over issued ordinary shares in ASX directly, indirectly
or beneficially.

Group Executive KMP holdings of ordinary shares

Held at
1 July 2015

Received on vest-
ing of rights over
deferred shares

Other changes

Held at
30 June 2016

Current
D J Stevens
(commenced 1 August 2016)

Current

P D Hiom

Former
E Funke Kupper
(resigned 21 March 2016)

Held at
1 July 2015

Granted as
compensation
during the year

Vested
and exercised
during the year

Lapsed
during the
year

Held at
30 June 2016

R Aziz

A J Bardwell

93,220

13,041

93,220

22,822

(35,680)

70,581

L A Green
(commenced 3 August 2015)

A J Harkness

P D Hiom

(116,042)

T J Hogben

No other KMP had performance-related rights over issued ordinary shares in ASX directly, indirectly
or beneficially.

K A Lewis

T Thurman

Former
E Funke Kupper
(resigned 21 March 2016)

ASX Annual Report 2016 | Remuneration report

11,500

28,545

4,906

N/A

4,577

30,295

11,053

11,500

28,545

4,930

4,577

30,295

N/A

Non-executive director fees for FY16

Equity holdings of non-executive directors

Details of the remuneration of the non-executive directors of ASX are set out in the following table.
Remuneration includes all fees received as directors of ASX as well as subsidiary boards and committees.

No performance rights have been granted to ASX non-executive directors.

Current

R Holliday-Smith

Y A Allen
(appointed 9 February 2015)

K R Henry

P R Marriott

H M Ridout

D Roche
(appointed 1 August 2014)

D J Stevens

P H Warne

Former
J S Segal
(resigned 1 September 2015)
Total

Year

2016
2015

Short-term
salary and fees

Subsidiary
boards and
committees

Post-
employment
superannuation

425,000
425,000

150,000
37,500

150,000
150,000

150,000
112,500

150,000
150,000

25,679
150,000

1,500,679
1,475,000

50,000
50,000

80,208
-

85,000
55,000

150,000
150,000

71,667
15,000

73,958
-

85,000
85,000

146,500
145,000

19,688
115,000

762,021
615,000

19,308
18,783

19,308
3,563

19,308
18,783

14,481
15,675

18,894
10,688

19,308
18,783

4,310
18,783

153,533
142,624

Total

494,308
493,783

249,516
41,063

254,308
223,783

319,308
318,783

236,148
180,675

242,852
123,188

254,308
253,783

315,808
313,783

49,677
283,783

2,416,233
2,232,624

The table below summarises the movements in holdings of ordinary shares in ASX held directly, indirectly
or beneficially by each ASX non-executive director and their personally related entities.

Current
R Holliday-Smith

Y A Allen

M B Conrad
(appointed 1 August 2016)

K R Henry

P R Marriott

H M Ridout

D Roche

P H Warne

Former
J S Segal
(resigned 1 September 2015)

Held at
1 July 2015

Other
changes

Held at
30 June 2016

Holding at
18 August 2016

8,000

N/A

1,860

5,316

5,000

10,000

6,000

4,000

5,000

N/A

3,140

12,000

5,000

N/A

5,000

5,316

5,000

10,000

6,000

12,000

5,000

5,316

5,000

10,000

6,000

4,211

N/A

Further details of the Board director shareholding policy for non-executive directors is set out on page
8 of this report.

ASX Annual Report 2016 | Remuneration report

Operating
and financial
review

The operating and financial review outlines ASX’s
activities, performance, financial position and main
business strategies. It also discusses the key risks
and uncertainties that could impact on ASX and
its subsidiaries (together referred to as the Group)
and its ability to achieve its financial and other
objectives.

Business model and operating environment

ASX is a multi-asset class and vertically integrated
exchange group, and ranks in the top 10 exchange
groups globally when measured by market capital-
isation. It operates markets for cash equities and
derivatives, and provides a full service offering
including listings, trading, clearing, settlement,
registry, and information and technical services.
ASX operates a significant part of the infrastructure
that supports Australia’s financial markets.

Primary markets capital formation – Listings
and Issuer Services
Capital formation is the process that brings
together, in one marketplace, organisations that
require capital and those that can provide it. ASX,
through its listing rules and infrastructure, provides
a facility for companies to list, raise capital and
have their securities publicly traded.

The Group provides a range of services to issuers of
capital, including the generation of security holding
statements and other shareholder and sub-register
services. At 30 June 2016, there were 2,204 issuers
on ASX. Along with the shares of companies, ASX
lists debt securities (including government debt
securities) and exchange-traded products.

ASX also provides its mFund settlement service to
access unlisted funds.

The business is conducted through a number of
regulated legal entities. ASX holds market operator
licences and clearing and settlement licences to
undertake its activities. ASX is subject to over-
sight by the Australian Securities and Investments
Commission (ASIC) and the Reserve Bank of
Australia (RBA).

ASX services companies and other issuers that list
equity and debt securities on the exchange, as well
as a wide range of retail and institutional investors
that invest in and trade those securities. Many of
ASX’s services are provided through intermediar-
ies including stockbrokers, Australian banks and
Australian-based international banks. Clients of
these intermediaries include retail and corporate
investors, asset managers, custodians and other
financial market participants.

While ASX’s operations are primarily based in
Australia, the Group services both domestic and
international customers, and some of its services
are accessible from offshore.

ASX’s diversified and vertically integrated business
model is typical of large exchange groups operating
in the Asia Pacific.

The Group earns revenue from listed entities for
initial listing, annual listing, secondary capital rais-
ings, and for issuer services. The main drivers of
revenue in this category include the:

• number of listed entities and their market

value

• number and value of initial public offerings

(IPOs)

• level of corporate actions, such as secondary

capital raisings

• level of retail trading activity and the resulting

number of holding statements

• number and value of managed funds utilising

mFund.

ASX faces competition for listings from other
exchanges both domestically and internationally.
There are also other non-public means of raising
capital, such as private equity funds, which can
compete with the ASX primary market.

Secondary markets – Trading Services
Trading Services comprises the trading of securities
in the cash market as well as the information and
technical services offered by ASX.

Cash market – trading of cash market securities
includes equity (shares), warrants, exchange-traded
funds and listed debt securities. At 30 June 2016,
there were 77 trading participants, many of which
provide intermediary broking services to end-
investors. The value of turnover transacted on the
ASX market is the primary revenue driver. There is
competition in trading from another equity market
operator and off-market trading facilities, which are
often referred to as ‘broker dark pools’.

ASX provides information and technical services
to its clients to support their secondary market
activities. Information services include the provi-
sion of real-time market data for the cash and
derivative markets, company news, and index and
other reference data. The main revenue driver is the
number of end-users accessing real-time market
data as well as the level of enterprise agreements
for the provision of data.

Technical services consists of four main categories
of services to facilitate market connectivity and
access to ASX and third-party services by custom-
ers. These are:

• liquidity access via ASX platforms

• community and connectivity services including
a secure low latency communication network
via ASX Net

• application services including terminals to

access ASX platforms

• hosting of customer infrastructure within the

ASX Australian Liquidity Centre (ALC).

Revenue drivers for each category consist of the
volume of services used by customers, such as
the number of connections to ASX markets or the
number of cabinets hosted in the ALC.

ASX Annual Report 2016 | Operating and financial review

Equity Post-Trade Services
ASX’s clearing and settlement infrastructure
provides critical risk management services to
financial market participants and investors. ASX’s
post-trade operations are backed by significant
Australian-based capital and collateral, and are
overseen by Australia’s regulators. Clearing and
settlement of cash markets is undertaken by ASX
for the entire Australian marketplace.

Cash market clearing
ASX provides central counterparty clearing (CCP)
services to the cash market through a licensed
subsidiary, ASX Clear. As a CCP, the clearing
subsidiary becomes the central counterparty to
every trade and assumes the credit risk of each
ASX clearing participant. In effect, ASX becomes
the seller to every buyer and the buyer to every
seller. This process is known as novation. The CCP
supports these risk management activities with
collateral lodged by clearing participants and ASX
funds available in the event of participant failure to
meet their obligations. The main revenue driver is
the value of equity securities novated and centrally
cleared.

Cash market settlement
ASX’s settlement services help reduce counterparty
and systemic risk, and provide transaction effi-
ciency and certainty for end-investors. Settlement
occurs on a delivery-versus-payment (DvP) basis
and involves the exchange of cash for physical
delivery of securities.

Cash market settlement is conducted through the
Clearing House Electronic Sub-register System
(CHESS). This system registers the title (ownership)
of shares and held $1.6 trillion of securities at 30
June 2016. ASX’s model for cash market settlement
maximises efficiency through the netting of settle-
ment obligations in each individual security and the
netting of all payment obligations, while minimising
the risk of settlement failure. The main driver of
settlement revenue is the number of settlement
messages.

ASX is currently the sole provider of clearing and
settlement services for ASX-listed securities traded

in Australia’s cash market. ASX clears and settles
transactions in non-ASX listed securities under-
taken on another licensed market through a Trade
Acceptance Service, allowing the seamless clearing
and settlement of these transactions alongside
ASX-listed transactions.

During the year, the Federal Treasurer provided
clarity on the market structure for equities clearing.
The Treasurer announced that Australia’s regu-
latory agencies will not recommend approval of
any clearing licence applications until the condi-
tions that support the Government’s policy for
safe and effective competition are established.
This is expected to take at least 18 months. ASX
has maintained its commitment to the Code of
Practice that sets out how it manages its clearing
and settlement infrastructure on behalf of the
Australian market.

Derivatives and OTC Markets
ASX offers exchange-traded derivatives, including
the trading and clearing of futures and options on
futures on interest rate, equity index, agricultural
and energy contracts, as well as exchange-traded
options over individual securities. At 30 June
2016, there were 59 futures trading participants
and approximately $51.4 trillion of notional value
was transacted during the year. The number of
contracts traded is the primary revenue driver. ASX
provides CCP clearing of these exchange-traded
derivatives as well as clearing of over-the-coun-
ter (OTC) derivatives through a licensed clearing
subsidiary, ASX Clear (Futures). This entity provides
risk management services supported by clearing
participant collateral and funds provided by both
ASX and participants, which are available in the
event participants fail to meet their obligations.
Competition comes from offshore exchanges and
OTC products. Clearing of futures and options
occurs exclusively in Australia by ASX while clearing
of OTC derivatives may be undertaken by certain
foreign domiciled clearing entities.

Austraclear
Austraclear provides settlement, depository and
registry services for debt securities and cash trans-
actions. ASX’s model for debt securities settles

transactions on a trade-by-trade basis, which
provides for certainty of settlement. The number
of transactions is the main revenue driver.

Depository services are provided through the
Austraclear Central Securities Depository (CSD),
which held $1.9 trillion of debt securities at 30
June 2016. These securities consist of fixed income
securities including government bonds. Settlement
of transactions on these securities occurs through
real-time gross settlement (RTGS). The value of
securities held is the main revenue driver.

Registry services are provided whereby Austraclear
facilitates security registration and the subsequent
cash transfers associated with the terms of the
individual securities. The main drivers of registry
revenue are the number and value of securities
held in the registry.

The ASX Collateral Service allows customers of
ASX to utilise collateral held in Austraclear to meet
obligations to other customers or to ASX’s clearing
subsidiaries. The service adds value by reducing the
cost of collateral for market participants. ASX earns
revenue for the provision of this service based on
the value of collateral lodged.

Following is a discussion of the contribution of
each of the above services to the Group’s segment
revenue and a review of the Group’s operations
over the financial year.

Review of operations

Investment in Digital Asset Holdings, LLC
During the financial year, ASX acquired an 8.5%
equity interest in Digital Asset Holdings, LLC (DAH)
for consideration of USD $17.4 million (A$24.4
million). DAH specialises in the development of
distributed ledger technology (DLT) solutions
(commonly referred to as blockchain), and is under-
taking a project to develop a potential solution for
ASX equity post-trade services currently performed
by CHESS.

Results of operations

The Group’s profit after tax for the year ended
30 June 2016 increased by 7.1% to $426.2 million.
Compared to underlying profit of the prior year,
(which excluded a restructuring charge to support
the technology transformation program and other
organisation changes), profit after tax increased
5.7%. A summary income statement in line with the
Group’s segment note is reflected in the following
table:

$ million

Operating revenue

FY16

FY15

746.3

700.7

Operating expenses

(170.6)

(160.1)

Variance %
fav/(unfav)

6.5

(6.5)

6.5

575.7

540.6

(42.7)

(38.6)

(10.5)

533.0

502.0

73.1

71.9

606.1
(179.9)

573.9
(170.7)

426.2

403.2

(5.4)

426.2

397.8

6.2

1.7

5.6
(5.4)

5.7

7.1

EBITDA

Depreciation and
amortisation

EBIT

Interest and dividend
income

Profit before tax
Tax expense

Underlying profit after
tax

Significant items after
tax

Statutory profit after
tax

Earnings per share
The Group’s basic earnings per share (EPS) in FY16
were 220.4 cents (FY15: 205.7 cents). The increase
in EPS of 7.1% resulted from higher earnings in
the current year. Underlying EPS was up 5.8%
on the pcp.

ASX Annual Report 2016 | Operating and financial review

Dividends
ASX paid an interim dividend of 99.1 cents per share
and directors have determined a final dividend of
99.0 cents per share. Total dividends per share of
198.1 cents are 5.7% higher than the prior year, and
reflect the increase in underlying earnings.

The Board’s dividend policy is to pay 90% of
underlying earnings after tax. This is reviewed
each time the Board considers payment of a divi-
dend. Underlying earnings (NPAT) are results from
operations adjusted for any significant revenues
or expenses such as those associated with major
restructuring or transactions.

Operating revenue

Operating revenue in FY16 increased 6.5% to
$746.3 million. All major revenue categories grew
compared to the prior year.

The following table depicts the contribution to
operating revenue from ASX’s various business
activities. The percentage contribution of each
category is illustrated in the pie chart and reflects
ASX’s diversified business mix.

Operating revenue mix

Austraclear
7%

Futures
and OTC
Clearing
26%

Derivatives
and OTC
Markets
36%

Listings
20%

Listings and
Issuer Services
26%

Trading
Services
24%

Issuer
Services
6%

Technical
Services
8%

Information
Services
11%

Equity Options
3%

Cash Market
Settlement
7%

Equity
Post-Trade
Services
14%

Cash Market
Clearing
7%

Cash Market
Trading
5%

ASX re-aligned responsibilities for the business
activities into the four key categories above during
the year.

Revenue category
Listings and Issuer
Services

Trading Services

Equity Post-Trade
Services

Derivatives and OTC
Markets

FY16
$ million

FY15
$ million

Variance %
fav/(unfav)

192.7

183.5

182.8

169.9

102.0

91.8

265.8

253.9

5.0

7.7

11.1

4.7

Other revenue

3.0

1.6

Large

Total operating revenue

746.3

700.7

6.5

Commentary on operating revenue for the various
business activities is provided below. Details of
transaction levels that drive a large portion of
ASX’s revenue are contained on pages 70 to 72 of
the Annual Report.

Listings and Issuer Services – $192.7 million, up
5.0%
In FY16, the number of new listings and secondary
capital raised increased, while the total amount of
capital raised was lower than the pcp.

• Annual listing revenue – up 6.3% to $75.2

million. There were 2,204 entities listed on the
ASX at 30 June 2016 (30 June 2015: 2,220).
Increases in market capitalisation combined
with fee changes were the main drivers
supporting the increase in revenue.

• Secondary capital raisings revenue – up 5.6%
to $45.1 million. The increase in revenue is due
to a 10.1% increase in the amount of secondary
capital raised to $55.0 billion.

• Issuer services revenue – up 7.5% to $43.3
million. The increase in revenue resulted
primarily from growth in the number of
CHESS holding statements, up 6.4% and
other issuer services, up 16.5%.

Trading Services - $182.8 million, up 7.7%
The following table depicts the growth in ASX
on-market value traded over the past five years.

ASX on-market value traded ($billion)

1,059.2

966.5

Total capital raised ($billion)

884.9

829.6

831.0

88.9

78.6

66.0

50.6

46.4

FY12

FY13

Open trading

FY14
Auctions trading

FY15

FY16
Centre Point

FY12

FY13

FY14

FY15

FY16

Secondary capital

IPO capital

Scrip-for-scrip

Cash Market Trading – up 12.9% to $40.7 million
The increase in revenue resulted from:

• Initial listing revenue – down 10.8% to $18.6
million. IPO capital raised was $23.6 billion,
down from $38.9 billion and there were 124
IPOs compared to 120 in the prior year. In FY16,
listings were from a range of industry sectors,
with 27 initial listings from the technology
sector.

• Higher on-market trading of $4.2 billion per

day, up 9.6%. ASX’s share of on-market trading
averaged 88.7% in FY16, slightly down on FY15
at 89.7%.

• Increased trading through Centre Point and the
auction process both of which attract higher
fees. Centre Point value traded was $78.9
billion, representing 7.5% of on-market value
traded. Trading through the auction process

represented 19.8% of on-market value traded.
Together these accounted for 45.9% of ASX
trading revenue.

• Participant trading rebates were $2.2 million

compared to $2.5 million in the pcp. This rebate
scheme has been discontinued from 1 July
2016.

Information Services – up 8.7% to $80.1 million
The increase in revenue resulted from restructuring
of fees which increased institutional data royalties
and reduced retail data royalties. Enterprise-wide
agreements were also entered into with many
institutions for the provision of market data over
multiple years. Higher revenue also resulted from
royalties from the licensing of the SPI 200 index.

Technical Services – up 3.2% to $62.0 million
The increase in revenue was due to:

• Liquidity access – up 1.2% to $31.3 million.

Over the year, the total number of ALC service
connections increased from 679 to 819.

• Community and connectivity – up 4.8% to $17.3
million, attributed to the growth in users of
ASX technical services provided at the ALC and
through its data networks.

• Application services – down 8.6% to $5.3

million. The revenue was impacted by a lower
number of cross-connection installations in the
ALC.

• Hosting – up 18.1% to $8.1 million. In FY16, the

number of customer cabinets hosted in the ALC
saw a further increase from 188 to 231.

Equity Post-Trade - $102.0 million, up 11.1%
• Cash market clearing revenue – up 14.5% to
$54.1 million. The daily average on-market
value cleared increased 11.7% to $4.4 billion
reflecting the increase in trading across all
venues in Australia.

• The clearing revenue sharing rebate was $3.2
million compared to $3.6 million in the pcp.

ASX Annual Report 2016 | Operating and financial review

• ASX reduced clearing fees by 10% from 1 July
2016. The clearing revenue sharing rebate will
continue to operate and returns 50% of any
increase in revenue (pre-rebate) from the prior
year to all customers.

• Settlement revenue – up 7.6% to $47.9 million.
Higher on-market trading activity levels led
to a 9.6% increase in the dominant settlement
messages compared to FY15.

• The settlement revenue sharing rebate was

$2.1 million compared to $1.2 million in the pcp.

Derivatives and OTC Markets - $265.8 million,
up 4.7%
Derivatives and OTC markets includes futures
and equity options; clearing of OTC interest rate
derivatives; settlement, depository and registry
services for debt securities and cash transactions
(Austraclear); and ASX Collateral Services.

• Futures and OTC – up 6.9% to $194.3 million.
The increase in revenue was due to an 8.3%
increase in volumes, partly offset by higher
proprietary trader rebates. ASX also provided
$14.4 million in interest rate rebates to
customers trading futures and clearing OTC
transactions. The value cleared through the
OTC clearing service increased to $2.7 trillion
compared to $0.8 trillion in the pcp.

• Equity options – down 6.0% to $23.1 million.
The decrease in revenue was due to a 15.8%
decrease in the volume of contracts traded
partly offset by a change in the mix of products
and users. Single stock option volumes were
down 19.0% while index option and futures
volumes were up 16.5%.

• Austraclear – up 1.5% to $48.4 million. The
increase in revenue was primarily due to
increased registry activity and higher balances
in the depository. At 30 June 2016, the value of
assets in the ASX Collateral Service was $4.8
billion compared to $4.1 billion in the pcp.

Futures and options on futures volume (million)

116

118

103

137

126

FY12

FY13

FY14

FY15

FY16

Operating expenses

Underlying operating expenses (excluding finance
costs, depreciation and amortisation, and signifi-
cant items) increased 6.5% to $170.6 million.

Operating expenses
Staff

Occupancy

Equipment

Administration

Variable

ASIC Supervision
Levy

FY16
$ million
101.1

FY15
$ million
96.4

Variance %
fav/(unfav)
(4.9)

14.1

27.0

19.3

6.2

2.9

13.7

24.0

17.2

5.1

3.7

(3.0)

(12.5)

(11.6)

(23.3)

21.8

(6.5)

Operating expenses

170.6

160.1

Staff costs increased 4.9% to $101.1 million. The
increase resulted from the annual remuneration
reviews and CEO transition costs. The average
full-time equivalent (FTE) headcount increased
from 524 in FY15 to 534 in FY16. As at 30 June
2016, ASX employed 546 FTE staff. The increase in
FTE supports the new business initiatives, technol-
ogy transformation including DLT, and continued
upskilling within the organisation.

Other operating costs increased 9.1% to $69.5
million due to higher equipment and administra-
tion costs associated with new service offerings
and higher variable costs.

CHESS holding statement production costs
increased 23.3% to $6.2 million, as the number of
statements was 6.4% higher along with increased
postage charges.

Depreciation and amortisation expenses increased
10.5% to $42.7 million. This was due to the
increased capital investment in new services as
well as ongoing technology maintenance and a
refresh of existing platforms.

Capital expenditure

The Group incurred $50.2 million of capital expend-
iture during the year, compared to $44.4 million in
FY15. Expenditure was focused on the technology
transformation program, particularly the futures
trading platform, the enhanced risk management
platform and the new ASX Online customer portal
that primarily provides services to trading, clearing
and settlement customers. The next phase of the
technology transformation program will focus on
equity post-trade platforms.

Net interest and dividend income

Net interest and dividend income increased 1.7% to
$73.1 million. Net interest consists of two compo-
nents: interest earned on ASX’s cash balances and
net interest earned from the investment of collat-
eral balances lodged by participants.

Interest income on ASX’s cash balances declined
17.3% to $22.3 million as a result of lower interest
rates. Net interest earned from the investment
of participant balances increased 17.0% to $37.7
million. This increase was driven by a 10.9% increase
in average collateral balances to $4.6 billion. A
change in the composition of the margins also
contributed to the increase in interest. Investment
earnings on this portfolio remained consistent with
the prior year at 41 basis points above the official
overnight cash rate.

Dividend income from ASX’s shareholding in IRESS
Limited increased 3.1% to $13.1 million.

Financial position

At 30 June 2016, the net assets of the Group were
$3,824.1 million, up 1.7% from 30 June 2015.

A summary balance sheet is presented below.

30 June
2016
$ million

30 June
2015
$ million

Variance
%

7,072.8

4,879.0

45.0

2,317.6

424.8

636.4

376.8

485.2

10,451.6

8,058.6

6,088.2

3,886.2

539.3

412.7

6,627.5

4,298.9

3,027.2

576.9

220.0

526.3

206.2

3,824.1

3,759.7

12.7

31.2

29.7

56.7

30.7

54.2

9.6

6.7

1.7

Assets
Cash and available-
for-sale financial
assets

Goodwill

Investments

Other assets

Total assets

Liabilities
Amounts owing to
participants

Other liabilities

Total liabilities

Equity
Capital

Retained earnings

Reserves

Total equity

Notable movements in the balance sheet were
as follows.

Investments – up $48.0 million or 12.7%
Investments reflect ASX’s 19.1% shareholding in
IRESS Limited, a listed entity providing financial
market and wealth management technology
solutions; a 49% shareholding in Yieldbroker Pty
Limited, an unlisted entity operating licensed elec-
tronic markets for trading Australian and New
Zealand debt securities; and a 8.5% shareholding
in Digital Asset Holdings LLC (DAH), an unlisted US
domiciled technology entity.

ASX Annual Report 2016 | Operating and financial review

The investment in IRESS increased 7.6% to $334.9
million, while the investment in DAH undertaken
during the year was valued at $23.3 million at 30
June 2016. ASX’s carrying value of its investment
in Yieldbroker was $66.6 million.

Amounts owing to participants –up $2,202.0
million or 56.7%
As part of its clearing operations, the Group holds
a significant amount of collateral lodged by partic-
ipants to cover cash market and derivatives expo-
sures including OTC transactions. The increase
related to larger positions held in interest rate and
equity index futures following elevated levels of
volatility in markets around the end of June 2016.

The increase in participant balances results in
a corresponding increase in cash and availa-
ble-for-sale financial assets, as the balances are
invested by ASX.

Regulatory and market structure
developments

The financial market structure and regulatory
requirements have a significant impact on the
way ASX manages its operations and business
strategy. The regulatory environment is discussed
on page 12.

Business strategies and prospects for
future financial years

ASX revenue is driven predominantly by activity
levels in Australia’s financial markets, which are
impacted by a number of factors including general
economic conditions. The level of activity impacts
on ASX’s revenue as many fees are linked to market
activity through the number of contracts traded,
and by the values of transactions, the equity index
and capital raisings.

In addition to activity levels, ASX’s strategies may
be impacted by existing or new competitors both
domestically or globally. In this context, ASX’s strat-
egy is to support the competitiveness and growth
of Australia’s financial markets, and to invest in new
services that investors and intermediaries value.

The key elements of the ASX strategy are to:

• be the global leader in Australian dollar and

New Zealand dollar financial markets

• expand the range of products and services to

intermediaries and end-investors

• provide world-class, globally connected finan-

cial infrastructure

• deliver an outstanding customer experience.

ASX advocates regulatory settings that support
investors and growth, and is committed to being
recognised as an employer of choice in financial
markets.

Following is a discussion of key strategic develop-
ments in each business. The key drivers of revenue
in future financial years will continue to be those
noted in the business model and operating environ-
ment section of this report, as well as the success
of the key business strategies discussed below.

Listings and Issuer Services
The Listings and Issuer Services strategy comprises
three main elements:

Improve Australia’s attractiveness as a market to
list and raise capital
ASX has implemented a range of initiatives in
recent years aimed at maintaining and enhancing
the attractiveness of Australia as a place to list
and raise capital. These include greater capital
raising flexibility for small and mid-size compa-
nies, improved reporting guidance, and a reduced
timetable for rights issues. Recently, ASX consulted
on new admission requirements for listing, which
seek to maintain the quality of ASX as a world-class
listing venue.

ASX has a particular focus on increasing the number
of New Zealand companies and those from the
technology sector listed on the exchange. During
the year, ASX streamlined the process for New
Zealand entities to dual list on ASX. There were 8
New Zealand and 27 technology IPOs in FY16, and
a total of 167 technology companies were listed on
ASX as at 30 June 2016.

ASX Annual Report 2016 | Operating and financial review

Develop an investment supermarket of products
and services
In order to give the broadest choice to customers,
ASX is expanding the range of products and asset
classes available for issuers and investors. Some of
the products that complement traditional equities
include:

• government bonds – ASX provides the ability
for clients to trade Australian Government
bonds on the exchange in the same way as
equity trading

• corporate bonds – ASX supports Government

initiatives to promote and expand the
Australian corporate bond market

• exchange-traded products (ETPs) – in recent
years ASX has focused on increasing the
number and range of ETPs. There are 176 ETPs
listed on ASX totalling $22.5 billion

• managed funds (mFund) – mFund allows inves-
tors to apply for and redeem unlisted managed
funds using their broker platform. At 30 June
2016, there were 161 funds available on mFund
through 18 brokers.

Provide efficiencies to issuers and investors
ASX Evolve is a program of initiatives designed to
improve the connection between investors and
companies listed on the exchange. The program
includes an equity research scheme that supports
small and mid-cap companies. ASX also organ-
ises investor briefings in Australia and overseas
that improve the exposure of small and mid-cap
companies to investors.

Trading Services
ASX competes domestically with another market
operator, as well as operators of non-exchange
venues (commonly referred to as broker dark pools)
for trading in ASX-listed securities. ASX performed
well in a competitive equity trading market with a
market share of 88.7% of on-market traded value
during the year.

ASX’s strategy is to continue to innovate in the
provision of services in order to maximise the
attractiveness of trading on ASX, and meet the
needs of a varied customer base.

The Centre Point order type is an example where
ASX has created an innovative suite of products
following feedback from end-investors. During
FY16, Centre Point order types accounted for 7.5%
of value transacted on ASX and 17.6% of ASX’s
trading revenue. The chart below shows the growth
in Centre Point activity and the new innovations
launched over the past four years.

Centre Point value traded ($billion)

74.9

78.9

61.1

36.9

19.8

FY12
Standard

FY13

FY14
Block

Preference

Dark limit

FY15

FY16

Sweep

Single ﬁll

Within the information and technical services
offerings, ASX’s strategy is predominantly driven
by the needs of clients in equities and derivatives.
These requirements include cross-connectivity as
well as low latency (high speed) services to access
information and ASX’s trading platforms.

Demand for information services is impacted
by the level of activity and the number of users
accessing ASX market data. There is an increasing
trend for customers to directly subscribe to data
rather than access it via a vendor, and there is an
increase in automated usage of data rather than
via a person operating a terminal. ASX’s services
are being tailored to meet these changing customer
requirements. ASX provides enterprise licences for
large users of data that offer pricing certainty to
customers along with standard monthly royalty plans.

ASX’s success in expanding its technical services
follows the investment in the ALC and communi-
cations network (ASX Net). ASX’s aim is to grow
the community of financial service providers it
supports. ASX will continue to invest in its product
and service offerings in order to become the leading
provider for the financial community.

While innovative service offerings further diversify
ASX’s revenue, the primary determinant of demand
for ASX’s information will be the underlying level
of activity and the number of users wishing to
access data and trading platforms. These depend
on prevailing market conditions and the product
offering in the cash and derivative markets.

Equity Post-Trade Services
ASX is the sole provider of equity post-trade
services to the Australian market consisting of
clearing and settlement of cash market transac-
tions. Following a review by the Council of Financial
Regulators (CFR), the Treasurer announced that
any new licence to undertake cash market clearing
would not be granted until a regulatory framework
for safe and effective competition was in place. This
is expected to take at least 18 months from the
Treasurer’s announcement in March 2016.

ASX’s strategy within equities post-trade is to
continue to innovate in order to improve the effi-
ciency of clearing and settlement and provide bene-
fits to issuers and investors, including lowering the
overall costs within the market. The transition from
three days to two days for settlement, commonly
referred to as T+2, was implemented in March
2016 following broad industry support. This initi-
ative provided significant benefits to participants
including reduced capital requirements for cash
equity transactions.

During the year ASX commenced an analysis of the
use of distributed ledger technology as a possi-
ble replacement for the settlement of cash equity
trades. In doing so, ASX invested in and partnered
with a specialist technology provider DAH. Over
FY17/FY18, ASX anticipates developing a platform
that may eventually replace the existing CHESS
application for equities settlement and provide
improved security, trust, efficiency and timeliness
to the process.

Derivatives and OTC Markets
ASX’s strategy is to be the global leader in
Australian and New Zealand dollar financial
markets. ASX will continue to develop new prod-
ucts and services, increase distribution, and provide
flexible and cost-effective trading and clearing
platforms.

In addition to increasing the products and services
available for trading, ASX has strategies designed
to attract additional users to its products. These
include attracting overseas traders to use ASX
derivatives products by making it easier for them
to connect through ASX’s data network (ASX Net
Global). ASX is attracting a growing number of
offshore traders to its derivatives market and in
FY17 will continue its focus on the Asia Pacific.

During the year several new futures products were
added, including a 20 year bond contract, mini-
SPI and eastern Australia wheat futures. In 2017,
ASX expects to launch a deliverable gold futures
contract with the Perth Mint. ASX increased distri-
bution with the opening of an office in Hong Kong
focused on attracting Asian sales.

A new futures trading platform replacing the exist-
ing SYCOM system will also be introduced in FY17
providing further efficiencies to customers.

Austraclear operates on a delivery-versus payment
basis so that customers receive efficient, secure
and guaranteed delivery of the underlying security
or the cash. Registry services provide for efficient
electronic registration and record-keeping, as well
as the ability to streamline customer transactions.

The Austraclear platform also allows cash transfers
in renminbi and has newly introduced renminbi
debt registry functionality. This efficient and secure
payments mechanism provides renminbi-denom-
inated cash transfers similar to Australian dollar
cash transfers.

ASX’s strategy includes delivering collateral effi-
ciency to customers by leveraging the function-
ality of Austraclear. The ASX Collateral Service
allows customers to utilise collateral held in ASX’s
Austraclear debt registry to meet obligations to
other customers or to ASX’s clearing subsidiaries.

Engagement with clients
ASX has a large and diverse customer base, includ-
ing approximately 2,200 listed companies and
issuers, and around 136 participants in the cash
equities and derivatives markets. In addition, ASX
provides services to other market operators and
various specialist businesses in the Australian
financial markets.

ASX has implemented a number of initiatives that
aim to build a more customer-centric corporate
culture. ASX engagement with customers extends
to industry partners including the Australian
Financial Markets Association, Stockbrokers
Association of Australia, Financial Services Council,
Australian Council of Superannuation Investors,
Australian Custodial Services Association,
Australian Payments Clearing Association and
Australian Shareholders’ Association. These
groups represent many of ASX’s customers and
have an interest in the quality and development
of Australia’s financial markets.

Three years ago ASX introduced a Code of Practice
that sets out how ASX will manage equity clear-
ing and settlement services for the benefit of all
stakeholders. The Code provides for non-discrim-
inatory access to ASX’s clearing and settlement
services, creates a transparent governance model
and establishes a forum that allows a broad range
of stakeholders to provide input to ASX. ASX will
update the Code to align it to the new regulatory
expectations, which are expected to be released
by the CFR in FY17.

Information technology platforms
ASX’s business is highly reliant on the informa-
tion technology platforms that support its vari-
ous activities. ASX’s objective is to provide stable,
reliable and innovative technology solutions that
meet the regulatory standards, provide efficient
connectivity for clients, and are quick to adapt to
new and changing business requirements. In 2015,
ASX announced it was undertaking a significant
technology transformation program to update
and replace many of its core applications. The first
phase includes the futures trading platform, risk
applications to monitor and manage clearing risk,
and market monitoring systems currently being
developed and deployed. The next phase, now
underway, is focused on post-trade platforms for
derivatives and equities, including the distributed
ledger technology referred to earlier for the equi-
ties settlement process. The technology transfor-
mation program is aimed at having world-class
applications supporting ASX’s various services.

ASX Annual Report 2016 | Operating and financial review

Risks

The Group’s operations and financial results are
subject to a number of risks. ASX has a strong track
record of managing the wide range of risks that
arise from operating and servicing Australia’s finan-
cial markets. Many of these risks are not directly
in the control of ASX. The main risks affecting ASX
include:

• the economic environment and market activity

levels

• changes to regulation, market structure and

competition

• operational risks in technology infrastructure

and processes

• clearing and settlement risk, as well as

increased capital requirements

• investment risk on cash and other investments.

The economic environment and market activity
levels
The ASX businesses, financial position and oper-
ating results are highly dependent on the levels of
market activity. This includes the number of listed
issuers, the number of new company listings, the
volume and value of financial instruments traded,
the number of settlement messages, and similar
factors. Market activity levels are significantly
influenced by economic performance, government
policy and general financial market conditions in
Australia and internationally. Slowing economic
activity can lead to a reduction in activity and reve-
nue. Changing levels of volatility may also impact
on ASX’s activities. ASX’s diversified business
model mitigates some of these risks, as revenue
is earned from a range of activities and services.
The expansion into new services is designed to
further diversify the Group’s revenue over time.

Changes to regulation and market structure
ASX operates in highly regulated markets. The
business is affected by licences that it holds, the
market structure in which it operates, and the regu-
lations under which it and its customers operate.

Licences
Several of the Group entities hold licences to oper-
ate financial markets, such as securities and deriv-
atives exchanges as well as clearing and settlement
facilities. These licences impose obligations on
the Group to comply with a range of conditions.
Failure to meet these obligations may result in
reputational damage, action being taken against
the Group, financial penalties, or loss of the licences.
In addition to line management, the Group has
internal audit and regulatory assurance functions,
and executive and Board oversight to monitor these
risks. ASIC and RBA provide annual assessments
of the Group’s licensed subsidiaries.

In addition, the clearing and settlement and ASX
Compliance subsidiaries have independent boards
to oversee these operations.

The licence obligations may result in the Group
undertaking significant programs or investments in
order to meet licence conditions. These can impact
on ASX as well as ASX’s customers. ASX seeks
to manage these risks by engaging with regula-
tors and customers to achieve the best possible
outcome for Australia’s financial markets, and by
ongoing monitoring of the effectiveness of the
arrangements.

Market structure and competition
ASX faces competition domestically and interna-
tionally in many parts of its business. Competition
can come from other exchanges as well as non-tra-
ditional sources.

Changes to the existing financial market structure
can affect the strategic market position and perfor-
mance of ASX. An example of a change in market
structure was the licensing of another market
operator in the Australian cash equities market.

In March 2016, the Treasurer announced that the
current market structure for cash equities clearing
will remain in place for at least 18 months, until the
conditions that support the Government’s policy
for safe and effective competition are estab-
lished. Following these regulatory changes, the
Government will be in a position to consider addi-
tional clearing facilities, noting that for systemically
important functions such as equities or interest
rate futures, any licensed clearing facility will need
to operate within Australia including holding capital
and collateral domestically. ASX is currently the
only licensed clearing and settlement facility for
cash equities in Australia.

In some of its businesses, ASX is facing competi-
tion from overseas financial markets, such as the
central clearing of OTC Australian dollar interest
rate swaps. Decisions by Australian regulators
or overseas regulators can impact on ASX’s rela-
tive competitive position. For example, regula-
tors have implemented location requirements for
certain systemically important services. Changes
to these requirements can impact on Australia’s
and ASX’s competitiveness. ASX makes significant
investments in its business to ensure that Australia
continues to have world-class financial markets.
ASX’s strategy is to provide a globally competitive
service offering across its business.

While changes to the market structure are outside
the control of ASX, the company is actively engaged
in providing input to regulators and policymakers.

Regulations that affect ASX and its customers
Regulations can impact on the way ASX provides
its services and the attractiveness of its services to
customers. Changes to domestic or international
regulations can pose risks to ASX. From time to
time, new regulations may provide opportunities
for ASX to offer new services to its customers.
The development of ASX’s clearing service for OTC
derivatives flows from changing international and
domestic regulations.

Regulations may change over time and may require
ASX to increase the capital and liquidity it provides
in support of the Group’s clearing and settlement
activities. Changing regulations also impact on
the level of capital and liquidity ASX customers
are required to hold in order to undertake their
business through ASX. These changes can lead to
customers undertaking less activity through ASX. In
some instances, regulations may also benefit ASX
by providing capital efficiencies to customers who
transact through licensed exchanges such as ASX.

Regulations may also impact on the investment
strategy that ASX adopts in relation to capital
and collateral balances held to support its licensed
clearing and settlement activities. Changes in
regulations over time may impact on earnings
generated by the investment of these balances.
From FY17, ASX expects investment earnings on
collateral invested to start to decline as new regu-
latory investment guidelines are implemented.
The full impact of the changes is expected to be
in place by FY18.

The Group manages the risks from changing regu-
lations by active engagement with regulators, poli-
cymakers and customers. As regulatory settings,
particularly international, are outside the control
of ASX, changes may impact on ASX’s business.

Operational risks in technology infrastructure
and processes
The Group operates a number of technology
platforms that facilitate trading, clearing and
settlement. Due to the complexity of and the high
reliance on this infrastructure, failure or other oper-
ational incidents can impact on the functioning of
markets and have a financial impact on ASX. Given
the nature of its business, clients and other third
parties connect to ASX via its proprietary network
(ASX Net) and to the ASX website. This exposes
the group to cyber security risks, particularly as
the frequency and sophistication of cyber attacks
are increasing within financial markets.

ASX Annual Report 2016 | Operating and financial review

The Group seeks to reduce these risks by invest-
ing in its underlying infrastructure, maintaining
an understanding of trends in technology and
cyber security, and entering into strategic rela-
tionships with specialist technology providers.
The infrastructure and operations are subject to
regulatory oversight, and ASX has backup recovery
infrastructure and processes to reduce any impact
from disruptions.

The Group’s operations and responsibilities cover
a broad range of services and functions. The way
in which these responsibilities and functions are
discharged, and operational incidents or errors,
can impact on the financial performance of the
Group and adversely affect its reputation. ASX
seeks to manage operational risk by putting in
place clear procedures, automating activities and
by following its enterprise risk framework. While
these policies assist in reducing the likelihood of
events occurring, the high volume and value of
transactions on ASX means that operational inci-
dents or fraudulent activity could have a significant
impact on the Group.

Clearing risk
The Group’s CCP activities expose it to credit,
investment and liquidity risk. In the event that
clearing participants encounter financial difficul-
ties, a failure to meet their contractual obligations
could result. This risk is commonly referred to as
clearing default risk and is managed by a number of
controls. These include enforcing minimum financial
and operating criteria for clearing participants,
requiring participants to provide collateral, holding
pre-funded financial resources, and maintaining
established risk policies and procedures to ensure
that the counterparty risks are monitored and
proactively managed.

Central counterparty clearing activities expose
the Group to investment and liquidity risk on
participants’ collateral balances. The Group is
also exposed to investment risk on its own cash
reserves. The Group seeks to manage these risks
by investing cash with high quality counterparties,
maintaining sufficient cash reserves and market-
able securities, and regular forward planning and

forecasting of liquidity requirements. Furthermore,
the Board has implemented policies that specify
concentration limits as well as maximum maturity
limits. At 30 June 2016, the Group had $7.1 billion
invested with a range of counterparties, comprising
collateral balances and cash reserves.

The CCP pre-funded financial resources provided
by ASX, which are at risk of loss in the event of a
default, currently total $250 million in ASX Clear
and $450 million in ASX Clear (Futures). These
resources and their application are fully described
in note B1 to the financial statements.

The management of clearing risk is important to
the stability of Australia’s financial markets, as the
CCPs provide critical infrastructure for the orderly
completion of transactions. For cash equity transac-
tions, the risk is typically the period between execu-
tion of a trade and settlement; while in derivatives,
the risk is typically the daily movement in the value
of the open positions or outstanding contracts.
Collateral is called daily by the CCPs and in some
instances intra-day. Additional collateral is called
depending on market conditions and the individual
exposures of clearing participants. Such collateral
could however prove inadequate, or a default could
occur before the additional collateral is received.

Settlement risk
ASX settles equity and debt instrument transac-
tions on a delivery-versus-payment basis. As such,
it facilitates the orderly exchange of securities
for cash. Settlement errors expose the Group to
potential financial and reputational impacts. On
average, the Group settled $4.7 billion of equity
securities and $64.8 billion of debt instruments
daily through its settlement facilities.

The Group manages settlement risk by a range of
measures, including setting out rules and processes
for settlement to occur and having infrastructure
(IT platforms and processes) in place to conduct
the settlement process.

During the year the settlement cycle for cash equi-
ties went from T+3 to T+2. This reduced clearing
risk by requiring settlement of equity transactions

to occur two days after trade compared to the
previous three days.

Investment risk
ASX is exposed to counterparty risk in the event
an investment counterparty, such as a bank or
issuer of financial instruments, fails. At 30 June
2016, ASX had approximately $6.1 billion of cash
collateral invested with a range of counterparties.
In addition, it had approximately $1 billion of Group
cash invested, much of which supports the clearing
and settlement activities. Investment earnings on
the Group cash is impacted by the level of interest
rates and is also subject to the risk of investment
counterparty default.

New Financial Stability guidelines will impact
on ASX’s investment strategy for cash collateral
lodged by participants. The new guidelines will
result in a repositioning of the portfolio over the
next 12 months into largely secured assets. As a
result, earnings from the investment of cash collat-
eral are expected to decline with the full impact
expected from FY18.

ASX has significant equity investments in IRESS,
Yieldbroker and DAH (refer notes C1 and C2 of the
financial statements). The value of these invest-
ments is subject to change based on the perfor-
mance of each entity. A significant decline in their
financial performance and/or prospects may result
in a loss to ASX as the value of the investment may
be required to be reduced. The carrying value of
the DAH investment is subject to change from
movements in the AUD/USD as the investment
is denominated in USD. Changes are recognised
through the equity reserve.

In addition, ASX has $2.3 billion of goodwill recog-
nised on balance sheet. The carrying value of this
asset may be impacted if the financial performance
of ASX deteriorates. Details of the carrying value
and analysis of possible impairment is contained
in note D2 of the financial statements. There have
been no impairments recognised on these assets
to date.

ASX Annual Report 2016 | Operating and financial review

Directors’
report

The directors present their report, together with
the financial statements of ASX Limited (ASX or the
Company) and its subsidiaries (together referred
to as the Group), for the year ended 30 June 2016
(FY16) and the auditor’s report thereon. The finan-
cial statements have been reviewed and approved
by the directors on the recommendation of the ASX
Audit and Risk Committee.

The consolidated net profit after tax for the year
attributable to the members of ASX was $426.2
million (2015: $397.8 million).

Directors

The directors of ASX in office during the financial
year and at the date of this report (unless otherwise
stated) were as follows:

• Mr Rick Holliday-Smith (Chairman)
• Mr Dominic J Stevens (Managing Director and

CEO)

• Ms Yasmin A Allen
• Ms Melinda B Conrad
• Dr Ken R Henry AC
• Mr Peter R Marriott
• Mrs Heather M Ridout AO
• Mr Damian Roche
• Mr Peter H Warne

Mr Dominic Stevens was appointed Managing
Director and CEO, and Ms Melinda Conrad was
appointed a director, on 1 August 2016.

Mr Elmer Funke Kupper was Managing Director and
CEO from 2011 until his resignation on 21 March
2016.

Ms Jillian Segal was a director from 2003 until her
resignation on 1 September 2015.

Directors’ meetings and attendance at those meet-
ings for FY16 (including meetings of committees of
directors) are disclosed on page 8 of the Annual
Report. The qualifications and experience of direc-
tors, including current and recent directorships,
are detailed on pages 4 to 6 of the Annual Report.

Company secretaries

Review of operations

Amanda J Harkness
Group General Counsel and Company Secretary,
Group Executive Corporate Affairs
BEc LLB (Hons)(ANU), MA (Macquarie), FGIA,
FAIM, FAICD
Ms Harkness is Group General Counsel and
Company Secretary. As Company Secretary, she is
responsible for company secretarial and corporate
governance support across the Group. Ms Harkness
has held senior adviser roles as a partner in the
Australian law firm Herbert Smith Freehills and at
the consulting firm McKinsey & Co. Ms Harkness has
held executive management roles in Telstra and a
start-up joint venture funded by British Telecom.
She has worked in businesses in Australia, New
Zealand, Malaysia, Korea, Hong Kong and Japan.
Since 2009, she has been a non-executive direc-
tor of Vodafone Hutchison Australia Pty Limited.
Previously she has served on a range of Federal
Government advisory boards focused on innova-
tion and technology development. She has been
recognised as one of the world’s leading General
Counsel in the Financial Times FT Global General
Counsel 30 list.

The following people are also Company Secretaries:
Mr Marcin Firek, BEc LLB (Macquarie), FGIA, General
Manager Company Secretariat; and Mr Daniel
Csillag, BA LLB (UNSW), Senior Legal Counsel and
Company Secretary. They both have experience in
company secretariat roles from their time at ASX,
large listed companies and other relevant entities.

Report on the business

Principal activities
During the year the principal activities of the Group
consisted of providing:

Information on the operations and financial posi-
tion of the Group, and its business strategies and
prospects, is set out in the Operating and Financial
Review on pages 26 to 33 of this Annual Report.

Dividends

The following table includes information relating to
dividends for the current and prior financial years,
including dividends determined by the Company
since the end of the financial year.

Cents per
share

Total
amount
$m

Type

Date of payment

In respect of the current financial year
99.1
Interim

191.9

23 March 2016

Final

Total

99.0

198.1

191.7

383.6

28 September 2016

In respect of the prior financial year
92.3
Interim

178.7

18 March 2015

Final

Total

95.1

187.4

184.1

362.8

23 September 2015

The final dividend was determined on 18 August
2016.

Significant changes in the state of affairs
There were no significant changes in the state of
affairs during the year.

Events subsequent to balance date
On 1 August 2016, Mr Stevens was appointed
Managing Director and CEO, having previously
been a non-executive director. No other matter
or circumstance has arisen since 30 June 2016
that has significantly affected, or may significantly
affect, the:

• securities exchange and ancillary services

a. Group’s operations in future financial years

• derivatives exchange and ancillary services

b. results of those operations in future financial

• central counterparty clearing services

• registry, depository, settlement and delivery-
versus-payment clearing of financial products.

years, or

c. Group’s state of affairs in future financial

years.

ASX Annual Report 2016 | Directors’ report

Likely developments
For further information about likely developments
in the operations of the Group, refer to the business
strategies and prospects for future financial years
section in the Operating and Financial Review on
pages 26 to 33 of this Annual Report. The expected
results from those operations in future financial
years have not been included because they depend
on factors, such as general economic conditions, the
risks outlined, and the success of these strategies,
some of which are outside the control of the Group.

Environmental regulation
The operations of the Group are not subject to any
particular or significant environmental regulations
under a Commonwealth, State or Territory law.

Exercise of performance rights to ordinary shares
No performance rights vested during the financial
year.

Proceedings on behalf of the Group
Under section 237 of the Corporations Act 2001, no
application has been made in respect of the Group
and no proceedings have been brought or inter-
vened in on behalf of the Group under that section.

Remuneration report
Information on ASX’s remuneration framework and
the outcomes for FY16 for the ASX Limited Board,
the CEO and the CEO’s direct reports, and changes
for FY17, is included in the remuneration report on
pages 17 to 25 of this Annual Report.

Indemnification and insurance of officers
The Group has paid insurance premiums for direc-
tors’ and officers’ liability for current and former
directors and officers of the Company, its subsid-
iaries and related entities.

Corporate governance
Group corporate governance matters are discussed
on pages 7 to 11 of this Annual Report and are also
available on the Group’s website.

Non-audit services
During the year, PricewaterhouseCoopers (PwC),
the Company’s auditor, performed certain non-au-
dit services in addition to its statutory duties.
Details of the amounts paid to PwC and its related
practices for non-audit services provided during the
year are set out in the following table.

Signed in accordance with a resolution of the
directors:

Rick Holliday-Smith
Chairman

Peter R Marriott
Director

Sydney, 18 August 2016

Directors’ declaration of satisfaction
with independence of auditor
The Board of directors has considered the non-au-
dit services provided during the year by the auditor
and in accordance with written advice provided by
resolution of the Audit and Risk Committee, is satis-
fied that the provision of those non-audit services
during the year by the auditor is compatible with,
and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the
following reasons:

• non-audit services were subject to the corpo-
rate governance procedures adopted by the
Group and have been reviewed by the Audit
and Risk Committee

• non-audit services provided do not under-

mine the general principles relating to auditor
independence as set out in APES 110 Code of
Ethics for Professional Accountants, as they did
not involve reviewing or auditing the auditor’s
own work, acting in a management or deci-
sion-making capacity for the Company, acting
as an advocate for the Company or jointly
sharing risks and rewards.

A copy of the auditor’s independence declaration
as required under section 307C of the Corporations
Act 2001 is on page 36.

The insurance policies prohibit disclosure of the
nature of the liabilities insured against and the
amount of the premiums.

The constitution of ASX provides that every person
who is or has been a director, secretary or executive
officer of the Company, and each other officer or
former officer of the Company or of its related
bodies corporate as the directors in each case
determine, is indemnified by the Company to the
maximum extent permitted by law . The indemnity
covers losses or liabilities incurred by the person
as a director or officer, including but not limited to
liability for negligence and for legal costs on a full
indemnity basis.

Share information
Performance rights to ordinary shares
At the date of this report, ASX had 70,581 perfor-
mance rights outstanding (2015: 186,440). For
further details on the performance rights includ-
ing performance hurdles for vesting, refer to the
remuneration report on pages 17 to 25 of this
Annual Report.

Non-audit services:
Tax compliance services

Due diligence services

Total non-audit services

Consolidated

2016
$

2015
$

57,265

58,395

240,950

298,215

58,395

Rounding of amounts
ASX is a company of the kind referred to in ASIC
Class Order 2016/191 dated 24 March 2016. In
accordance with that class order, amounts in the
financial statements and the directors’ report have
been rounded to the nearest hundred thousand
dollars, unless otherwise indicated.

In addition to the above, total non-audit service
fees of $18,105 (2015: $18,105) were received by
the auditor for tax compliance services for ASX
Division 3 Compensation Fund and the Sydney
Futures Exchange Limited Fidelity Fund, which are
not consolidated as part of the Group.

ASX Annual Report 2016 | Directors’ report

Auditor’s
independence
declaration

As lead auditor for the audit of ASX Limited for
the year ended 30 June 2016, I declare that to the
best of my knowledge and belief, there have been:

a. no contraventions of the auditor independ-
ence requirements of the Corporations Act
2001 in relation to the audit; and

b. no contraventions of any applicable code of
professional conduct in relation to the audit.

This declaration is in respect of ASX Limited and
the entities it controlled during the period.

Matthew Lunn
Partner

PricewaterhouseCoopers

Sydney, 18 August 2016

PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street,

GPO BOX 2650, SYDNEY NSW 1171

T: +61 2 8266 0000

F: +61 2 8266 9999

www.pwc.com.au

Liability limited by a scheme approved under

Professional Standards Legislation.

ASX Annual Report 2016 | Auditor’s independence declaration

Statutory
report –
Financial
statements

Contents

Financial statements
Consolidated statement of comprehensive
income

Consolidated balance sheet

Group disclosures
E1 Subsidiaries

E2 Deed of Cross Guarantee

E3 Related party transactions

Consolidated statement of changes in equity 40

E4 Parent entity financial information

E5 Other disclosures

E5.1 Commitments

E5.2 Share-based payments

E5.3 Key Management Personnel
remuneration

E5.4 Auditor’s remuneration

E5.5 Other accounting policies

E5.6 Subsequent events

Directors’ declaration

Independent auditor’s report

Consolidated statement of cash flows

Preface to the notes to the financial statements
Key judgements and estimates

Reclassification of prior year balances

Performance of the Group
A1 Segment reporting

A2 Dividends

A3 Capital management

A4 Earnings per share

A5 Taxation

Risk management
B1 Clearing risk

B2 Cash and funds on deposit and
available-for-sale financial assets

B3 Financial risk management

Investments
C1 Available-for-sale investments

C2 Equity accounted investments

Other balance sheet assets and liabilities
D1 Receivables
D2 Intangible assets – goodwill

D3 Intangible assets – software

D4 Property, plant and equipment

D5 Payables

D6 Provisions

ASX Annual Report 2016 | Statutory report – Financial statements

Consolidated
statement of
comprehensive
income

The consolidated entity consists of ASX Limited
(ASX or the Company) and its subsidiaries (together
referred to as the Group). Items included in the
financial statements for each of the Group’s entities
are measured using the currency of the primary
economic environment in which the entity operates
(the functional currency). These financial statements
are presented in Australian dollars (AUD) which is
the Group’s functional and presentation currency.
Foreign currency transactions are translated using
the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions,
and from the translation at period end exchange
rates of monetary assets and liabilities denominated
in foreign currencies, are recognised in profit or
loss, except where they are deferred in equity as
qualifying cash flow hedges (refer to note B3) and
available-for-sale investments in unlisted entities
(refer to note C1).

Goods and services tax (GST) Revenues and
expenses are recognised net of the amount of GST,
except where the amount of GST is not recoverable
from the taxation authority. In these circumstances
the GST is recognised as part of the item of expense
to which it relates.

For the year ended 30 June

Revenue
Listings and issuer services

Trading services

Equity post-trade services

Derivatives and OTC markets

Interest income

Dividend income

Share of net profit of equity accounted investments

Other

Expenses
Staff

Occupancy

Equipment

Administration

Finance costs

Depreciation and amortisation

Profit before income tax expense

Income tax expense

Net profit for the period attributable to owners of the Company

Other comprehensive income
Items that may be reclassified to profit or loss2:
Change in the fair value of available-for-sale financial assets

Change in the fair value of available-for-sale investments

Change in the fair value of cash flow hedges

Other comprehensive income for the period, net of tax

Total comprehensive income for the period
attributable to owners of the Company

Earnings per share

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

Note

2016
$m

194.3

183.8

102.0

266.2

146.3

13.1

0.9

1.7

908.3

(101.1)

(14.1)

(28.4)

(29.6)

(86.3)

(42.7)

(302.2)

606.1

(179.9)

426.2

(0.5)

15.8

(1.0)

14.3

20151
$m

185.0

170.8

91.8

254.3

151.4

12.7

0.3

1.7

868.0

(104.1)

(13.7)

(25.3)

(27.8)

(92.3)

(38.6)

(301.8)

566.2

(168.4)

397.8

0.7

41.4

0.8

42.9

440.5

440.7

220.4

205.7

1 See preface to the notes to the financial statements for details regarding the reclassification of revenue items.
2 $0.3 million (2015: $0.1 million) was reclassified from equity to profit or loss following the sale of available-for-sale

financial assets prior to their maturity.

ASX Annual Report 2016 | Consolidated statement of comprehensive income

Consolidated
balance sheet

Goods and services tax (GST) Assets are recog-
nised net of the amount of GST, except where
the amount of GST is not recoverable from the
taxation authority. In these circumstances the
GST is recognised as part of the cost of acquisi-
tion of the asset. Receivables and payables are
stated with the amount of GST included. The net
amount of GST recoverable from, or payable to,
the taxation authority is included as a current
asset or liability.

As at 30 June

Current assets
Cash and funds on deposit

Available-for-sale financial assets

Receivables

Prepayments

Total current assets

Non-current assets
Available-for-sale investments

Equity accounted investments

Intangible assets - goodwill

Intangible assets - software

Property, plant and equipment

Total non-current assets

Total assets

Current liabilities
Amounts owing to participants

Payables

Current tax liabilities

Provisions

Revenue received in advance

Other liabilities

Total current liabilities

Non-current liabilities
Amounts owing to participants

Net deferred tax liabilities

Provisions

Revenue received in advance

Total non-current liabilities

Total liabilities

Net assets

Equity
Issued capital

Retained earnings

Restricted capital reserve

Asset revaluation reserve

Equity compensation reserve

Total equity

Note

2016
$m

3,276.4

3,796.4

469.1

12.6

7,554.5

358.2

66.6

2,317.6

103.1

51.6

2,897.1

10,451.6

5,888.2

437.8

9.9

14.5

16.4

2015
$m

1,989.4

2,889.6

328.6

9.4

5,217.0

311.1

65.7

2,317.6

92.4

54.8

2,841.6

8,058.6

3,686.2

312.5

13.1

13.6

18.0

0.1

6,366.8

4,043.5

200.0

51.6

9.0

0.1

260.7

6,627.5

3,824.1

3,027.2

576.9

71.5

139.7

8.8

3,824.1

200.0

44.3

10.9

0.2

255.4

4,298.9

3,759.7

3,027.2

526.3

71.5

125.4

9.3

3,759.7

ASX Annual Report 2016 | Consolidated balance sheet

Asset
revaluation
reserve
$m

Equity
compensation
reserve
$m

Consolidated
statement of
changes in
equity

For the year ended 30 June
Opening balance at 1 July 2015
Profit for the period

Other comprehensive income for the period

Total comprehensive income for the period, net of tax

Transactions with owners in their capacity as owners:
Employee share schemes - value of employee services

Dividends paid

Closing balance at 30 June 2016

Opening balance 1 July 2014
Profit for the period

Other comprehensive income for the period

Total comprehensive income for the period, net of tax

Transactions with owners in their capacity as owners:
Employee share schemes - value of employee services

Dividends paid

Closing balance at 30 June 2015

Note

Issued
capital
$m

3,027.2
-

3,027.2

3,027.2
-

3,027.2

Retained
earnings
$m

526.3
426.2

426.2

(375.6)

576.9

480.9
397.8

397.8

(352.4)

526.3

Restricted
capital
reserve
$m

71.5
-

71.5

71.5
-

125.4
-

14.3

139.7

82.5
-

42.9

71.5

125.4

Total
equity
$m

3,759.7
426.2

14.3

440.5

(0.5)

(375.6)

3,824.1

3,670.9
397.8

42.9

440.7

0.5

(352.4)

3,759.7

9.3
-

(0.5)

8.8

8.8
-

0.5

9.3

Restricted capital reserve The restricted capital
reserve was created when funds were transferred
from the National Guarantee Fund (NGF) to ASX
Clear Pty Ltd (ASX Clear) in 2005. Under the terms
of the transfer, ASX Clear must not, without first
obtaining the consent in writing of the Assistant
Treasurer (the Minister), take action to use these
funds for a purpose other than clearing and settle-
ment support.

Asset revaluation reserve Changes in the fair value of financial assets including
available-for-sale assets and investments and assets designated as part of
cash flow hedging relationships, are taken to the asset revaluation reserve.
Amounts are recognised in profit or loss when the associated available-for-sale
assets and investments are sold or impaired or to the extent that the cash flow
hedges are ineffective.

The movement in the asset revaluation reserve is primarily due to the change in
the market value of investments in listed and unlisted entities (refer to note C1).

Equity compensation
reserve The equity
compensation reserve
is used to recognise
the fair value of perfor-
mance rights issued
under the ASX Long-
Term Incentive (LTI) plan.

ASX Annual Report 2016 | Consolidated statement of changes in equity

Consolidated
statement of
cash flows

For the year ended 30 June

Cash flows from operating activities
Receipts from customers (inclusive of GST)

Payments to suppliers and employees (inclusive
of GST)

Interest received

Interest paid

Dividends received

Income taxes paid

Net cash inflow from operating activities

Cash flows from investing activities
Increase/(decrease) in participants’ margins and
commitments

Note

2016
$m

801.2

(252.3)

548.9
148.0

(85.6)

13.1

(182.0)

442.4

2015
$m

756.1

(210.4)

545.7
153.0

(92.2)

12.7

(197.4)

421.8

2,146.4

(126.8)

Payments for available-for-sale investments

(24.4)

For the year ended 30 June

Reconciliation of the operating profit after income tax
to the net cash flows from operating activities

Net profit after tax

Non-cash items:
Depreciation and amortisation

Share-based payments

Share of net profit of equity accounted investments

Tax on fair value adjustment of available-for-sale financial
assets

Tax on fair value adjustment of cash flow hedges

Changes in operating assets and liabilities:
(Decrease) in tax balances

(Increase) in current receivables

(Increase)/decrease in prepayments

(Decrease)/increase in payables

(Decrease)/increase in revenue received in advance

(Decrease) in other current liabilities

Increase in current provisions

(Decrease) in non-current provisions

2016
$m

2015
$m

426.2

397.8

42.7

(0.5)

(0.9)

0.2

0.4

(2.7)

(8.2)

(3.2)

(8.8)

(1.7)

(0.1)

0.9

(1.9)

38.6

0.5

(0.3)

(28.4)

(7.8)

0.3

20.1

3.2

0.3

(1.9)

Net cash inflow from operating activities

442.4

421.8

(48.4)

2,073.6

(375.6)

(1.6)

(65.3)

(41.5)

(235.2)

(352.4)

Payments for equity accounted investments

Payments for other non-current assets

Net cash inflow/(outflow) from investing activities

Cash flows from financing activities
Dividends paid

Net cash (outflow) from financing activities

Net increase/(decrease) in cash and cash
equivalents

(Decrease)/increase in the fair value of cash and
cash equivalents

Increase in cash and cash equivalents due to
changes in foreign exchange rates

2,140.4

(165.8)

(2.2)

55.6

2.3

26.9

Cash and cash equivalents includes all cash and funds on deposit and avail-
able-for-sale financial assets (refer to note B2). Cash flows are reported on
a gross basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the taxation
authority are classified as operating cash flows.

Cash and cash equivalents at the beginning of the
financial period

Cash and cash equivalents at the end of the
financial period

4,879.0

5,015.6

7,072.8

4,879.0

Cash and cash equivalents consist of:
ASX Group funds

Participants’ margins and commitments

Total cash and cash equivalents

984.6

6,088.2

7,072.8

992.8

3,886.2

4,879.0

ASX Annual Report 2016 | Consolidated statement of cash flows

Preface to
the notes
to the
financial
statements

ASX is a for-profit company limited by shares incor-
porated and domiciled in Australia.

The consolidated financial statements of the Group
for the year ended 30 June 2016 were authorised
for issue by the Board of directors on 18 August
2016. The directors have the power to amend and
reissue the financial statements.

The financial statements are general purpose finan-
cial statements that:

• have been prepared in accordance with

the requirements of the Corporations Act
2001, Australian Accounting Standards and
other authoritative pronouncements of the
Australian Accounting Standards Board
(AASB) and International Financial Reporting
Standards (IFRS) as issued by the International
Accounting Standards Board (IASB)

• include the assets and liabilities of all subsid-
iaries of the Company as at 30 June 2016 and
the results of the subsidiaries for the year
then ended. Inter-entity transactions with, or
between, subsidiaries are eliminated in full on
consolidation

• have been prepared on a historical cost basis,
except for available-for-sale financial assets
and investments which have been measured at
fair value

• are presented in Australian dollars (being

ASX’s functional and presentation currency)
with all values rounded to the nearest hundred
thousand dollars unless otherwise stated, in
accordance with ASIC Class Order 2016/191.

Significant accounting and company policies and
key judgements and estimates are contained in
shaded text and are included within the relevant
note. These policies have been consistently applied
to all years presented, unless otherwise stated.

Key judgements and estimates
In the process of applying the Group’s account-
ing policies, management has made a number
of judgements and applied estimates of future
events.

Reclassification of prior year balances
On 1 July 2015, the Group re-aligned responsibilities
for the business activities into four main catego-
ries reflecting the management structure for each
activity. The four main categories are:

Judgements and estimates that are material to
the financial report are found in the following
notes:
• C1 Available-for-sale investments

• C2 Equity accounted investments

• D2 Intangible assets – goodwill

• D3 Intangible assets – software.

• listings and issuer services

• trading services

• equity post-trade services

• derivatives and OTC markets.
The prior year operating revenue line items in the
consolidated statement of comprehensive income
have been reclassified to reflect this change and
enhance comparability. The effect of the reclassi-
fication is shown in the below table:

Consolidated statement of comprehensive
income (extract)
Listings and issuer services

Trading services
(includes cash market trading, technical services and
information services)

Equity post-trade services
(includes cash market clearing and settlement)

Derivatives and OTC markets
(includes futures, equity options, OTC clearing,
Austraclear and collateral)

Cash market
(includes cash market trading, clearing and settlement)

Information services

Technical services

Austraclear
(includes collateral)

Interest income

Dividend income

Share of net profit of equity accounted investments

Other

2015
$m
178.1

206.5

125.2

73.7

58.2

45.4

151.4

12.7

0.3

16.5

868.0

Movement
Increase/(decrease)
$m
6.9

2015
(Restated)
$m
185.0

170.8

91.8

47.8

(125.2)

(73.7)

(58.2)

(45.4)

(14.8)

170.8

91.8

254.3

151.4

12.7

0.3

1.7

868.0

ASX Annual Report 2016 | Preface to the notes to the financial statements

Performance
of the Group

A1 Segment reporting

(a) Description of segment
Operating segments are reported in a manner
consistent with the internal reporting provided to
the Chief Operating Decision Maker (CODM). The
CODM, who is responsible for allocating resources
and assessing performance of the operating
segments, has been identified as the Managing
Director and CEO.

The CODM assesses performance of the Group
as a single segment, being a vertically integrated
organisation that provides a multi-asset class
product offering.

Vertical integration includes the:

• listing and issuer services offered to public

companies and other issuers

• trading venue or exchange activities for trading

• clearing and settlement activities

• exchange-traded and over-the-counter (OTC)

products.

Multi-asset class service offerings include equities,
interest rate, commodity and energy products
across cash and derivatives markets.

In addition to reviewing performance based on
statutory profit after tax, the CODM assesses the
performance of the Group based on underlying
profit after tax. This measure excludes amounts
regarded as significant items of revenue and
expense such as those that may be associated
with significant business restructuring or individual
transactions of an infrequent nature. There were no
items reported as significant in the current financial
year. A restructure charge of $7.7 million before tax,
classified as significant items, was recognised in the
prior year to support the technology transforma-
tion program and other organisational changes.

Group performance measures, including earn-
ings before interest and tax (EBIT) and earnings
before interest, tax, depreciation and amortisa-
tion (EBITDA), are also reviewed by the CODM. In
assessing performance, doubtful debt provisions
and arrangements where revenue is shared with
external parties are reclassified from expenses to
operating revenue; certain expenses are reclassi-
fied within operating expenses; and gross interest
income and expense is reclassified to net inter-
est income. The reporting provided to the CODM
presents interest income net of interest expense.

(b) Segment results
The information provided on a regular basis to
the CODM, along with a reconciliation to statu-
tory profit after tax for the period attributable
to owners of the Company, are presented on the
following page.

The revenue categories within the note have been
re-aligned to better reflect the main business activ-
ities of the Group and are consistent with internal
reporting. This change has also been reflected in
the statement of comprehensive income. The prior
year has been restated for comparability.

ASX derives all external customer revenue within
Australia and some services are accessible offshore.

No single customer generates revenue greater than
10% of the Group’s total revenue.

Revenue is measured at the fair value of the
consideration received or receivable, net of
rebates. Revenue is recognised when it can be
reliably measured, and when it is probable that
the economic benefits will flow to the Group.
Revenue is recognised for the major revenue
lines as shown below.

• Listings and issuer services includes listing

fees and other issuer services revenue. Initial
and subsequent listing fees are recognised
when the listing or subsequent event has
taken place. Annual listing fees are recognised
over the financial year to which they relate.
Unamortised balances are recognised as

deferred revenue on the balance sheet. Issuer
services revenue includes revenue for the
provision of holding statements and other
related activities, and is recognised in the
period that the service is provided.

• Trading services includes revenue from cash
market trading, information and technical
services. Cash market transaction revenue is
recognised at settlement date. The normal
market convention is that settlement occurs
two days after the initial trade date (T+2).
Prior to 7 March 2016 it was three days (T+3).
Accordingly, revenue for trades transacted
in the last two days prior to period end are
recognised in the subsequent reporting period
(settlement date). Revenue in relation to infor-
mation and technical services is recognised
over the period the service is provided.

• Equity post-trade services includes revenue
from clearing and settlement of quoted
securities including equities, debt securities,
warrants and exchange-traded funds. Clearing
and settlement fees for trades transacted
in the last two days prior to period end are
recognised in the subsequent reporting
period.

• Derivatives and OTC markets includes reve-

nue from trading and clearing of futures and
equity options, and clearing of OTC interest
rate derivatives; settlement, depository and
registry services for debt securities and cash
transactions (Austraclear); and ASX Collateral
services. Transaction revenue is recognised
at trade date except for Austraclear and ASX
Collateral services where revenue is recog-
nised over the period the service is provided.
This may involve deferring a portion of the
revenue to future reporting periods.

Dividend income is recognised when the right to
receive the dividend has been established.

Interest income comprises interest earned
on the Group’s own funds, as well as interest
earned from the investment of funds lodged
by participants as collateral. Interest income is
recognised using the effective interest method.

Interest expense is recognised as a finance cost
in the statement of comprehensive income using
the effective interest rate method.

ASX Annual Report 2016 | Performance of the Group

Year ended 30 June 2016

Net interest and dividend income
Net interest income

Net interest on participant balances

Dividend income

Net interest and dividend income

Underlying profit before tax

Income tax expense

Underlying profit after tax

Significant items

Tax on significant items

Net profit after tax

Segment
information
$m

Adjustments
$m

Consolidated
income statement
$m

22.3

37.7

13.1

73.1

606.1

(179.9)

426.2

(22.3)

(37.7)

(13.1)

(73.1)

606.1

(179.9)

426.2

Year ended 30 June 2016

Revenue
Listings

Issuer services

Listings and issuer services
Cash market trading

Information services

Technical services

Trading services
Cash market clearing

Cash market settlement

Equity post-trade services
Equity options

Futures and OTC clearing

Austraclear

Derivatives and OTC markets

Other

Operating revenue
Interest income

Dividend income

Share of net profit of equity accounted investments

Total revenue

Expenses
Staff

Occupancy

Equipment

Administration

Variable

ASIC supervision levy

Operating expenses

EBITDA
Finance costs

Depreciation and amortisation

Total expenses

EBIT

Segment
information
$m

Adjustments
$m

Consolidated
income statement
$m

149.4

43.3

192.7
40.7

80.1

62.0

182.8
54.1

47.9

102.0
23.1

194.3

48.4

265.8

3.0

746.3

(101.1)

(14.1)

(27.0)

(19.3)

(6.2)

(2.9)

(170.6)

575.7
-

(42.7)

533.0

1.6

1.6
-

1.0

1.0
-

-
-

0.3

0.1

0.4

(1.3)

146.3

13.1

0.9

162.0

(1.4)

(10.3)

6.2

2.9

(86.3)

(88.9)

151.0

43.3

194.3
40.7

80.1

63.0

183.8
54.1

47.9

102.0
23.1

194.6

48.5

266.2

1.7

146.3

13.1

0.9

908.3

(101.1)

(14.1)

(28.4)

(29.6)

(86.3)

(42.7)

(302.2)

ASX Annual Report 2016 | Performance of the Group

Year ended 30 June 2015

Net interest and dividend income
Net interest income

Net interest on participant balances

Dividend income

Net interest and dividend income

Underlying profit before tax

Income tax expense

Underlying profit after tax

Significant items

Tax on significant items

Net profit after tax

Segment
information
$m

Adjustments
$m

Consolidated
income statement
$m

26.9

32.3

12.7

71.9

573.9

(170.7)

403.2

(7.7)

2.3

397.8

(26.9)

(32.3)

(12.7)

(71.9)

(7.7)

2.3

(5.4)

7.7

(2.3)

566.2

(168.4)

397.8

Year ended 30 June 2015

Revenue
Listings

Issuer services

Listings and issuer services
Cash market trading

Information services

Technical services

Trading services
Cash market clearing

Cash market settlement

Equity post-trade services
Equity options

Futures and OTC clearing

Austraclear

Derivatives and OTC markets

Other

Operating revenue
Interest income

Dividend income

Share of net profit of equity accounted investments

Total revenue

Expenses
Staff

Occupancy

Equipment

Administration

Variable

ASIC supervision levy

Operating expenses

EBITDA
Finance costs

Depreciation and amortisation

Total expenses

EBIT

Segment
information
$m

Adjustments
$m

Consolidated
income statement
$m

143.3

40.2

183.5
36.1

73.7

60.1

169.9
47.3

44.5

91.8
24.6

181.6

47.7

253.9

1.6

700.7

(96.4)

(13.7)

(24.0)

(17.2)

(5.1)

(3.7)

(160.1)

540.6
-

(38.6)

502.0

1.5

1.5
-

0.9

0.9
-

-
-

0.3

0.1

0.4

0.1

151.4

12.7

0.3

167.3

(7.7)

(1.3)

(10.6)

5.1

3.7

(92.3)

(103.1)

144.8

40.2

185.0
36.1

73.7

61.0

170.8
47.3

44.5

91.8
24.6

181.9

47.8

254.3

1.7

151.4

12.7

0.3

868.0

(104.1)

(13.7)

(25.3)

(27.8)

(92.3)

(38.6)

(301.8)

ASX Annual Report 2016 | Performance of the Group

A2 Dividends

Dividend franking account

Dividends recognised and paid by ASX for the finan-
cial years ended 30 June 2016 and 2015:

2016
Final dividend for the year
ended 30 June 2015

Interim dividend for the
year ended 30 June 2016

Total amount

2015
Final dividend for the year
ended 30 June 2014

Interim dividend for the
year ended 30 June 2015

Total amount

Cents per
share

Total
amount
$m

95.1

184.1

99.1

191.9

194.2

376.0

89.9

174.0

92.3

178.7

182.2

352.7

The above dividends paid by the Company include
amounts attached to certain shares held by the
Group’s Long-Term Incentive Plan Trust (LTIP).
The dividend revenue recognised by LTIP of $0.4
million (2015: $0.3 million) has been eliminated
on consolidation.

Since the end of the financial year, the directors
have determined the below dividend. The dividend
will be fully franked based on tax paid at 30%.

Final dividend for the year
ended 30 June 2016

Cents per
share

Total
amount
$m

99.0

191.7

The Board’s policy is to pay a dividend based on
90% of underlying net profit after tax. A liability
is recognised for the amount of any dividends
determined on or before the end of the financial
year but not paid at balance sheet date. Typically,
the final dividend in respect of a financial period
is determined after period end, and is therefore
not included as a provision at year end.

Company
Franking credits available for future
years at 30% adjusted for the
payment of current income tax

2016
$m

2015
$m

221.3 201.0

Adjusting for the payment of the final dividend for
the year ended 30 June 2016, the franking balance
would be $139.2 million (2015: $122.1 million).

A3 Capital management

At 30 June 2016, equity of the Group totalled
$3,824.1 million (2015: $3,759.7 million). The Group’s
capital supports a range of activities and risks.
Capital requirements are subject to change from
time to time. Some factors that may impact the
amount of capital the Group requires to support
its business include:

• regulatory standards, both domestic and

international, which may impact on the level
of capital supporting the clearing and settle-
ment activities or other licensed activities.
Regulatory standards applying to many
financial market participants have increased in
recent years and there is an expectation that
these may increase further over time. There
may also be uncertainty over the application of
new regulatory standards

• the competitive environment in which ASX

operates may lead to higher levels of capital in
order to provide competitive services, noting
that customers may be able to access compet-
ing services internationally

• the level or concentration of activity under-

taken in markets and clearing and settlement
facilities operated by ASX. Generally the higher
level of activity may result in higher capital
requirements, however the relationship is not
necessarily linear

• the general economic or credit conditions

that may impact on capital requirements as
the level of risk generally increases as credit
conditions deteriorate. The level of operational
risk capital held by the Group can be impacted
by any revision to future loss assessments and
regulatory requirements

• the level of investments made, their market
value and the potential movement in their
market values. Capital requirements may also
be impacted by ASX’s level of investment in
existing or new services.

The Board’s policy is to maintain an appropriate
level of capital within the Group and relevant
subsidiaries with the objectives of:

• meeting its compliance obligations with

respect to the Financial Stability Standards,
and other regulations, including international,
as required by the various licences held

• sustaining prudential stability through

maintaining an adequate level of equity at the
Group level, cognisant of the fact that a signifi-
cant allocation of capital supports the activi-
ties of the two licensed central counterparty
(CCP) clearing subsidiaries as discussed in note
B1 and the two licensed settlement facilities

• facilitating growth of the Group’s exchange-

traded and OTC markets, and providing appro-
priate risk-adjusted returns to shareholders.

In accordance with the Group’s objectives and
policies, capital represented by cash is invested
at an appropriate liquidity profile, taking into
consideration the potential claims on that equity
that may arise from the Group’s activities,
predominantly CCP clearing.

(a) Movements in ordinary share capital
The closing balance of ordinary share capital
as at 30 June 2016 was $3,027.2 million (2015:
$3,027.2 million). There was no movement in
ordinary share capital in the current or prior
year.

The number of shares outstanding as at 30 June
2016 was 193,595,162 (2015: 193,595,162). There
was no movement in the number of shares
outstanding in the current or prior year.

Fully paid ordinary shares carry the right to
participate in dividends. Ordinary shares also
entitle the holder to the proceeds on winding up
of the Company in proportion to the number of
and amounts paid on the shares held. Ordinary
shares have no par value and ASX does not
have a limited amount of authorised capital. At
30 June 2016, all ordinary shares issued were
fully paid. On a show of hands, every holder of
ordinary shares present in person or by proxy, is
entitled to one vote, and upon a poll each share
is entitled to one vote.

Ordinary shares are classified as equity.
Incremental costs directly attributable to the
issue of new shares or options are shown in
equity as a deduction from the proceeds, net of
tax.

Dividend reinvestment plan shares allotted to
ASX shareholders as part of the dividend rein-
vestment plan (DRP) at the DRP allocation price
are classified as fully paid ordinary shares.

(b) Treasury shares
The number of treasury shares as at 30 June
2016 was 181,269 (2015: 181,269). There was no
movement in the number of treasury shares in
the current or prior year.

The LTIP holds treasury shares for the benefit of
employees under the ASX LTI plan as described
in the remuneration report. The shares, net of
any tax effect, are deducted from the equity
compensation reserve in equity.

ASX Annual Report 2016 | Performance of the Group

A4 Earnings per share

Basic and diluted earnings
per share (cents)

Weighted average number
of ordinary shares used
in calculating basic and
diluted earnings per share

2016

220.4

2015

205.7

193,413,893 193,413,893

The basic and diluted earnings per share (EPS)
amounts have been calculated on the basis of net
profit after tax of $426.2 million (2015: $397.8
million).

Basic EPS is calculated by dividing the consol-
idated profit attributable to the owners of the
Company, excluding any costs of servicing equity
other than ordinary shares, by the weighted
average number of ordinary shares outstanding
during the financial year, adjusted for bonus
elements in ordinary shares issued during the
year and excluding treasury shares.

Diluted EPS adjusts the figures used in the
determination of basic EPS to take into account
the after income tax effect of interest and other
financing costs associated with dilutive poten-
tial ordinary shares, and the weighted average
number of additional ordinary shares that would
have been outstanding assuming the conversion
of all dilutive potential ordinary shares.

A5 Taxation
The movements during the year in the following
components of deferred tax asset and liability were
recognised in profit or loss with the exception of
revaluations of available-for-sale financial assets,
available-for-sale investments and cash flow
hedges, which were recognised in other compre-
hensive income.

(a) Income tax expense
Profit before income tax expense
Prima facie income tax expense calculated at 30% (2015: 30%) on the profit before tax

Movement in income tax expense due to:
Non-deductible items
Non-assessable items
Franking credit offset
Adjustments to current tax for prior periods
Total income tax expense

(b) Major components of income tax expense
Current tax expense
Movement in deferred tax liability
Movement in deferred tax asset
Adjustments for current tax of prior periods
Total income tax expense

(c) Income tax on items recognised directly in other comprehensive income
Revaluation of available-for-sale financial assets
Revaluation of available-for-sale investments
Revaluation of cash flow hedges
Total

2016
$m

2015
$m

606.1
(181.8)

566.2
(169.9)

(0.4)
0.2
2.1
-
(179.9)

(178.8)
(0.1)
(1.0)
-
(179.9)

0.2
(6.8)
0.4
(6.2)

(0.3)
0.1
1.5
0.2
(168.4)

(168.4)
0.6
(0.8)
0.2
(168.4)

(0.3)
(17.8)
(0.3)
(18.4)

(d) Deferred tax asset/(liability)
Deferred tax asset comprises the estimated future benefit at an income tax rate of 30% (2015: 30%) of the below items:
Provisions for:
Doubtful debts
Employee entitlements
Premises provisions
Accrued expenses
Revenue received in advance
Revaluation of cash flow hedges
Revaluation of available-for-sale investments - unlisted entities
Deferred tax asset

0.3
10.5
2.6
1.6
3.6
0.2
0.3
19.1

0.5
9.9
3.1
2.6
4.0
-
-
20.1

Deferred tax liability comprises the estimated future expense at an income tax rate of 30% (2015: 30%) of the following items:
(10.4)
Fixed assets
(0.6)
Revaluation of available-for-sale financial assets
(52.9)
Revaluation of available-for-sale investments - listed entities
(0.2)
Revaluation of cash flow hedges
(0.3)
Long-term incentive plan
(64.4)
Deferred tax liability

(10.0)
(0.4)
(60.0)
-
(0.3)
(70.7)

Net deferred tax liability

(51.6)

(44.3)

Income tax expense is recognised in profit or
loss except to the extent that it relates to items
recognised in other comprehensive income or
directly in equity. In this case, the tax is also
recognised in other comprehensive income
or directly in equity respectively. Income tax
expense recognised in profit or loss comprises
current and deferred income tax.

Current tax is the expected tax payable on the
taxable income for the year, using tax rates
enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable
in respect of previous years. Current tax assets
and tax liabilities are offset if there is a legally
enforceable right to offset and the Group intends
to either settle on a net basis, or to realise the
asset and settle the liability simultaneously.

Deferred income tax is provided using the
balance sheet liability method, providing for
temporary differences between the carrying
amounts of assets and liabilities for financial
reporting purposes, and the amounts used for
taxation purposes. Deferred income tax is not
recognised for certain temporary differences
such as the initial recognition of goodwill.

The amount of deferred income tax is deter-
mined using tax rates enacted or substantively
enacted at the balance sheet date and expected
to apply when the related deferred income tax
asset is realised or the deferred income tax
liability is settled.

A deferred tax asset is recognised only to the
extent that it is probable that future taxable
amounts will be available against which the
asset can be utilised, and is reduced to the extent
that it is no longer probable that the related tax
benefit will be realised.

Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset
current tax liabilities and assets, and when the
deferred tax balances relate to income taxes
levied by the same tax authority.

ASX Annual Report 2016 | Performance of the Group

Risk
management

Some of the risks the Group is exposed to include
clearing and settlement risk and operational risk.
ASX settled equity (on average $4.7 billion per
day) and debt instrument (on average $64.8 billion
per day) transactions on a delivery-versus-pay-
ment basis. Settlement errors expose the Group
to potential financial and reputational losses.
Operational incidents or errors can impact on the
financial performance of the Group and adversely
affect its reputation.

These margins are based on risk parameters
attached to the underlying security or contract
at trade date. The margin rates are subject to
regulatory standards including a high level of
confidence that they meet expected movements
based on historical events. However there could
be circumstances where losses are greater than
the margins held.

At 30 June, participants’ margins and commitments
recognised on balance sheet comprised:

In addition to the initial margin, participants must
also settle changes in the fair value of derivatives
contracts (variation margin). Participants must
settle both initial and variation margins daily. The
amounts owing to participants are repayable on
settlement or closure of the contracts.

In the event of default by a clearing participant on
its obligations under contracts, ASX Clear and ASX
Clear (Futures) have the authority to retain collat-
eral deposited by the defaulting clearing participant
to satisfy its obligations. As at 30 June, collateral
lodged by clearing participants was as follows:

ASX Clear

ASX Clear
(Futures)

2016
$m
5,674.9

213.3

2015
$m
3,595.1

91.1

5,888.2

3,686.2

200.0

Cash

200.0

Bank guarantees

6,088.2

3,886.2

Debt securities

213.3

91.1

Equity securities

3,385.7 3,625.2

2016
$m
815.7

14.6

2015
$m

2015
2016
$m
$m
673.7 4,859.2 2,921.4

16.0

Cash

Debt securities

Current amounts
owing to participants
Commitments

Non-current amounts
owing to participants

Total participants’
margins and commitments

Current amounts owing to participants represent
collateral lodged to cover margin requirements
on unsettled derivative contracts and cash
market trades. Non-current amounts owing to
participants represent cash balances deposited
by participants as commitments to clearing
guarantee funds, which at reporting date had no
determined repayment date.

Margins that are settled by cash or debt securi-
ties are recognised on balance sheet at fair value
and are classified as amounts owing to partici-
pants within current liabilities. Balances lodged
in cash are interest bearing and are carried at the
amounts deposited which represent fair value.
Margins that are settled by bank guarantees or
equity securities are not recognised on balance
sheet as the Group is not party to the contractual
provisions of the instruments other than in the
event of a default.

All net delivery and net payment obligations
relating to cash market and derivative securities
owing to or by participants as at 30 June 2016
were subsequently settled.

(c) Financial resources available to CCPs
The Financial Stability Standards require each CCP
to have adequate financial resources to cover its
exposures in the event of default by the two partic-
ipants and their affiliates that would potentially
cause the largest aggregate credit exposure for the
CCP in extreme but plausible market conditions.
Financial resources include the clearing default
funds shown in the next two tables as well as eligi-
ble collateral. The level of clearing default funds
which the CCPs must maintain may therefore
increase from time to time. The Financial Stability
Standards also require each CCP to have a process
for replenishing any clearing default funds after
depletion caused by a default loss. The replen-
ished fund is then available to support new activity
post the loss. To comply with this obligation, the
company has undertaken in certain circumstances
to provide funds up to pre-determined levels for
replenishment of the clearing default funds. The

B1 Clearing risk

The Group collects margins and other balances
(commitments) from clearing participants as secu-
rity for clearing risk undertaken.

Subsections (a) and (b) below discuss participants’
obligations and the nature of collateral and commit-
ments lodged, as well as ASX’s recognition princi-
ples concerning these liabilities.

(a) Novation
The Group has the following wholly-owned subsid-
iaries that provide CCP clearing services:

• ASX Clear Pty Limited (ASX Clear), which

provides novation of cash market securities
and derivatives

• ASX Clear (Futures) Pty Limited (ASX Clear
(Futures)), which provides novation of both
exchange-traded and OTC derivatives.

Transactions between two clearing participant
organisations are replaced by novation. This makes
the CCPs contractually responsible for the obliga-
tions entered into by clearing participants on both
the buying and selling legs of the same transaction.
Through novation, the respective CCP assumes the
credit risk of the underlying clearing participant
in the event of a participant default. The novation
process results in all positions held by the CCPs
being matched.

(b) Participants’ margins
Clearing participants are required to lodge an
amount (initial margin) on open cash market and
derivative positions novated to the Group’s CCPs.

ASX Annual Report 2016 | Risk management

Group may utilise a number of alternative funding
sources to contribute to an increase in or replenish-
ment of the CCPs’ clearing default funds, including
its own cash reserves. In certain circumstances
participants may have an obligation to the CCP to
contribute to an increase in or replenishment of
the clearing default funds.

The CCPs’ operating rules also provide for the CCPs
to undertake certain actions to deal with events
of default and utilisation of collateral and clearing
default funds. These are further explained below.

On 30 June 2016, the subordinated debt provided
by the Group to each CCP was replaced with an
equivalent amount of equity.

ASX Clear

Restricted capital reserve

Equity provided by the Group

Subordinated debt provided
by the Group

Paid in resources
Recovery assessments

Total financial resources

2016
$m
71.5

178.5

2015
$m
71.5

103.5

75.0

250.0
300.0

550.0

250.0
300.0

550.0

The financial resources at 30 June 2016 available
to ASX Clear in the event of a participant default
would be applied in the following order:

1. collateral or other margin or contributions

lodged by the defaulting participant

2. restricted capital reserve of $71.5 million

3. equity capital of $178.5 million

4. contributions lodged by non-defaulting

participants under the ASX Clear operating
rules (no contributions were lodged in the
current or prior year)

5. recovery assessments of $300.0 million

which can be levied on participants (nil has
been levied for periods ending 30 June 2015
and 2016).

ASX Clear (Futures)

Equity provided by the Group

Subordinated debt
provided by the Group

Commitments

Equity provided by the Group

Commitments

Equity provided by the Group

Total financial resources

2016
$m
120.0

2015
$m
30.0

90.0

100.0

150.0

100.0

180.0

650.0

100.0

150.0

100.0

180.0

650.0

B2 Cash and funds on deposit and
available-for-sale financial assets

The cash, funds on deposit and available-for-sale
financial assets represent total cash and cash
equivalents as per the statement of cash flows.
The balance represents the Group’s own cash
funds as well as collateral lodged by participants
in accordance with note B1.

(a) Cash and funds on deposit

The financial resources at 30 June 2016 available
to ASX Clear (Futures) in the event of participant
default would be applied in the following order:

Cash at call

Deposits

2016
$m
2,781.4

2015
$m
1,159.4

495.0

830.0

Cash and funds on deposit

3,276.4 1,989.4

Impairment indicators for available-for-sale assets
include a significant or prolonged decline in the
fair value of the security below its cost. When the
asset is considered to be impaired, any loss that
had been recognised directly in equity is trans-
ferred to profit or loss.

(c) Restricted cash
The Group holds $71.5 million of restricted cash
that is only available for use by the entity in specific
circumstances as described in the policy below the
statement of changes in equity.

Restricted cash is included in the previous table
within cash and funds on deposit, and is also recog-
nised as a restricted capital reserve within equity
on the balance sheet.

1. collateral and commitments lodged by the

defaulting participant

2. equity capital of $120.0 million

3. commitments lodged in cash by participants,

totalling $100.0 million. Any defaulting
participant’s commitments in this total will
be included in amounts previously applied as
part of (1) above

4. equity capital of $150.0 million

5. commitments lodged in cash by participants,

totalling $100.0 million

6. equity capital of $180.0 million.

A participant may be both a futures and OTC partic-
ipant. The order of application in the event of a
default with respect to items 3 and 5 above, will
depend on the status of the defaulting participant.
Where a participant default is only a single cate-
gory (ie futures or OTC), then the non-defaulting
participants’ commitments from the same cate-
gory are utilised in item 3, with the other category
utilised in item 5. Where a defaulting participant
is a participant in both futures and OTC, the other
non-defaulting participants’ commitments are
apportioned for the purposes of 3 and 5.

(b) Available-for-sale financial assets
Money market instruments – at cost

3,795.1

2,887.5

B3 Financial risk management

Revaluation recognised
directly in equity

1.3

2.1

Available-for-sale financial assets

3,796.4 2,889.6

Available-for-sale financial assets comprise short-
term money market investments, including bank
bills, certificates of deposit, bonds, floating rate
notes, promissory notes and treasury notes and
are traded in active markets.

The Group’s activities expose it to a variety of finan-
cial risks including market risk (comprising interest
rate, foreign currency and equity price risk), credit
risk and liquidity risk. The maximum exposure to
credit risk at the end of the reporting period is the
carrying amount of each class of financial assets
as detailed on the following table.

Available-for-sale financial assets are initially
recognised at fair value, being the fair value of the
consideration given plus transaction costs that
are directly attributable to acquiring the asset.
After initial recognition, available-for-sale financial
assets continue to be measured at fair value as
determined by valuation techniques outlined in
note B3(d)(ii).

With the exception of impairment losses, gains or
losses are recognised directly in the asset revalu-
ation reserve in equity until the asset is derecog-
nised, at which time the cumulative gain or loss
previously recognised in equity is recognised in
profit or loss.

The Group’s overall risk management strategy
seeks to manage potential adverse effects on
the financial performance of the Group. Risk
management is carried out under policies
approved by the Board of Directors.

Management monitors investment credit, foreign
currency, market liquidity and cash flow interest
rate risk, and manages clearing default credit risk
with counterparties with ongoing reporting to
the respective boards.

ASX Annual Report 2016 | Risk management

(a) Market risk
Market risk is the risk of loss arising from move-
ments in observable market variables such as
interest rates, foreign exchange rates and other
market prices.

(i) Interest rate risk

Exposure arising from Risk management
Variable rate cash
investments and
money market
instruments expose
the Group to cash flow
interest rate risk.

• The Boards of the relevant
subsidiaries have set limits
with respect to maximum
and weighted average.
maturity and value at risk

• Principally managed by
policies that enable the
Group to pay a variable
rate of interest to partici-
pants on the funds held.

Fixed rate money
market instruments
that are carried at
fair value expose the
Group to fair value
interest rate risk.

• The Boards of the relevant
subsidiaries have set limits
with respect to maximum
and weighted average
maturity and value at risk.

Interest bearing assets comprise the investment of
the Group’s cash resources (participant collateral
lodged and Group funds). Interest bearing liabilities
comprise cash collateral and commitment funds
lodged by participants.

The Group’s receivables, investments, payables
and other liabilities are non-interest bearing so
are therefore not subject to interest rate risk, since
neither the carrying amount nor the future cash
flows will fluctuate due to a change in market inter-
est rates. The Group’s interest bearing financial
assets and liabilities are shown in the following
table.

The Group holds the following financial assets and
liabilities by category:

As at
30 June 2016

Financial assets
Cash and funds
on deposit

Available-for-
sale financial
assets

Receivables

Available-
for-sale
investments

Total financial
assets

Available
-for-sale
$m

Amorti-
sed cost
$m

Note

Total
$m

3,276.4 3,276.4

3,796.4

469.1

358.2

4,154.6

3,745.5

7,900.1

Financial liabilities
Payables

Amounts
owing to
participants

Total financial
liabilities

As at 30 June 2015

431.2

6,088.2 6,088.2

6,519.4

Financial assets
Cash and funds
on deposit

Available-for-
sale financial
assets

Receivables

Available-
for-sale
investments

Total financial
assets

1,989.4

2,889.6

- 2,889.6

328.6

311.1

3,200.7

2,318.0

5,518.7

Financial liabilities
Payables

Amounts
owing to
participants

Other liabilities

Total financial
liabilities

306.0

3,886.2 3,886.2

0.1

4,192.3

ASX Annual Report 2016 | Risk management

As at 30 June 2016

Floating
interest
rate
$m

Fixed
interest
rate
$m

Total
$m

Interest bearing financial assets
Cash and funds on
deposit

1,711.4

1,565.0

3,276.4

Available-for-sale
financial assets

Total interest bearing
financial assets
Weighted average
interest rate
at period end

1,012.9

2,783.5

3,796.4

2,724.3

4,348.5

7,072.8

1.97%

2.20%

With respect to the prior table:
• floating interest rate refers to financial

instruments where the interest rate is subject
to change prior to maturity or repayment,
predominantly deposits at call and floating
rate notes

• fixed interest rate refers to financial instru-
ments where the interest rate is fixed up
to maturity, predominantly term deposits,
bank accepted bills, negotiable certificates
of deposit, promissory notes, treasury notes,
reverse repurchase agreements and bonds.

6,088.2

Interest bearing financial liabilities
Amounts owing to
participants

6,088.2

1.21%

Total interest bearing
financial liabilities
Weighted average
interest rate
at period end

Net interest bearing
financial
(liabilities)/assets

As at 30 June 2015

(3,363.9)

4,348.5

984.6

Interest bearing financial assets
Cash and funds on
deposit

1,159.4

830.0

1,989.4

Available-for-sale
financial assets

Total interest bearing
financial assets
Weighted average
interest rate
at period end

1,161.0

1,728.6

2,889.6

2,320.4

2,558.6

4,879.0

2.29%

2.74%

Interest bearing financial liabilities
Amounts owing to
participants

3,886.2

1.52%

Total interest bearing
financial liabilities
Weighted average
interest rate
at period end

Net interest bearing
financial
(liabilities)/assets

3,886.2

(1,565.8)

2,558.6

992.8

Sensitivity analysis
The Group does not account for any interest bear-
ing financial assets or liabilities at fair value through
profit or loss. As such, any change in fair value that
would result from a change in interest rates at
the end of the reporting period would only affect
profit or loss if a subsequent disposal is made
prior to maturity.

Fair value interest rate risk for fixed rate instru-
ments (net of tax)
At 30 June 2016, if interest rates had increased/
decreased by 25 basis points from year-end rates
with all other variables held constant, equity would
have been $0.9 million lower/higher (2015: $0.8
million) due to a change in the fair value of availa-
ble-for-sale financial assets.

Fair value interest rate risk for floating rate
instruments (net of tax)
At 30 June 2016, if interest rates had increased/
decreased by 25 basis points from year-end rates
with all other variables held constant, equity would
have been $0.2 million lower/higher (2015: $0.1
million) due to a change in the fair value of availa-
ble-for-sale financial assets.

Cash flow interest rate risk (net of tax)
At 30 June 2016, if interest rates had increased/
decreased by 25 basis points from year-end rates
with all other variables held constant, profit would
be $0.4 million higher/lower (2015: $0.5 million)
mainly due to higher/lower interest income on cash
and available-for-sale financial assets.

(ii) Foreign currency risk
Exposure arising from
Foreign currency transactions The Group
enters into cash flow commitments in foreign
currencies.

Clearing operations The Group’s CCPs accept
and hold foreign currency as collateral on clear-
ing participants’ derivatives exposures.

Risk management
• Where the Group enters into cash flow commitments in

foreign currencies, its policy is to enter into hedging arrange-
ments to mitigate the exchange risk where possible.

• The collateral held in foreign currency is offset by an equal
payable in the same currency to the participant, which
reduces foreign currency risk in the normal course of
business.

The majority of the Group’s foreign currency risk is associated with foreign denominated cash, net
interest and exchange fees receivable. Such exposure however, is not considered significant and is
converted to AUD on a regular basis.

At 30 June 2016, USD 24.0 million (2015: USD 7.2 million) and EUR 5.6 million (2015: EUR 7.5 million)
were designated by the Group as the hedging instruments in qualifying cash flow hedges for committed
expenditure to be paid in USD and EUR. These amounts are included in the below table within cash
and funds on deposit.

During the current financial year, the use of cash flow hedges resulted in a $1.2 million reduction in
cash flow required for committed capital and operating expenses (2015: $1.2 million).

Available-for-sale investments denominated in USD are subject to foreign currency risk, impacting
their carrying value.

The table below shows the Group’s exposure to foreign currency risk at the end of the year, expressed
in AUD.

Foreign exchange risk sensitivity analysis (net of tax)
At 30 June 2016, a 10 percent strengthening/weakening of the AUD against the following currencies
would have increased/decreased profit or loss, net of tax by the amounts shown below. This analysis
assumes all other variables, in particular interest rates, remain constant.

NZD

2016
$m
0.1

2015
$m
-

A 10 percent strengthening/weakening of the AUD against the USD would have decreased/increased
equity by $3.6 million (net of tax) (2015: $0.6 million), as a result of foreign currency cash flow commit-
ments designated as cash flow hedges and investments in unlisted securities. A 10 percent strength-
ening/weakening of the AUD against the EUR would have decreased/increased equity by $0.5 million
(net of tax) (2015: $0.7 million), as a result of foreign currency cash flow commitments designated as
cash flow hedges and investments in unlisted securities.

At the inception of the hedging transaction, the Group documents the relationship between hedging
instruments and hedged items, as well as its risk management objective and strategy for undertaking
various hedge transactions. The Group also documents its assessment, both at hedge inception and also
on an ongoing basis, of whether the instruments that are used in hedging transactions have been, and will
continue to be, highly effective in offsetting changes in cash flows of hedged items.

For cash flow hedges, the effective portion of any change in the fair value of the instrument that is desig-
nated and that qualifies as a cash flow hedge is recognised in the asset revaluation reserve in equity. The
gain or loss relating to the ineffective portion is recognised immediately in the statement of comprehen-
sive income.

30 June 2016

30 June 2015

(iii) Price risk

Financial assets:
Cash and funds on deposit

Receivables

Available-for-sale investments

Financial liabilities:
Payables

Amounts owing to participants

NZD

$m
125.8

0.7

0.2

125.2

USD

$m
33.1

23.3

EUR

$m
8.3

JPY

$m
253.0

NZD

$m
108.3

USD

$m
170.2

EUR

$m
11.0

JPY

$m
-

0.7

0.3

252.8

108.0

160.4

Net exposure

1.1

56.4

8.3

0.2

0.7

9.8

11.0

Exchange rate for conversion AUD 1:

1.0489 0.7458

0.6711

76.73

1.1218 0.7669 0.6843

93.92

Exposure arising from
Equity securities price movements with
respect to the Group’s investments in listed
entities of $334.9 million (2015: $311.1
million).

Other price movements associated with
underlying equities and derivatives on
trades novated to the CCPs.

Risk management
• Ongoing monitoring of values with respect to any impairment,

with consideration to financial and other implications of holding
instruments.

• Under normal circumstances, this risk is minimal as the trades
are matched. However price movements may impact on credit
risk associated with participant obligations (as discussed in the
following section).

Equity price risk sensitivity analysis (net of tax)
A 10 percent increase/decrease in the price of the Group’s external listed equity investment (refer note
C1) at balance date would have increased/decreased equity by $23.4 million (2015: $21.8 million). The
Group does not account for any equity investments at fair value through profit or loss, therefore any
change in fair value that would result from a change in price at the end of the reporting period would
only affect the profit or loss if the investment was subsequently disposed.

ASX Annual Report 2016 | Risk management

(b) Credit risk

Exposure arising from
Clearing participant default credit risk
Through the novation process, the Group is
exposed to the potential loss that may arise
from the failure of a counterparty to meet its
obligations or commitments. The obligations
mainly relate to T+2 settlement risk for cash
market trades and daily mark-to-market
movements on open derivative positions.
Failure of clearing participants to meet these
obligations exposes the Group to potential
losses.

Risk management
• Clearing participant membership requirements and admission

standards, including minimum capital requirements.
• Participant surveillance, including capital monitoring.
• Daily and intraday counterparty credit risk control, including

margining and collateral management.

• Position limits based on the capital of the participant.
• Financial resource adequacy, including fixed capital and

stress-testing of clearing participants’ exposure limits against
the amount and liquidity of variable and fixed financial
resources available.

• Operating rules that deal with recovery and resolution of

losses in the event of a clearing participant default.

Investment counterparty credit risk arising on
certain financial assets including cash, funds
on deposit, current available-for-sale financial
assets, and trade and other receivables.

• Board policies that limit the amount of credit exposure and
concentration to any one counterparty, as well as minimum
credit ratings for counterparties. Investments are limited to
non-derivative assets.

• Operating rules that address the allocation of losses between

the Group and clearing participants.

• Active debt collection procedures and regular review of the

ageing of trade receivables.

The Group’s ongoing monitoring of participants’ market positions and exposures, coupled with daily
margining and collateral management, including possible intraday and additional margin calls, enables
it to manage its central counterparty credit risk and meet its regulatory obligations. Further informa-
tion on the resources available to the CCPs in the event of a participant default is shown in note B1.

Standard & Poor’s (S&P) credit ratings are used in determining the credit quality of the counter-
party with whom cash and funds on deposit, and current available-for-sale financial assets are held.
Counterparties are limited to licensed banks with a minimum short-term credit rating of A1, Australian
state governments and the Commonwealth of Australia.

The Group’s largest single counterparty exposure at the end of the reporting period was $1,007.1 million
(2015: $740.6 million) to an Australian licensed bank with an S&P short-term credit rating of A1+. The
risk ratings of the counterparties that the Group has exposure to at the end of the period are shown
in the following table.

2016

Cash and funds on deposit
Negotiable certificates of deposit

Promissory notes

Treasury notes

Floating rate notes

Bonds

Total current available-for-sale financial assets

2015

Cash and funds on deposit
Bank bills

Negotiable certificates of deposit

Promissory notes

Floating rate notes

Bonds

Total current available-for-sale financial assets

Counterparty credit ratings

A1+
$m

2,642.5
624.1

1,123.1

114.8

797.1

366.1

3,025.2

1,404.3
34.9

608.7

239.5

935.3

271.5

2,089.9

A1
$m

633.9
555.4

215.8

771.2

585.1
-

569.5

225.7

4.5

799.7

Total
$m

3,276.4
1,179.5

1,123.1

114.8

1,012.9

366.1

3,796.4

1,989.4
34.9

1,178.2

239.5

1,161.0

276.0

2,889.6

The Group does not utilise credit ratings to determine the credit quality of other financial assets,
which includes trade receivables, margins receivable from participants, accrued revenue and interest
receivable. Intercompany receivables consist of balances owing between the entities of the Group and
are eliminated on consolidation. The parent entity considers the credit risk on these balances to be low.

Exposure arising from
Clearing operations of CCPs Margins to cover
derivatives and cash market exposures are
settled with participants and invested in the
short-term money market on a daily basis.
The investment of these balances requires
strict management to provide sufficient
liquidity for the routine daily margin
settlement.

Risk management
• The Board has implemented policies that specify liquidity

requirements, based on whether assets can be liquidated and
converted to cash on a same-day basis, including maximum
average maturity limits. Instruments that are eligible for
repurchase agreements with the Reserve Bank of Australia are
treated as liquid.

• Forward planning and forecasting of liquidity requirements.

The expected contractual undiscounted cash flows of these investments, and other financial assets
and liabilities, are shown in the table on the following page. All available-for-sale financial assets are
eligible for repurchase in the secondary market. All financial assets and liabilities are non-derivative.

The values on the balance sheet may differ to the assets and liabilities in the table on the following page
due to the difference in fair value at balance date compared to the contractual cash flows up to maturity.

ASX Annual Report 2016 | Risk management

30 June 2016

Assets
Cash and funds on deposit

Available-for-sale financial
assets

Receivables

Available-for-sale investments

Total assets

Liabilities
Payables

Amounts owing to participants

Total liabilities

Commitments
Capital and operating
commitments

Operating lease commitments

Total commitments

30 June 2015

Assets
Cash and funds on deposit

Available-for-sale financial
assets

Receivables

Available-for-sale investments

Total assets

Liabilities
Payables

Amounts owing to participants

Other liabilities

Total liabilities

Commitments
Capital and operating
commitments

Operating lease commitments

Total commitments

Up to
1 month
$m

>1 month
to 3 months
$m

>3 months
to 1 year
$m

>1 year1
$m

No specific
maturity
$m

2,447.1

788.2

45.4

668.7

467.1

1,573.0

1,362.8

248.0

2.0

3,582.9

2,363.2

1,408.2

248.0

406.0

5,888.2

6,294.2

0.7

0.9

1.6

940.4

280.2

328.1

17.8

2.2

1.8

4.0

321.0

261.6

0.5

1.2

15.0

8.4

23.4

6.2

50.9

93.4

144.3

735.3

2,278.4

126.3

1,548.7

583.1

3,013.7

126.3

358.2

200.0

311.1

Total
$m

3,280.7

3,852.5

469.1

358.2

7,960.5

431.2

6,088.2

6,519.4

68.8

104.5

173.3

1,996.7

2,946.5

328.6

311.1

5,582.9

280.5

3,686.2

0.1

3,966.8

0.4

0.9

1.3

15.3

1.6

1.7

3.3

1.0

16.3

8.0

24.3

9.2

35.2

103.9

139.1

306.0

200.0

3,886.2

0.1

200.0

4,192.3

53.5

114.5

168.0

1 Available-for-sale financial assets include securities with contractual cash flows beyond one year, but are classified
as current assets on the balance sheet as they are expected to be held for less than 12 months. These comprise
Commonwealth Government securities lodged as collateral by clearing participants. Under normal circumstances the
Group does not receive coupon payments on these instruments.

With respect to amounts owing to participants, the actual maturity cannot be determined as maturity
will depend on a number of factors including new contracts opened and contracts closed by partici-
pants. These have been classified as having maturities up to one month on the basis of the shortest
possible legal obligation for repayments.

(d) Fair value measurements

(i) Fair value hierarchy
The following tables present the Group’s financial assets measured and recognised at fair value at 30
June. The Group did not have any financial liabilities measured at fair value in either year.

30 June 2016

Assets
Available-for-sale financial assets:

- Negotiable certificates of deposit

- Promissory notes

- Treasury notes

- Floating rate notes

- Bonds

Available-for-sale investments

Total assets

30 June 2015

Assets
Available-for-sale financial assets:

- Bank bills

- Negotiable certificates of deposit

- Promissory notes

- Floating rate notes

- Bonds

Available-for-sale investments

Total assets

Level 1
$m

Level 2
$m

Level 3
$m

Total
$m

213.3

334.9

548.2

91.1

311.1

402.2

1,179.5

1,123.1

114.8

1,012.9

152.8

3,583.1

34.9

1,178.2

239.5

1,161.0

184.9

2,798.5

23.3

1,179.5

1,123.1

114.8

1,012.9

366.1

358.2

4,154.6

34.9

1,178.2

239.5

1,161.0

276.0

311.1

3,200.7

The Group uses the following hierarchy to categorise its financial instruments measured and carried at fair
value:

• quoted prices (unadjusted) in active markets for identical assets and liabilities (level 1)

• inputs other than quoted prices included within level 1 that are observable for the asset or liability,

either directly (as prices) or indirectly (derived from prices) (level 2)

• inputs for the asset or liability that are not based on observable market data (unobservable inputs)

(level 3).

The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the
reporting date.

There were no transfers between levels for recurring measurements during the year. The Group did
not measure any assets or liabilities at fair value on a non-recurring basis as at 30 June 2016.

ASX Annual Report 2016 | Risk management

2016
$m

-
23.3

23.3

2015
$m

-
-

(ii) Valuation techniques used to determine fair values

Investments in listed entities The fair value of the Group’s external listed equity investment is determined
by reference to the ASX-quoted closing price at reporting date.

(ii) Valuation techniques used to determine fair values

(iv) Level 3 fair value instruments
The following table presents the changes in level 3 instruments for the years ended 30 June 2016
and 2015.

Australian Government bonds Fair values are determined by reference to published bond yields.

As the fair value of investments in listed entities and government bonds are based on quoted market
prices in active markets, these instruments fall within level 1 of the fair value hierarchy.

Opening balance at 1 July
Additions

Closing balance at 30 June

There were no gains or losses recognised in profit or loss for the years ended 30 June 2016 and 2015.

The following table summarises the quantitative information about the significant unobservable inputs
used in level 3 fair value measurements. This analysis assumes all other variables, in particular foreign
exchange rates, remain constant.

Description

Investment in
unlisted entities

Fair value at
30 June 2016
$m

Unobservable
inputs*

Change in
Inputs

Relationship of unobservable
inputs to fair value

$23.3

Purchase price

10%

A 10% increase/decrease in
the purchase price would
increase/decrease fair value
by $2.3 million

Total assets

$23.3

* There were no significant inter-relationships between unobservable inputs that materially affect fair values.

Available-for-sale financial assets (excluding Australian Government bonds) Discounted cash flow anal-
ysis is used as the primary valuation technique for fair value measurement of current available-for-sale
financial assets. The fair value of bank bills, negotiable certificates of deposit and floating rate notes are
determined by reference to money market bid rates, while the fair value of bank-issued bonds is deter-
mined by reference to the respective quoted bond yields.

As the fair value of these instruments is determined using valuation techniques rather than quoted market
prices, they do not qualify for recognition in level 1 of the hierarchy. However, as the inputs (rates) used in
the discounted cash flow analysis are derived from quoted market prices and are readily observable in the
market, these instruments will qualify for recognition within level 2 of the fair value hierarchy.

Investments in unlisted entities The fair value of the Group’s external unlisted equity investment is deter-
mined by reference to the most recent purchase price (inclusive of the cost of any rights to acquire) for the
same class of securities held at reporting date. As the fair value of unlisted equity investments is based on
unobservable market data, these instruments fall within level 3 of the fair value hierarchy.

(iii) Fair values of other financial instruments

The Group has a number of financial instruments which are not measured at fair value on the balance
sheet. Due to their short-term nature, the carrying amounts of current receivables, current payables and
other liabilities are assumed to approximate their fair value. The carrying amount of non-current payables
approximates their fair value as the impact of discounting is not significant.

(e) Enforceable netting arrangements
There are no financial assets and financial liabilities recognised on a net basis. In the event that a clearing
participant defaults and ASX assumes open positions under novation, ASX’s policy is to recognise the
net open positions where it has the right to offset exposures.

In the event that a clearing participant defaults, ASX may utilise collateral lodged by that participant to
offset net losses realised from the close-out of positions. While ASX has the right to offset this collateral
from the open position, its policy is to only offset following the close-out. The aggregate amount of
collateral lodged by participants at 30 June 2016 was $6,088.2 million (2015: $3,886.2 million).

ASX Annual Report 2016 | Risk management

Investments

C1 Available-for-sale investments

Investments in listed entities

Investments in unlisted entities

Total available-for-sale
investments

2016
$m
334.9

23.3

2015
$m
311.1

358.2

311.1

(a) Investments in listed entities
As at 30 June 2016, ASX held 19.1% (2015: 19.2%) of
the share capital in IRESS Limited (IRESS), whose
principal activities consist of the provision of finan-
cial planning and associated tools, in addition to an
equity information and trading platform for finan-
cial market and wealth management participants.

During the current financial year, ASX did not
purchase any share capital in IRESS (2015:$1.6
million).

The Group does not have significant influence over
the investee as it has no representation on the
Board of directors and does not have the power
to participate in financial and operating policy
decisions.

There was no impairment in investments in listed
entities during the current or prior financial year.

(b) Investments in unlisted entities
During the current financial year, ASX acquired
an 8.5% equity interest in Digital Asset Holdings
LLC (DAH) for consideration of $24.4 million (USD
$17.4 million). DAH specialises in the development
of distributed ledger technology solutions.

Available-for-sale investments are initially
recognised at fair value, being the consideration
given plus transaction costs that are directly
attributable to acquiring the asset. After initial
recognition, they continue to be measured at fair
value.

The fair value of investments in listed entities
is determined by reference to quoted market
prices at the close of business on the balance
sheet date.

The fair value of investments in unlisted entities
is determined by reference to unobservable
market data at balance date.

Refer to note B3 for valuation techniques.

C2 Equity accounted investments

As at 30 June 2016, ASX held a 49% (2015: 49%)
interest in an associate entity, Yieldbroker Pty
Limited (Yieldbroker). Yieldbroker’s principal
place of business is Australia. It operates licensed
electronic markets for trading Australian and
New Zealand debt securities and interest rate
derivatives.

The carrying amount of equity accounted invest-
ments was $66.6 million (2015: $65.7 million). There
was no impairment charge incurred in the current
or prior year.

The financial information below represents ASX’s
49% share of Yieldbroker from the period of
ownership:

Profit from continuing operations

Other comprehensive income

Total comprehensive income

2016
$m
0.9

0.9

2015
$m
0.3

0.3

Equity accounted investments are initially
recognised at cost. The carrying amount is
subsequently adjusted to recognise the Group’s
share of the investee’s post-acquisition profit
and loss and other comprehensive income. This
is recognised in the Group’s profit and loss and
comprehensive income respectively. Dividends
received or receivable from associates are
recognised as a reduction in the carrying amount
of the investment.

The carrying amount of equity accounted invest-
ments is tested for impairment whenever events
or changes in circumstances indicate that the
carrying amount may not be recoverable.

ASX Annual Report 2016 | Investments

Other balance
sheet assets
and liabilities

D1 Receivables

Current
Trade receivables

Less: provision for impairment

Margins receivable

Accrued revenue

Interest receivable

Other debtors

Total

2016
$m

2015
$m

93.7

(1.1)

92.6
365.9

4.3

5.0

1.3

80.0

(1.6)

78.4
233.6

9.6

6.6

0.4

469.1

328.6

Trade receivables aged analysis
As at 30 June, the aged analysis for trade receiv-
ables of the Group was as follows:

Not past due

Past due 0-30 days

Past due 31-60 days

Past due 61-90 days

Past due 91 days and over

Total trade receivables not impaired
Trade receivables impaired

Total trade receivables

85.6

0.5

4.4

1.9

0.2

92.6
1.1

93.7

74.1

0.6

2.6

0.7

0.4

78.4
1.6

80.0

Trade receivables, which generally have terms of
30 days, are initially recognised at fair value and
subsequently measured at amortised cost, less
any provision for impairment.

The collectability of trade receivables is reviewed
on a regular basis. Debts known to be uncollect-
able are written-off by reducing the carrying
amount directly. A provision is raised when there
is objective evidence that the Group will not be
able to collect all of the original amounts due.
The amount of the provision is the difference
between the asset’s carrying amount and the
present value of the estimated future cash flows.
Impairment losses are recognised in the state-
ment of comprehensive income.

Margins receivable represents collateral receiv-
able from clearing participants on cash markets
and derivative positions held at the end of the
day, and are received on the next business day.
The amounts include the movement in the fair
value of derivative positions and are recognised
on trade date.

D2 Intangible assets - goodwill

The carrying amount of intangible assets - good-
will as at 30 June 2016 was $2,317.6 million (2015:
2,317.6 million). There was no movement in intan-
gible assets - goodwill in the current or prior year.

(a) Impaired trade receivables
As at 30 June 2016, the Group provided $1.1 million
(2015: $1.6 million) for trade receivables that were
identified as being impaired. The individually
impaired receivables relate to companies that are in
administration, entities with prolonged suspension
from the ASX official list of listed companies, and
debts that remain unpaid for a prolonged period
despite active debt collection procedures.

Movements in the provision for
impairment of trade receivables

At 1 July
Provision for impairment
recognised during the year

Receivables written-off during
the year as uncollectable

Provisions subsequently reversed

At 30 June

2016
$m

(1.6)

(0.6)

0.2

0.9

(1.1)

2015
$m

(1.5)

(0.9)

0.3

0.5

(1.6)

The creation and release of the provision for
impairment of trade receivables has been
included in administration expenses in the
statement of comprehensive income. Amounts
provided for are written-off when there is no
expectation of recovering the balance.

(b) Past due but not impaired
As at 30 June 2016, $7.0 million (2015: $4.3
million) of trade receivables were past due but
not impaired. These balances relate to a number of
individual customers with whom the Group expects
to recover the debts.

The other classes within receivables do not
include any amounts that are past due and are
not impaired. Based on the credit history of these
classes, it is expected that these amounts will be
received when due.

Goodwill on acquisition is initially measured at
cost, being the excess of the consideration paid
over the acquirer’s interest in the net fair value
of the identifiable assets, liabilities and contin-
gent liabilities of the acquiree. Following initial
recognition, goodwill is measured at cost less any
accumulated impairment losses.

(a) Impairment test for goodwill
Management determined the Group to consist
of two cash generating units (CGUs), namely
exchange-traded and non exchange-traded. The
goodwill attributable to each CGU at the time of
acquisition is as follows:

• exchange-traded: $2,242.2 million

• non exchange-traded: $75.4 million.

No impairment charge arose in the current or prior
year.

Intangible assets that have an indefinite useful
life, such as goodwill, are not subject to amorti-
sation and are tested semi-annually for impair-
ment, or more frequently if events or changes
in circumstances indicate that they might be
impaired. For the purpose of assessing impair-
ment, assets are grouped at the lowest levels
for which there are separately identifiable cash
flows (CGUs) and goodwill is allocated to each of
the Group’s CGUs that are expected to benefit
from the business combination in which the
goodwill arose.

Where the recoverable amount is less than the
carrying amount, an impairment loss is recog-
nised as an expense in the statement of compre-
hensive income.

ASX Annual Report 2016 | Other balance sheet assets and liabilities

The recoverable amount of each CGU is deter-
mined based on value-in-use calculations. These
calculations use cash flow projections based on
financial estimates reviewed by management
covering a five-year period.

Cash flows beyond the five-year period are
extrapolated using the estimated growth rates
stated below. The growth rate does not exceed
the long-term average growth rate for the busi-
ness in which the CGU operates.

(b) Key assumptions used for value-in-use
calculations
Management determined budgeted operating
results based on past performance and expec-
tations for the future. The growth rates used for
revenue and expense projections are consistent
with, or lower than, historical trends for the CGUs.

The pre-tax discount rate used is 9.5% (2015: 9.5%)
for all CGUs. The growth rate used to extrapolate
cash flow projections beyond five years is 3.5%
(2015: 3.5%) per annum for the exchange-traded
CGU and 3.5% (2015: 3.5%) per annum for the non
exchange-traded CGU. These calculations support
the carrying value of goodwill.

D3 Intangible assets – software

The movements in the intangible assets - software
balances are as follows:

Cost

2016
$m
282.4

2015
$m
251.9

Accumulated amortisation

(190.0)

(163.2)

Net book value at 1 July
Additions

Amortisation expense

Impairment and write-downs

Net book value at 30 June
Cost

Accumulated amortisation

Net book value at 30 June

92.4
40.1

(28.5)

(0.9)

103.1
321.6

88.7
30.5

(26.4)

(0.4)

92.4
282.4

(218.5)

(190.0)

103.1

92.4

All intangible assets – software are classified as
externally acquired.

D4 Property, plant and equipment

The movements in the property, plant and equipment asset balances are as follows:

The impairment charge recognised in the current
and prior financial year relates to certain intangible
assets that were identified as having no future
economic benefit to the Group. Impairment charges
were recognised within depreciation and amorti-
sation in the statement of comprehensive income.

Costs incurred in developing products or
systems, and acquiring software and licences
that will contribute to future benefits, are capi-
talised at cost and amortised on a straight-line
basis over their expected useful lives, from the
time the assets are in use. Certain staff costs are
capitalised when they can be specifically attrib-
uted to major software development projects.

Software purchased from external vendors is
classified as externally acquired and may include
capitalised staff costs that have been incurred in
the implementation of the software.

Software is subject to amortisation and is
reviewed for indicators of impairment at the
end of each reporting period or when events or
changes in circumstances have arisen that indi-
cate the carrying value may be impaired. Where
the recoverable amount is less than the carry-
ing amount, an impairment loss is recognised as
an expense in the statement of comprehensive
income. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value-
in-use. Determining whether the intangibles are
impaired requires an estimation of their useful
lives, residual values and amortisation method.
The effect of any changes will be recognised on
a prospective basis.

Estimated useful lives of significant
computer software systems
Cash market and
derivative trading systems

Cash market clearing system

Derivative and OTC clearing systems

Debt depository system

5 years

10 years

30 June 2016
Cost
Accumulated depreciation
Net book value at 1 July 2015
Additions
Depreciation expense
Net book value at 30 June 2016
Cost
Accumulated depreciation
Net book value at 30 June 2016

30 June 2015
Cost
Accumulated depreciation
Net book value at 1 July 2014
Additions
Depreciation expense
Net book value at 30 June 2015

Leasehold
improvements
$m

Plant and
equipment
$m

Computer
equipment
$m

32.8
(16.8)
16.0
0.5
(3.1)
13.4
33.3
(19.9)
13.4

27.8
(14.1)
13.7
5.0
(2.7)
16.0

46.3
(30.6)
15.7
0.2
(3.0)
12.9
46.5
(33.6)
12.9

45.7
(27.9)
17.8
0.6
(2.7)
15.7

101.1
(78.0)
23.1
9.4
(7.2)
25.3
110.5
(85.2)
25.3

93.3
(72.2)
21.1
8.2
(6.2)
23.1

Total
$m

180.2
(125.4)
54.8
10.1
(13.3)
51.6
190.3
(138.7)
51.6

166.8
(114.2)
52.6
13.8
(11.6)
54.8

Property, plant and equipment is measured at cost less accumulated depreciation and any impairment in
value. Cost includes expenditure that is directly attributable to the acquisition of the assets. Subsequent
costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the
cost of the item can be measured reliably. All other repairs and maintenance are recognised in profit or
loss during the financial period in which they are incurred.

Assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing the proceeds on disposal with the carrying
amount and are included in profit or loss.

Depreciation of assets begins from the date of acquisition or, in respect of internally developed assets,
from the time an asset is completed and ready for use. Depreciation is provided on a straight-line basis on
all plant and equipment, over their estimated useful lives.

The depreciation periods for each class of asset, for the current and previous years, are as follows:
Leasehold improvements

The shorter of minimum lease term and useful life

Plant and equipment

Computer equipment

3 – 10 years

3 – 5 years

The cost of improvements to leasehold property is capitalised and amortised over the unexpired period of
the lease or the estimated useful lives of the improvements, whichever is the shorter.

ASX Annual Report 2016 | Other balance sheet assets and liabilities

D5 Payables

Trade creditors

Margins payable

Interest payable

Rebates payable

Transaction taxes payable

Employee-related payables

Expense accruals

Other payables

Total

The movement in the premises provision during
the year is set out below:

2016
$m
1.7

2015
$m
0.7

365.9

233.6

Opening balance at 1 July

7.0

19.6

6.6

20.6

14.8

1.6

6.3

19.4

6.5

18.9

20.5

6.6

Provisions used during the period

Provisions reversed during the
period

Additions during the period

Unwinding of discount

437.8

312.5

Closing balance at 30 June

2016
$m

9.8

(2.0)

0.2

0.1

8.1

2015
$m

11.6

(2.1)

(0.1)

0.3

0.1

9.8

Payables are initially recognised at fair value
and represent liabilities for goods and services
provided to the Group prior to the end of the
reporting period that are unpaid. The amounts,
stated at amortised cost using the effective
interest method, are unsecured and usually paid
within 30 days of recognition. Trade and other
payables are presented as current liabilities
unless payment is not due within 12 months of
the reporting date.

Interest payable includes interest owed to
participants on cash collateral lodged in addition
to interest owed on any borrowings. Interest is
recognised as a finance cost in the statement
of comprehensive income using the effective
interest rate method.

D6 Provisions

Current
Employee provisions

Premises provisions

Total

Non-current
Employee provisions

Premises provisions

Total

12.2

2.3

14.5

3.2

5.8

9.0

11.6

2.0

13.6

3.1

7.8

10.9

The provisions for employee benefits predom-
inantly relate to annual and long service leave
obligations. Premises provisions comprise lease
rental amortised on a straight-line basis over the
term of the lease, and provisions for make-good
and lease incentives.

Provisions are recognised when the Group has
a present legal or constructive obligation as a
result of a past event, it is probable the obliga-
tion will be settled and the amount can be relia-
bly estimated. If the effect is material, provisions
are determined by discounting the expected
future cash flows at a pre-tax rate that reflects
current market assessments of the time value of
money and when appropriate, the risks specific
to the liability. The increase in the provision due
to the passage of time is recognised as a finance
cost in profit or loss.

Current employee provisions include liabilities for
annual leave and wages and salaries, including
non-monetary benefits that are expected to be
settled wholly within 12 months after the end of
the period in which the employees render the
related service. These are recognised in respect
of employees’ services up to the end of the
reporting period. Long service leave provisions
that the Company does not have an uncon-
ditional right to defer for 12 months after the
reporting date are recognised as a current provi-
sion, regardless of when the actual settlement is
expected to occur. Current employee provisions
are measured at the amounts expected to be
paid when the liabilities are settled.

ASX Annual Report 2016 | Other balance sheet assets and liabilities

and the Group either:

• does not occupy the premises and does not

expect to occupy it in the future

• sub-lets the premises for lower rentals than it
is presently obliged to pay under the original
lease, or

• occupies the premises, but does not expect
that the premises will provide any substan-
tive benefit beyond a known future date and
there is a committed plan to vacate.

Make-good obligations are provided for office
space under operating leases that require the
premises to be returned to the lessor in their
original condition. The operating lease payments
do not include the make-good payment at the
end of the lease term. Provisions for make-good
obligations are recognised when the Group
becomes party to operating lease contracts that
include make-good obligations.

Lease incentives received or receivable, such as
rent-free periods and premises fit-out allow-
ances, may be included in operating leases
entered into by the Group. The value of lease
incentives is included in the premises provision
and is recognised as a reduction in occupancy
expense in profit or loss on a straight-line basis
over the term of the lease. Where the original
lease term has been extended, these incentives
will continue to be recognised over the original
lease term.

Non-current employee provisions include long
service leave provisions where the Company
has an unconditional right to defer settlement
for at least 12 months after the reporting
period. Non-current employee provisions are
not expected to be wholly settled within 12
months after the end of the reporting date, and
are therefore measured as the present value of
expected future payments. When determining
whether employees qualify or are expected
to qualify for the Group’s long service leave
arrangements, consideration is given to history
of employee departures and periods of service.
Expected future wage and salary levels are
discounted using the rates attached to a basket
of comparable liquid corporate bonds at the end
of each reporting period, which most closely
match the terms to maturity of the related
liabilities.

Short-term incentive plans The Group recognises
a liability and an expense for short-term cash
incentives offered to staff. A provision is recog-
nised where there is a contractual obligation
or where there is past practice that gives clear
evidence of the amount of the obligation.

Where short-term incentives are deferred to
a future period the value of the incentives is
expensed over the term of the deferral and
recognised as a liability. Amounts expected to be
wholly settled within 12 months after the end of
the reporting date are recognised as current, all
others are recognised as non-current.

Termination benefits are payable when employ-
ment is terminated by the Group before the
normal retirement date, or when an employee
accepts voluntary redundancy in exchange for
these benefits.

The Group recognises termination benefits at
the earlier of when the offer of those benefits
can no longer be withdrawn or when costs for
a restructure are permitted to be provided for
within the scope of accounting standard guid-
ance. Benefits not expected to be settled wholly
within 12 months after the end of the period are
discounted to present value.

Surplus lease space provisions are recognised for
onerous contracts where premises are currently
leased under non-cancellable operating leases

Group
disclosures

E1 Subsidiaries

Parent entity1: ASX Limited

Subsidiaries of ASX Limited:
ACN 611 659 664 Limited2
ASX Acceler8 Pty Limited
ASX Clearing Corporation Limited
ASX Compliance Pty Limited
ASX Data Analytics Pty Limited
ASX Energy Limited
ASX Futures Exchange Pty Limited
ASX Long-Term Incentive Plan Trust
ASX Operations Pty Limited2
ASX Settlement Corporation Limited2
Australian Securities Exchange Limited2
Australian Stock Exchange Pty Limited
SFE Corporation Limited2

Subsidiaries of ASX Settlement
Corporation Limited:
ASX Settlement Pty Limited
Austraclear Limited

Subsidiaries of Austraclear Limited:
Austraclear Services Limited

Subsidiaries of ASX Operations Pty Limited:
ASX Collateral Management Services Pty Limited
Australian Clearing Corporation Limited2
Australian Clearing House Pty Limited
Equityclear Pty Limited
New Zealand Futures and Options Exchange Limited
Options Clearing House Pty Limited
Sydney Futures Exchange Pty Limited

Subsidiaries of ASX Settlement Pty Limited:
CHESS Depositary Nominees Pty Limited

Subsidiaries of Australian
Securities Exchange Limited:
Australian Securities Exchange (US) Inc

Subsidiaries of ASX Clearing
Corporation Limited:
ASX Clearing Corporation Trust
ASX Clear (Futures) Pty Limited
ASX Clear Pty Limited

1. Parent entity refers to the immediate controlling entity
of the entity in which the investment is shown. The parent
entity’s investment in relation to all subsidiaries during the
financial year was 100% (2015: 100%).
2. These subsidiaries have been granted relief from the
necessity to prepare financial statements in accordance
with ASIC Class Order 98/1418. Refer note E2 for details of
the Deed of Cross Guarantee.

ASX Limited and Australian Securities Exchange
Limited are licensed to operate financial markets
while ASX Clear, ASX Clear (Futures), Austraclear
Limited and ASX Settlement Pty Limited are
licensed to operate clearing and settlement
facilities.

Although ASX is the sole member of the Securities
Exchanges Guarantee Corporation (SEGC), SEGC
has not been consolidated into the Group’s consol-
idated financial statements. SEGC is governed by
the Corporations Act 2001 and ASX is not able to
control the entity to pursue Group objectives nor
is it entitled to the entity’s assets.

All subsidiaries are incorporated in Australia
except for Australian Securities Exchange (US)
Inc (incorporated in the US), New Zealand Futures
and Options Exchange Limited and ASX Energy
Limited (both incorporated in New Zealand). All
subsidiaries have the same reporting date.

Subsidiaries are consolidated from the date on
which control is transferred to the Group and
are de-consolidated from the date that control
ceases. Control exists when the Company is
exposed to, or has rights to, variable returns
from its involvement with that entity and has
the ability to affect those returns through its
power to direct the activities of the entity. In
addition to considering the existence of poten-
tial voting rights that are presently exercisable
or convertible, the Company also considers
relationships with other parties that may result
in the Company controlling an entity on the
basis of de facto circumstances.

Established trusts The Group has two estab-
lished trusts. LTIP administers the Group’s
employee share scheme while ASX Clearing
Corporation Trust manages the cash of the two
CCP subsidiaries. Both trusts are consolidated as
the substance of the relationship is that they are
controlled by the Group.

E2 Deed of Cross Guarantee

Pursuant to ASIC Class Order 98/1418, the wholly
owned subsidiaries listed below are relieved from
the requirement to prepare a financial report and
directors’ report.

It is a condition of the Class Order that the Company
and each of the participating subsidiaries enter into
a Deed of Cross Guarantee (the Deed) under which
each company guarantees the debts of the others.

The subsidiaries subject to the Deed at the end of
the reporting period are:

Subsidiary name
ACN 611 659 664 Limited

ABN/ACN
611 659 664

ASX Operations Pty Limited

42 004 523 782

Australian Clearing
Corporation Limited

Australian Securities
Exchange Limited

ASX Settlement
Corporation Limited

068 624 813

83 000 943 377

48 008 617 187

SFE Corporation Limited

74 000 299 392

The above entities represent a ‘Closed Group’ for
the purposes of the Class Order, and as there are
no other parties to the Deed that are controlled by
the Company, they also represent the ‘Extended
Closed Group’.

ACN 611 659 664 Limited, a newly formed entity in
the current financial year, was added to the Deed
during the year. No entities were removed from
the Deed during the year.

ASX Annual Report 2016 | Group disclosures

(b) Balance sheet
Set out below is a consolidated balance sheet for
the year ended 30 June 2016 and prior year, for
the Closed Group.

E3 Related party transactions

(a) Transactions between subsidiaries
ASX Operations Pty Limited provides operational
support for the majority of the Group’s transactions.

Significant transactions with
related entities:
Contributions to superannuation
funds on behalf of employees

2016
$000

2015
$000

6,077

5,917

(a) Consolidated statement of comprehensive
income and summary of movements in retained
earnings
Set out below is a consolidated statement of
comprehensive income and summary of move-
ments in consolidated retained earnings for the
year ended 30 June 2016 and prior year, for the
Closed Group consisting of ASX Limited and the
above mentioned parties to the Deed.

Current assets
Cash and funds on deposit

Available-for-sale financial assets

2016
$m

2015
$m

Receivables

Prepayments

Statement of comprehensive income
Total revenue

816.9

757.5

Total expenses

Profit before income tax
expense
Income tax expense

Net profit for the period

(219.5)

(214.2)

597.4

543.3

(164.0)

(153.2)

433.4

390.1

Total current assets

Non-current assets
Investments in subsidiaries

Available-for-sale investments

Equity accounted investments

2016
$m

2015
$m

159.1

45.9

130.9

12.6

348.5

722.0

358.2

66.6

134.6

125.6

229.5

9.4

499.1

557.0

311.1

65.7

Items that may be
reclassified to profit or loss:
Change in the fair value of avail-
able-for-sale investments

Change in the fair value of cash
flow hedges

Other comprehensive income
for the period, net of tax

Total comprehensive
income for the period

Summary of movements in
consolidated retained earnings

Retained earnings at the
beginning of the period
Dividends paid

Profit for the period

Retained earnings at
the end of the period

15.8

41.4

(1.0)

0.8

14.8

42.2

448.2

432.3

Intangible assets – goodwill

2,262.8 2,262.8

Intangible assets – software

Property, plant and equipment

102.8

51.6

92.0

54.8

Total non-current assets

3,564.0 3,343.4

Total assets

3,912.5 3,842.5

Current liabilities
Payables

Current tax liabilities

Provisions

Revenue received in advance

Other liabilities

61.9

9.9

14.5

16.4

64.9

13.5

18.0

0.1

Total current liabilities

102.7

110.0

517.4

480.0

(376.0)

(352.7)

433.4

390.1

574.8

517.4

Non-current liabilities
Deferred tax liabilities

Provisions

Revenue received in advance

Total non-current liabilities

Total liabilities

Net assets

Equity
Issued capital

Retained earnings

Asset revaluation reserve

Equity compensation reserve

Total equity

51.1

9.0

0.1

60.2

43.5

10.9

0.2

54.6

162.9

164.6

3,749.6 3,677.9

3,027.2 3,027.2

574.8

138.8

8.8

517.4

124.0

9.3

3,749.6 3,677.9

ASX Annual Report 2016 | Group disclosures

E4 Parent entity financial information

(a) Summary financial information
The individual financial statements for the parent
entity show the following aggregate amounts:

2016
$m

Statement of comprehensive income
Total revenue

434.6

2015
$m

396.0

(0.1)

395.9

(4.5)

391.4

(0.6)

434.0

(3.5)

430.5

15.8

41.4

446.3

432.8

165.3

3,598.7

3,764.0

9.9

58.4

68.3

304.4

3,385.8

3,690.2

13.6

50.7

64.3

3,695.7

3,625.9

3,027.2

522.3

139.2

7.0

467.8

123.4

7.5

3,695.7

3,625.9

Total expenses

Profit before income tax
expense
Income tax expense

Net profit for the period

Other comprehensive
income for the period, net
of tax

Total comprehensive income
for the period

Balance sheet
Current assets

Non-current assets

Total assets

Current liabilities

Non-current liabilities

Total liabilities

Net assets

Issued capital

Retained earnings

Asset revaluation reserve

Equity compensation
reserve

Total equity

Expenses paid, revenues collected and purchase
of capital items on behalf of other entities within
the Group are booked into inter-entity accounts.
Interest is not charged on any inter-entity account.

Company

2015
Balances with entities within
$000
the wholly owned group
Net amounts receivable by the Company from wholly
owned subsidiaries at balance date is as follows:

2016
$000

Current

Amounts due from subsidiaries

161,972

285,031

Dividends

Dividends received or due and
receivable by the Company from
wholly owned subsidiaries

414,000 375,500

(b) Transactions with other related entities

The Company regularly enters into transactions
on an arm’s length basis and under normal
commercial terms and conditions with corpo-
rations that some of the directors are either
related to or employed by.

In accordance with the Corporations Act 2001,
the Group maintains two fidelity funds for claims
about the defalcation of monies in relation
to cash market and derivative trading. ASX
Limited acts as manager for the ASX Division 3
Compensation Fund and Australian Securities
Exchange Limited acts as trustee for the Sydney
Futures Exchange Limited Fidelity Fund. ASX
Division 3 Compensation Fund, Sydney Futures
Exchange Limited Fidelity Fund and SEGC are not
consolidated by ASX.

ASX Limited is the sole member of SEGC, which
is responsible for administering the NGF, a
compensation fund available to meet certain
types of claims arising from dealings with
participants of ASX and, in limited circumstances,
participants of ASX Clear.

The financial information for the parent entity,
ASX, has been prepared on the same basis as the
consolidated financial statements, except as set
out below.

Unlisted shares in subsidiaries are accounted for
at cost in the financial statements of ASX.

Tax consolidation ASX elected to form a tax
consolidated group (tax group) for income
tax purposes. ASX is the head entity and is
therefore liable for the income tax liabilities of
the tax group. The consolidated current and
deferred tax amounts arising from temporary
differences of the members of the tax group
are recognised in the separate financial state-
ments of the members of the tax group using
the ‘separate taxpayer within group’ approach.

Tax funding agreement ASX has entered into
a tax funding agreement with members of the
Australian tax group. The agreement has the
objective of achieving an appropriate allocation
of the Group’s income tax expense to the main
operating subsidiaries within the Group. The
tax funding agreement also has the objective
of allocating deferred tax assets relating to tax
losses only, and current tax liabilities of the
main operating subsidiaries to ASX. The subsid-
iaries will reimburse ASX for their portion of
the Group’s current tax liability and will recog-
nise this payment as an inter-entity payable or
receivable in their financial statements for that
financial year. ASX will reimburse the subsidiar-
ies for the deferred tax asset from any unused
tax losses or credits by making a payment
equal to the carrying value of the deferred tax
asset.

(b) Guarantees entered into by the parent entity
The parent entity, ASX, is party to a Deed of Cross
Guarantee together with the entities defined in
note E2. Under the Deed, the Company guarantees
to each creditor payment in full of any debt in the
event of winding up of any of the subsidiaries under
certain provisions of the Corporations Act 2001. No
deficiencies of assets exist in any of these entities.

In accordance with the recovery rules the parent
entity, ASX, is obligated in certain circumstances to
replenish a shortfall in the financial resources avail-
able to the CCPs up to predetermined levels for any
one participant default. No replenishments were
made in the current or prior year.

(c) Contractual commitments and contingencies
ASX has an agreement with ASX Clear for a $150
million standby loan facility that may be used in
limited and specific circumstances following default
of clearing participants.

ASX has an agreement with CHESS Depositary
Nominees Pty Limited (CDN) which provides $10
million (2015: $10 million) in funds to support CDN’s
licence obligations. No payments were made under
either facility in the current or prior year.

The NGF, which is administered by SEGC, is main-
tained to provide compensation for prescribed
claims arising from dealings with market partic-
ipants as set out in the Corporations Act 2001.
If the net assets of the NGF fall below the mini-
mum amount determined by the Minister, SEGC
may determine that ASX must pay a levy to SEGC.
Where a levy becomes payable, ASX may determine
that market participants must pay a levy, provided
that the total amounts payable under this levy do
not exceed the amount payable by ASX to SEGC.
No levies were called in the current or prior year.

In accordance with the Australian Financial Services
Licence of ASX Collateral Management Services Pty
Limited, the Group has an obligation to fund any
amounts required by the subsidiary.

ASX Limited did not have any other contractual
commitments or contingent liabilities as at 30 June
2016 or 30 June 2015.

(d) Borrowings
The Group did not have any drawn borrowings
during the current or previous financial year. ASX
Limited has an unsecured committed facility that
can only be called upon to provide short-term
liquidity to ASX Clear following a clearing partici-
pant default. The facility limit is $100 million and
remained undrawn at the date of this report.

E5 Other disclosures

E5.1 Commitments
(a) Capital commitments
Capital commitments contracted for but not yet
incurred as at balance date are as follows:

Intangible assets - software

2016
$m
20.4

2015
$m
4.4

(b) Operating lease commitments
Commitments for minimum lease payments of
non-cancellable leases:
Due:
Not later than one year

10.6

11.1

Later than one year but not later
than five years

Later than five years

Total

37.6

38.6

55.8

104.5

65.3

114.5

The Group’s major leases are for the premises from
which it operates. These leases are all generally
long-term with unexpired periods up to 11 years,
with options to extend for further periods included
in certain lease agreements. Future rentals are
subject to indexation and periodical rent reviews.
The operating lease expense for the year was $10.7
million (2015: $10.4 million).

Operating leases are those in which a significant
portion of the risks and rewards of ownership
are not transferred to the Group as lessee.
Minimum lease payments, which includes fixed
rental increases, are recognised in profit or loss
on a straight-line basis over the period of the
lease.

E5.2 Share-based payments
(a) Long-term incentive plan
The Group provides performance rights to ordinary
shares of the Company to employees as part of the
LTI plan to recognise performance, skills and behav-
iours that deliver sustainable long-term share-
holder value. They entitle certain Key Management
Personnel (KMP) to performance rights over ASX
Limited shares.

Under the plans, participants are granted perfor-
mance rights that only vest if certain performance
conditions are met. All performance rights are to
be settled by physical delivery of ordinary shares in
ASX Limited subject to the performance conditions
being attained.

The number of rights that vest depends on an EPS
hurdle being achieved and ASX’s total shareholder
return (TSR) relative to a comparator group. The
plans do not carry rights to dividends. The terms
and conditions of these grants are shown in the
table on the following page.

ASX Annual Report 2016 | Group disclosures

Grants outstanding at the end of the reporting period:

Grant date/employees
entitled
Performance rights
granted to KMP on 30
September 2015

Performance rights
granted to KMP on 23
September 2014

Performance rights
granted to KMP on 25
September 2013

Total

Number of
instruments
granted

13,041

27,432

30,108

70,581

Vesting conditions

4 years service; 50% of performance
rights require relative TSR and 50% of
performance rights require growth in EPS

3 years service; 30% of performance
rights require relative TSR and 70% of
performance rights require growth in EPS

Contractual
life of the
award

Weighted
average
fair value

4 years

$23.34

3 years

$27.34

3 years

$24.91

No grants vested during the current reporting period.

(b) Employee share purchase plan
In February 2016, ASX employees were offered the opportunity to purchase shares in ASX at a discount
of 10 percent up to the value of $1,000 under a salary sacrifice arrangement. Under the arrangement,
employees can only dispose of the shares purchased at the earlier of cessation of employment with
ASX or 1 March 2019.

On 26 February 2016, 6,672 ASX shares were allocated to 278 employees participating in the scheme. The
purchase price on this date was $41.83 which represents the fair value of the shares. Employees have
legal ownership of the shares under the scheme. The costs of acquisition were expensed as incurred.

(c) Employee expenses
The table below shows the total share-based payments recognised within staff expenses during the
year and includes the impact of reversals resulting from non-market based performance hurdles not
being achieved.

Long-term incentive plan

Employee share purchase plan

Other share-based payments

Total

2016
$m
(0.5)

0.2

(0.1)

2015
$m
0.5

0.5

The fair value of the performance rights for the EPS awards is calculated using the share price at market
close on the grant date, less the present value of the expected dividends over the performance period. The
fair value of performance rights for the TSR awards is calculated by an independent valuer using a Black-
Scholes option valuation model and Monte Carlo simulation at grant date.

Fair values are recognised over the vesting period as an expense with a corresponding increase in the
equity compensation reserve. Fair values include the impact of any market performance conditions and
the impact of any non-vesting conditions, but excludes the impact of any service and non-market perfor-
mance vesting conditions. Non-market vesting conditions are included in assumptions about the number
of performance rights that are expected to vest. The impact of any revisions to the original estimates are
recognised in profit or loss with a corresponding adjustment to equity.

E5.3 Key Management Personnel remuneration
KMP compensation (including non-executive directors) provided during the financial years ended 30
June 2016 and 2015 is as follows:

Short-term employee benefits

Post-employment benefits

Long-term benefits

Share-based payments

Total

2016
$000
11,592

322

2,504

(503)

13,915

2015
$000
10,614

312

1,695

522

13,143

Further details of KMP remuneration are disclosed in the remuneration report on pages 17 to 25.

E5.4 Auditor’s remuneration
The following fees were paid or payable by the Group for and on behalf of all Group entities for services
provided by the auditor and its related practices during the financial years ended 30 June 2016 and 2015:

PricewaterhouseCoopers Australia

Statutory audit services:
Audit and review of the financial statements and other
audit work under the Corporations Act 2001

Audit of information technology platforms

Other audit services:
Model validation

Code of Practice compliance

Non-audit services:
Tax compliance services

Due diligence services

Total remuneration for PricewaterhouseCoopers Australia

2016
$

627,889

194,440

153,000

10,200

57,265

240,950

1,283,744

2015
$

595,560

159,700

182,800

41,000

58,395

1,037,455

In addition to the above, total audit fees of $29,046 (2015: $28,200) and tax compliance fees of $18,105
(2015: $18,105) were received by the auditor in relation to SEGC, NGF, ASX Division 3 Compensation Fund
and the Sydney Futures Exchange Limited Fidelity Fund, which are not consolidated as part of the Group.

ASX Annual Report 2016 | Group disclosures

E5.5 Other accounting policies
(a) New and amended standards and interpretations adopted by the Group
The new standards and amendments to standards that are mandatory for the first time in the annual
reporting period commenced on 1 July 2015 do not affect any amounts recognised in the current or
prior periods, and are not likely to materially affect amounts in future periods. The Group has not
elected to apply any pronouncements before their operative date in the annual reporting period
ended 30 June 2016.

(b) New and amended standards and interpretations not yet adopted by the Group
The following new or amended accounting standards and interpretations have been issued by the AASB
but are not mandatory for the annual reporting period ended 30 June 2016 and have not been early
adopted by the Group. The Group’s assessment of the impact of these standards and interpretations
is set out below.

AASB 16 Leases

This standard will replace AASB 117 Leases. It contains a
revised definition of a lease and has removed the distinction
between operating and finance leases by lessees.

1 January 2018

On adoption of the standard, the Group will be required to
recognise its leases on the balance sheet with a correspond-
ing depreciation and finance charge recognised over the
term of the lease.

Certain performance metrics and ratios will be impacted as
a result of the above changes.

The Group’s assessment of the potential accounting, disclo-
sure and financial impact on adoption of the standard will
continue up to the date of application.

Title
AASB 9 Financial Instruments

AASB 15 Revenue from
Contracts with Customers

Nature of change and impact on the Group
The new standard simplifies the model for classifying and
recognising financial instruments and introduces a new
expected credit loss model for calculating impairment. It
also aligns hedge accounting more closely with common risk
management practices.

Under the new standard, the Group’s available-for-sale
assets that are currently measured at fair value through
other comprehensive income are required to be measured
either at amortised cost or fair value through profit or loss.

There will be no impact on the accounting for the Group’s
financial liabilities as the new standard only impacts finan-
cial liabilities designated at fair value through profit or loss
and the Group does not have any such liabilities.

The Group’s assessment of the potential accounting, disclo-
sure and financial impact on adoption of the standard will
continue up to the date of application.

This standard will replace AASB 111 Construction Contracts
and AASB 118 Revenue. The new standard is based on the
principle that revenue is recognised when control of a good
or service transfers to the customer.

There will be no impact on the Group’s accounting policies
on the adoption of the standard, however there will be new
disclosure requirements.

Mandatory and
anticipated date
of application
1 January 2018

There are no other standards that are not yet effective or are expected to have a material impact on
the Group in the current or future reporting periods or on foreseeable future transactions.

E5.6 Subsequent events
On 1 August 2016, Mr Dominic Stevens was appointed Managing Director and CEO.

From the end of the reporting period to the date of this report, no other matter or circumstance has
arisen which has significantly affected the operations of the Group, the results of those operations or
the state of affairs of the Group.

1 January 2018

ASX Annual Report 2016 | Group disclosures

Directors’
declaration

In the opinion of the directors of ASX Limited (the
Company):

Signed in accordance with a resolution of the
directors:

Rick Holliday-Smith
Chairman

Peter R Marriott
Director

Sydney, 18 August 2016

a. the financial statements and notes that are
contained in pages 38 to 63 and the remu-
neration report set out on pages 17 to 25 in
the Annual Report, are in accordance with the
Corporations Act 2001, including:

i. giving a true and fair view of the consol-
idated entity’s financial position as at 30
June 2016 and of its performance for the
financial year ended on that date, and

ii. complying with Australian Accounting

Standards, the Corporations Regulations
2001 and other mandatory professional
reporting requirements

b. there are reasonable grounds to believe that
the Company will be able to pay its debts as
and when they become due and payable

c. at the date of this declaration, there are
reasonable grounds to believe that the
members of the Extended Closed Group
identified in note E2 will be able to meet any
obligations or liabilities to which they are, or
may become, subject by virtue of the Deed of
Cross Guarantee described in note E2, and

d. the financial statements also comply with

International Financial Reporting Standards.

The directors have been given the declarations
required by section 295A of the Corporations Act
2001 from the Deputy CEO and Group General
Counsel and Chief Financial Officer for the financial
year ended 30 June 2016.

ASX Annual Report 2016 | Directors’ declaration

Independent
auditor’s
report to the
members of
ASX Limited

Report on the audit of the financial report

Our opinion
In our opinion:

The accompanying financial report of ASX Limited
(the Company) and its subsidiaries (together the
Group) is in accordance with the Corporations Act
2001, including:

a. giving a true and fair view of the Group’s

consolidated financial position as at 30 June
2016 and of its consolidated financial perfor-
mance for the year ended on that date; and

b. complying with Australian Accounting

Standards and the Corporations Regulations
2001.

What we have audited
The Group’s financial report comprises:

• the consolidated balance sheet as at 30 June

2016;

Independence
We are independent of the Group in accordance
with the auditor independence requirements of
the Corporations Act 2001 and the ethical require-
ments of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are rele-
vant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsi-
bilities in accordance with the Code.

Our audit approach

Overview
Set out below is an overview of our audit approach,
highlighting key aspects including materiality level,
scope and Key Audit Matters of our audit. These
are described in further detail later in this report.

The scope of our audit and the nature,
timing and extent of audit procedures
performed were determined by our
risk assessment and other qualitative
factors. We tailored the scope of our
audit to ensure we obtained sufficient
appropriate audit evidence to express
an opinion on the financial report
as a whole.

For the purposes of our audit we used a
threshold for overall Group materiality
of $30 million, which represents 5% of
profit before tax of the Group.

The Key Audit Matters, which are those
matters which were of the most signifi-
cance in our audit, were:
• goodwill impairment assessment; and
• valuation and existence of availa-

ble-for-sale financial assets.

• the consolidated statement of comprehensive

income for the year then ended;

Audit
scope

• the consolidated statement of changes in

equity for the year then ended;

• the consolidated statement of cash flows for

the year then ended;

Materiality

• the notes to the consolidated financial state-

ments, which include a summary of significant
accounting policies; and

• the directors’ declaration.

Key audit
matters

Basis for opinion
We conducted our audit in accordance with
Australian Auditing Standards. Our responsibili-
ties under those standards are further described
in the auditor’s responsibilities for the audit of the
financial report section of our report.

We believe that the audit evidence we have
obtained is sufficient and appropriate to provide
a basis for our opinion.

PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street,

GPO BOX 2650, SYDNEY NSW 1171

T: +61 2 8266 0000

F: +61 2 8266 9999

www.pwc.com.au

Liability limited by a scheme approved under

Professional Standards Legislation.

Audit scope
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial report. In particular,
we considered where the directors made subjec-
tive judgements, for example, in respect of signif-
icant accounting estimates that involved making
assumptions and considering future events that
are inherently uncertain. As in all of our audits, we
also addressed the risk of management override of
internal controls, including among other matters
whether there was evidence of bias that repre-
sented a risk of material misstatement due to fraud.

We tailored the scope of our audit in order to
perform sufficient work to enable us to provide
an opinion on the financial report as a whole, taking
into account the structure of the Group, the Group’s
processes and controls, and the industry in which
the Group operates. The accounting processes are
structured around a Group Finance function at its
head office in Sydney, where we predominatly
performed our audit procedures.

We also ensured that the audit team included the
appropriate skills and competencies which are
needed for the audit of the Group. This included
industry experts in addition to specialists and
experts in IT and valuation.

Materiality
The scope of our audit was influenced by our
application of materiality. An audit is designed to
provide reasonable assurance about whether the
financial report is free from material misstatement.
Misstatements may arise due to fraud or error.
They are considered material if individually or in
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on
the basis of the financial report.

ASX Annual Report 2016 | Independent auditor’s report to the members of ASX Limited

Based on our professional judgement, we deter-
mined certain quantitative thresholds for materi-
ality, including the overall Group materiality for the
financial report set out in the table below. These,
together with qualitative considerations, helped
us to determine the scope of our audit and the
nature, timing and extent of our audit procedures
and to evaluate the effect of misstatements, both
individually and in aggregate on the financial report
as a whole.

Overall Group
materiality

How we
determined it

Rationale for
the materi-
ality bench-
mark applied

$30 million (2015: $28 million)

5% of profit before tax of the Group

We chose profit before tax as the
benchmark because, in our view, it is the
metric against which the performance of
the Group is most commonly measured,
and is a generally accepted benchmark.
We selected 5% based on our professional
judgement noting that it is also within the
range of commonly acceptable quantita-
tive materiality thresholds.

Key audit matters
Key audit matters are those matters that, in our
professional judgement, were of most significance
in our audit of the financial report for the current
period. We have communicated the key audit
matters to the Audit and Risk Committee, but they
are not a comprehensive reflection of all matters
that were identified by our audit and that were
discussed with the Committee. In the following
section we have described the key audit matters
we identified and have included a summary of
the principal audit procedures we performed to
address those matters.

The key audit matters were addressed in the
context of our audit of the financial report as a
whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Further, any commentary on the outcomes of a
particular audit procedure is made in that context.

Key audit matter

How our audit addressed the matter

We also challenged:

Goodwill impairment assessment
The Group’s goodwill is recognised in two Cash
Generating Units (CGUs): ‘exchange-traded’
($2,242.2 million) and ‘non-exchange traded’ ($75.4
million).

While only 3% of the goodwill relates to the non-ex-
change traded CGU, the balance is still well above
our materiality threshold and so we perform
detailed procedures over both CGUs which included
the following, amongst others:

We evaluated the Group’s cashflow forecasts and
the process by which they were developed, includ-
ing considering the mathematical accuracy of the
underlying calculations. We also compared them to
the latest Board-approved budgets. We found that
the budgets used in the value in use calculations
were consistent with the Board approved budg-
ets, and that the key assumptions were subject
to oversight by the directors. We noted that the
Board-approved budgets cover a period of three
years, but that forecasts for the purposes of the
value in use calculation extend out to five years.
We therefore made years four to five a particular
focus area for the procedures below.

We compared current year (2016) actual results
with the figures included in the prior year (2015)
forecast to consider whether any forecasts included
assumptions that, with hindsight, had been opti-
mistic. We found that actual performance was
materially consistent with forecast performance.

We focused on this area due to the size of the
goodwill balance ($2,317.6 million as at 30 June
2016), and because the Group’s assessment of
the ‘value in use’ of the CGUs involves judgements
about the future results of the business and the
discount rates applied to future cash flow forecasts.

The Group performed an impairment assessment
over the goodwill balance by:
1. calculating the value in use for each CGU

using a discounted cash flow model. These
models used cash flows (revenues, expenses
and capital expenditure) for each CGU for
five years, with a terminal growth rate applied
to the fifth year. These cash flows were
then discounted to net present value using
the Company’s weighted average cost of
capital (WACC); and

2. comparing the resulting value in use of each

CGU to their respective book values.

The Group also performed a sensitivity analy-
sis over the value in use calculations, by varying
the assumptions used (growth rates, terminal
growth rate and WACC) to assess the impact on
the valuations.

As a final check, the Group compared the book
values of both CGUs to the ASX Limited market
capitalisation and to major analyst valuations for
the Company.

Refer to page 39 (consolidated balance sheet),
and page 56 note D2 for details of the Group’s
impairment test and assumptions.

• the Group’s key assumptions for growth

rates in the forecasts by comparing them to
historical results and economic and industry
forecasts; and

• the discount rate used in the model by assess-
ing the cost of capital for the Group by compar-
ing it to market data and industry research.

We found that the growth rate assumptions were
consistent with historic results adjusted for the
economic outlook and industry forecasts.

We found that the discount rate used by the Group
of 9.5% pre-tax was consistent with market data
and industry research.

We then stress-tested the assumptions used by
analysing the impact on results from using other
reasonably possible growth rates and discount
rates which were within a reasonably foreseeable
range.

We found that headroom remained between the
stress-tested value in use calculations and the
carrying value of the CGUs in the financial state-
ments. In particular, we noted that headroom
remained even when a zero terminal growth rate
was assumed in conjunction with no revenue
growth for the first five years.

As a final test we also compared the Group’s net
assets as at 30 June 2016 of $3.8 billion to its
market capitalisation of $8.9 billion and noted the
$5 billion of implied headroom was consistent with
the results of our testing.

ASX Annual Report 2016 | Independent auditor’s report to the members of ASX Limited

Key audit matter

How our audit addressed the matter

Valuation and existence of available-for-sale
financial assets
We focused on this area due to the size of the
balance and the inherent judgement involved in
determining the fair value of financial instruments.

As at 30 June 2016, the available-for-sale assets
were valued at $3,796.4 million (2015: $2,889.6
million).

Of these assets, $213.3 million were classified as
‘level 1’ financial instruments in accordance with
the classification under Australian Accounting
Standards where quoted prices in active markets
are available for identical assets.

The remaining $3,583.1 million were classified as
‘level 2’ financial instruments in accordance with
the classification under Australian Accounting
Standards where values are derived from observ-
able prices (or inputs to valuation models) other
than quoted prices included within level 1.

The valuation of the level 2 securities therefore
requires a higher degree of judgement.

Our audit procedures included the following,
amongst others:

There were no material differences noted between
the available-for-sale security balances held at 30
June 2016 and the Austraclear holdings statements.
Austraclear provides depository, registration, cash
transfer and settlement services for debt instru-
ment securities in financial markets in Australia.

As Austraclear is owned and operated by the
Company, our work included testing the:
1. controls used to manage the Information
Technology activities and computer envi-
ronment, covering the overall IT computer
environment, program development,

program changes, access to programs, and
data and computer operations in place at
Austraclear;
2. operation of the Austraclear control that
matches trade details between counterpar-

ties, by inputting a range of test trades, with

both correct and incorrect details, to test

that only appropriate trades were processed

by the system; and
3. generation of the Austraclear holdings

Refer to page 49 note B2 (b) for details of the
assets and page 53 note B3 (d) for the level 1 or 2
classification.

reports by running test reports and compar-
ing the output to the observed data in the
system.

We attended all four Audit and Risk Committee
meetings held during the year, each of which
included discussions without management present.
Through these meetings and other interactions and
correspondence, among other things we sought to
ensure the Audit and Risk Committee members
understood:

• our audit plan for the year and in particular our

areas of focus which, as required by audit-
ing standards, included specific attention to
the risk of management override of internal
controls and the risk of fraud in revenue;

• how we had assessed and challenged any

alternative accounting treatments considered
by management;

• the results of our audit work in relation to the
Key Audit Matters, as described above; and

• the results of our audit work in relation to

other areas of heightened focus, such as the
investments made in Digital Asset Holdings,
LLC in the current year and management’s
other critical accounting estimates (described
in the preface to the notes to the financial
statements) including available-for-sale
investments, software and equity accounted
investments.

Directors’ responsibilities for the financial
report
The directors of the Company are responsible for
the preparation of the financial report that gives
a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act
2001 and for such internal control as the directors
determine is necessary to enable the preparation of
the financial report that gives a true and fair view
and is free from material misstatement, whether
due to fraud or error.

In preparing the financial report, the directors are
responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as appli-
cable, matters related to going concern and using
the going concern basis of accounting unless the
directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative
but to do so.

We found these controls could be relied upon for
the purposes of our audit.

To test valuation we first understood and evaluated
the controls in place over the valuation of availa-
ble-for-sale securities.

For both level 1 and level 2 securities we then used
independent sources of information to determine
an acceptable range of valuations for 100% of the
securities held at 30 June 2016, and compared this
to the valuations recorded on the balance sheet.

We found that all securities tested were recorded
at values materially consistent with the valuations
that we independently calculated.

ASX Annual Report 2016 | Independent auditor’s report to the members of ASX Limited

PricewaterhouseCoopers

Matthew Lunn
Partner

Sydney, 18 August 2016

Auditor’s responsibilities for the audit of the
financial report
Our objectives are to obtain reasonable assurance
about whether the financial report as a whole is
free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guaran-
tee that an audit conducted in accordance with
the Australian Auditing Standards will always
detect a material misstatement when it exists.
Misstatements can arise from fraud or error and
are considered material if, individually or in the
aggregate, they could reasonably be expected to
influence the economic decisions of users taken on
the basis of the financial report.

As part of an audit in accordance with the
Australian Auditing Standards, we exercise profes-
sional judgement and maintain professional scep-
ticism throughout the audit. The audit involves us:

• identifying and assessing the risks of material
misstatement of the financial report, whether
due to fraud or error, designing and performing
audit procedures responsive to those risks, and
obtaining audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
The risk of not detecting a material misstate-
ment resulting from fraud is higher than for
one resulting from error, as fraud may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of internal
control;

• obtaining an understanding of internal control
relevant to the audit in order to design audit
procedures that are appropriate in the circum-
stances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s
internal control;

• evaluating the appropriateness of account-
ing policies used and the reasonableness of
accounting estimates and related disclosures
made by the directors;

• concluding on the appropriateness of the

directors’ use of the going concern basis of
accounting and, based on the audit evidence

obtained, whether a material uncertainty
exists related to events or conditions that may
cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude
that a material uncertainty exists, we are
required to draw attention in our auditor’s
report to the related disclosures in the financial
report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date
of our auditor’s report. However, future events
or conditions may cause the Group to cease to
continue as a going concern;

• evaluating the overall presentation, structure
and content of the financial report, including
the disclosures, and whether the financial
report represents the underlying transactions
and events in a manner that achieves fair
presentation; and

• obtaining sufficient appropriate audit evidence

regarding the financial information of the
entities or business activities within the Group
to express an opinion on the financial report.
We are responsible for the direction, supervi-
sion and performance of the Group audit. We
remain solely responsible for our audit opinion.

As described above, we communicate with the
directors regarding, among other matters, the
planned scope and timing of the audit and signifi-
cant audit findings, including any significant defi-
ciencies in internal control that we identify during
our audit.

We also provide the directors with a statement that
we have complied with relevant ethical require-
ments regarding independence, and communi-
cate with them all relationships and other matters
that may reasonably be thought to bear on our
independence, and where applicable, related
safeguards.

From the matters communicated with the directors,
we determine those matters that were of most
significance in the audit of the financial report
for the current period and are therefore the key
audit matters. We describe these matters in our
auditor’s report unless law or regulation precludes

ASX Annual Report 2016 | Independent auditor’s report to the members of ASX Limited

public disclosure about the matter or when, in
extremely rare circumstances, we determine that
a matter should not be communicated in our report
because the adverse consequences of doing so
would reasonably be expected to outweigh the
public interest benefits of such communication.

Other information
The directors are responsible for the other infor-
mation in the Annual Report for the year ended
30 June 2016 other than the financial report and
our report thereon. Our opinion on the financial
report does not cover the other information and
accordingly we do not express any form of assur-
ance conclusion thereon.

In connection with our audit of the financial report,
our responsibility is to read the other information
and, in doing so, consider whether the other infor-
mation is materially inconsistent with the financial
report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we
conclude that there is a material misstatement of
this other information we are required to report
that fact. We have nothing to report in this regard.

Report on the audit of the remuneration
report

Opinion on the remuneration report
We have audited the remuneration report on pages
17 to 25 for the year ended 30 June 2016. In our
opinion, the remuneration report of ASX Limited,
for the year ended 30 June 2016 complies with
section 300A of the Corporations Act 2001.

Responsibilities for the remuneration report
The directors of the Company are responsible for
the preparation and presentation of the remuner-
ation report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is
to express an opinion on the remuneration report,
based on our audit conducted in accordance with
Australian Auditing Standards.

Key financial
ratios

Year ended 30 June 2016
Basic earnings per share (EPS)

Diluted EPS

Underlying EPS

Dividend per share – interim

Dividend per share – final

Statutory return on equity

Underlying return on equity

EBITDA/operating revenue

EBIT/operating revenue

Total expenses (including depreciation and amortisation)/operating revenue

Capital expenditure ($’000)

Net tangible asset backing per share

Net asset backing per share

Shareholders’ equity as a % of total assets (excluding participants’ balances)

Shareholders’ equity as a % of total assets (including participants’ balances)

Share price at end of period

Ordinary shares on issue at end of period

Weighted average number of ordinary shares

Market value of ordinary shares on issue ($m)

Market to book ratio

Full-time equivalent permanent staff:
- number at period end

- average during the period

Notes
1,2

1,2

2,3

6,7

FY12
190.6c

190.6c

194.6c

92.8c

85.1c

11.5%

11.7%

76.9%

72.4%

27.6%

FY13
195.5c

195.5c

87.9c

82.3c

11.5%

76.3%

71.4%

28.6%

FY14
198.5c

198.5c

88.2c

89.9c

10.6%

76.7%

71.5%

28.5%

FY15
205.7c

205.7c

208.4c

92.3c

95.1c

10.8%

10.9%

77.1%

71.6%

28.4%

FY16
220.4c

220.4c

99.1c

99.0c

11.4%

77.1%

71.4%

28.6%

$39,074

$38,881

$43,235

$44,404

$50,237

$3.85

$17.10

83.5%

45.9%

$29.36

$5.04

$18.05

91.9%

45.1%

$33.07

$6.53

$18.96

91.3%

45.8%

$35.64

$6.97

$19.42

90.1%

46.7%

$39.90

$7.25

$19.75

87.6%

36.6%

$45.76

175,136,729

184,066,764

193,595,162

177,916,677

178,068,323

193,022,315

193,413,893

$5,223

1.74

505

502

$6,087

1.83

$6,900

1.88

529

515

526

534

$7,724

2.05

515

524

$8,859

2.32

546

534

Notes
1. Based on statutory net profit after tax (NPAT) including significant items and weighted average number of shares.
2. Financial year 2012 has been restated for the bonus element of the rights issue in financial year 2013.
3. Based on underlying NPAT excluding significant items and weighted average number of shares.
4. Based on statutory NPAT including significant items.
5. Based on underlying NPAT excluding significant items.
6. Operating revenue excludes interest and dividend revenue (underlying).
7. EBITDA – earnings before interest, tax, depreciation and amortisation; EBIT – earnings before interest and tax.

These metrics along with total expenses exclude significant items.

8. The share price for financial year 2012 has been restated for the impact of the capital raising in financial year 2013.

ASX Annual Report 2016 | Key financial ratios

Transaction
levels and
statistics

Year ended 30 June 2016

Listings and issuer services

Total domestic market capitalisation ($bn)

Total number of listed entities (includes stapled entities)

Number of new listings

Average annual listing fee

Average initial listing fee

Average fee per $m of secondary capital

Initial capital raised ($m)

Secondary capital raised ($m)

Other secondary capital raised including scrip-for-scrip ($m)

Total capital raised ($m)

Number of new warrant series quoted

Total warrant series quoted

Number of CHESS holding statements issued (m)

Cash market
Trading days

Total cash market trades (‘000)

Average daily cash market trades

Open trading ($bn)

Auctions trading ($bn)

Centre Point ($bn)

Trade reporting ($bn)

Total cash market value ($bn)
Average daily on-market value ($bn)

Average daily value (including trade reporting) ($bn)

Average trade size

Total billable value ($bn)

Average cash market trading, clearing and settlement fee per trade

Average fee per $1,000 of value traded (cents)

Average fee per dollar of value (bps)

Velocity (total value/average market capitalisation)1
Number of dominant settlement messages (m)

1 Total value transacted on all venues.

FY12

FY13

FY14

FY15

FY16

$1,186

2,211

$27,388

$63,160

$851

$10,187

$32,558

$7,850

$50,595

7,113

4,743

11.1

253

165,806

655,359

$717.882

$147.213

$19.789

$300.443

$1,185.327
$3.498

$4.685

$7,149

$1,347

2,185

$27,463

$87,139

$1,026

$9,908

$32,448

$4,027

$46,383

6,690

5,140

11.1

252

174,750

693,454

$645.161

$147.418

$36.953

$216.420

$1,552

2,192

107

$28,333

$166,786

$1,002

$27,659

$33,378

$4,985

$66,022

4,206

3,564

11.8

253

181,861

718,817

$612.491

$157.338

$61.135

$177.933

$1,045.952
$3.292

$1,008.897
$3.284

$4.151

$5,985

$3.988

$5,548

$1,612

2,220

120

$31,859

$174,080

$854

$38,916

$38,787

$11,170

$88,873

2,903

3,050

13.1

254

190,647

750,578

$698.315

$193.292

$74.933

$145.909

$1,112.449
$3.805

$4.380

$5,835

$1,620

2,204

124

$34,101

$150,199

$819

$23,587

$45,299

$9,704

$78,590

2,959

2,886

14.0

254

235,923

928,829

$770.805

$209.412

$78.941

$144.991

$1,204.149
$4.170

$4.741

$5,104

$1,161.573

$1,024.227

$989.760

$1,092.799

$1,189.162

$0.75

10.5

1.05

97%

16.1

$0.66

$0.64

$0.66

$0.59

11.0

1.10

86%

15.4

11.6

1.16

78%

15.2

11.3

1.13

82%

15.7

11.6

1.16

92%

17.1

ASX Annual Report 2016 | Transaction levels and statistics

Year ended 30 June 2016

Equity options (excluding ASX SPI 200)
Trading days (exchange-traded options)

Total contracts traded – equity options (‘000)
Single stock options

Index options and futures
Grains futures and options on futures1

Total equity options (‘000)

Average daily derivatives contracts

Average fee per derivatives contract

Futures
Trading days (futures and options)

Total contracts traded – futures (‘000)
ASX SPI 200

90 day bank bills

3 year bonds

10 year bonds

20 year bonds

30 day interbank cash rate

Agricultural

Electricity
Other2
NZ$ 90 day bank bills

Total futures

Total contracts traded – options on futures (‘000)
ASX SPI 200

90 day bank bills

3 year bonds

Overnight 3 year bonds

Intra-day 3 year bonds
Other2

Total options on futures

Total futures and options on futures contract volume (‘000)

Daily average contracts – futures and options

Average fee per contract – futures and options

OTC markets
Total notional cleared value ($bn)3
Open notional cleared value (period end $bn)3
1 Grain contracts were transferred to the futures market in October 2011.
2 Other includes VIX and sector futures.
3 Cleared notional value is double sided

FY12

253

151,619

12,125

154

163,898

647,819

$0.17

FY13

252

145,531

11,762

N/A

157,293

624,179

$0.18

FY14

253

116,343

8,249

N/A

124,592

492,460

$0.18

FY15

254

109,546

10,958

N/A

120,504

474,426

$0.20

FY16

254

88,701

12,768

N/A

101,469

399,486

$0.23

256

255

256

257

11,811

21,652

42,503

17,220

N/A

5,334

288

183

1,597

100,593

477

347

1,029

978

2,886

103,479

404,215

$1.56

N/A

10,259

25,866

47,499

21,211

N/A

4,780

354

168

1,176

9,715

25,903

47,886

25,520

N/A

3,517

181

165

1,157

111,332

114,064

349

526

1,914

1,443

4,276

115,608

453,365

$1.46

473

416

1,523

1,527

3,990

118,054

461,148

$1.57

10,301

28,706

49,717

29,498

N/A

3,678

135

224

107

1,394

123,760

454

245

896

927

2,581

126,341

493,520

$1.44

12,105

29,567

50,105

36,079

423

4,112

132

257

137

1,915

134,832

363

356

579

660

1,991

136,823

532,386

$1.42

N/A

124.413

120.409

805.869

440.506

2,742.002

1,600.194

ASX Annual Report 2016 | Transaction levels and statistics

Year ended 30 June 2016

Austraclear
Settlement days

Transactions (‘000)
Cash transfers

Fixed interest securities

Discount securities

Foreign exchange

Other

Total transactions (‘000)

Average daily settlement volume

Securities holdings (monthly average $bn)

Securities holdings (period end $bn)

Average settlement and depository fee (including portfolio holdings) per transaction (excludes registry services revenue)

System uptime (period average)
ASX Trade

CHESS

Futures trading

Futures clearing

Austraclear

Technical services (number at period end)

Liquidity access
ASX sessions

ASX gateways

ASX liquidity cross-connects

ASX 24 gateways

ASX ITCH access

ASX OUCH access

ASX 24 liquidity cross-connects

ASX 24 ITCH access

Community and connectivity
ASX Net connections

ASX Net service feeds

Australian Liquidity Centre service connections

Application services
ASX Trader/ASX Best terminals

Hosting
Australian Liquidity Centre cabinets

Other data centre cabinets

ASX Annual Report 2016 | Transaction levels and statistics

FY12

FY13

FY14

FY15

FY16

253

616

733

217

1,599

6,319

$1,292.3

$1,330.9

$13.54

99.75%

99.99%

100.00%

99.89%

252

587

763

183

1,566

6,214

$1,374.5

$1,406.8

$14.01

100.00%

99.99%

100.00%

253

600

800

162

1,593

6,298

$1,475.5

$1,571.8

$14.18

99.97%

100.00%

99.95%

254

602

774

157

1,564

6,156

$1,671.5

$1,752.5

$14.88

100.00%

99.97%

100.00%

1,737

1,526

1,431

1,185

302

352

N/A

154

N/A

125

270

110

609

248

272

221

140

356

415

491

117

233

241

297

122

356

622

318

142

207

228

357

126

358

679

277

188

254

590

717

150

1,470

5,786

$1,857.6

$1,895.6

$15.60

100.00%

99.98%

99.96%

100.00%

99.93%

1,113

192

208

306

116

382

819

251

231

ASX Limited – ordinary shares

On-market buy-back

Shareholder
information

ASX has ordinary shares on issue. These are listed
on the Australian Securities Exchange under ASX
code: ASX. Details of trading activity are published
daily in most major Australian newspapers (print,
online and mobile) and by electronic information
vendors, and broadcast on television and radio.

At a general meeting, every shareholder present in
person or by direct vote, proxy, attorney or repre-
sentative has one vote on a show of hands and, on
a poll, one vote for each fully paid share held unless
that share is a ‘default share’.

There is no current on-market buy-back.

Substantial shareholders at 29 July 2016

The following organisations have disclosed a substantial shareholder notice to ASX.

Name

UniSuper Limited

Schroder Investment Management Australia Limited

Largest 20 shareholders at 29 July 2016

The ASX constitution classifies default shares as
any shares held above the 15% voting power limit
by one party and its associates.

Name
1. HSBC Custody Nominees (Australia) Limited

2. JP Morgan Nominees Australia Limited

Distribution of shareholdings at 29 July
2016

Number of
shares held
1 to 1,000

Number of
holders
41,097

Number of
shares
15,660,766

1,001 to 5,000

5,001 to 10,000

11,680

22,969,131

873

6,105,783

% of
issued
capital
8.09

11.87

3.15

10,001 to
100,000

100,001 and
over

Total

664

20,909,766

10.80

108

127,949,716

66.09

3. BNP Paribas Noms Pty Limited

4. National Nominees Limited

5. Citigroup Nominees Pty Limited

6. Bond Street Custodians Limited

7. RBC Dexia Investor Services Australia Nominees Pty Limited

8. Australian Foundation Investment Company Limited

9. Navigator Australia Limited

10. Milton Corporation Limited

11. CS Fourth Nominees Pty Limited

12. BT Portfolio Services Limited

13. UBS Nominees Pty Limited

14. Avanteos Investments Limited

54,422 193,595,162 100.00

15. Brickworks Limited

The number of investors holding less than a
marketable parcel of 11 ASX shares (based on a
share price of $49.70) was 334. They hold 1,247
ASX shares in total.

16. Senior Master of the Supreme Court

17. Law Venture Pty Ltd

18. Asgard Capital Management Ltd

19. Share Direct Nominees Pty Limited

20. Gwynvill Trading Pty Limited

Total

Number
of shares

% of voting
power

14,575,384

10,542,882

7.53

5.45

Number
of shares
37,271,917

26,474,186

19,754,723

16,025,604

10,909,698

2,622,856

1,522,905

708,685

629,921

548,965

490,959

451,882

394,790

378,310

375,500

332,134

310,365

259,116

251,962

241,559

% of issued
capital
19.25

13.68

10.20

8.28

5.64

1.35

0.79

0.37

0.33

0.28

0.25

0.23

0.20

0.19

0.17

0.16

0.13

0.12

119,956,037

61.95

ASX Annual Report 2016 | Shareholder information

Shareholders’ calendar

Annual General Meeting 2016

Electronic communication

FY16

Full-year financial
results announcement

Full-year final dividend
Ex-dividend date

Record date for
dividend entitlements

18 August 2016

8 September 2016

9 September 2016

Payment date

28 September 2016

Annual General Meeting

28 September 2016

The ASX AGM will be held in the ASX Auditorium,
lower ground floor, Exchange Square, 18 Bridge
Street Sydney, New South Wales, at 10am
(Australian Eastern Standard Time) on Wednesday
28 September 2016.

The AGM will be webcast live on the internet at
www.asx.com.au/agm

A copy of the webcast will be placed on the ASX
website after the event.

FY171

Half-year financial
results announcement

Half-year interim dividend
Ex-dividend date

Record date for
dividend entitlements

Payment date

Full-year financial
results announcement

Full-year final dividend
Ex-dividend date

Record date for
dividend entitlements

17 February 2017

The external auditor will be present at the AGM to
answer questions relevant to the external audit.

9 March 2017

10 March 2017

29 March 2017

17 August 2017

7 September 2017

8 September 2017

ASX encourages shareholders to receive informa-
tion electronically.

Shareholders who currently receive information by
post can log in at www.linkmarketservices.com.au
to provide their email address and elect to receive
electronic communications.

ASX emails shareholders when important infor-
mation becomes available such as dividend state-
ments, notices of meeting, voting forms and Annual
Reports.

Electronic communication allows ASX to commu-
nicate with shareholders faster and reduce its
use of paper.

For further information, please contact ASX’s
share registry, Link Market Services, on
1300 724 911 (for the cost of a local call) or
asx@linkmarketservices.com.au

Important information
about dividend payments

Payments are made by direct credit only to ASX
shareholders with registered addresses in Australia
and New Zealand. No cheque payments are made.

If you have not already done so, please
provide direct credit instructions by visiting
www.linkmarketservices.com.au

Payment date

27 September 2017

Annual General Meeting

26 September 2017

1 Dates are subject to final ASX Board approval.

ASX Annual Report 2016 | Shareholder information