ASX Limited
Annual Report 2018
ASX's AGM will be held on
Thursday 4 October 2018
at 10am Sydney time,
in the ASX Auditorium,
lower ground floor,
Exchange Square,
18 Bridge Street, Sydney
Contents
Who we are
FY18 highlights
Vision, strategy, execution
Letter from the Chairman
Letter from the CEO
Operating and financial review
Corporate responsibility and sustainability
Corporate governance
Remuneration report
Directors' report
Auditor's independence declaration
Statutory report – financial statements
Key financial ratios
Transaction levels and statistics
Shareholder information
Directory
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Our people
have expertise,
experience
and passion
We use innovative
technology to
make life easier
for our customers
and create value
for our shareholders
ASX Limited ABN 98 008 624 691
ASX Annual Report 2018 / 1
Who we are
ASX is at the heart of the globally attractive,
deep and liquid Australian financial markets,
helping companies grow and investors build wealth.
As an integrated exchange, ASX offers listings, trade
execution, technology, data and post-trade services.
Recognised as world-leading and innovative, ASX
operates markets for a wide range of asset classes,
including equities, fixed income, commodities and
energy. We are a top 10 global securities exchange
and the largest interest rate derivatives market
in Asia.
Companies, issuers and corporates from Australia
and around the world engage with ASX to manage
risk and to raise capital to grow. ASX operates liquid,
transparent and reliable markets of integrity.
The certainty of our clearing and settlement
activities underpins systemic stability.
ASX also provides data and technology services
to intermediaries, banks, information vendors
and software developers to help them make
informed decisions, offer services to their
customers and connect with one another.
With a proud history as an early and successful
adopter of new technology, ASX continues to
embrace innovative solutions to make life easier
for customers, create value for shareholders and
contribute to the growth of the Australian economy.
Through the expertise, experience and passion
of our people, ASX works to ensure that its
activities are built on the strong foundations
of quality, security, resilience and trust.
More information about ASX can be found
at www.asx.com.au
ASX operates
at the heart
of Australia’s
financial markets
ASX contributes
to the growth and
prosperity of the
Australian economy
2
/ ASX Annual Report 2018 Who we are
FY18 highlights
For our customers
99.98%
Access to the 5 main trading and
post-trade systems for Australia's
financial markets
~$70bn
$81.7bn
Average value of transactions
settled electronically every day
Capital raised to enable
companies to grow
For our shareholders
$445.1m
216.3c
21.9%
Statutory net profit after tax
(NPAT), up 2.5%
– 6th consecutive year of
NPAT growth
– Underlying NPAT $465.3m,
up 7.2%
For our people
73%
Employee engagement
Total dividends per share,
fully franked
– 90% payout ratio
Total shareholder return (TSR)
for the year ended 30 June 2018
– TSR for S&P/ASX 200 over
the same period 8.1%
41%
63%
Employees working flexibly
Management roles held
by women
– 33% of Board directors
are women
For Australia’s financial markets and our community
4th edition
ASX
>700,000
Update of Corporate
Governance Principles and
Recommendations underway
Retail investors connected to
MyASX, our free education portal
Charities supported by ASX
and its employees
47
3
ASX Annual Report 2018 FY18 highlights / Vision, strategy, execution
Our vision
The world’s most respected
financial marketplace
Our strategy
Diverse ecosystem
Innovative solutions
and technology
Enduring trust, integrity
and resilience
We provide an open
system of collaboration
to support partnerships,
products and services
across the Australian
financial ecosystem
We offer innovative
solutions and technology
to drive efficiency and
deliver benefits to
customers, employees
and the wider financial
marketplace
We earn trust and deliver
resilience by making sure
our systems and processes
are stable, secure, reliable
and fair, and our people
act with integrity
towards the market
and each other
Customer centric
Collaborative culture
We think constantly
about how we can
improve the experience
for our customers and
make their lives easier
We foster collaboration
and agility within our
businesses, across
our teams and among
our people
4 / ASX Annual Report 2018 Vision, strategy, execution
4
Our Licence to Operate
activities focus on
what we need to do
to stay a resilient,
reliable and leading
financial marketplace.
Our Growth Initiatives
refer to key projects
we are undertaking.
Together, they
progress us towards
realising our vision.
Dominic Stevens
Managing Director and
Chief Executive Officer
/ ASX Annual Report 2018 Strategy, vision, execution Our execution
Licence to Operate
Provide clarity of strategic direction
• Articulate and embed company
vision, strategy and values
Strengthen risk awareness culture
• Engaging employees on individual
risk responsibilities and speaking up
Deliver a contemporary equities
clearing and settlement solution
• Replace CHESS with contemporary
technology that makes doing
business easier for ASX customers
Upgrade and move secondary
data centre
• Strengthen ASX's resilience
and update its technology
Enhance digital offering
• Pursue a market-leading digital
strategy to improve the
digital experience of customers
Refresh technology platform
• Accelerate program of legacy
infrastructure replacement
Growth Initiatives
Rebuild trust in recently acquired
BBSW benchmark
• Develop best practice valuation
methodology
Data optimisation strategy
• Identify opportunities to maximise
the value of the data generated
by ASX
Attract quality listings
• Marketing initiatives focused
on selected international markets
and technology companies
Grow derivatives and futures
participants
• Attract new international customers
• Leverage attraction of new platform
to potential customers
Continue to expand the Australian
Liquidity Centre (ALC) community
Expand Austraclear’s settlement options
• Enable settlement in US$ cash
and bonds
Strategy alignment
solutions and
Innovative
technology
Diverse
ecosyste m
Enduring trust,
integrity and
Custo m er
resilience
centric
Collaborative
culture
FY18 progress
• Introduced vision, strategy and execution (VSE) framework
to set FY18 corporate and employee goals and objectives
• Developed company values in collaboration with employees
and incorporated in annual performance assessments
• Launched new reward and recognition program celebrating
ASX's values
• Embedding 3 Lines of Defence risk framework
• Rolling out education support materials for leaders
• Selected distributed ledger technology as the
underlying technology platform and Digital Asset as
ASX’s development partner
• Completed market consultation with over 600 people to
identify desirable functionality for the new system
• Proposed Day 1 requirements and implementation
timeframe
• Selected dedicated site
• Put in place detailed multi-year transition plan
• Set up dedicated digital team
• Approved strategic digital roadmap
• Commenced build
• Board-approved plan to upgrade and refresh IT
infrastructure
• Progressing plan to replace ASX Net infrastructure
• Launched regular service release schedules for key systems
• Launched new BBSW methodology
• Strengthened trust and confidence in BBSW calculation
• Developed strategy
• Progressing implementation via investment in supporting IT
• New international listings from New Zealand, Europe,
the United States and Israel
• New listings in the areas of technology, industrials,
materials, healthcare, financials and resources
• Continued to raise listing standards – e.g. tightened
guidance on good fame and character requirements
• Growth in international participants
• Recruited additional off-shore sales resource
• Increased the number of customers at the ALC
• Increased the number of cross connections between parties
co-located at ALC
• Completed required technical development
• On track for first US$ settlement in 1H FY19
5
ASX Annual Report 2018 Vision, strategy, execution / Letter from the Chairman
Shareholders are continuing to see
the benefits of ASX’s strong cash
flow, steady earnings growth and
commitment to pay out 90% of
underlying profit in dividends.
Rick Holliday-Smith
Chairman
I am pleased to present ASX’s Annual Report for the financial year
ended 30 June 2018 (FY18).
Trust and confidence
ASX operates at the heart of Australia’s financial markets. With
this privilege comes great responsibility. Our products, services
and technology power Australia’s equity, debt and futures markets.
Over the past three years we have worked in partnership with
our regulators to improve the robustness and resilience of all our
infrastructure, integrate contemporary technologies, and adopt
new methods and processes. This is a multi-year challenge with
several more years to go before we achieve the higher standards
which we aspire to, and which our customers and the wider financial
community have come to expect.
ASX works hard to earn the trust and confidence of its custom-
ers and the wider community. We know this cannot be taken for
granted and must be renewed every day. We also recognise that
the standards for all financial institutions globally are being raised
and we need to respond accordingly.
Trust in ASX is critical to our success. We endeavour to protect and
strengthen our reputation through ongoing operational improve-
ment and encouraging our people to act responsibly and be account-
able. Overseeing how this is done is one of the core responsibilities
of the Board, as is increasing capabilities across the Group.
To that end, the Board has encouraged and supported a deep
focus on a range of risk-based and operational activities, as well
as a significant renewal of technology platforms and systems.
This involves an increase in capital expenditure, upskilling of the
executive, and a reorganisation of critical functions recommended
and led by the CEO.
Embedding a strong foundation of respect, trust and integrity
ASX seeks to build and preserve a trustworthy and responsible
culture, and pays close attention to:
• Vision and strategy
• Company and community values
• Remuneration incentives.
Over the past 12 months, ASX continued to embrace technological
and operational change to strengthen our foundations, develop
new products and services for customers, and position the Group
for future growth.
This extends our long history of innovation within a market and
regulatory environment that is constantly on the move.
In FY18, ASX increased its returns to shareholders for the fifth
year in a row. The total shareholder return was 21.9%, significantly
outperforming the wider market as measured by the S&P/ASX
200 Index. This continues a longer term trend, with ASX delivering
shareholders a total return of 107.0% over the past five years
compared to 50.9% by the Index.
Statutory profit after tax was $445.1 million, up $11.0 million or 2.5%
on the previous 12-month period.
There was one $20.2 million significant item in FY18. This was
a non-cash impairment charge taken against the value of ASX’s
investment in Yieldbroker Pty Limited, an electronic market
operator for OTC debt and interest rate derivatives in Australia.
ASX acquired 49% of Yieldbroker in 2014. While the move to an
electronic market for these financial instruments has been slower
than expected, ASX remains confident that the move is inevitable.
Yieldbroker continues to be an important strategic investment.
Underlying profit after tax was $465.3 million for the period,
$31.2 million or 7.2% higher than last year, excluding the significant
item.
Statutory earnings per share (EPS) grew by 2.4% to 230.0 cents
and underlying EPS rose 7.1% to 240.4 cents.
Shareholders are continuing to see the benefits of ASX’s strong cash
flow, steady earnings growth and commitment to pay out 90% of
underlying profit in dividends. The Yieldbroker impairment charge
did not impact on dividends.
Total dividends for FY18 were 216.3 cents per share, up 7.2% on the
previous year. Our dividends remain 100% franked.
66
/ ASX Annual Report 2018 Letter from the Chairman
Letter from the Chairman continued
ASX’s vision and strategy guide our actions
Strengthening ASX’s risk foundations
ASX’s vision is to be the world’s most respected financial market-
place. This guides the actions and choices we make, and anchors
our commitment to operate from a foundation of respect, trust
and integrity.
Importantly, ASX’s vision aligns the pursuit of financial returns for
shareholders with preserving our licence to operate in the Australian
market. To deliver sustainable returns to shareholders, ASX needs
the trust and support of regulators, the financial market and the
wider community.
ASX’s strategy to achieve our vision has several key elements, all
focused on acting with integrity, being resilient and reliable, and
maintaining trust and confidence. These are fundamental to ASX’s
reputation and licence to operate. They shape our actions and
behaviours, and help ensure ASX:
• Enables investors to participate with confidence in our markets
• Offers companies access to sufficient and cost-effective capital
• Provides systems and technical services that are resilient,
stable, secure and reliable
• Employs people who act with integrity toward our stakeholders
and each other
• Has respectful and constructive relationships with regulators,
government and media.
ASX’s company values – guiding the behaviour of our people
ASX’s BE program was launched during the year. The four BE values
guide the behaviours and actions of our people to support the
delivery of our vision and strategy. They are listed over the page.
ASX encourages its staff to live these values by assessing an
employee’s behaviour against them during their annual performance
review. This assessment contributes towards an employee’s indi-
vidual short-term incentive (STI) payment.
Remuneration incentives – incentivising the actions of the
business and the behaviours of our people
ASX’s remuneration structure incentivises our people to take actions
aligned with the outcomes ASX wants for its customers, regulators
and shareholders.
In 2015, the Board improved alignment between STIs paid to staff
and shareholder interests. ASX moved from paying STIs wholly in
cash to a combination of cash and ASX shares. To encourage the
right behaviour over the longer term, the shares component is
deferred for two years, or for two and four years, depending on a
staff member's seniority. Linking remuneration to the ASX share
price aligns the interests of our people with our shareholders;
while deferral ensures our people have long-term alignment with
the company.
Managing risk across ASX is a critical part of ensuring ASX remains
a trusted market operator and services provider. Anticipating uncer-
tainty and disruption helps ASX recognise and respond to challenges
and opportunities, generate better information for decision-making,
reduce risk, and increase the likelihood of achieving our opera-
tional, strategic and financial goals. This is an ongoing challenge
and can always be improved – for example, by keeping pace with
industry developments and embracing new technology to help us
do a better job.
Risk has been a major area of attention for the Board over the past
12 months. Following the appointment of a new Chief Risk Officer
in the prior financial year, we’ve focused on ensuring ASX’s risk
processes and controls are as strong and robust as possible. This
has included embedding ASX’s chosen risk approach – the 3 Lines
of Defence risk model – that clarifies the ownership of risks and
controls, and helps improve the effectiveness of risk management
systems. This will take time to complete.
The Board believes having a culture of risk awareness is critical to
ASX’s success. All our people are trained to understand the impor-
tance of risk management, and to speak up and identify current and
emerging risks in their day-to-day business activities.
Supporting best practice corporate governance
across the market
A best practice corporate governance framework for companies
listed on ASX benefits all financial market participants – especially
the millions of Australians who invest directly on exchange or indi-
rectly via their superannuation funds. Encouraging the adoption
of best practice corporate governance standards is an important
part of ASX’s role as a responsible and respected market operator.
In 2003, the ASX Corporate Governance Council, an indepen-
dent body that brings together a range of business, shareholder
and industry groups, released the first edition of the Corporate
Governance Principles and Recommendations. These Principles
are a practical guide to assist listed entities adopt best practice
governance standards and meet the expectations of investors and
the wider Australian community. Where alternative arrangements
work better for a company, the Principles provide the ‘if not, why
not’ flexibility for a company to disclose its preferred practice to
the market.
The Principles are reviewed from time to time to ensure they address
emerging issues in corporate governance and continue to serve the
interests of participants in the market. Recognising this, in May 2018
the Council commenced a consultation on a proposed fourth edition
of the Principles. Once stakeholder feedback has been considered,
a new edition reflecting the broad consensus of the market will be
published and is expected to come into effect on 1 July 2019.
7
ASX Annual Report 2018 Letter from the Chairman / Letter from the Chairman continued
Board update
Thank you for your support
In June 2018, Robert Priestley resigned as a non-executive director
from the ASX Board. Rob stepped down to avoid any distraction to
ASX from a matter involving the ACCC and a number of banks, one
of which he serves as Chairman. Rob made a valuable contribution to
the company and put ASX ahead of other considerations by resigning,
which is testament to his commitment to the highest standards of
corporate governance. We thank Rob for his service and wish him
well. We are now considering appointing a new director as part of
ASX’s ongoing process of Board renewal.
Collectively, I believe your Board has the appropriate mix of skills,
experience and expertise to understand ASX and its operating
environment, navigate current and emerging issues, and oversee
the performance of management in executing the Board-approved
strategy. This is a complex challenge and we must remain vigilant.
I thank the directors for their hard work and commitment.
On behalf of the Board, I would like to thank the ASX team for its
passion, dedication and achievements this year. We are confident
ASX has in place the right vision, values and strategy, together with
the appropriate talent and experience, to continue to improve and
deliver sustainable long-term performance.
To our shareholders, thank you for your ongoing support and confi-
dence in ASX. I look forward to talking with you further at our Annual
General Meeting in October.
Rick Holliday-Smith
Chairman
ASX values
ASX’s BE values capture our company culture
and celebrate those behaviours we see as key
to our success.
Our BE values articulate the types of behaviours and personal
interactions we expect at ASX. They represent what we stand for
as an organisation, help guide the behaviour of our people and act
as a powerful motivator.
The four BE values were developed collaboratively by management
and staff, who were asked to describe what kind of company culture
we have, as well as which behaviours were key to our long-term
success. Once the four values of BE Open, BE Trustworthy, BE
Original and BE The Example were selected, we then identified
behaviours to embody each value.
ASX is committed to seeing the values evident in the behaviour and
actions of our people. We support this by integrating the values into
our leadership programs, new reward and recognition program, and
performance and assessment processes.
8
FOR THE BENEFIT OF OURSELVES,
OUR CUSTOMERS AND THE MARKETS
Open
• Create transparency
• Welcome new ideas
• Seek input
• Promote diversity
Original
• Act with integrity
• Take responsibility
• Say what you mean
• Do what you say
Trustworthy
• Embrace change
• Think deeply and
broadly
• Be curious
• Fuel innovation
The Example
• Own it
• Speak up
• Do your best
• Enjoy yourself
/ ASX Annual Report 2018 Letter from the Chairman Letter from the CEO
The 2018 financial year was
another strong year for ASX. We
increased returns to shareholders
and strengthened our foundations
for future growth.
Dominic Stevens
Managing Director and Chief Executive Officer
Dear Fellow Shareholder,
Unique opportunity
Group revenue (as per ASX’s segment reporting) was $822.7 million
for the financial year ended 30 June 2018 (FY18), up 7.7% on the
prior year.
Since becoming CEO in August 2016, I have become increasingly
convinced of the unique position in which ASX finds itself. This
conviction is underpinned by three factors:
Growth in revenue of $58.6 million came from all four businesses,
with the key drivers being:
• Strong performance in our Derivatives and OTC business, with
futures volumes up 9.8%, OTC clearing up 22.2% and ASX collat-
eral up 45.1%
• Solid increases in both data and technology services revenues
from a growing customer base
• Significantly increased listings performance (revenue up 14.5%)
from growth in primary and secondary issuance
• Equities trading, clearing and settlement revenues on par with
our FY17 result.
As forecast, underlying expenses for 2018 grew by $14.6 million
or 8.0%, reflecting a number of one-off increases, including the
doubling of the supervision levy we pay the Australian Securities
and Investments Commission and a significant rise in electricity
prices. The increase also includes our program of operational risk
and technology enhancements.
Capital expenditure was $54.1 million as we continued to invest in
laying the foundations for ASX’s ongoing success. In particular, this
was by strengthening our technology capabilities with projects such
as the replacement of CHESS and the upgrading of our secondary
data centre.
Underlying earnings before interest, tax, depreciation and amor-
tisation (EBITDA) for the period were $627.2 million, up 7.5%. This
supported the underlying net profit growth that enabled the
payment to shareholders of 7.2% higher total dividends in FY18.
• The critical role ASX plays in Australia’s financial markets as
a trusted, central and independent party. This means we are
well-placed to take advantage of new opportunities and to
leverage our skills and expertise to make doing business easier
for our customers
• The backdrop of continued, legislated growth in Australia’s
superannuation pool, which is expected to grow from around
$2.6 trillion today to $9.5 trillion in 2035. This is driving demand
for new financial products and services that ASX can deliver
• The technological developments that are transforming the way
exchanges and financial services operate. This will create a
platform for future growth, enabling new products and services
to be developed by enhancing our operational capabilities and
technology systems.
A unifying long-term goal
In early FY18, we adopted our vision to be the world’s most respected
financial marketplace. We believe it is the right time for a new,
unifying, long-term aspirational goal given ASX has met its earlier
target to be the global leader in A$ and NZ$ markets.
Our vision reflects that we compete on a world stage, such as
in listings, derivatives, equity trading, post-trade services and
technical services.
It also encapsulates the importance of focusing on our core oper-
ations as well as pursuing growth opportunities.
9
ASX Annual Report 2018 Letter from the CEO / Letter from the CEO continued
With our vision in place, we identified five elements we saw as
critical to achieving it and brought them together in our strategy.
Our five strategic pillars are:
1. Creating a diverse ecosystem
2. Delivering innovative solutions and technology
3. Maintaining enduring trust, integrity and resilience
4. Being customer centric
5. Fostering a collaborative culture.
We then identified two groups of initiatives which, through their
execution, will progress us towards achieving our strategy and
vision. The first group captures what we need to do to stay a resil-
ient, reliable, leading and trusted financial marketplace – they are
fundamental to having strong foundations and we refer to them
as our Licence to Operate activities. The second group comprises
the Growth Initiatives we are undertaking.
For more detail on our strategy, please see page 4 of this report
and for an overview of our FY18 progress with both groups of
initiatives, please see page 5.
Building Stronger Foundations through technology
Investing in technology is essential to ASX’s success. Such investment
strengthens the foundations that deliver our core earnings and
enables innovation and growth. With this in mind, we are accelerating
our program to upgrade our technology infrastructure so it remains
contemporary through a number of multi-year initiatives, including
those outlined below.
We are accelerating our technology program to update systems that
will enable us to grow. This will increase our capital expenditure to
around $70-75 million per annum for the next couple of financial
years, up from an average spend over the past few years of $50
million per annum.
CHESS replacement
One of the key projects of our technology upgrade is replacing
our CHESS equities clearing and settlement – or post-trade –
system. CHESS has been world-leading and served the Australian
equity market very well for over 20 years. In December 2017, after
24 months of research and testing, we announced that we will build
a new equities post-trade platform for the Australian market using
distributed ledger technology (DLT) developed with our technology
partner, Digital Asset.
The new system is expected to start operating between September
2020 and March 2021, subject to stakeholder readiness and after
considerable industry-wide testing.
We are excited about the ways it will make doing business easier
for our customers. A DLT-based system will improve record keeping,
reduce reconciliation, enable more timely transactions and generate
better quality source of truth data for our customers. Beyond this,
we believe a system built on DLT will stimulate product and service
innovation across the industry in ways we can’t conceive today.
To learn more about our CHESS replacement project, please see
page 19 of this report.
Investing in contemporary technology to drive efficiency and innovation
Building Stronger Foundations and enabling future growth.
=
+
+
Contemporary
technology
will deliver
Richer, more timely
data sets
Better operational
functionality and
resilience
Improved analytics
10
/ ASX Annual Report 2018 Letter from the CEO Letter from the CEO continued
Operational Infrastructure replacement
We are also modernising our operational infrastructure and
processes that support ASX’s equities trading, clearing and settle-
ment activities. Ensuring we have contemporary technology gives
ASX a strong, reliable and resilient core from which to operate and
pursue opportunities as they arise.
A good example of an opportunity we are pursuing is our data
strategy. Here we are looking at ways to optimise the value inherent
in the large volume of data we generate across our businesses for
our customers.
Secondary data centre upgrade
Our secondary data centre acts as a backup facility to our primary
data centre, the Australian Liquidity Centre (ALC). It is critical infra-
structure that allows us to keep the markets open if there is an
unexpected interruption.
Work to upgrade our secondary data centre capability and move
to a new contemporary facility is well underway. Like replacing
CHESS, it’s another once-in-a-generation project, which will allow
us to complement the success and sophistication of the ALC. It also
strengthens ASX’s overall resilience and reduces our operational
risk profile.
ASX Net upgrade
We are upgrading the ASX Net communications network that connects
our ALC and secondary data centre to customers in Australia and
overseas. Combining six networks into one and enabling those on it
to connect with anyone to whom they are permissioned, will deliver
efficiency to our customers, making it easier for them to communi-
cate with their customers, business partners and service providers.
Building Stronger Foundations for the future
As we assess our future growth options, we are looking for oppor-
tunities to leverage ASX’s expertise and experience, as well as our
reputation as a trusted, independent party.
An example of this is our investment in Sympli Australia Pty Ltd
(Sympli), of which we own 50%. Sympli brings together the exper-
tise of InfoTrack, the market leader in the electronic management of
property-based information at legal and conveyancing firms, with
ASX, the market leader in resilient and secure settlement services.
Sympli has applied for a licence to become an electronic lodgment
network operator and expects to enter the property settlement
market towards the end of this calendar year, subject to regulatory
approvals. This coincides with the nationwide move to mandatory
electronic settlement over the coming years.
We believe by leveraging the complementary expertise and experience
of InfoTrack and ASX, Sympli will provide a compelling offering for
users to realise the efficiencies of electronic property settlements.
Positive momentum
We have started the 2019 financial year with strong momentum
and clarity on what we need to achieve. While there is still much to
do, there is energy and enthusiasm across the whole organisation.
I would like to thank all our people for their hard work and commit-
ment to providing our customers and other stakeholders with
reliable, resilient and high-quality infrastructure, products and
services. Underpinning it all is their dedication to integrity and
ethical behaviour.
Building Stronger Foundations through our people
We have a dedicated and talented team of approximately 600
people. Supporting and engaging them is crucial to ASX’s ability to
deliver on our strategy.
To our shareholders, thank you for your ongoing support. ASX has
a strategy in place to deliver sustainable and attractive returns,
while upholding our Licence to Operate credentials. We are opti-
mistic about the future, and I am looking forward to keeping you
updated on our progress.
Over the last 12 months we have put in place new company values,
leadership program, and reward and recognition program. As an
example of living our BE Open company value (see page 8), we have
increased the number of staff updates, lunch and learn lectures,
and informal networking opportunities for sharing information.
We continue to encourage and promote diversity and inclusion.
For the eighth consecutive year, ASX was recognised in FY18 by
the Federal Government’s Workplace Gender Equality Agency as
an Employer of Choice for Gender Equality. Pay equality remains
a priority and we review and monitor annual remuneration and
performance recommendations. This has resulted in ASX narrowing
the pay gap between men and women over the past three years. In
FY18, ASX was also recognised as one of the top 20 best Australian
workplaces for new dads by the Direct Advice for Dads website.
We have a number of exciting Growth Initiatives to deliver in the
coming years. To enable their execution we are recruiting to get the
right quality and quantity of new people. We are complementing
the hiring with an investment in efficiency tools to make doing
business easier for our people.
Dominic Stevens
Managing Director and Chief Executive Officer
11
ASX Annual Report 2018 Letter from the CEO / Operating and financial review
Financial performance
The Operating and financial review outlines ASX’s activities, perfor-
mance, financial position and main business strategies. It also
discusses the key risks and uncertainties that could impact ASX
and its subsidiaries (together referred to as the ASX Group) and its
ability to achieve its financial and other objectives.
Group financial performance
Statutory net profit after tax (NPAT) for the year
ended 30 June 2018 increased 2.5% on the prior
year to $445.1 million.
Statutory earnings per share (EPS) were 230.0 cents
up 2.4% from 224.5 cents per share.
The statements are prepared and audited in accordance with the
Corporations Act 2001 and Australian Accounting Standards, which
comply with International Financial Reporting Standards (IFRS).
The Group’s underlying net profit after tax was
$465.3 million, up 7.2%.
Business model and operating environment
ASX is a multi-asset class and integrated exchange group. The Group
operates markets for cash equities and derivatives, and provides a full
service offering including listings, trading, clearing, settlement, regis-
try, and information and technical services. ASX operates a significant
part of the infrastructure that supports Australia’s financial markets.
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
oversight by the Australian Securities and Investments Commission
(ASIC) and the Reserve Bank of Australia (RBA).
ASX’s activities and revenues are grouped into four key businesses,
being Listings and Issuer Services, Derivatives and OTC Markets,
Trading Services, and Equity Post-Trade Services. These are each
discussed separately later in this report.
Underlying NPAT excludes the non-cash impairment recognised of
$20.2 million on the Group’s investment in Yieldbroker in order to
reduce its carrying value to fair value, based on the expected financial
performance of that entity.
ASX paid an interim dividend of 107.2 cents per share in March 2018
and directors have determined a final dividend of 109.1 cents per
share. Total dividends per share for FY18 of 216.3 cents are 7.2% higher
than the prior year, and reflect the increase in underlying earnings.
The Board’s dividend policy is to pay 90% of underlying profit after
tax. This is reviewed each time the Board considers payment of a
dividend. Underlying profit reflects NPAT adjusted for any significant
revenues or expenses such as those associated with major restruc-
turing, transactions or other material items that are not commonly
recurring. In the current period the reduction in carrying value of
the investment in Yieldbroker was the only expense treated as a
significant item. This reduction did not impact the dividend amount.
Summary Income Statement for the period ending 30 June 2018
Based on the Group segment reporting note
Operating revenue
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
Interest and dividend income
Profit before tax
Tax expense
Underlying profit after tax
Significant items1
Statutory profit after tax
Statutory earnings per share (cents)
Underlying earnings per share (cents)
Dividends per share (cents)
1 Refer to note C2 of the financial statements for further details.
12
FY18
$m
822.7
(195.5)
627.2
(47.6)
579.6
82.7
662.3
(197.0)
465.3
(20.2)
445.1
230.0
240.4
216.3
FY17
$m
764.1
(180.9)
583.2
(46.0)
537.2
79.2
616.4
(182.3)
434.1
-
434.1
224.5
224.5
201.8
Variance fav/(unfav)
$m
58.6
(14.6)
44.0
(1.6)
42.4
3.5
45.9
(14.7)
31.2
(20.2)
11.0
%
7.7
(8.0)
7.5
(3.5)
7.9
4.3
7.4
(8.1)
7.2
-
2.5
2.4
7.1
7.2
/ ASX Annual Report 2018 Operating and financial review Operating and financial review continued
Operating revenue
Statutory net profit after tax ($m)
Operating revenue as reflected in the Group's segment
note in FY18 increased 7.7% to $822.7 million.
383.2
397.8
426.2
434.1
445.1
The key components of operating revenue were:
Listing and Issuer Services revenue increased 14.5%, reflecting
the 46.0% increase in total capital raised and fee changes.
Derivatives and OTC Markets revenue increased 6.4%, reflecting
a significant increase in activity, particularly futures.
Trading Services revenue increased 7.0%, reflecting new data
product revenues and increased hosting and connections within
the ALC.
Equity Post-Trade Services revenue increased 0.4%, reflecting
higher overall settlement messages partially offset by a 1.9%
decline in the overall value cleared.
Revenue category
Listing and Issuer
Services
Derivatives and OTC
Markets
Trading Services
Equity Post-Trade
Services
Other revenue
Total operating
revenues
FY18
$m
220.6
286.4
209.9
104.8
1.0
FY17
$m
192.7
269.1
196.0
104.4
1.9
822.7
764.1
Variance fav/(unfav)
$m
27.9
17.3
13.9
0.4
(0.9)
58.6
%
14.5
6.4
7.0
0.4
(44.0)
7.7
Equity
Options
3%
Listings
21%
FY14
FY15*
FY16
FY17
FY18*
*Underlying profit in FY18 $465.3 million, FY15 $403.2 million
Statutory earnings per share (EPS) (cents)
220.4
224.5
230.0
198.5
205.7
Net profit after tax $m and
STI outcome % for executions
FY14
FY15*
FY16
FY17
FY18*
*Underlying EPS in FY18 240.4 cents, FY15 208.4 cents
Dividends per share (DPS) (cents)
178.1
89.9
88.2
187.4
95.1
92.3
198.1
99.0
201.8
99.8
99.1
102.0
216.3
109.1
107.2
FY14
Interim
FY15
Final
FY16
FY17
FY18
101.0
80.8
60.6
40.4
20.2
0.0
Futures and OTC Clearing
26%
Operating expenses
Derivatives and
OTC Markets
35%
Listing and
Issuer Services
27%
Trading
Services
25%
Equity
Post-Trade
Services
13%
Issuer Services
6%
Cash Market
Trading
5%
Information
Services
11%
Cash Market
Clearing
6%
Technical
Services
9%
Austraclear
6%
Cash Market
Settlement
7%
Underlying operating expenses in FY18 increased in
line with guidance provided to the market. As reflected
in the segment note, underlying operating expenses
(excluding finance costs, depreciation and amortisation
and significant items) increased 8.0% to $195.5 million.
• Staff costs increased 3.6% to $114.6 million. This reflects the
annual remuneration review, and a lower level of staff costs
capitalised on projects compared to the prior comparative
period (PCP). The average full-time equivalent (FTE) headcount
increased slightly to 560 compared to 556 in the pcp. As at
30 June 2018, there were 587 FTE staff compared to 554 a
year earlier. The increase supports continued strategies to
strengthen the resilience of ASX’s existing service offerings
and develop core offerings.
13
500
400
300
200
100
0
ASX Annual Report 2018 Operating and financial review / Operating and financial review continued
(116.8)
Total equity
• Occupancy costs increased 12.1% to $16.4 million, primarily due
to the increase in electricity costs and the step change from
ASX’s renewal of its Bridge Street premises lease in Sydney.
• Equipment costs were broadly flat reflecting savings on
certain core system licences and maintenance offset by other
increases.
• Administration costs increased 23.1% due to increased consult-
ing (business, technical and security) and other costs to support
ASX's Stronger Foundations program and new initiatives for the
ASX business.
• Variable costs increased 17.5% due to higher postage and addi-
tional CHESS holding statements produced.
• Regulatory fees more than doubled in the year due to the new
levy arrangements introduced by ASIC on listed entities and
financial market firms.
Depreciation and amortisation expense increased 3.5% to $47.6
million, reflecting ASX’s continued investment in technology in
recent years.
Operating expenses
Staff
Occupancy
Equipment
Administration
Variable
ASIC Levy
Total operating
expenses
FY18
$m
114.6
16.4
27.9
22.4
7.9
6.3
FY17
$m
110.6
14.6
27.9
18.2
6.7
2.9
Variance fav/(unfav)
$m
(4.0)
(1.8)
0.0
(4.2)
(1.2)
(3.4)
%
(3.6)
(12.1)
0.1
(23.1)
(17.5)
195.5
180.9
(14.6)
(8.0)
Capital expenditure
The Group invested $54.1 million in capital expenditure during the
year, compared to $50.3 million in the pcp. Expenditure included
the continued investment in distributed ledger technology for the
CHESS replacement, the development and expansion of the data
platform as well as various initiatives to strengthen resiliency of
ASX services, by continuing to contemporise platforms.
Net interest income
Net interest and dividend income increased 4.3% to $82.7 million. Net
interest consists of two components: interest earned on ASX’s cash
balances and net interest earned from the investment of collateral
balances lodged by participants.
Interest income on ASX’s cash balances was up marginally on the
pcp with no significant change in the level of cash. Net interest
earned from the investment of participant balances increased 5.9%
to $50.3 million. This increase was driven by a 14.0% increase in
average collateral balances (lodged as cash) to $6.9 billion, reflective
of larger positions. Investment earnings on this portfolio declined
slightly to 34 basis points compared to 37 basis points above the
official overnight cash rate. The reduction which was foreshadowed
in prior reports reflects the change in investment mandate in line
with new regulatory standards.
14
Financial position
At 30 June 2018, the net assets of the Group were
$3,945.5 million, up 1.0% from 30 June 2017.
Summary Balance Sheet for period ending 30 June 2018
Assets
Cash and
available-for-sale
financial assets
Intangibles
(excluding software)
Investments
Other assets
Total assets
Liabilities
Amounts owing to
participants
Other liabilities
Total liabilities
Equity
Capital
Retained earnings
Reserves
%
5.3
-
(4.7)
(57.2)
(2.2)
30 June
2018
$m
9,565.3
30 June
2017
$m
9,085.6
Variance increase/
(decrease)
$m
479.7
2,326.3
2,326.6
(0.3)
474.3
557.1
497.8
1,301.7
12,923.0
13,211.7
(23.5)
(744.6)
(288.7)
8,495.8
8,084.7
411.1
5.1
481.7
1,218.9
8,977.5
9,303.6
(737.2)
(326.1)
(60.5)
(3.5)
3,027.2
3,027.2
666.7
251.6
622.2
258.7
3,945.5
3,908.1
-
44.5
(7.1)
37.4
-
7.2
(2.7)
1.0
Investments
Investments for the period were down $23.5 million or 4.7% on the
prior year and reflect the carrying value of ASX’s investments as
detailed below. The movement reflects the change in fair value of
these investments:
• 19% shareholding in IRESS Limited, down $20.9 million. A listed
entity providing financial market and wealth management
technology solutions
• 49% shareholding in Yieldbroker Pty Limited, down $20.2 million
representing the impairment treated as a significant item.
An unlisted entity operating licensed electronic markets for trading
Australian and New Zealand debt securities
• 7% shareholding in Digital Asset Holdings LLC, up $11.0 million
inclusive of convertible notes purchased. An unlisted US domiciled
technology entity
• 50% shareholding in Sympli Australia Pty Limited, up $6.6 million
following investment in this venture in May 2018. Established to
provide electronic property conveyancing and settlement services.
Amounts owing to participants
Amounts owing to participants were up $411.1 million or 5.1% compared
to the prior year. As part of its clearing operations, the Group holds a
significant amount of collateral lodged by participants to cover cash
market and derivatives exposures cleared through its licensed central
counterparty (CCP). The growth primarily resulted from an increase in
open positions held in interest rate and equity index futures as well as
equity margins and OTC derivative positions.
The increase in participant balances results in a corresponding increase
in cash and available-for-sale financial assets, as the balances are
invested by ASX.
/ ASX Annual Report 2018 Operating and financial review Operating and financial review continued
Listings and Issuer Services
Business model and operating environment
ASX, through its infrastructure and operating rules, provides a facility
for entities 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. ASX also lists debt securities (including
bonds) and exchange-traded investment products.
The Group earns revenue from listed entities for initial listing, annual
listing, secondary capital raisings, 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
• Number of holding statements.
Business strategies
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 updates to the listing
rules and guidance to maintain the integrity of ASX's equity market.
Consistent with the strategy of providing a premier listing venue,
ASX has been successful increasing the number of foreign compa-
nies and those from the technology sector listed on the exchange.
ASX has 279 foreign entities listed and 237 technology companies
as at 30 June 2018.
ASX has a range of products and asset classes available for issuers
and investors. Some of the investment products that complement
traditional equities include:
• Bonds – ASX provides the ability for clients to trade Australian
Government bonds on the exchange
• Exchange-traded products (ETPs) – in recent years ASX has
focused on increasing the number of ETPs. The value of ETPs
listed on ASX increased 33% to $39 billion
• Managed funds (mFund) – mFund allows investors to apply for
and redeem unlisted managed funds using their broker platform.
At 30 June 2018, there were 199 funds available on mFund with a
market capitalisation of $677 million, 83% up on the pcp.
Results of operations
Listings and Issuer Services revenue was $220.6
million, up 14.5% reflecting:
Annual listing revenue up 8.2% to $85.8 million
An increase in the number of listed entities to 2,285 along with
growth in market capitalisation and fee changes resulted in the
increase in revenue.
Initial listing revenue up 15.4% to $18.6 million
While there were fewer IPOs, 137 compared to 152 in the pcp, the
amount of capital raised was up 75.4% to $25.7 billion, leading to
higher overall listing fees.
Secondary capital raisings revenue up 26.7% to $58.9 million
The amount of secondary capital raised was up 35.6% which
combined with fee changes were the main drivers supporting the
increase in revenue.
Issuer services revenue up 16.2% to $49.2 million
An increase in the number of CHESS holding statements, which
were up 7.6%, combined with fee changes, supported the increase
in revenue, along with other ancillary services which also increased.
Total capital raised ($billion)
88.9
78.6
66.0
81.7
56.0
FY14
Secondary capital
FY15
FY16
Scrip-for-scrip
FY17
IPO capital
FY18
Quality is key for market integrity
As markets evolve, we too are continually updating
our listing rules and guidance.
Over the last seven years, there has been a number of enhancements
to the listing rules. These have involved significant rule and policy
development, putting out consultation papers, taking account of
feedback from stakeholders across the market, and getting input
and regulatory signoff before instituting the changes.
The process of strengthening our compliance framework – and with
it market integrity and quality – is ongoing. In calendar 2018 we will
consult on an extensive package of listing rule amendments dealing
with a wide range of issues, including notification and approval of
share issuances and related party transactions.
2012 2013
2014
2015
2016
2017
2018
Good fame
and character
requirements
introduced
Enhanced regulations
of back door listings
New mining, oil
and gas codes
Continuous disclosure
improvements
3rd edition Corporate
Governance Principles
and Recommendations
Tightened acceptable
structure, minimum
free float and
minimum spread
for emerging
market issuers
10% minimum
free float applied
New pre-vetting
process for listings
Tightened rules on
reverse takeovers
Abolition of
appeal on
listings decisions
New foreign
exempt category
for NZ entities
20% minimum free float
New suspension policy
for back doors introduced
Major strengthening
of admission rules
Tightened guidance on
minimum working capital
Introduced ‘show cause’
process to terminate
delinquent listed entities
Automatic removal of
long-term suspended entities
Removed trading
halts for block sales
Tightened guidance on good
fame and character requirements
Consulting on 4th edition
Corporate Governance Principles
and Recommendations
Consulting on extensive
listing rule amendments:
– Issue and quotation of securities
– Placement rules
– Related party transactions
15
ASX Annual Report 2018 Operating and financial review /
Operating and financial review continued
Derivatives and OTC Markets
Business model and operating environment
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. The number of contracts traded
is the primary revenue driver.
Through the licensed clearing and settlement facility, ASX Clear
(Futures), ASX provides central counterparty clearing (CCP) of
exchange-traded derivatives as well as clearing of over-the-counter
(OTC) derivatives. ASX Clear (Futures) provides risk management
services supported by clearing participant collateral, and funds
provided by both ASX Group and participants, which are available
in the event that participants fail to meet their obligations.
Austraclear provides settlement, depository and registry services.
Austraclear settles transactions in debt securities and cash on a
real-time gross settlement (RTGS) basis. The number of transactions
is the main revenue driver.
With respect to depository services, the value of securities held is
the main revenue driver.
Austraclear also provides registry services, facilitating the issu-
ance and registration of debt security, coupon and redemption
payments. The number and value of securities is the main driver
of registry revenue.
The ASX Collateral service supports the utilisation of debt securi-
ties held in Austraclear as collateral to meet obligations to other
customers or to ASX’s clearing subsidiaries. The value of collateral
balances managed is the main revenue driver.
Business strategies
The Derivatives and OTC Markets strategy is to continue to develop
new products and services, increase distribution, and provide flexible
and cost-effective trading and clearing platforms.
It also incorporates 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 the volume of trading during the night session is around 31%
reflecting the global reach of ASX’s offerings.
The OTC clearing service continues to expand with the addition
of NZ$ interest rate swaps and the availability of client clearing.
Notional open interest at the end of June was $3.8 trillion, up
29.0% on the pcp.
Through ASX’s Austraclear platform, ASX delivers collateral effi-
ciency to customers in its collateral management service. This service
allows customers to utilise collateral held in ASX’s Austraclear
debt registry to meet obligations to other customers (mainly repo
transactions) or to ASX’s clearing subsidiaries. The value of collateral
within this service increased 45.1% compared to pcp.
During the year, ASX invested in a joint venture, Sympli Australia
Pty Limited, which will offer electronic settlement of property
transactions.
16
Results of operations
Derivatives and OTC revenue was $286.4 million,
up 6.4% reflecting:
Futures and OTC revenue up 7.7% to $212.5 million
The increase in revenue was due to a 9.8% increase in futures
volumes and a 22.2% increase in OTC clearing value. As volume from
proprietary traders increased significantly following the addition
of new trading participants, the average revenue per contract
reduced slightly to $1.36 versus $1.39 in the pcp. The value cleared
through the OTC clearing service was $6.3 trillion, compared to
$5.2 trillion in the pcp.
Equity options revenue up 1.0% to $21.9 million
The slight increase in revenue resulted from the growth in index
options, up 20.0%, offset by lower single stock option volumes
which were down 14.2%.
Austraclear revenue up 3.7% to $52.0 million
The increase in revenue was primarily due to higher balances in the
depository, increased transactions and growth in the ASX Collateral
service. The ASX Collateral service value of assets at 30 June 2018
was $23.5 billion compared to $16.2 billion in the pcp.
200000000
ASX futures and options on futures contract volumes ($million)
137
142
156
150000000
118
126
FY14
FY15
FY16
FY17
FY18
100000000
BBSW gets an innovative
world-leading makeover
Using its trusted and independent market
position, ASX has strengthened the foundations
of Australia’s bank bill market with a new
calculation methodology for the bank bill
swap rate (BBSW), introduced in May 2018.
BBSW is a major interest rate benchmark for the Australian
dollar and is widely referenced in many financial contracts. In
January 2017, ASX became the administrator and is responsible
for providing it on a daily basis to customers.
The market’s confidence in the benchmark has grown because
it is now calculated directly from actual market transactions
over a longer time period, delivering greater accuracy and
transparency. Previously, BBSW was calculated from the best
executable quotes for Prime Bank securities and was influenced
by shorter term trading volume.
ASX has worked with regulators and the industry to implement
an innovative and world-leading calculation methodology. This
has strengthened the market's trust in the robustness and
reliability of BBSW and the functioning of this market.
/ ASX Annual Report 2018 Operating and financial review Operating and financial review continued
Trading Services
Business model and operating environment
Trading Services comprises the trading of securities in the cash
market as well as the information and technical services offered
by ASX.
Cash market comprises the trading of equities, warrants, exchange-
traded funds and listed debt securities. The value of turnover trans-
acted on the ASX market is the primary revenue driver.
Information services includes the provision of real-time market data
for the cash and derivative markets, provision of indices, company
news, and index and other reference data. The main revenue driver
is the number of end-users accessing real-time market data and
customer enterprise licences 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 customers. These are:
• ASX distribution platform, hosting of customer infrastructure
within the ASX Australian Liquidity Centre (ALC) and ASX Net
site management
• The facilitation of connectivity with the ALC and ASX Net
• ASX service access including access and sessions for market
data products and clearing and settlement systems
• Market access for trading sessions, liquidity cross connects and
order entry as well as trade gateways.
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.
Business strategies
The Trading Services 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.
This includes leading price discovery and liquidity access execution
types such as the auction process and Centre Point.
The Centre Point service is an example where ASX has created an
innovative suite of functionalities following feedback from end-
investors. The various Centre Point order types provide customers
with optionality and control over how their orders are executed.
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 hosting of hardware,
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. ASX’s services
are being tailored to meet changing customer requirements such
as electronic usage of data. 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 invest-
ment in the ALC and communications network (ASX Net). ASX will
continue to invest in its product and service offerings and has also
commenced development of a broader data platform.
Using ASX‘s broad range of data and combining this with other data
sources provides the ability to offer additional data and analytics
to a range of users.
ASX expanded its data offerings with the commencement of the
administration and provision of the BBSW interest rate benchmark
in January 2017. Users of this benchmark include both domestic and
global entities. During FY18 ASX strengthened the integrity of this
benchmark by introducing a new calculation methodology following
consultation with stakeholders and regulators. ASX’s independence
and strength in operating critical infrastructure will support the
integrity of this critical benchmark.
Results of operations
Trading Services revenue was $209.9 million,
up 7.0% reflecting:
Cash market trading revenue down 1.3% to $45.7 million
The decrease in revenue resulted from:
• Lower on-market trading value of $4.2 billion per day, down
2.7%. ASX’s share of on-market trading averaged 86.6% in FY18,
down slightly from 87.5% in the pcp
• Offsetting the lower trading values was an increase in the use
of the Auction trade execution service and continued usage of
the Centre Point execution service, both of which have higher
associated revenues. Auctions accounted for 25.0% of the ASX
on-market value while Centre Point usage was 10.2%. Together
these accounted for 53.3% of ASX trading revenue, up from
49.5% in the pcp.
Information services revenue up 9.3% to $90.1 million
The increase in revenue resulted from:
• New revenue from the BBSW interest rate benchmark which
ASX commenced providing in January 2017
• Additional revenues from futures data pricing and fee changes
to certain data services.
Technical services revenue up 10.1% to $74.1 million
The increase in revenue was due to:
• Increased cabinet hosting with 301 cabinets at 30 June 2018
up from 285 a year earlier, additional access and connections
to the trading platforms and growth in the number of cross
connections within the ALC. The number of ALC cross connec-
tions grew from 871 to 984 during the year.
Auctions and Centre Point value traded ($billion)
74.9
193.3
78.9
209.4
61.1
157.3
107.0
237.0
106.5
262.1
FY14
Auctions
FY15
Centre Point
FY16
FY17
FY18
17
ASX Annual Report 2018 Operating and financial review / Operating and financial review continued
ASX’s Australian Liquidity Centre
(ALC), is Australia’s financial markets
engine and ecosystem
The ALC is home to the contemporary, resilient
and secure technology that facilitates the
exchange of trillions of dollars’ worth of
financial instruments traded on ASX’s markets.
The ALC is a state-of-the-art financial markets data centre.
It provides the fastest and most direct access to Australia’s
financial markets and plays a central role in the exchange of
capital, risk, information and services.
All ASX and customer cabinets and devices within the ALC's
Tier-3 designed data centre are protected from physical security
breaches by a biometric IRIS security system and video surveil-
lance. The ALC also offers a temperature controlled environment
and advanced fire protection.
The ALC ecosystem
Since opening in 2011, the number of
customers and connections between them
has grown each year. This growth reflects
the evolution of the ALC ecosystem, which
has formed due to the mutual benefit of
being located together.
More and more financial market participants see the advantages
of being co-located and connected with the ASX and each other.
Today, over 120 customers are located at the ALC with almost
1,000 connections between them and other venues. Also
connecting into this community are organisations connected
via ASX’s low latency networks, ASX Net and ASX Net Global.
Australian Liquidity Centre customers
871
116
819
108
984
123
622
89
679
95
FY14
FY15
FY16
FY17
FY18
ALC customers
ALC service connections
1200
1000
800
600
400
200
0
130
120
110
100
90
80
70
60
50
18
Equity Post-Trade Services
Business model and operating environment
ASX’s cash market clearing and settlement infrastructure provides
risk management services through its central counterparty clearing
(CCP) and delivery versus payment settlement of cash market trades.
ASX’s post-trade operations are backed by significant Australian-based
capital and collateral, and are overseen by Australia’s regulators.
Through a process known as novation, the CCP assumes the credit
risk of all trades centrally cleared and thus facilitates an efficient and
orderly clearing and settlement function for the market.
Cash market clearing
The CCP supports these risk management activities with collateral
lodged by clearing participants and ASX Group funds in the clearing
guarantee fund. These collateral and guarantee fund resources can
be called upon in the event a clearing participant does not meet its
obligation to finalise a trade that has been novated to the CCP. The
main revenue driver is the value of equity securities centrally cleared.
Cash market settlement
Cash market settlement is conducted through the Clearing House
Electronic Sub-register System (CHESS). This system registers the
title (ownership) of shares. ASX’s model for cash market settlement
maximises efficiency through the netting of settlement 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 which can
be impacted by a number of variables including the level of transac-
tions and the netting efficiency.
Business strategies
ASX is the sole provider of equity post-trade services to the Australian
market consisting of clearing and settlement of cash market transactions.
ASX’s strategy within equities post-trade is to continue to innovate in
order to improve the efficiency of clearing and settlement and provide
benefits to issuers and investors, including lowering the overall costs
within the market.
ASX spent a considerable amount of effort over the past two years
in evaluating the suitability of new distributed ledger technology
as a possible equities post-trade solution. In December 2017, ASX
announced it would replace the CHESS post-trade platform using
distributed ledger technology. Further details on this initiative are
outlined on page 19 of this report.
Results of operations
Equity Post-Trade operating revenue $104.8 million,
up 0.4% reflecting:
Cash market clearing revenue down 2.6% to $51.9 million
This results from a 2.1% decrease in the value of trades centrally
cleared on-market, as the total value of equities traded was lower.
An average of $4.5 billion on-market value was centrally cleared each
day by ASX Clear and no calls were made on the clearing guarantee
fund in the current or prior year.
Settlement revenue up 3.5% to $52.9 million
The number of messages increased year on year, with the main message
type broadly consistent and messages related to the movement and
conversion of securities 7.6% higher than the previous year. The settle-
ment revenue rebate was $0.6 million compared to $1.1 million in the pcp.
/ ASX Annual Report 2018 Operating and financial review CHESS replacement project
Building on ASX’s strong tradition of innovation,
we are leading the global financial exchange
industry by selecting distributed ledger
technology (DLT) for our new equities
clearing and settlement system.
Our existing clearing and settlement system, called CHESS, has
successfully served the Australian financial markets for over
20 years. At the time of its release, it was world-leading and
delivered significant efficiencies as it enabled the conversion of
physical shares into an electronic format.
We are excited about the benefits we see a DLT-based clearing and
settlement system delivering the Australian financial markets. Over
time we expect it will deliver greater efficiencies through improved
record keeping, reduced reconciliation, more timely transactions
and better quality source of truth data.
Beyond this, we believe the change will enable the industry to
create an exciting new generation of products and services – some
of which we can’t conceive today.
The journey to date
In December 2017, we made the decision to build the new system
on DLT with our technology partner Digital Asset, after 24 months
of assessment and testing.
Following consultation with over 600 people from over 120 organ-
isations over 18 months, we published our proposed Day 1 func-
tionality in May 2018. The consultation process is ongoing, and we
will publish Day 1 scope in the coming months.
At the start of 2018 we began the analysis, build and testing work
stream. Over the next 18 to 24 months, ASX will work with Digital
Asset to complete the software build. We will then enter a long
testing period, giving participants time to be ready for the final
implementation, which is currently forecast to occur between
September 2020 and March 2021.
The broader benefits and potential of a DLT-based clearing
and settlement system
CHESS today is highly reliable infrastructure that has operated for
over 20 years – and is more than capable of operating for a few
more. Clearing and settlement participants who are connected to
CHESS have their own bespoke databases, which are different to
ASX’s and typically different to each other. Messages are constantly
sent back and forth to CHESS in order to reconcile data with ASX.
CHESS today
Sends messages to reconcile many and different systems
Broker F
Bank A
DLT-based CHESS
Offers real-time, single source of truth data on standardised
databases
Broker F
Bank A
Broker E
0101010101
0101010101
0101010101
DLT system
Bank B
Bank D
Broker C
The DLT-based system we are building allows participants to ‘take
a node’ – which is a database that contains their customers' data,
and only their data. This is part of the ‘source of truth’ database
operated by ASX. This node is kept in real-time synchronisation
with the ASX database. This is because the Global Synchronisation
Log, or blockchain, enables the participant to independently and
mathematically prove that their node is correct.
If a participant chooses to take a node, they will have real-time
access to all information that is pertinent to them. They will be able
to reduce their risks and costs by no longer having to reconcile their
databases with ASX’s. They will also be able to use the richer data
set to provide better products and services to their customers.
In addition, those who use a node will have a database structure
that is identical to the database structure used by other customers.
If multiple customers across the industry chose to connect to ASX in
this way, then software or applications produced for one customer
would be able to be used by other customers’ databases as well.
ASX’s DLT solution is NOT a public cryptocurrency blockchain
Public blockchain
ASX private permissioned ledger
Not applicable to highly
regulated markets
Similar to today but an enhanced
database architecture
Unregulated
• Anyone can join and transact
• Users are anonymous or use
pseudonyms
• Limited rules and minimal
regulatory oversight
Highly regulated
• Infrastructure providers
with licences to operate
• Rule book defines market
operation
• Participants identified,
approved and meet regulatory
standards (e.g. Know Your
Client)
• Operated on a system within
a private network
• Securities exist digitally only
within the ASX register
• Cash remains within banking
system
19
Broker E
CHESS
today
Bank B
• Operated on the public internet
• Accessed through downloading
software
• Exchange and user security not
subject to scrutiny
Bank D
Broker C
ASX Annual Report 2018 Operating and financial review / Operating and financial review continued
Risk
Like any business, ASX faces a number of risks and uncertainties.
Some come from outside the organisation, some from within. Some
we can control through taking mitigating actions to reduce their
impact and others we accept, as they provide attractive returns.
Risk management is a critical component of ASX’s day-to-day oper-
ations and our ability to achieve long-term success. A concentrated
focus on risk management reduces the risk of negative outcomes
and increases the likelihood of ASX achieving its strategic and
financial goals.
Our approach
Accountability for risk management is held at all levels across the
organisation, from the Board, down through Executive Management
to individual team members. ASX believes embedding a culture of
risk awareness is critical to ASX’s long-term success. ASX proactively
engages employees on the understanding and importance of risk
management. This includes the identification and management
of current and emerging risks in their day-to-day activities and
speaking up about any concerns they have.
ASX has a Board approved Risk Appetite Statement that describes the types of risk we encounter in our business, along with our toler-
ance for outcomes that impact our customers, shareholders and the wider financial market community. Complementing this we have a
governance structure, commencing at the Board and flowing down through executive level management committees to individuals, that
clearly articulates roles and responsibilities for managing risk within the organisation. This is underpinned by the 3 Lines of Defence risk
management framework.
Below is a table discussing ASX’s key risks and how we respond to them.
Risk
Regulation,
market structure
and competition
Economic environ-
ment and market
activity
Operational
excellence
The risk and its impact
ASX operates in highly regulated markets.
Changes in regulations and/or market structure
can impact ASX or its customers and the competi-
tive environment in which we operate.
Examples of how ASX’s business could be
impacted include if:
• New competitors commenced operation in
Australia
• Regulatory requirements were changed for
certain systemically important services
• ASX’s products or services did not meet industry
expectations in terms of quality or value.
ASX’s business can be impacted by the level of
market activity. Market activity levels are influenced
by economic performance, government policy, and
general financial market conditions in Australia and
overseas.
Slowing economic conditions or a lessening of general
market volatility can lead to a reduction in activity and
revenues.
Examples of how ASX’s business could be impacted
if there was a slowdown in the Australian economy
include:
• Fewer new listings
• Less secondary capital raisings
• Decline in the volume and value of equities traded
• Slowdown of growth rates associated with data
products and/or technical services.
The resilience, continuity and quality of our oper-
ational processes are critical for our ability to
operate.
This risk arises when failures in our people,
processes, systems and controls impact the delivery
of our products and services to our customers.
The occurrence of such a failure may result in
reduced customer service, the inability to provide
services, reduced revenues, increased costs or
regulatory issues.
20
/ ASX Annual Report 2018 Operating and financial review
How we are responding
• We regularly engage with government, regulators and industry participants on
market structure issues to promote the best industry-wide efficiency outcomes.
• We constantly engage with our customers to seek feedback on the quality and
value of our products and services, and continually look for ways to improve
these.
• We monitor the performance of individual products and services against
those available elsewhere to support ASX's ability to deliver a strong value
proposition.
• We consider the impact of ASX driven change on our customers.
• We invest in technology enabling us to stay at the forefront of innovative
products and services.
• We constantly engage with government on the future direction of policy
impacting our business.
• We continue to build resilience into our business model through the diversi-
fication of revenue streams.
• We have been growing those services that have annuity style revenue
streams.
• We have been focusing on building our reputation as a preferred listing
venue for technology companies and attracting foreign companies.
• We continually look to introduce new domestic and international partici-
pants to our trading markets and clearing and settlement facilities.
• We have people, processes, systems and controls in place designed to meet our
operational benchmarks.
• We regularly assess how we can make improvements to the resilience and
reliability of our operational processes.
• We regularly consider the effectiveness of our controls.
• We monitor customer complaints for feedback on where we could improve
performance.
• We have business continuity plans that are regularly tested.
• We have an incident management framework requiring that timely attention
be paid to rectifying incidents as they occur.
• We undertake resource planning and have staff training and retention
programs.
Operating and financial review continued
Technology
availability
ASX operates critically important financial market
infrastructure which is expected to be open and
available at all relevant business times.
• We regularly monitor our systems availability against targets and test to
understand maximum throughput capacity.
• We monitor the health of critical systems and have contingency plans in
A risk to ASX arises in the situation where infra-
structure and technology is unreliable and has
slow recoverability. Issues that would heighten
this risk are the prevalence of ageing infrastruc-
ture, systems or applications that are near their
end of life, and a significant increase in cyber-
attack activity.
The risk may result in reduced ability or an inabil-
ity to deliver ASX’s trading, clearing and settle-
ment services, reduced customer service, reduced
revenues, unplanned remediation or replacement
costs or further licence conditions.
This risk arises in our licenced Clearing and
Settlement (CS) facilities when a participant fails
to meet its contractual obligations to any of the
facilities.
Depending on the size and complexity of the
defaulting counterparty, the default could lead to
extremely volatile conditions in global financial
markets. This, along with ASX’s default manage-
ment strategy will determine the size of the
possible loss sustained by ASX.
Financial losses may arise from investment
decisions taken in relation to the management
of collateral balances received from clearing and
settlement activity, from the investment of ASX’s
own capital or the clearing and settlement facili-
ties pre-funded default capital resources.
ASX also makes equity investments in support
of its broader business objectives (e.g. IRESS,
Yieldbroker, Digital Asset).
place for disruptions.
• We replace ageing technology in a phased and planned manner. Recent
examples include the replacement of SYCOM with NTP, the announcement
to replace CHESS with a DLT solution and upgrading our secondary
data centre.
• We constantly engage with our vendor partners who provide some of our
critical systems and applications.
• We have a regular disaster recovery testing program in place.
• We have a cyber security strategy in place and continually look to improve
our capability.
• As part of our regulatory framework, ASX has the financial resources in
place to withstand the concurrent default of our two largest participants
under extreme market conditions.
• We enforce minimum financial and operating criteria for participants.
• We require participants to provide collateral in the form of initial
margin and to make regular and frequent and at least daily variation
margin payments.
• We hold pre-funded default risk financial resources.
• We have technology and risk policies and procedures to constantly monitor
and manage counterparty exposures.
• We have default management strategies that are regularly fire-drilled.
• We have recovery plans for very extreme default scenarios.
• We have investment limits in place under which ASX is only able to invest
up to a certain proportion of investable funds, in highly rated counterpar-
ties, with short-term maturities.
• We closely monitor financial markets activity, performance and sentiment
to inform investment decisions.
• We monitor the business strategy and financial performance of companies
that we have invested in and follow the prescribed accounting treatment in
terms of impairment or loss recognition should that be necessary.
Counterparty
default risk
Investment returns
Reputation and
stakeholder
confidence
The ongoing success of ASX is highly dependent on
its impeccable reputation for trust, integrity and
resilience in everything that we do.
• We aspire to be the world’s most respected financial marketplace.
• Understanding the importance of and protecting our reputation is at the
centre of everything that we do.
Reputation risk arises in a wide variety of situ-
ations, for example, where ASX is perceived to
have not acted with integrity or failed to deliver
resiliency in its activities.
Any outcome that causes detriment to this repu-
tation has the potential to damage ASX’s future
business prospects through reduced business
volumes or regulatory impact or intervention.
• ASX considers the possible reputation risk in all its business activities
and decisions.
• We have refreshed our company values and focus on trustworthy
behaviours.
• We have regular and open engagement with customers and wider stake-
holders to seek feedback on our performance.
• We have regular interaction with our regulators and Government at
management, CEO and Board level to facilitate fulsome coverage of issues.
• We regularly engage with media representatives so that they understand
the role that ASX plays in the financial system.
ASX Annual Report 2018 Operating and financial review / 21
Corporate responsibility and sustainability
Our corporate responsibility
and sustainability approach
As a provider of critical market infrastructure, ASX fulfils a meaning-
ful social purpose. Through the raising of capital and management
of risk, ASX helps business to grow, create jobs and contribute to
the community. By facilitating the exchange of capital and providing
data for informed decision-making, we provide investors opportu-
nities to invest their capital which will in turn help them to create
wealth that contributes to their positive future.
We assess and manage our social, governance and environmental
sustainability risks and know the importance of this in executing
our strategy and creating long-term value. This report explains how
we conduct our business in a sustainable way.
For us, sustainability is about taking steps in the near-term to
help ensure that our strong financial and operational performance
continues into the long-term and that we are prepared for the
opportunities and challenges ahead. This means:
• Investing in our infrastructure and enhancing our customers’
experience
• Building an engaged and skilled workforce
• Establishing appropriate governance arrangements and playing
a leadership role in governance
• Making a positive impact on the community
• Managing our impact on the environment.
Information about our investments in infrastructure and enhancing
our customers’ experience is set out on page 5. Details of our mate-
rial business risks and how we are responding to them are set out
in the Operating and financial review on pages 12 to 21.
Our people
Our people are central to achieving ASX’s vision of being the ‘world’s
most respected financial marketplace’. ASX is committed to building
an engaged, skilled and responsible workforce guided by values and
behaviours that support our strategy. To do this, we:
• make clear the behaviours we expect of employees
• commit to protecting the confidentiality and position of
employees who wish to raise matters concerning the integrity
of ASX
• strive to create a diverse and inclusive workplace
• have a strategy to attract and retain talent through our remu-
neration policies and practices, our training and development
programs, by providing a safe workplace and programs to
support employee wellbeing.
Corporate culture
We work to instill and reinforce a culture of acting lawfully, ethically
and responsibly and know this is key to creating long-term value.
We are committed to maintaining a high standard of integrity and
investor confidence. We’ve implemented the following programs,
policies and codes which articulate the behaviours we expect of
our people.
Our values
The launch of ASX’s values program was a highlight of FY18. Our
values program was developed by our employees, for our employ-
ees. The ASX values are behaviours that guide our actions and
decision-making and reflect our brand and culture. Our values are to:
Be Open, Be Trustworthy, Be Original, Be The Example.
Code of Conduct
ASX has a Code of Conduct which is underpinned by our values.
The Code of Conduct applies to directors and employees. It sets the
standards for how we work at ASX and states our values to anyone
dealing with ASX. The Code requires employees and directors to act
in a way that is guided by ASX’s values – including acting in the best
interests of ASX and with honesty, integrity and fairness.
Management and the Board monitor ASX’s culture and behaviour,
through the use of online surveys to measure engagement. Results
are reviewed by the Remuneration Committee. ASX’s Internal Audit
function and Regulatory Assurance function provide periodic feed-
back on cultural matters.
Anti-bribery and corruption and whistleblower protection
In addition to our Code of Conduct, ASX has a range of policies in
place that guide employee behaviour including our:
• Anti-bribery and corruption policy which states our require-
ments regarding the management of gifts and benefits. The
policy requires employees to report all gifts above a specified
threshold. The Audit and Risk Committee receives periodic
reports on these disclosures
• Whistleblower protection policy which supports employees
who report non-compliant or suspicious or unethical conduct.
It formalises ASX’s commitment to protecting the confiden-
tiality and position of employees who wish to raise matters
concerning the integrity of ASX.
ASX periodically requires staff to attest to their understanding of,
and compliance with, ASX’s Code of Conduct and anti-bribery and
corruption policy. These policies and our whistleblower protection
policy are available on ASX’s website.
22
/ ASX Annual Report 2018 Corporate responsibility and sustainability Corporate responsibility and sustainability continued
Diversity and inclusion
ASX knows that a diverse and inclusive work environment brings
performance benefits.
We support a workplace where employees have equal access to
career opportunities, training and benefits. We treat employees
fairly and respectfully and ensure they are not judged by their
gender, age, ethnicity, race, cultural background, religion, sexual
orientation, disability or caring responsibilities.
Our focus on gender equality
We promote gender equality as a priority. We have a target of
40% female representation for all management levels. In FY18
we exceeded this target at 41%. Our progress in FY18 against our
measurable objectives is set out below.
To encourage greater representation of women at all levels in the
organisation we:
• Set gender diversity targets. Achievement against the targets is
monitored by the Remuneration Committee
• Require gender-balanced shortlists when recruiting all roles
• Embed gender equality targets as part of an executive’s
balanced score card and review the executive’s achievement
against these targets when determining their short-term
incentive
• Undertake annual pay equity reviews and make adjustments
where a gap is identified
• Participate in the Chief Executive Women Leaders Development
program which provides individual coaching for participants
• Support Male Champions of Change, with our CEO a member.
Reporting
Diversity % of women
On the Board
Executive committee roles
Management executive roles
Management/team leader
roles
Total % of women in
management position roles
Professional/technical roles
Administrative roles
Across the entire organisation
Target
FY18
FY17
33%
40%
40%
40%
40%
40%
50%
40%
33%
21%
46%
42%
41%
41%
83%
44%
30%
31%
45%
42%
41%
39%
84%
43%
ASX also implements gender-neutral policies to help build an inclu-
sive workplace. An example of this is our parental leave policy which
makes available paid and unpaid leave to all new parents (including
superannuation payments) regardless of gender.
Attracting and retaining talent
The market for talented people is competitive and so we continue to
evolve our offerings to employees to ensure we attract and retain
high performing professionals. In addition to remuneration, we
offer learning and development opportunities, leadership training
and support employee wellbeing programs.
Remuneration
ASX employees receive a market competitive total fixed remunera-
tion package. Subject to performance, employees also participate in
a short-term incentive plan that rewards individual behaviours and
performance with ASX shares and/or cash (depending on the role).
Details about our remuneration practices and policies are included
in the Remuneration report on pages 39 to 50
ASX also supports employees who want to be shareholders and
during the year, offered to all ASX employees the opportunity to
acquire ASX shares under a $1,000 General Employee Share Plan.
In FY18, this offer was accepted by 57% of staff.
Learning and development
We believe that our sustainability is strongly supported by high
performing individuals who seek to improve their skills and perfor-
mance. ASX offers learning and development programs at all levels
of the organisation to help staff grow their skills and their careers.
Building leadership capability
During FY18, ASX launched a new leadership development program
which is aligned with ASX’s values and designed to positively influ-
ence our culture. All leaders at ASX have participated in this program
which will be rolled out to additional staff in FY19.
ASX also participates in the Chief Executive Women Leaders
Development Program which provides individual coaching for
participants.
Employee wellbeing
Safety
ASX is committed to the health and safety of all employees, visitors
and contractors. Employees are encouraged to identify and address
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. WHS
performance is audited periodically by an independent third party.
ASX’s FY18 lost-time injury frequency rate (the number of lost time
injuries per 1 million hours worked) was very low at less than 0.1.
This is in line with FY17.
23
ASX Annual Report 2018 Corporate responsibility and sustainability / Corporate responsibility and sustainability continued
Prevention of harassment and discrimination
ASX works to prevent discrimination and harassment in the work-
place. ASX has processes in place to monitor and address discrim-
ination and employees must complete online training periodically.
Wellbeing
ASX has a wellbeing program to support employees to balance
their work, personal and family life. We offer subsidised activities
such as yoga, pilates, meditation, lunchtime sport and a walking
club. ASX’s Social Committee co-ordinates company funded events
throughout the year.
Arrangements are also in place for handling conflict sensitive infor-
mation relating to other market operators that use services provided
by ASX’s clearing and settlement (CS) facilities.
ASIC is ASX’s listing authority and monitors ASX’s own compliance
with the listing rules.
ASX has a Regulatory Assurance function whose responsibilities
include reviewing ASX’s compliance with our conflict and informa-
tion handling standards and reports on these matters to the Audit
and Risk Committee.
Supporting working families
ASX offers flexible working conditions to help employees balance
their work and personal lives. We enable employees to change their
work hours and place of work, set up a job share arrangement,
take career breaks and parental leave or purchase additional leave.
Compliance and enforcement arrangements
ASX Group licensed entities have arrangements for monitoring and
enforcing compliance by listed entities and participants with ASX’s
operating rules, and for handling conflicts between the licensed
entities’ commercial interests and their licence responsibilities.
In FY18, approximately 63% of staff identified as working in a
flexible capacity.
ASX’s parental leave policy provides 16 weeks’ paid leave for
primary carers and four weeks’ paid leave for secondary carers.
Superannuation contributions foregone during unpaid parental
leave are paid as a one-time contribution on return to work up to
a maximum of 36 weeks. Graduated return to work options are
available to support employees transition back to the workplace.
ASX has a dedicated Compliance function which monitors and
enforces compliance with the operating rules of each licensed entity.
ASX’s conflict handling arrangements are set out in our conflict
handling policy which is available on our website.
ASX’s Audit and Risk Committee and ASX licensed entities have
oversight of the performance of these functions. Previously, this
oversight role was performed with the assistance of a related body
corporate, ASX Compliance Pty Limited.
Governance
ASX is committed to maintaining and promoting high standards of
corporate governance and believes this is a driver of shareholder
value. This section of the report is divided into two segments. Firstly,
it explores elements of ASX’s own governance arrangements and
secondly, how ASX promotes high standards of corporate govern-
ance in Australia.
ASX’s governance arrangements
Our corporate governance statement on pages 28 to 38 describes
our principal governance arrangements and practices for effective
decision-making and accountability.
Additional details on how we manage conflicts of interest and
perform our compliance and enforcement functions are set out
below.
Managing conflicts of interests
ASX has well established arrangements to address the potential
for actual and perceived conflicts. These include:
• Governance arrangements, including for ASX’s self-listing
• Customers, competitor and supplier arrangements
– licence obligations (including the ‘review party’ framework)
– information handling standards.
Playing a leadership role in corporate governance
ASX Corporate Governance Council
Promoting high standards of corporate governance helps develop
a market of quality and integrity. These are key to maintaining the
attractiveness of ASX’s listing franchise and also help strengthen
the investment environment in Australian.
The ASX Corporate Governance Council, a body independent of
ASX, brings together business, shareholder and industry groups.
As the convener, ASX nominates the Chair (currently Ms Elizabeth
Johnstone), contributes one member to the Council and provides
executive support.
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.
ASX’s listing rules require that listed entities 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 recommendation, they must provide an explanation (‘if
not, why not’ reporting). These reporting requirements bring trans-
parency to the corporate governance practices of listed companies,
which enables investors to make informed investment decisions.
24
/ ASX Annual Report 2018 Corporate responsibility and sustainability Corporate responsibility and sustainability continued
In May 2018, the Council commenced public consultation on propos-
als to update and issue a fourth edition of the Principles to address
a number of matters including corporate values and culture, whis-
tleblower and anti-bribery and corruption policies, and cyber risks.
The Council’s proposed changes anticipated and respond to some
of the governance issues identified in recent enquiries such as the
Hayne Royal Commission. On behalf of the Council, ASX conducted
national roadshows in June 2018 to inform and seek feedback
from listed entities and other interested stakeholders about the
proposed changes.
ESG guidance to issuers
The Council has contributed to an improvement in public reporting
and awareness of environment, social and governance (ESG) matters
by listed entities. The Principles require listed entities to include
details in their Annual Report of how they manage their material
economic, environmental, social sustainability and governance risks.
Sustainable Stock Exchanges Initiative
ASX is a partner exchange in the United Nations’ Sustainable Stock
Exchange (SSE) Initiative.
The SSE is a peer-to-peer learning platform for exploring how
exchanges, in collaboration with investors, regulators and compa-
nies, can enhance corporate transparency on ESG issues and encour-
age sustainable investment.
Responsible and ethical
business practices
Fraud and cyber security
As the operator of critical financial markets infrastructure ASX has
a range of fraud and cyber-risk mitigation strategies and systems
in place.
We are proactive in managing resilience across our systems and
processes. In addition to the use of risk management strategies,
processes and tools, ASX employees undertake regular security
awareness training.
As a markets operator and provider of clearing and settlement
facilities, ASX is subject to the risk of fraud – either internally by
staff or externally by third parties targeting customers using ASX’s
name or infrastructure. To mitigate these risks we have appropriate
fraud prevention and detection procedures in place.
Our fraud control framework enables executive management and
business units to prevent, detect and respond to potential fraud.
The framework is a combination of embedded fraud controls and
general staff awareness, supported by regular business unit and
independent fraud risk assessment.
Socially responsible practices
ASX is committed to acting in a socially responsible way. In addition
to the practices and policies outlined above, this is reflected in our
approach to taxation and how we work with our key suppliers to
ensure they also meet our ESG requirements.
Taxation
Taxation is an important component of our corporate responsibility
framework and enterprise risk management framework.
We adopt a low risk tax strategy with our activities and tax compli-
ance obligations and apply the following principles:
• Meet all taxation obligations in accordance with applicable
legislation and requirements
• Adopt a conservative approach in the interpretation of applica-
ble taxation legislation
• Seek professional tax advice or a tax ruling from the ATO
in circumstances where the potential taxation outcome is
uncertain
• Do not enter into transactions or structures with the primary
objective of reducing tax liabilities.
ASX’s Tax Transparency Report is released to the market at the time
of its Annual Report and published on ASX’s website. The report
provides further detail on our approach to tax and discloses the
amount of income tax paid. ASX’s total tax contribution in FY18
was $313.4 million.
Our suppliers and how we manage our suppliers
ASX aims to partner with suppliers that share our ESG standards.
ASX promotes ESG practices in our supply chain by incorporating
ESG clauses in our standard supplier agreement. ASX's suppliers
are expected to comply with all relevant laws and regulations, ASX's
ESG standards and to measure and improve their ESG practices.
Material suppliers must comply with ASX's Supplier Code of Conduct,
which includes minimum expectations across key ESG areas. ASX
reserves the right to carry out assessments of the practices of our
suppliers to ensure alignment with this Code.
ESG considerations are included in all material procurement tenders.
Community engagement
ASX aims to contribute positively to the Australian community. We
contribute through providing free, accessible education about the
markets, supporting volunteer work by ASX employees and working
with select charity foundations and not-for profit organisations.
Education
We are committed to promoting informed investing and acknowl-
edge its importance in supporting ASX’s business.
We provide access to free tools and resources to explain the potential
rewards and risks of investing including online courses, YouTube
presentations, face-to-face events around Australia and a monthly
e-newsletter that has approximately 300,000 subscribers.
ASX also conducts a share market game for school students and
the general public. The game helps familiarise participants with
the mechanics of share trading. It is linked to the live market –
connecting players to real-world events. In FY18, there were more
than 69,000 student entries and over 46,000 entries from members
of the public.
25
ASX Annual Report 2018 Corporate responsibility and sustainability / Corporate responsibility and sustainability continued
Volunteering
We believe volunteering is an important way that our employees can contribute to the community. We assist our employees to support
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 and made donations to 47 charities in FY18.
Charity and donations
ASX works with a number of charity foundations and not-for-profit organisations that support a range of causes. Details of our contribu-
tions and relationships are set out below.
ASX Thomson Reuters Charity Foundation
The Foundation supports Australian children’s and medical research charities by organising fundraising events for financial markets
participants. In FY18, over $1.2 million was raised and distributed to 38 charities.
The Foundation has two ASX representatives on its eight person board. ASX volunteers the company secretariat and finance functions
for the Foundation and ASX employees volunteer to assist with the fundraising activities.
ANZAC Centenary Public Fund
ASX is contributing a total of $1 million over 5 years 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 understanding of the service and sacrifice of Australia’s servicemen and women, past and present, in defending
Australia’s values and freedom.
ShareGift Australia
ASX supports ShareGift Australia, a not-for-profit organisation that aggregates under-utilised share capital to generate funding for other
charities. To date ShareGift has donated more than $1.6 million to over 470 charities.
ASX's reimburses all ASX exchange fees on ShareGift transactions and promotes ShareGift via the CHESS statements sent to investors.
Any individual shareholder may donate a parcel of shares – large or small – free of brokerage and the proceeds support the community.
Environment
We are a service-based organisation that does not extract physical or natural resources and are not involved in the manufacture or
transport of products. Our environmental footprint is small. It arises from the energy used in our three offices, two data centres and from
consumables (primarily paper). ASX’s environmental risks are not significant.
Nevertheless, we are mindful of our impact on the environment and committed to acting responsibly. We measure the impact of our activities.
We minimise consumption of materials. We recycle and use carbon-neutral consumables. We support awareness of environmental issues.
FY18 environmental outcomes
ASX’s electricity and paper usage outcomes are set out below:
FY18 electricity and paper usage
Electricity GHG1 emission (excluding ASX’s data centre hosting) per $1,000 of revenue generated (in t CO2-e2)
Paper usage (excluding CHESS statements and notifications) by headcount (tonnes)
1 Greenhouse gas (GHG) emissions
2 Tonnes of carbon dioxide equivalent
Actual
reduction
from prior
year
3%
FY17
0.0102 0.0099
FY18
0.0123
0.0121
1%
26
/ ASX Annual Report 2018 Corporate responsibility and sustainability Corporate responsibility and sustainability continued
Electricity usage
ASX’s total electricity consumption remained flat in FY18 and decreased 3% relative to revenue.
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 and provides efficiencies to customers generally.
Customers would otherwise be required to operate such systems from their own or other facilities.
Growth in this business (and its energy consumption) reflects the ALC’s position as the premier financial markets ecosystem in Australia.
The number of IT cabinets hosted in the ALC has grown from 117 to 301 in the last five years.
ASX has implemented measures to ensure that a disruption to the supply of electricity to our sites (including to its data centres) will not
result in a service disruption to our customers. The infrastructure that supports ASX’s data centres incorporates uninterruptible power
supply systems, which provide ongoing electricity in the event of a loss of power from the grid. ASX’s business continuity management
plans outline how we will maintain operations in such circumstances. These plans are reviewed periodically.
Paper usage
ASX’s paper usage is carbon neutral and by headcount (excluding CHESS statements and notifications) decreased by 1% over FY18.
Management continues to reduce paper usage in ASX’s business. ASX encourages its shareholders to receive electronic communications
instead of hard copy communications via post.
Environmental reporting
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)2
– paper usage (CHESS statements and notifications)2
Paper usage
Office use
CHESS statements and notifications
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
2015
29
13,011
2015
29
8,457
4,554
986
16
146
2015
8.01
73
2016
11
2017
48
14,435
14,262
2016
14
10,105
4,332
1,021
02
02
2016
7.35
75
2017
48
9,983
4,279
613
0
0
2017
6.82
74
2018
52
14,330
2018
52
10,031
4,299
660
0
0
2018
6.80
79
1 Tonnes of carbon dioxide equivalent
2 GHG emissions reported inclusive of carbon offset. ASX commenced using 100% carbon neutral paper in 2015.
27
ASX Annual Report 2018 Corporate responsibility and sustainability / Corporate governance
Directors (from left to right): Ms Melinda Conrad, Mr Damian Roche, Ms Yasmin Allen, Mr Peter Warne, Mr Dominic Stevens (CEO), Mr Peter Marriott,
Mr Rick Holliday-Smith (Chairman), Dr Ken Henry AC and Mrs Heather Ridout AO.
Dominic Stevens
Managing Director and CEO, Executive Director
BCom (Hons)
Mr Dominic Stevens was appointed Managing Director and CEO of
ASX Limited in August 2016. He was an independent non-executive
director of ASX from December 2013 until his appointment as CEO.
Mr Stevens is a director of the ASX Group clearing and settlement
licensees and their intermediate holding companies.
Mr Stevens has over 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.
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
derivatives businesses.
ASX Limited Board
Rick Holliday-Smith
Independent Chairman
BA (Hons), FAICD
Mr Rick 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 Holliday-Smith is Chairman of the Nomination Committee and the
intermediate holding companies of the ASX 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 leadership 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 & 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.
28
/ ASX Annual Report 2018 Corporate governance Corporate governance continued
Yasmin Allen
Independent, Non-Executive Director
BCom, FAICD
Dr Ken Henry AC
Independent, Non-Executive Director
BCom (Hons), PhD, DB h.c, FASSA
Ms Yasmin Allen was appointed a director of ASX in February 2015.
She is a member of the Audit and Risk Committee.
Dr Ken Henry was appointed a director of ASX in February 2013.
He is a member of the Audit and Risk Committee.
Ms Allen is also a director of ASX Clear (Futures) Pty Limited and
Austraclear Limited, the ASX Group clearing and settlement licens-
ees for Australia’s derivatives, OTC and debt markets, and their
intermediate holding companies.
Ms Allen has extensive financial services, strategy and corporate
governance experience, gained during a career of over 20 years in
finance and investment banking.
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. Ms Allen’s previous
appointments include director of Insurance Australia Group Limited
between November 2004 and September 2015.
Ms Allen is also Chairman of Advance, a director of the George
Institute for Global Health, the National Portrait Gallery and a
member of the Australian Government Takeovers Panel.
Melinda Conrad
Independent, Non-Executive Director
MBA, FAICD
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.
Dr Henry has extensive experience as an economist in Australia and
overseas, and has worked as a senior policy adviser to successive
Australian governments.
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, 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.
Peter Marriott
Independent, Non-Executive Director
BEc (Hons), FCA, MAICD
Mr Peter Marriott was appointed a director of ASX and Chair of the
Audit and Risk Committee in July 2009.
Ms Melinda Conrad was appointed a director of ASX in August 2016.
He is a director of each ASX clearing and settlement facility licensee
and their intermediate holding companies.
She has over 20 years’ experience in business strategy and market-
ing, and brings skills and insights as an executive and director from a
range of industries, including retail, financial services and healthcare.
Ms Conrad has been a strategy and marketing adviser, an executive
with Colgate-Palmolive, and founded and managed a retail business.
She was appointed a director of Stockland Corporation Limited and
Stockland Trust in May 2018, Caltex Australia Limited in March 2017
and OFX Group Limited (formerly OzForex Group) in September
2013. Ms Conrad’s previous appointments include a director of David
Jones Limited between July 2013 and August 2014, APN News and
Media Limited between January 2012 and February 2013 and Reject
Shop Limited between August 2011 and June 2017.
Ms Conrad is also a director of the Centre for Independent Studies
and the George Institute for Global Health, and a member of the
ASIC Director Advisory Panel.
Mr Marriott has spent over 30 years in senior management roles
in the finance industry, spanning international banking, finance
and auditing.
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.
29
ASX Annual Report 2018 Corporate governance / Corporate governance continued
Heather Ridout AO
Independent, Non-Executive Director
BEc (Hons)
Peter Warne
Independent, Non-Executive Director
BA, FAICD
Mr Peter 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 a director of ASX Clear (Futures) Pty Limited, the ASX
clearing and settlement licensee for Australia’s derivatives and
OTC markets, and Chairman of Austraclear Limited, the securities
settlement facility licensee for Australia’s debt and OTC markets. He
is also 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.
Mr Warne has been Chairman of Macquarie Bank Limited and
Macquarie Group Limited since April 2016, having served as a
director since July 2007.
Mr Warne’s previous appointments include Chairman of OFX Group
Limited (formerly OzForex Group) between September 2013 and
November 2016, Chairman of Australian Leisure and Entertainment
Property Management Limited between September 2003 and May
2017, Deputy Chairman of Crowe Horwath Australasia Limited
between May 2007 and January 2014, and Adjunct Professor at
the University of Sydney Business School between November 2011
and November 2014.
Mrs Heather Ridout was appointed a director of ASX in August 2012.
Mrs Ridout is also 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. She 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 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 was appointed as a Director of
AustCyber – The Australian Cyber Security Growth Network in
July 2017.
Mrs Ridout is a member of the ASIC External Advisory Panel.
Mrs Ridout’s previous appointments include member of the
Board of the Reserve Bank of Australia from February 2012 until
February 2017, Infrastructure Australia, the Australian Workforce
and Productivity Agency, a member of the Henry Tax Review panel,
the Climate Change Authority and the Prime Minister’s Taskforce
on Manufacturing.
Damian Roche
Independent, Non-Executive Director
BCom
Mr Damian Roche was appointed a director of ASX in August 2014.
Mr Roche is also Chairman of ASX Clear (Futures) Pty Limited and a
director of Austraclear Limited, the ASX Group clearing and settle-
ment licensees for Australia’s derivatives, OTC and debt markets,
and their intermediate holding companies.
Mr Roche has 20 years’ experience in global investment 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 at
the bank was as Head of Markets and Investor Services, Sales and
Distribution for Asia Pacific, based in Hong Kong.
3030
/ ASX Annual Report 2018 Corporate governance Corporate governance continued
Overview
ASX is committed to maintaining and promoting high standards
of corporate governance. By corporate governance we mean the
framework of rules, relationships, systems and processes within and
by which authority is exercised and managed within our company,
and our structures for accountability.
This statement outlines our principal governance arrangements
and practices for effective decision-making and accountability. It is
current as at 16 August 2018 and has been approved by the Board.
ASX’s governance arrangements have been consistent with the
third edition of the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations throughout the report-
ing period.
The ASX Board and its committees regularly review ASX’s gover-
nance arrangements and practices to ensure they are in line with
regulatory requirements and developments in industry expectations,
and that they continue to support ASX’s business objectives.
The role of committees
The Board has established three committees to assist in discharging
its responsibilities:
• Audit and Risk Committee
• Nomination Committee
• Remuneration Committee.
The duties of each committee and details of their membership are
disclosed in this Corporate governance report.
Delegation to management
The Board has appointed Dominic Stevens as CEO. The CEO is
responsible for managing the ASX Group in accordance with the
strategy and policies approved by the Board.
Executives support and report to the CEO. Executives’ biographies
are available on ASX’s website.
More information on ASX’s corporate governance is available on
ASX’s website.
Executives attend and report at regular Board meetings.
Laying solid foundations for
management and oversight
The role of the Board
The Board is accountable to shareholders for the performance
of ASX.
The Board has set the Company’s vision to become the world’s most
respected financial marketplace. This is a long-term goal. The Board
reviews and approves ASX’s strategy to achieve that vision includ-
ing the annual budget and financial plans. It is also responsible for
monitoring management’s progress in implementing that strategy.
The Board meets regularly to review the ASX Group’s performance
and progress against the strategy. The Board’s responsibilities also
include:
• Appointing and assessing the performance of the CEO and
overseeing succession plans for the whole executive team
• Overseeing systems in place for risk management, internal
controls and regulatory compliance
• Monitoring ASX’s corporate culture.
The Board’s responsibilities are detailed in the Board charter (avail-
able on ASX’s website). The Board’s conduct is also governed by
ASX’s constitution.
Nomination and appointment of directors
The Board has established a Nomination Committee to help bring the
focus and independent judgement needed for decisions regarding
the composition of the Board.
The Nomination Committee reviews the skills represented by direc-
tors on the Board and considers whether the composition, mix of
those skills and succession plans remain appropriate for ASX’s strat-
egy. It makes recommendations to the Board based on its reviews.
The Nomination Committee also considers and makes recommenda-
tions to the Board about the process for nomination and selection
of directors for the Board and Board committees and the perfor-
mance of directors.
The Nomination Committee is currently comprised of three inde-
pendent, non-executive directors. The ASX Chairman, Rick Holliday-
Smith chairs the Nomination Committee. Heather Ridout and Peter
Warne are also committee members.
The Nomination Committee’s charter is available on the ASX website.
The number of times the Nomination Committee met during FY18
and the individual attendance of its members at those meetings is
disclosed on page 34.
Before appointing a director, ASX undertakes comprehensive refer-
ence checks including education, employment, character, criminal
history and bankruptcy checks. A statutory 'fit and proper' test
applies to directors because of their involvement with market
licensees and/or clearing and settlement facilities. It is a condition
of appointment that any new director is not a disqualified person
under this test. Directors make an annual declaration to this effect.
31
ASX Annual Report 2018 Corporate governance / Board – Gender diversity
Corporate governance continued
Non-Executive Director Tenure
Ages of Directors
Ages of directors
45-55
56-65
66-70
12%
44%
44%
Board – gender diversity
Non-executive director tenure
Female directors
Male directors
CEO
11%
33%
1-3 Years
4-6 Years
7-10 Years
>10 Years
56%
25%
25%
12.5%
37.5%
Any director (except the CEO) who has been appointed during the
year must stand for election at the next Annual General Meeting
(AGM). ASX provides shareholders with all material information in
its possession that is relevant to a decision on whether to elect (or
re-elect) a director.
ASX has adopted a diversity and inclusion policy (available on ASX’s
website) which describes how ASX promotes diversity. The diversity
objectives adopted by the Board, and performance in FY18 are set
out on page 23, along with further details on ASX's initiatives and
programs to support diversity.
New directors receive a letter of appointment that outlines ASX’s
expectations about director time commitment, compliance with
ASX policies and regulatory requirements. As part of their induction
process, new directors receive briefings on strategic initiatives and
operational matters.
Director retirement and re-election
The Board is committed to maintaining its diversity of member-
ship. The Board has adopted a target of a minimum of 33% female
directors. Currently, 33.3% percent of ASX’s directors are female
and 37.5% of non-executive directors are female.
ASX’s most recent report to the Workplace Gender Equality Agency
which sets out our performance against gender equality indicators
is available on ASX’s website.
Directors are generally elected for three years. Retiring directors
are not automatically re-appointed.
Performance reviews
Mr Rick Holliday-Smith, Ms Yasmin Allen, Mr Peter Marriott and
Mrs Heather Ridout AO will retire by rotation in 2018. They are
standing for re-election at the 2018 AGM and are unanimously
supported by the directors.
Board renewal
The Board, in consultation with the Nomination Committee, regularly
reviews its composition and succession plans and the process for
nominating and selecting ASX directors.
Company secretaries
The Board is responsible for the appointment of company secretaries.
The 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 on page 51.
Diversity
ASX’s Board and workforce are comprised of individuals with a
range of skills, backgrounds and experiences. ASX values diversity
and inclusion and recognises the organisational capability and
business performance that it brings.
Board
Under its charter, the Board and directors are required to undergo
regular performance reviews. The performance of the Board, its
committees and individual directors are reviewed each year. This
evaluation took place in FY18, supported by an internal, confidential
survey.
Periodically, the Board engages an external consultant to facilitate
its performance review. The next such review is scheduled to occur
in FY19.
The Board takes this evaluation into consideration when recom-
mending directors for election.
Executives
The CEO and ASX’s executives have written agreements setting out
their employment terms.
The Board assesses each executive’s performance on an annual
basis. The process for evaluating executives’ performance and
remuneration is set out in the Remuneration report on pages 39
to 50. Performance evaluations for the CEO and ASX’s executives
took place in FY18 in accordance with the process disclosed in the
Remuneration report.
32
/ ASX Annual Report 2018 Corporate governance Corporate governance continued
Structuring the board to add value
Director skills and experience
Board composition
As at the date of this report, the Board comprised eight non-exec-
utive, independent directors and the CEO.
The directors have elected Mr Rick Holliday-Smith as the Chairman.
The Chairman is an independent, non-executive director. He leads
the Board in its duties to ASX and is responsible for facilitating
effective Board meeting discussion.
The roles of CEO and Chairman are separate and are not performed
by the same person.
The names, qualifications and tenure of each director are set out on
pages 28 to 30. Director biographies are published on ASX’s website.
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.
To guide its assessment of the skills and experience of non-executive
directors and to identify any gaps in the collective skills of the Board,
the Board uses the skills matrix below. The chart below shows the
Board’s current assessment of its skills coverage.
The Board considers that individually and collectively, the directors
have an appropriate mix of skills, experience and expertise to under-
stand ASX and its operating environment, to navigate current and
emerging issues and to oversee the performance of management
in executing the Board-approved strategy.
The Board keeps up-to-date with market and industry developments
through regular briefings at Board meetings, Board workshops,
meetings with customers and regulators, and through site visits.
Board skills matrix
Category
Executive leadership
Description
Successful career as a CEO or senior executive
Number of non-executive directors with these skills
1
2
3
4
5
6
7
8
Strategy
Define strategic objectives, constructively
question business plans and implement strategy
Financial acumen
Risk and compliance
Public policy
Accounting and reporting, corporate finance and
internal controls, including assessing quality of
financial controls
Forward looking, able to identify the key risks
to the organisation and monitor effectiveness
of risk management frameworks and practices
Public and regulatory policy, including impact
on markets and corporations
Information technology/
digital
Use and governance of critical information tech-
nology infrastructure, digital disruption
and information monetisation
Business develop-
ment and customer
management
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 frameworks, strategic human
resource management and organisational change
Corporate governance
Knowledge, experience and commitment to
the highest standards of governance
International exchange
experience
International financial markets or exchange
groups including post trade services and relation-
ships with financial markets participants
Financial services
experience
Broking, funds management, superannuation
and/or investment banking activities
33
ASX Annual Report 2018 Corporate governance / Corporate governance continued
Director independence
Aligning interests of the Board with shareholders
To underscore the alignment of the Board with shareholders’ inter-
ests, the Board has adopted a policy that all non-executive directors
should accumulate at least 5,000 shares (12,000 for the Chairman)
within three years of their appointment. All directors comply with
this policy.
Details regarding director remuneration and ASX’s remuneration
policies and practices are set out in the Remuneration report on
pages 39 to 50.
Access to information and advice
Directors have access to management to request information.
Directors are also entitled, with the approval of the Chairman, to
obtain independent professional advice at ASX’s expense relating
to their role as an ASX director.
Attendance at meetings
Details of director attendance at meetings in the 12 months up to
30 June 2018 are set out below. Provided there is no conflict of
interest, directors are also invited to, and frequently attend,
meetings of Board committees of which they are not members.
All directors receive copies of agendas, papers and minutes of
committee meetings to help ensure they remain equally informed,
regardless of whether they are appointed to particular committees.
ASX recognises that having a majority of independent directors helps
to ensure that the decisions of the Board reflect the best interests
of ASX and its shareholders generally and that those decisions are
not biased towards the interests of management or any other group.
The Board requires a majority of its directors to be independent.
In determining whether a director is independent, the Board consid-
ers whether the director is free of interests that could (or could be
perceived to) materially interfere with the independent exercise of
the director’s judgement and the capacity to act in the best interests
of ASX and its shareholders generally.
The Board has adopted a policy and guidelines to assess a director’s
independence status. The policy includes guidelines for assessing
the materiality of directors’ relationships that may affect their
independence. This policy is available in full on ASX’s website.
The Board regularly assesses the independence of its directors. The
Board has assessed each non-executive director as independent.
There is no limit on director tenure. The tenure of each director is
set out on pages 28 to 30. Mr Rick Holliday-Smith (ASX’s Chairman)
and Mr Peter Warne have been directors of ASX Limited for more
than 12 years. In FY18, the Board reviewed and determined that
their tenure has not impacted on their independence. As at the date
of this report, all other directors have served on the ASX Board
for less than 10 years. The mix of directors’ tenure is shown in a
diagram on page 32.
Conflicts of interest
Directors are required to disclose all interests that may conflict
with their duties. If a director has a material personal interest in a
matter being considered by the Board, they must not be present
for the consideration of that matter or vote on the matter (unless
approved by other directors who do not have a material personal
interest in the matter).
Board meetings
Audit and Risk
Committee meetings
Nomination
Committee meetings
Remuneration
Committee meetings
Attended Observed
4
-
4
-
4
4
-
-
3
-
-
4
-
4
-
-
3
3
-
4
Held
4
-
-
-
-
-
4
-
4
-
Attended Observed
4
-
-
-
-
-
4
-
4
-
-
4
4
4
4
4
-
3
-
3
Held
4
-
-
-
-
-
4
-
4
-
Attended Observed
4
-
-
-
-
-
4
-
4
-
-
4
4
4
4
4
-
3
-
3
Director name
Rick Holliday-Smith
Held
9
Attended
9
Held
4
9
9
9
9
9
9
9
9
8
9
9
9
9
9
9
8
9
8
-
4
-
4
4
-
-
4
-
Dominic Stevens
Yasmin Allen
Melinda Conrad
Ken Henry
Peter Marriott
Heather Ridout
Damian Roche
Peter Warne
Robert Priestley1
1 Resigned on 19 June 2018
34
/ ASX Annual Report 2018 Corporate governance Corporate governance continued
Act ethically and responsibly
We are committed to conducting business in an open and account-
able way. We believe that ethical and responsible business practices
are a driver of shareholder value, and that ASX has a leadership
role in setting and articulating corporate governance standards
in Australia.
Code of Conduct
ASX has adopted a Code of Conduct which sets the standards for
how we work at ASX and states our values to anyone dealing with
ASX. A copy of the Code is available on ASX's website. Further
information about our Code of Conduct and corporate culture is
set out on page 22.
Our Corporate responsibility and sustainability report also details
other ASX policies, practices and governance frameworks for
how we:
• Operate with integrity
• Engage with the community
• Act responsibly towards the environment.
Securities trading
ASX has adopted dealing rules that restrict dealing in ASX and
non-ASX securities. The rules apply to directors and all staff. The
dealing rules:
• Are designed to help prevent directors and staff from contra-
vening laws on insider trading
• Establish a best practice procedure for dealings in securities.
During FY18, 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 range of policy and
business decision makers.
All payments to political parties are disclosed by ASX and must be
approved by the CEO and the General Counsel in line with the policy
and limits set by the Board.
Safeguarding integrity in
corporate reporting
ASX believes that accurate and timely corporate reporting underpins
effective risk management and is key to executing ASX’s strategy.
The Board is responsible for overseeing that appropriate monitoring
and reporting mechanisms are in place. It has established the Audit
and Risk Committee to assist in discharging this responsibility. The
Audit and Risk Committee’s functions include assisting the Board to:
• Review the integrity of ASX’s financial reporting
• Review the adequacy of the Group’s corporate reporting
processes
• Oversee systems of risk management, internal control and
regulatory compliance.
The Committee's charter is available on its website.
The Audit and Risk Committee is currently comprised of five inde-
pendent, non-executive directors. The Committee's members are
Peter Marriott (Committee Chairman), Rick Holliday-Smith, Yasmin
Allen, Ken Henry and Peter Warne.
Additional dealing restrictions apply to staff working in speci-
fied functions (including our Listings Compliance, the Market
Announcements and Surveillance functions).
The number of times the Committee met in FY18 and the individ-
ual attendance of its members at those meetings are detailed on
page 34.
The dealing rules were reviewed in FY18.
Derivatives and hedging arrangements for unvested securities or
vested ASX securities subject to holding locks are prohibited.
Payments to political parties
ASX has a responsibility to Australia’s financial markets and its
shareholders, customers and staff to articulate the opportuni-
ties and challenges facing its business, communicate its position
on relevant public policy issues and contribute to well-informed
decision-making by government.
ASX actively engages with government and political decision makers
about its role, the investments it is making to build world-class
infrastructure and the dynamic and globally competitive market
environment in which it operates.
Integrity of financial reporting
Before it approves the financial statements for the half-year
and full-year, the Board receives a statement from the CEO and
Chief Financial Officer consistent with the requirements of the
Corporations Act 2001. These statements are made after the CEO
and the CFO receive attestations from executives regarding their
respective areas of responsibility.
The Board also receives a statement from the CEO and Chief Risk
Officer that ASX’s risk management systems and internal control
systems are operating effectively for the management of material
business risks.
35
ASX Annual Report 2018 Corporate governance / Corporate governance continued
External auditor
Respecting the rights of security holders
ASX has appointed PwC as its external auditor. The appointment
was approved by shareholders at the 2008 AGM.
Shareholder engagement
Among its key responsibilities, PwC reviews the financial reporting
of ASX and provides an opinion on whether ASX’s financial report
gives a true and fair view of the ASX Group’s financial position and
financial performance and whether it complies with Australian
Accounting Standards and the Corporations Regulations 2001.
PwC’s opinion on the FY18 financial report is on pages 86 to 90.
PwC attends each Audit and Risk Committee meeting and meets with
the Committee without management present at least once annually.
PwC has provided confirmation that there have been no contraven-
tions of the auditor independence requirements of the Corporations
Act 2001 and no contraventions of any applicable code of profes-
sional conduct in relation to its audit (refer to page 53). The fees paid
to PwC for non-audit services are disclosed on page 83.
PwC’s lead audit partner will attend the 2018 Annual General
Meeting to answer questions relevant to the external audit.
Making timely and balanced disclosure
ASX is committed to communicating promptly, concisely, accurately
and in plain language with shareholders. This commitment is detailed
in our shareholder communications policy which is available on
our website.
All market announcements (including half-year and Annual Reports)
are published on ASX’s website after they have been released to
the market. ASX also publishes media releases and other relevant
information on its website (including its corporate governance
arrangements).
ASX uses a number of channels and technologies, including webcast-
ing and social media to communicate promptly, transparently and
widely. It enables shareholders to participate in shareholder meet-
ings and deals with shareholder enquiries fairly and respectfully.
ASX has implemented an investor relations program to facilitate
effective two-way communications with investors.
ASX does not hold meetings with investors or analysts to discuss
ASX's financial performance within a ‘blackout’ period in advance
of results announcements.
Continuous and periodic disclosure
Electronic communications
ASX is committed to providing shareholders and the market with
equal access to material information about its activities in a timely
and balanced way.
ASX has adopted a continuous disclosure policy which sets out how
it complies with its listing rule disclosure obligations. This policy was
reviewed in FY18 and determined to be fit for purpose.
All market sensitive information is first made available on the Market
Announcements Platform.
Key periodic shareholder communications include our Annual Report,
full-year and half-year financial results and monthly activity reports.
We encourage shareholders to receive communications from us
electronically. Electronic communication allows ASX to commu-
nicate with shareholders quickly, and reduces ASX’s paper
usage. ASX emails shareholders when important information
becomes available such as financial results, dividend state-
ments, notice of meetings, voting forms and Annual Reports.
Shareholders who receive information from us by post can log in at
www.linkmarketservices.com.au to provide their email address and
elect to receive electronic communications.
Annual General Meetings
Details about ASX’s 2018 AGM are provided on page 96.
The Annual General Meeting is an opportunity for shareholders and
stakeholders to hear from and put questions to the Board, external
auditor and executives.
We encourage shareholders to attend and participate. To improve
access and participation for those who cannot attend in person,
ASX webcasts proceedings and allows shareholders to vote directly
without having to appoint a proxy.
36
/ ASX Annual Report 2018 Corporate governance Corporate governance continued
Recognising and managing risk
Internal Audit
The Board recognises that effective risk management is critical to
maintaining ASX’s reputation.
Division of responsibilities
The Board is responsible for setting ASX’s risk strategy and risk
appetite. It is also responsible for reviewing and overseeing systems
of risk management and the process for identifying significant
risks, and that appropriate controls, monitoring and reporting
mechanisms are in place.
Management implements the Board-approved strategy and manages
ASX’s operations within the Board-approved risk appetite. It is
responsible for identifying, monitoring, mitigating and reporting
on risks.
ASX’s Internal Audit function reviews and reports on internal control
systems and procedures. Its role and responsibilities are set out in
its charter, which is available on ASX’s website.
The General Manager of Internal Audit reports to the Chairman
of the Audit and Risk Committee and the CEO for functional audit
purposes and to the Chief Risk Officer for other purposes. The Audit
and Risk Committee determines the Internal Audit function’s scope,
function and budget each year.
The Internal Audit function has full access to the Audit and Risk
Committee. It also has unrestricted access to all ASX records, prop-
erty and personnel. The Internal Audit function is independent of
ASX’s external auditor.
Audit and Risk Committee
As outlined above, the Board has established an Audit and Risk
Committee. The Audit and Risk Committee’s responsibilities include:
• Reviewing the enterprise risk management framework
• Oversee the process for identifying significant risks facing ASX
• Reviewing and overseeing risk management processes, internal
controls and compliance systems.
The Audit and Risk Committee receives regular reports from the
Chief Financial Officer on financial matters, the Chief Risk Officer on
enterprise risks, from the Chief Operating Officer on operational,
technology and cyber security risks, from the Chief Compliance
Officer on compliance matters as well as reports from ASX’s Internal
Audit and Regulatory Assurance functions, and from our external
auditor. The Audit and Risk Committee reports to the ASX Board.
ASX’s risk management framework
ASX has an established enterprise risk management framework. The
framework encompasses (among other matters) the risk governance
structure across ASX, the risk strategy and appetite, risk culture and
behaviours and supporting frameworks and processes governing
risk assessment, monitoring and reporting.
The Audit and Risk Committee reviews the enterprise risk manage-
ment framework annually. This review took place in FY18.
Management Risk Committee
ASX’s risk management function has day-to-day responsibility for
the implementation of the enterprise risk management framework.
ASX has a Risk Committee comprised of senior executives and
chaired by the Chief Risk Officer. It has oversight of the implemen-
tation of ASX’s enterprise risk management framework, approves
risk policies and considers general risk matters consistent with the
ASX Board’s risk appetite.
Regulatory Assurance
ASX’s Regulatory Assurance function maps the compliance frame-
work for ASX regulatory obligations, oversees ASX’s conflict
handling arrangements and provides training to the business so
that key Australian and international obligations are understood and
complied with. It also undertakes compliance reviews and reporting
to regulators. The General Manager of Regulatory Assurance has a
direct reporting line to the Audit and Risk Committee and clearing
and settlement (CS) Boards for key licence obligations and conflict
handling arrangements and reports to the Chief Risk Officer for
other purposes.
Exposure to material economic, environmental and
social sustainability risks
Details of ASX’s material business risks and how these are managed
are provided on pages 20 to 21 in our Operating and financial review.
ASX’s environmental and social sustainability risks and how these
are managed are described in our Corporate responsibility and
sustainability report set out on pages 22 to 27.
Clearing and Settlement Boards
ASX has four subsidiary companies that hold licences to operate
facilities, and two intermediate holding companies.
The CS Boards focus on risk management and oversight of the
operation of the CS subsidiaries. The responsibilities of these
boards include the management of clearing and settlement risk
and compliance with the Financial Stability Standards determined
by the Reserve Bank of Australia. The CS Boards charter (available
on ASX’s website) sets out further details regarding their functions
and governance.
The Audit and Risk Committee serves as the audit and risk commit-
tee for the CS Boards where such matters relate to CS operations
outside of those matters carried out by the CS Boards (and detailed
in the CS Boards charter).
37
ASX Annual Report 2018 Corporate governance / Corporate governance continued
Remunerating fairly and responsibly
ASX aims to attract and retain high quality directors and senior
executives.
The Board oversees executive and non-executive director remuner-
ation arrangements and has established a Remuneration Committee
to assist it in this regard. The Remuneration Committee helps to
bring the focus and independent judgement needed on remuner-
ation decisions.
The Remuneration Committee’s responsibilities include reviewing
and reporting to the Board on:
• ASX’s remuneration structure including incentives
• The process for overseeing performance accountability and
effective monitoring of management performance (including
setting and evaluating performance against goals and targets)
• Incentives and behaviours arising from ASX’s remuneration
structure
• Compliance of remuneration arrangements with Financial
Stability Standards and other regulatory requirements
• Recruitment and retention strategies
• Remuneration by gender.
The Remuneration Committee charter is available on ASX's website.
ASX’s Remuneration Committee is currently comprised of three
independent, non-executive directors. The current members are
Heather Ridout (Committee Chair), Rick Holliday-Smith and Peter
Warne. It is a requirement under the Remuneration Committee
charter that the Committee chairman be an independent director
who is not the Chairman of the ASX Board.
The number of times the Committee met in FY18 and the individ-
ual attendance of its members at those meetings are detailed on
page 34.
Details of executive and director remuneration and ASX’s remu-
neration polices are disclosed in the Remuneration report on pages
39 to 50.
38
/ ASX Annual Report 2018 Corporate governance Remuneration report
Dear Fellow Shareholder,
FY18 Group remuneration outcomes
The Remuneration Committee takes a continuous improvement
approach to ASX's remuneration framework. Each year we review
ASX’s remuneration policies and practices, particularly those for
the Chief Executive Officer (CEO), the Deputy CEO, Group Executives
and Executive General Managers – a group collectively referred to
throughout this report as the Executive Management.
We continue to seek the right balance in remuneration outcomes
between achieving financial and non-financial goals, which include
cultural, risk management and regulatory measures. This accords
with ASX’s vision to be the world’s most respected financial
marketplace.
Following the FY18 review, the Board concluded:
• ASX’s remuneration structure continues to meet our five key
remuneration principles – aligned with creating shareholder
value; regularly and rigorously measured; uses a mix of finan-
cial and non-financial metrics; attracts, retains and motivates
talent; and promotes integrity within our workforce
• There are no financial incentives in place that might encourage
the wrong behaviour by our employees and lead to undesirable
outcomes for our customers, shareholders or regulators.
Consistent with the Board’s conclusions, there were no material
changes to ASX’s remuneration strategy and structure for Executive
Management during FY18.
Non-executive directors fee structure
We also take a continuous improvement approach with director
remuneration. In October 2017, ASX implemented a new fee struc-
ture for non-executive directors (NEDs) that more accurately aligns
their responsibilities and remuneration. Under the new structure
NEDs are paid an all-inclusive base fee, which replaces the approach
of paying a base fee plus additional payments for participation
on Board committees and subsidiaries. Chairpersons of Board
committees continue to be paid an additional fee to reflect the
extra work involved in the role. There was a minimal increase in
overall remuneration of directors as a result of the implementation
of the new structure.
FY18 remuneration context
ASX delivered a strong financial performance in FY18 and made
significant progress on a number of non-financial strategic initia-
tives. Further detail regarding ASX’s financial performance can be
found in the Operating and financial review on pages 12 to 21 of
this report. An overview of ASX’s non-financial strategic initiatives
can be found on page 5 or listed in the performance outcomes on
pages 44 to 45 of this report.
Fixed remuneration outcomes
The Board determined there will be no change to the fixed remuner-
ation for the CEO, Deputy CEO and additional three Group Executives
classified as key management personnel (KMP) for the financial year
ending 30 June 2019 (FY19).
Short-term incentive (STI) outcomes
The Remuneration Committee also determined that the Group
multiplication factor to be applied to an individual’s potential STI
payment will be 100%.
Further detail regarding how the Group factor was determined is
discussed on pages 44 to 45 of this report.
The STI outcomes for the CEO, Deputy CEO and three KMPs ranged
from 50% to 125% of target STI. These outcomes were the result
of ASX’s overall performance as measured by the Group factor,
and their individual performance as measured against their own
objectives and the Group’s values.
Long-term incentive (LTI) outcomes
The performance rights granted under the LTI Plans are measured
against earnings per share (EPS) targets and total shareholder
return (TSR) targets.
In FY18, consistent with the three-year vesting schedule, the FY15
LTI performance rights were assessed in September 2017. The EPS
portion of the FY15 LTI award was not met, while the TSR portion
of the FY15 LTI award was met. Further details of the LTI Plan can
be found on page 81 of this report.
Key Management Personnel changes
Ms Amanda Harkness, Group General Counsel and Company
Secretary, ceased employment with ASX during FY18.
ASX values and FY18 individual remuneration
outcomes
As noted in the Chairman’s letter and outlined on page 8 of this report,
ASX launched its new company values towards the end of 2017.
These values and behaviours were integrated into the determination
of an individual’s STI outcome. This provides a tangible link between
our values and an employee’s actions, and incentivises employees
to embrace our shared ASX values.
Keeping ASX’s remuneration structure ‘fit for purpose’ requires
regular review and assessment. The Remuneration Committee
is confident that ASX’s remuneration structures and policies will
continue to align the performance of the Group with outcomes
beneficial to our shareholders.
Thank you for your support.
Heather Ridout
Chair, Remuneration Committee
ASX Annual Report 2018 Remuneration report / 39
Remuneration report continued
1. Remuneration framework
ASX’s remuneration framework aims to attract, retain and motivate talented employees and to structure rewards so the interests of
executives and shareholders are aligned.
The design of ASX’s remuneration framework incorporates five guiding principles that together deliver a competitive, measured,
performance-based approach to remuneration, and which promotes sound decision-making and market integrity.
Governance
Remuneration Committee
• Operates independently of ASX management
• Oversees executive remuneration framework
• Monitors executive remuneration outcomes
• Oversees directors remuneration
• Recommends the remuneration of ASX’s KMP to the Board for approval.
For some KMP, the Remuneration Committee takes input from ASX’s
subsidiary boards
• May engage external remuneration advisers for independent advice
Principles
Aligned
Measured
Link rewards to
the achievement of
the strategy and the
creation of shareholder
value
Apply rigorous perfor-
mance measures to ‘at
risk’ remuneration
Financial and
non-financial
Assess and reward
performance on both
financial and non-finan-
cial measures
Competitive
Integrity
Provide competitive
remuneration that is
designed to attract,
motivate and retain talent
and promote diversity
Promote sound
and effective risk
management and
market integrity
Components
Fixed remuneration
‘At risk’ variable remuneration
Measures
Leadership and culture
Risk management and
regulatory focus
Operational excellence
Financial results
Strategic priorities
Mix varies by role, level and comparative market rates
(cash, deferred shares, performance rights)
1.1. Executive Management remuneration components
Executive Management remuneration is the sum of two components: fixed remuneration and ‘at risk’ variable remuneration.
Components
Purpose
Fixed remuneration
• To provide competitive fixed remuner-
ation to attract, retain and motivate
talent.
‘At risk’ variable remuneration
Short-term incentives
• Align STI awards to drive achievement
of financial and non-financial goals.
• Deferral periods align performance to
support achievement of strategic goals.
Long-term incentives
• Incentivise performance that create
long-term value for shareholders.
Delivery
• Paid as cash and expressed as a total
• STI delivered as:
• Participation is limited to CEO and the
dollar amount.
• Comprises cash salary, superannuation
and other salary-sacrificed benefits.
- 40% cash
- 60% deferred equity.
Determination
• Fixed remuneration is set with reference
to relevant market benchmarks typically
within finance, legal, technology and
other sectors relevant to ASX’s functions
or the broader market.
• Reviewed annually.
• STI performance measures include
performance against individual financial
and non-financial goals, and overall
Group performance.
• Further detail about STI determination,
Group factor and individual performance
is illustrated below in 1.2, 1.3 and 1.4.
Deputy CEO.
• 100% delivered as performance rights
which may vest if performance hurdles
are achieved.
• Subject to performance hurdles:
- 50% total shareholder return
- 50% earnings per share.
• Plan features are outlined below in 1.5.
40
/ ASX Annual Report 2018 Remuneration report
Remuneration report continued
1.2 STI determination
STI is calculated using the formula in the diagram below.
Target STI
in $
Target reward
model
On-target STI as
% of total reward
Group
incentive
factor %
Determines the
available pool
Financial and
non-financial
performance
Individual
performance
rating %
Differentiated
based on 1-5
rating scale
Behaviours also rated
on a scale and used
as a moderator
Individual goals
linked to
ASX strategy
STI award in $
ASX equity
deferral
Recommendation
Incentives are at
Board discretion
60% award
deferred into
equity for Executive
Management
1.3 Group incentive factor
The target STI pool for Executive Management is the sum of individual target STIs.
Following an assessment of the Group’s performance based on the achievement of financial and non-financial objectives, the Board
determines what percentage of the pool may be released. This is referred to as the Group factor.
For example, if the target STI pool for Executive Management is $10 million and the Board determines that the Group’s performance
warranted 90% of the pool, the Group STI pool available for distribution to Executive Management would be $9 million.
1.4 Individual performance
Executive Management are assessed against financial and non-financial measures. The CEO recommends to the Remuneration Committee
individual performance ratings and the percentage of STI target to be applied. The Remuneration Committee considers the CEO’s recom-
mendations and then determines the final recommendations that will be submitted for Board approval.
An individual’s performance rating determines what percentage of individual STI targets are received. The range is 0% to 150%.
1.5 Long-term incentives
Participation is limited to the CEO and the Deputy CEO. Key features of the plan features are summarised below.
Performance
measures
Vesting schedule
External performance measure
Total shareholder return (TSR) (50%)
• TSR is measured over a four-year period against a peer
group determined by the Board at the time of the offer.
Currently it is based on the ASX 100, excluding
property trusts.
• The peer group may change as a result of specific events
such as mergers and acquisitions, de-listings and
financial failures.
• Guidelines provide for adjustments of the peer group
following such events.
Performance
Less 51st percentile
51st percentile
Vesting
0%
25%
Greater than 76th percentile
100%
Vesting occurs in a straight line between the 51st and 76th
percentile
Internal performance measure
Earnings per share (EPS) growth (50%)
• 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.
Performance p.a.
Less than 5.1%
5.1%
Greater than 10%
Vesting
0%
50%
100%
Vesting occurs in a straight line between 5.1% and 10%
ASX Annual Report 2018 Remuneration report / 41
Remuneration report continued
Calculation
• TSR is calculated as the movement in share price and divi-
dends 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.
• EPS is calculated by dividing the underlying profit after tax
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. This is then
compared to the starting EPS, calculated in a similar fashion
to determine the EPS performance.
• Significant items are revenues and expenses associated with
specific events considered appropriate 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.
Performance period
Four years
Instrument
Performance rights over ASX ordinary shares
Determining the
number of perfor-
mance rights
Expiry
Dividends
Retesting
The number of performance rights allocated is based on the volume weighted average price of ASX shares (face value) on the
10 business days preceding the grant date
At the end of the performance period, any performance rights that have not vested will lapse
None on performance rights
No
1.6 Executive Management remuneration alignment with framework
Executive Management remuneration is aligned to ASX’s key remuneration principles:
1. Creating shareholder value: under the STI program, 60% of at-risk remuneration is deferred and provided in ASX shares creating
alignment with shareholders through the performance of ASX’s share price.
2. Regularly and rigorously measured: individual performance against financial targets, non-financial operating outcomes, personal
objectives and behaviours are used to determine remuneration. Each year Executive Management undergo a formal assessment
process including a self and manager assessment that factors in Board and peer feedback. The determination of Executive Management
remuneration is supported by a governance framework that manages conflicts of interest, defines clear accountabilities, and sees that
the proper checks and balances are in place.
3. Use the right mix of financial and non-financial metrics: financial performance, risk management, and adherence to ASX values are
considered when determining Executive Management at-risk remuneration. At-risk STI remuneration may range from 0% – 150% of
target based on individual and Group performance. Performance-related remuneration is subject to satisfactory performance and
clawback.
4. Attracting, retaining and motivating talent: ASX provides competitive remuneration that is benchmarked against data for comparable
roles in companies of a similar size, and other publicly available data.
5. Promotes integrity in the workforce: ASX’s company values are designed to encourage and support our people to act and make deci-
sions with integrity. An assessment is made about how well an individual has exemplified ASX’s company values, which then has a
direct outcome on their overall STI payment.
The diagram below sets out the remuneration structure and mix for Executive Management.
Fixed remuneration
60-75%
At-risk
Target STI (25-40%)
Maximum STI opportunity of 150%
Equity deferred 2 years
30%
Equity deferred 4 years
30%
Cash
40%
1.7 CEO and Deputy CEO remuneration alignment with framework
The CEO and Deputy CEO’s remuneration is aligned to the Executive Management remuneration principles set out in paragraph 1.6. In
addition to the measures outlined in 1.6 above, the CEO and Deputy CEO participate in the ASX LTI Plan. The LTI Plan further aligns indi-
vidual performance with creating long-term shareholder value.
The diagram below sets out the remuneration structure and mix for the CEO and Deputy CEO.
At-risk
Fixed remuneration
40%
Target STI (40%)
Maximum STI opportunity of 150%
Equity deferred 2 years
30%
Equity deferred 4 years
30%
LTI grant face value
20%
TSR (50%
of award)
EPS (50%
of award)
Cash
40%
42
/ ASX Annual Report 2018 Remuneration report
Remuneration report continued
1.8 Treatment of STI and LTI on departure
Under the rules of the STI plan, unless the Board determines otherwise,
shares subject to a holding lock will be forfeited if the participant’s
employment is terminated other than for a qualifying reason, or if a
condition of the invitation to participate in the plan has not been met
in the time specified in the invitation. A qualifying reason means, death,
permanent disability, retirement, hardship, redundancy or another
reason determined by the Board. If the participant’s employment is
terminated for a qualifying reason, the Board retains a discretion to
determine the number of shares that will be forfeited, if any.
Under the rules of the LTI Plan, unless the Board determines otherwise,
performance rights will lapse if the participant’s employment is termi-
nated for cause or poor performance, or if the participant resigns. If a
participant ceases employment in other circumstances (for example
by mutual agreement with ASX), any performance rights will remain
on foot in accordance with their original terms, except that any service
condition will be waived, unless the Board determines otherwise. The
Board retains a discretion to determine the proportion of performance
rights that remain on foot, vest or lapse.
2. Remuneration governance
The diagram below provides an overview of our governance arrange-
ments relating to remuneration.
Shareholders
ASX Board
Clearing and
settlement
boards
Provide input
Audit and Risk
Committee
Provide input
Remuneration
Committee
Make
recommendations
to the Board
for approval
External
advisers
Provides
Independent
advice
2.1 Role of the Board
The Board oversees executive remuneration arrangements and NED
remuneration arrangements and has established a Remuneration
Committee to assist it in this regard. Ultimate responsibility for
remuneration policy matters rests with the Board.
• Reviewing of recruitment and retention
• Approving of, and monitoring progress against, gender diversity
objectives
• Completing of the ASX remuneration report
• Overseeing of remuneration paid to directors.
2.3 Composition of the Committee
The members of the Committee, all of whom are independent
NEDs are:
• Heather Ridout (Chair)
• Rick Holliday-Smith
• Peter Warne.
All NEDs who are not Remuneration Committee members are invited
to attend Remuneration Committee meetings. Meeting attendance
is set out on page 34.
The CEO and Group Executive, Human Resources attend Committee
meetings, however, the CEO is not present when issues related to
him are discussed.
2.4 Board discretion relating to at-risk remuneration
The Board understands that to make good remuneration decisions
it needs both a robust framework and the ability to exercise judge-
ment. Therefore, the Board retains discretion to adjust at-risk remu-
neration outcomes in certain cases so that awards are appropriate,
consistent with supporting sound and effective risk management,
and aligned to shareholder interests.
2.4.1 Short-term incentives
All Group Executive remuneration is approved by the Board which
receives recommendations from the Remuneration Committee.
The Board may use its discretion to vary any individual STI award.
2.4.2 Long-term incentives
As with STIs, the Board has discretion to vary any individual
LTI award. Specifically the Board can adjust LTI outcomes:
• By no more than 20% following an assessment of whether
performance criteria applicable to that performance period has
been met
• If they have been impacted materially by changes to dividend
policy, capital structure, gearing or corporate structure.
2.2 Role and responsibilities of the Remuneration Committee
The Remuneration Committee helps to bring the focus and indepen-
dent judgement needed on remuneration matters. The Remuneration
Committee’s responsibilities are outlined below and include a range
of matters related to ASX’s remuneration practices and policies:
2.4.3 Clawback policy
The Board retains discretion to claw back some or all perfor-
mance-based remuneration which has not yet been paid or vested
without restrictions to an executive if it considers that such remu-
neration would be an inappropriate benefit.
• Reviewing the remuneration of KMP and Group Executives on
an annual basis and provide recommendations for the Board’s
review and approval
• Setting, and evaluating performance against, goals and targets
for Executive Management
• Overseeing ASX’s remuneration and incentive framework,
including STI and LTI arrangements and participation
The Board has absolute discretion to determine what constitutes
an ‘inappropriate benefit.’ Examples of actions that may cause the
Board to claw back remuneration include:
• Fraudulent or dishonest behaviour
• A material misstatement or omission in ASX’s financial
statements
• Ensuring the remuneration arrangements comply with regula-
• A breach of obligations to ASX
tory requirements
• Ensuring ASX’s remuneration structure supports desired
behaviours
• Reviewing and approving of Executive Management succession
and key staff succession plans
• Acting in a manner that brings ASX into disrepute.
ASX Annual Report 2018 Remuneration report / 43
Remuneration report continued
2.5 External advice
When an external perspective is needed, the Remuneration
Committee may seek professional advice from remuneration
advisers. Remuneration advisers can be engaged by the Committee
independently of management.
2.6 Engagement with external stakeholders
Each year, the ASX Chairman meets with investors and proxy advis-
ers. These meetings provide an opportunity to discuss remuneration
practices and policies and any issues raised by the investor or
proxy adviser.
In FY18, the Remuneration Committee engaged Ernst & Young to
provide advice on remuneration market trends.
No remuneration recommendations were made by Ernst & Young
in FY18.
3. FY18 Executive Management performance outcomes
To determine the Group factor, the Board considers all aspects of ASX’s performance. These aspects include assessment of financial goals
and progress of agreed strategic priorities. They also include a review of how management is strengthening ASX’s technical and operational
foundations that provide for long-term and sustained growth, and an evaluation of Executive Management’s leadership of a culture that
upholds standards of the highest integrity.
3.1 FY18 Group factor
For FY18, the Board determined a Group factor of 100%. This took into account the following:
Link to strategy
Financial
objectives
Measure
Revenue
Expense
Actual outcome
Up 7.7% on pcp
8% growth in line with guidance
Statutory net profit after tax (NPAT)
Statutory NPAT up 2.5%, includes impairment charge
Underlying net profit after tax (NPAT)
Underlying earnings per share (EPS)
Dividends per share (DPS)
Underlying NPAT up 7.2%
Underlying EPS up 7.1%
Full-year DPS 216.3 cents, fully franked, up 7.2%.
Payout ratio 90%
Capital expenditure (capex)
Capex approximately $54m
Identification of investment opportunities and
oversight of existing portfolio
Further participation in DA capital raising
Investment in Sympli
Non-financial
objectives
Enduring trust,
integrity and resilience
Increase employees focus on risk awareness,
accountability and speaking up
Impairment to Yieldbroker carrying value
Board approved risk strategy. Risk culture action plan
developed and in progress. Company wide risk culture
workshops completed
Enterprise risk management, technology governance
and market oversight improvement plans designed
and in progress
Begin a multi-year project to upgrade secondary
data centre
New site and vendor selected. Detailed transition
plan developed
No significant regulatory breaches (legal, compliance,
finance, tax, operations)
Continue to align with Australian CCP risk regulations
All systems meet availability targets
No significant regulatory breaches
95% of Financial Stability Standard assessment met
target rating. 5% of assessment has plans in place
to meet target
Average system uptime for our critical systems over
the past 12 months was 99.99%
Providing innovative
solutions and technol-
ogy for our customers
Refresh BBSW benchmark methodology
New methodology successfully delivered
Decision on using DLT for CHESS replacement Day 1
requirements and DLT implementation plan proposed
Completed. Consultation paper released outlining
Day 1 scope and implementation plan
ASX Net core infrastructure replaced and RBA
and Austraclear clients migrated
Articulate comprehensive digital and data
centric strategy
Build new data and analytic products
All employees to put forward two efficiency ideas
Upgrade and migration commenced
Digital strategy and roadmap approved, execution
underway
Delivered new products including non-display, adviser
and broker service provider products and completion
of implementation of ASX24 trader terminals
Completed. Many have been implemented delivering
efficiencies internally and to our customers
44
/ ASX Annual Report 2018 Remuneration report
Remuneration report continued
Link to strategy
Non-financial
objectives
continued
Embracing a
customer centric
approach
Measure
Embed customer centric culture across all ASX teams Year 1 improvement initiatives implemented:
Actual outcome
Provide an onshore OTC clearing service for
domestic customers
Help customers optimise use of collateral
Maintain diverse clearing client base
Creating a diverse
ecosystem
Grow new mandates for ASX listing across NZ,
technology and foreign jurisdictions
measurement of customer satisfaction, customer
feedback framework (complaints) and customer
principles upgrade plan completed
First client clearer in final stages of onboarding
Significant growth in ASX Collateral balances and
number of collateral users
Target met to maintain current number of futures
clearing participants
Coverage and communication plan delivered
Expand listings franchise to grow ETP and mFunds
Targets exceeded
Grow international participant activity in
futures markets
Targets exceeded
Grow number of technical services customers
Targets exceeded
Fostering a
collaborative
culture
Define ASX values and embed across the organisation Completed values. Developed by employees through
a consultative focus group approach. Embedded in
performance, reward, and recognition
Implement a new leadership program that focuses
on collaboration, agility, innovation and performance
New leadership program aligned to ASX values
designed and implemented for senior ASX employees
Design a new multi-faceted staff reward and
recognition program
Program designed and implemented for all employees
3.2 FY18 KMP STI allocations
Current
D J Stevens
R Aziz
P D Hiom
T J Hogben
H J Treleaven
Total STI awarded1
Cash payment paid
July 2018
STI deferred for 2 years
(vesting August 2020)2
STI deferred for 4 years
(vesting August 2022)2
$
2,000,000
200,000
1,050,000
472,500
333,334
%
100%
50%
105%
105%
125%
$
800,000
80,000
420,000
189,000
133,334
$
600,000
60,000
315,000
141,750
100,000
$
600,000
60,000
315,000
141,750
100,000
1 Total STI award including cash payment and deferred component.
2 The deferred STI awards are subject to continued employment and satisfactory performance during the deferral period.
Net profit after tax $m and
STI outcome % for executions
Statutory net profit after tax $m and
STI outcome % for executives
Statutory earnings per share (EPS)
(cents)
Dividends per share (cents) and
share price ($ at end of financial year)
101%
101%
77%
92%
99%
397.8
383.2
426.2
434.1
445.1
198.5
205.7
220.4
224.5
230.0
35.64
89.9
88.2
FY14
FY15*
FY16
FY17
FY18*
FY14
FY15*
FY16
FY17
FY18*
FY14
64.39
53.61
45.76
99.0
99.8
109.1
99.1
102.0
107.2
FY16
FY17
FY18
101.0
39.90
80.8
95.1
60.6
40.4
92.3
20.2
0.0
FY15
240.40
192.32
144.24
96.16
48.08
0.00
STI outcome % for executives
Interim
Final
Share price ($)
* Underlying profit in FY18 $465.3 million,
FY15 $403.2 million
* Underlying EPS in FY18 240.4 cents,
FY15 208.4 cents
ASX Annual Report 2018 Remuneration report / 45
Remuneration report continued
3.3 FY18 KMP LTI allocations
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 KMP, including their personally related parties.
Current
D J Stevens
P D Hiom
Held as at
1 July 2017
20,889
50,918
Granted as
compensation
during the year
Vested during
the year
Lapsed during
the year
Held at
30 June 2018
18,975
9,488
-
(8,065)
-
(19,367)
39,864
32,974
No other KMP had performance-related rights over issued ordinary shares in ASX directly, indirectly or beneficially.
3.4 Current LTI grants
Shares relating to grants of performance rights that have vested are allocated from a trust established to hold shares for this purpose. The table below
sets out a summary of the LTI grants that were in operation during FY18.
Grant year
Grant date
Performance period
Vesting date
Vesting period
Participation
Performance rights awarded
Performance measure
EPS vesting commences at
TSR vesting commences at
Dividends paid
Retesting
Share price at grant date
Volatility p.a.
Discount rate (risk free rate) p.a.
Dividend yield p.a.
Fair value of performance rights (EPS awards)
Fair value of performance rights (TSR awards)
Weighted average AASB 2 share-based
payment fair value
FY18
26 September 2017
27 September 2017
– 28 September 2021
26 September 2021
4 years
2
FY17
28 September 2016
28 September 2016
– 29 September 2020
29 September 2020
4 years
2
CEO
18,975
Deputy CEO
9,488
CEO
20,889
Deputy CEO
10,445
FY161
30 September 2015
30 September 2015
– 1 October 2019
1 October 2019
4 years
1
Deputy CEO
13,041
50% EPS and 50% TSR
50% EPS and 50% TSR
50% EPS and 50% TSR
5.1% compound growth
5.1% compound growth
5.1% compound growth
51st percentile
51st percentile
51st percentile
No
No
$52.62
17%
2.24%
4.00%
$44.83
$23.78
$34.30
No
No
$47.78
17%
1.70%
4.60%
$39.75
$19.62
$29.68
No
No
$37.88
16%
1.94%
4.75%
$31.32
$15.36
$23.34
1 The grants for FY16 exclude the former CEO Mr Elmer Funke Kupper who resigned 21 March 2016.
ASX will submit Mr Stevens' FY19 LTI grant for shareholder approval at the 2018 AGM.
3.5 Potential future value of LTI allocations for CEO and Deputy CEO
The following table shows the minimum and maximum values of performance rights that may be received by the CEO and Deputy CEO as remuneration
in future financial years:
Grant date:
Vesting date:
Current
D J Stevens
P D Hiom
30 September 2015
1 October 2019
Min $1
Max $2
28 September 2016
29 September 2020
Min $1
Max $2
27 September 2017
26 September 2021
Min $1
Max $2
N/A
-
N/A
304,377
-
-
619,986
310,008
-
-
650,843
325,438
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.
46
/ ASX Annual Report 2018 Remuneration report
Remuneration report continued
3.6 Translating Group performance into LTI outcomes
% determined
by performance
measure
Vested %
Year
Grant
date
Performance
period (years)
FY12
7 October 2011
3 years
FY13
5 October 2012
3 years
FY14
FY15
25 September
2013
23 September
2014
3 years
3 Years
Performance
period ended
10 October
2014
8 October
2015
26 September
2016
24 September
2017
EPS
TSR
EPS
TSR
Granted
shares
Vested
shares
Vested %
70
70
70
70
30
30
30
30
0
0
0
0
0
0
60
98
53,820
71,360
-
-
60,216
5,419
0%
0%
9%
54,864
8,065
15%
Participation
CEO,
Deputy CEO
CEO,
Deputy CEO
CEO,
Deputy CEO
CEO,
Deputy CEO
4.Data disclosure – Key Management Personnel
The five members of the Executive Management team listed in the following tables are determined to be Key Management Personnel (KMP).
4.1 Statutory remuneration
The remuneration table below has been prepared in accordance with accounting standards as required by the Corporations Act 2001. The
accounting standards require the disclosure of the expense or cost to the company in the financial 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.
Short- term
Long-term
Share-based payments4
r
a
e
Y
y
r
a
a
S
l
I
T
S
y
r
a
t
e
n
o
m
-
n
o
N
2018
2017
1,962,192
1,796,126
800,000
658,849
17,759
16,061
2018
2017
2018
2017
2018
2017
2018
2017
579,951
580,384
80,000
144,000
962,192
961,049
420,000
360,000
649,780
565,748
779,013
256,339
189,000
169,344
133,334
35,337
2018
2017
206,919
830,384
-
234,000
-
-
17,759
19,335
4,233
-
-
-
-
-
-
-
d
e
l
t
t
e
s
h
s
a
c
-
I
T
S
d
e
r
r
e
f
e
D
2
r
e
h
t
O
3
n
o
i
t
a
u
n
n
a
r
e
p
u
S
d
e
r
r
e
f
e
d
I
T
S
l
n
a
p
y
t
i
u
q
e
n
a
P
l
I
T
L
-
-
-
-
20,049
17,950
277,029
116,248
370,603
-
-
55,000
-
112,500
-
58,750
-
-
9,667
9,675
16,335
16,342
10,918
9,446
-
-
20,049
19,616
-
-
20,049
19,616
226,917
(157,768)
20,049
19,616
20,049
11,058
148,500
67,500
427,500
225,000
174,006
78,750
19,877
-
–
e
c
n
a
m
r
o
f
r
e
P
5
d
e
t
a
e
r
l
l
a
t
o
T
3,447,632
2,605,234
42.0%
29.8%
838,167
876,175
27.3%
30.4%
2,090,752
1,556,074
51.4%
34.7%
1,048,924
902,592
34.6%
34.0%
953,211
502,734
16.1%
7.0%
r
e
h
t
O
-
-
-
-
-
-
938
938
938
-
1
r
e
h
t
O
-
-
-
-
-
-
-
-
-
200,000
632,040
-
-
85,000
194,343
13,842
5,770
19,616
-
625,000
-
38,750
-
118,017
-
17,365
247,500
115,875
-
-
1,286,572
1,298,717
19.2%
33.5%
-
112,802
-
1,285,116
-
11.8%
-
-
-
-
-
-
-
-
Current
D J Stevens
Managing Director and
CEO6
R Aziz
Chief Financial Officer
P D Hiom
Deputy CEO
T J Hogben7
Chief Operating Officer
H J Treleaven
Chief Risk Officer
Former
A J Harkness
Group General Counsel
(ceased 29 September
2017)
A J Bardwell
Chief Risk Officer (ceased
10 February 2017)
2018
2017
-
373,182
-
-
Total
2018
2017
5,140,047
5,363,212
1,622,334
1,601,530
39,751
35,396
632,040
825,000
-
350,000
231,263
167,322
106,015
124,837
503,946
(41,520)
1,387,986
599,927
1,876
938
9,665,258
9,026,642
36.4%
27.8%
1 Reflects one-off payments.
2 Reflects long service leave entitlements paid on termination or accrued where 10 years of service has been reached.
3 Reflects post-employment benefits.
4 Reflects annual share-based payments expense for performance rights issued under the LTI Plan, shares issued under the deferred STI equity plan 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. All share-based payments are equity-settled.
5 Reflects the percentage of total remuneration that is performance-related (short-term and long-term cash settled STI and shared-based payments relating to the
LTI and STI plans).
6 FY17 reflects remuneration related to Mr Stevens' position as CEO from 1 August 2016. Remuneration relating to his non-executive directorship is disclosed in the
non-executive director fees table on page 50.
7 Mr Hogben was promoted from Group Executive Operations to Chief Operating Officer from 2 January 2017.
ASX Annual Report 2018 Remuneration report / 47
Remuneration report continued
4.2 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 KMP in the current and prior financial years.
Total fixed
remuneration1
a
2,000,000
1,830,137
600,000
600,000
1,000,000
1,000,000
675,000
585,364
800,000
267,397
Other
remuneration
b
-
-
-
-
-
-
-
-
-
-
212,689
850,000
-
390,547
632,040
-
-
625,000
-
-
-
-
Current
D J Stevens6
Managing Director and CEO
(commenced 1 August 2016)
R Aziz
Chief Financial Officer
P D Hiom
Deputy CEO
T J Hogben7
Chief Operating Officer
H J Treleaven
Chief Risk Officer
(commenced 1 March 2017)
Former
A J Harkness
Group General Counsel
(ceased 29 September 2017)
A J Bardwell
Chief Risk Officer
(ceased 10 February 2017)
E Funke Kupper
Managing Director and CEO
(ceased 21 March 2016)
Total
Year
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Previous year awards that
vest during the year
STI awarded
and paid2
c
Total
payments
d=a+b+c
Deferred STI
award3
e
Deferred
share-based
awards4
f
Total
remuneration
received5
g=d+e+f
800,000
658,849
80,000
144,000
420,000
360,000
189,000
169,344
133,334
35,337
2,800,000
2,488,986
680,000
744,000
1,420,000
1,360,000
864,000
754,708
933,334
302,734
-
234,000
844,729
1,084,000
-
-
-
110,000
-
225,000
-
117,500
-
-
-
170,000
-
77,500
-
-
-
-
424,945
265,435
-
-
-
-
-
-
-
-
-
-
2,800,000
2,488,986
680,000
854,000
1,844,945
1,850,435
864,000
872,208
933,334
302,734
844,729
1,254,000
-
1,093,047
-
750,000
-
1,015,547
-
-
-
-
-
-
-
750,000
5,287,689
5,523,445
632,040
625,000
1,622,334
1,601,530
7,542,063
7,749,975
-
1,450,000
424,945
265,435
7,967,008
9,465,410
1 Fixed remuneration comprises salary, superannuation, non-monetary benefits and share-based payments that have been salary sacrificed.
2 The portion of STI awarded for the financial year in cash. The remaining portion of STI in respect of FY18 but deferred for two and four years, is shown in the
FY18 KMP STI allocations on page 45.
3 This relates to the payment of the cash-based STI awarded and deferred for two years. None were awarded in FY18 (2017: Relates to July 2015).
4 This relates to the vesting of the September 2014 share-based LTI offer. It has been calculated using the total number of shares vested and the ASX-quoted
share price at vesting date.
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.
6 FY17 reflects remuneration related to Mr Stevens' position as CEO from 1 August 2016. Remuneration relating to his non-executive directorship is disclosed in
the non-executive director fees table on page 50.
7 Mr Hogben was promoted from Group Executive Operations to Chief Operating Officer from 2 January 2017.
4.3 Holdings of ordinary shares
Current
D J Stevens
R Aziz
P D Hiom
T J Hogben
H J Treleaven
Former
A J Harkness
(ceased 29 September 2017)
Held at 1 July
2017
Received on vesting
of rights over
deferred shares
Allocated under
deferred STI plan
Other changes
Held at 30 June
2018
11,500
32,052
42,405
4,111
-
-
-
8,065
-
-
18,254
3,990
9,974
4,692
979
-
-
-
17
17
29,754
36,042
60,444
8,820
996
10,598
N/A
N/A
N/A
N/A
48
/ ASX Annual Report 2018 Remuneration report
Remuneration report continued
4.4 Service agreements
Name
D J Stevens
R Aziz
P D Hiom
T J Hogben
H J Treleaven
Former
A J Harkness2
Minimum notice periods (months)
Position held
Managing Director and CEO
Chief Financial Officer
Deputy CEO
Chief Operating Officer
Chief Risk Officer
19 July 2010
1 July 2015
1 April 2010
1 March 2017
Contract effective date
1 August 2016
Executive
6
Group General Counsel
10 September 2007
3
6
3
6
6
ASX
12
6
12
6
12
12
Poor performance
3
11
31
11
31
6
1 The notice period for termination for poor performance requires an initial written notice of one month.
2 A J Harkness resigned on 29 September 2017.
5. Non-executive director remuneration arrangements
The Remuneration Committee reviews and recommends to the Board the remuneration for non-executive directors.
Fees are broadly aligned to median fees paid to directors of ASX top 50 listed entities so that:
• ASX non-executive directors are remunerated fairly for their services, recognising the workload and level of skill and experience
required for the role
• ASX can attract and retain talented non-executive directors.
5.1 Remuneration structure
ASX reviewed its non-executive director fee structure in August 2017 and made changes that became effective in October 2017. These
were determined having regard to changed responsibilities of directors across ASX's governance forums.
Under the new fee structure, non-executive director remuneration comprises one base fee (plus superannuation) in respect of a director’s
appointment to the ASX Board and any Board committee and/or subsidiary. An additional amount is paid to the chairperson of ASX or a
committee or subsidiary board.
The aggregate amount paid to directors is approved by shareholders. Non-executive directors have no entitlement to any performance-based
remuneration or participation in any share-based incentive schemes.
ASX does not have a non-executive director retirement scheme.
5.2 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 $3 million per annum. This was approved by shareholders at the 2017 AGM. The
amount paid in FY18 was $2.7 million.
The Board reviews its fees regularly in line with ASX’s objectives for non-executive director remuneration.
ASX Annual Report 2018 Remuneration report / 49
Remuneration report continued
5.3 Director fees for FY18
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
R C Priestley1
D J Stevens2
Total
Year
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Short-term salary
and fees
Post-employment
superannuation
556,250
525,000
235,000
235,000
213,750
138,068
235,000
235,000
285,000
300,000
250,000
235,000
270,000
270,000
257,500
265,000
206,519
19,038
-
19,796
2,509,019
2,241,902
20,049
19,616
20,049
19,616
18,599
13,117
20,049
19,616
20,049
19,616
20,049
19,616
20,049
19,616
20,049
19,616
18,599
1,809
-
1,881
177,541
154,119
Total
576,299
544,616
255,049
254,616
232,349
151,185
255,049
254,616
305,049
319,616
270,049
254,616
290,049
289,616
277,549
284,616
225,118
20,847
-
21,677
2,686,560
2,396,021
1 R C Priestley resigned from the ASX Board on 19 June 2018.
2 This is the portion of Mr Stevens' remuneration relating to his position as a non-executive director. The remuneration in relation to his position as CEO from
August 2016 is disclosed in the statutory remuneration on page 47.
5.4 Equity holdings
Share ownership is encouraged among directors to strengthen the alignment between their interests and the interests of shareholders.
The Chairman is encouraged to hold 12,000 or more ASX shares. NEDs are encouraged to hold 5,000 or more ASX shares from the date
of their appointment to the Board.
The table below sets out current equity holdings.
R Holliday-Smith
Y A Allen
M B Conrad
K R Henry
P R Marriott
H M Ridout
D Roche
P H Warne
Held as at
1 July 2017
12,000
5,000
2,000
5,000
5,316
5,000
10,000
6,000
Other changes
-
-
3,000
-
-
-
-
-
Held at
30 June 2018
12,000
5,000
5,000
5,000
5,316
5,000
10,000
6,000
6. Glossary of key terms
Term
EPS
Meaning
Earnings per share, this being net profit after tax divided by the average number of issued shares during the year.
The LTI Plan has two performance measures, one of which is EPS.
Executive Management
Members of the Executive Committee (including the CEO, Deputy CEO, direct reports to the CEO and Executive General
Managers).
KMP
NEDs
TSR
Key Management Personnel are those people with authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly and report directly to the CEO.
Non-executive directors.
Total shareholder return as defined as share price growth plus dividends paid over the measurement period. Dividends
are assumed to be reinvested on the ex-dividend date. The LTI Plan has two performance measures, one of which is TSR.
50
/ ASX Annual Report 2018 Remuneration report
Directors’ report
The directors present their report, together with the financial state-
ments of ASX Limited (ASX or the Company) and its subsidiaries
(together referred to as the Group), for the year ended 30 June 2018
(FY18) and the auditor’s report thereon. The financial statements
have been reviewed and approved by the directors on the recom-
mendation of the ASX Audit and Risk Committee.
The FY18 consolidated net profit after tax attributable to the owners
of ASX was $445.1 million (2017: $434.1 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 Robert C Priestley resigned as a director on 19 June 2018.
Directors’ meetings and attendance at those meetings for FY18
(including meetings of committees of directors) are disclosed on
page 34. The qualifications and experience of directors, including
current and recent directorships, are detailed on pages 28 to 30.
Company secretaries
Daniel Moran
Group General Counsel and Company Secretary,
BA (UTS) LLB (UNSW)
Daniel Moran was appointed Group General Counsel and Company
Secretary on 1 November 2017. Mr Moran joined ASX as Deputy
General Counsel in 2010. Prior to that he was a Senior Associate in
the Australian law firm Herbert Smith Freehills. Since joining ASX
he has worked across ASX's businesses and engaged closely with
ASX's boards and committees as a lawyer and company secretary.
Mr Daniel Csillag, BA LLB (UNSW), General Manager Company
Secretariat and Senior Legal Counsel, is a Company Secretary. As
Company Secretary, he is responsible for company secretariat and
corporate governance support across the Group. He has company
secretariat experience from his time at ASX and other entities.
Report on the business
Principal activities
During the year the principal activities of the Group consisted
of providing:
• Securities exchange and ancillary services
• Derivatives exchange and ancillary services
• Central counterparty clearing services
• Registry, depository, settlement and delivery-versus-payment
clearing of financial products
• Technical and information services.
Review of operations
Information on the operations and financial position of the Group,
and its business strategies and prospects, is set out in the Operating
and financial review on pages 12 to 21.
Dividends
Information relating to dividends for the current and prior financial
year, including dividends determined by the Board since the end of
the financial year, is set out in note A2 of the financial statements
on page 62.
Significant changes in the state of affairs
There were no significant changes in the Group's state of affairs
during the year.
Events subsequent to balance date
From the end of the reporting period to the date of this report, no
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.
Likely developments
For further information about likely developments in the oper-
ations of the Group, refer to the Operating and financial review
on pages 12 to 21. 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.
Indemnification and insurance of officers
The Group has paid insurance premiums for directors’ and officers’
liability for current and former directors and officers of the Company,
its subsidiaries and related entities.
The insurance policies prohibit disclosure of the nature of the liabil-
ities insured against and the amount of the premiums.
ASX Annual Report 2018 Directors’ report / 51
Rounding of amounts
ASX is a company of the kind referred to in ASIC Legislative
Instrument 2016/191. In accordance with that instrument, amounts in
the financial statements and the Directors' report have been rounded
to the nearest hundred thousand dollars, unless otherwise indicated.
Signed in accordance with a resolution of the directors:
Rick Holliday-Smith
Chairman
Dominic Stevens
Managing Director and Chief Executive Officer
Sydney, 16 August 2018
Directors’ report continued
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.
Performance rights over issued shares
At the date of this report, ASX had 72,838 performance rights
outstanding (2017: 71,807). For further details on the performance
rights including performance hurdles for vesting, refer to the
Remuneration Report on pages 39 to 50.
During the year, 8,065 (2017: 5,419) performance rights vested as a
result of partial attainment of hurdles under the September 2014
long-term incentive plan. The remaining 19,367 performance rights
under this plan lapsed (2017: 24,689).
Proceedings on behalf of the Group
No application for leave has been made under section 237 of the
Corporations Act 2001 in respect of the Group and no proceedings
have been brought or intervened in on behalf of the Group under
that section.
Remuneration report
Information on remuneration for the ASX Limited Board and Key
Management Personnel (KMP), is contained in the Remuneration
Report on pages 39 to 50.
Non-audit services
Details of the amounts paid or payable to the Group's auditor
PricewaterhouseCoopers (PwC) and its related practices for non-au-
dit services provided during the year are set out in note E5.3 of the
financial statements on page 83.
Directors’ declaration of satisfaction with independence of auditor
The Board of directors has considered the non-audit services
provided during the year by the auditor and in accordance with writ-
ten advice provided by resolution of the Audit and Risk Committee, is
satisfied that the provision of those non-audit services is compatible
with, and did not compromise, the auditor independence require-
ments of the Corporations Act 2001 for the following reasons:
• Non-audit services were subject to the corporate governance
procedures adopted by the Group and have been reviewed by
the Audit and Risk Committee
• Non-audit services provided do not undermine 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 decision-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 53.
52
/ ASX Annual Report 2018 Directors’ report
Auditor’s independence declaration
As lead auditor for the audit of ASX Limited for the year ended 30 June 2018, I declare that to the best of my knowledge and belief, there
have been:
a. no contraventions of the auditor independence 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, 16 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000 F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
ASX Annual Report 2018 Auditor’s independence declaration / 53
Statutory report – financial statements
Contents
Financial statements
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Preface to the notes to the financial statements
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 cash equivalents
B3 Financial risk
Investments
C1 Available-for-sale investments
C2 Equity accounted investments
C3 Investments at fair value through profit or loss
Other balance sheet assets and liabilities
D1 Receivables
D2 Intangible assets
D3 Property, plant and equipment
D4 Payables
D5 Provisions
Group disclosures
E1 Subsidiaries
E2 Deed of Cross Guarantee
E3 Related party transactions
E4 Parent entity financial information
E5 Other disclosures
E5.1 Commitments
E5.2 Share-based payments
E5.3 Auditor’s remuneration
E5.4 Other accounting policies
E5.5 Subsequent events
Directors’ declaration
Independent auditor’s report
55
56
57
58
59
60
62
62
63
64
65
66
67
73
73
73
74
75
76
77
77
78
79
80
80
81
81
81
83
84
84
85
86
54
/ ASX Annual Report 2018 Statutory report – financial statements
Consolidated statement of comprehensive income
For the year ended 30 June
Revenue
Listings and Issuer Services
Derivatives and OTC Markets
Trading Services
Equity Post-Trade Services
Interest income
Dividend income
Note
Share of net (loss)/profit of equity accounted investments
C2
Other
Expenses
Staff
Occupancy
Equipment
Administration
Finance costs
Depreciation and amortisation
Other
Profit before income tax expense
Income tax expense
Net profit for the year attributable to owners of the Company
Other comprehensive income
Items that may be reclassified to profit or loss1:
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 year, net of tax
Total comprehensive income for the year attributable to owners of the Company
Earnings per share
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
D2, D3
C2
A5
A4
A4
2018
$m
222.9
286.7
211.8
105.3
170.9
14.2
(0.4)
1.6
1,013.0
(114.6)
(16.4)
(29.4)
(40.3)
(102.4)
(47.6)
(20.2)
(370.9)
642.1
(197.0)
445.1
(0.9)
(10.3)
1.2
(10.0)
435.1
230.0
230.0
2017
$m
194.8
269.4
197.1
104.4
150.5
13.9
0.1
1.9
932.1
(110.6)
(14.6)
(29.3)
(30.0)
(85.2)
(46.0)
-
(315.7)
616.4
(182.3)
434.1
(0.5)
39.6
(0.4)
38.7
472.8
224.5
224.5
1 $0.2 million (2017: $0.3 million) was reclassified from equity to profit or loss following the sale of available-for-sale financial assets prior to their maturity.
Foreign currency transactions are translated into AUD, being the currency of the primary economic environment in which the entity operates (the
functional currency), 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 availa-
ble-for-sale investments in unlisted entities (refer to note C1).
Revenues and expenses are recognised net of the amount of Goods and Services Tax (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.
ASX Annual Report 2018 Consolidated statement of comprehensive income / 55
Consolidated balance sheet
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
Investments at fair value through profit or loss
Intangible assets
Property, plant and equipment
Prepayments
Total non-current assets
Total assets
Current liabilities
Amounts owing to participants
Payables
Current tax liabilities
Provisions
Revenue received in advance
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
B2
B2
D1
C1
C2
C3
D2
D3
B1
D4
D5
B1
A5
D5
A3
2018
$m
5,563.9
4,001.4
373.2
17.4
9,955.9
416.4
53.1
4.8
2,438.1
54.4
0.3
2,967.1
12,923.0
8,295.8
354.3
17.1
14.6
22.4
2017
$m
5,683.8
3,401.8
1,124.9
16.6
10,227.1
431.1
66.7
-
2,439.2
46.6
1.0
2,984.6
13,211.7
7,884.7
1,092.4
16.3
15.8
18.2
8,704.2
9,027.4
200.0
64.7
8.5
0.1
273.3
8,977.5
3,945.5
3,027.2
666.7
71.5
168.4
11.7
3,945.5
200.0
69.3
6.8
0.1
276.2
9,303.6
3,908.1
3,027.2
622.2
71.5
178.4
8.8
3,908.1
Assets are recognised net of the amount of GST, except where the amount of GST is not recoverable from the taxation authority. In these circum-
stances the GST is recognised as part of the cost of acquisition 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.
56
/ ASX Annual Report 2018 Consolidated balance sheet
Consolidated statement of changes in equity
For the year ended 30 June
Note
Opening balance at 1 July 2017
Profit for the year
Other comprehensive income for
the year
Total comprehensive income for
the period, net of tax
Transactions with owners in their
capacity as owners:
Incentive plans –
value of employee services
Dividends paid
Closing balance at 30 June 2018
Opening balance 1 July 2016
Profit for the year
Other comprehensive income for
the year
Total comprehensive income for
the period, net of tax
Transactions with owners in their
capacity as owners:
Dividends paid
Closing balance at 30 June 2017
E5.2
A2
A2
Issued
capital
$m
3,027.2
-
-
-
-
-
3,027.2
3,027.2
-
-
-
-
3,027.2
Retained
earnings
$m
622.2
445.1
-
445.1
-
(400.6)
666.7
576.9
434.1
-
434.1
(388.8)
622.2
Restricted
capital
reserve
$m
71.5
-
-
-
-
-
71.5
71.5
-
-
-
-
71.5
Asset
revaluation
reserve
$m
Equity
compensation
reserve
$m
178.4
-
(10.0)
(10.0)
-
-
168.4
139.7
-
38.7
38.7
-
178.4
8.8
-
-
-
2.9
-
11.7
8.8
-
-
-
-
8.8
Total
equity
$m
3,908.1
445.1
(10.0)
435.1
2.9
(400.6)
3,945.5
3,824.1
434.1
38.7
472.8
(388.8)
3,908.1
ASX Annual Report 2018 Consolidated statement of changes in equity / 57
Consolidated statement of cash flows
For the year ended 30 June
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid
Dividends received
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Increase in participants’ margins and commitments
Payments for available-for-sale investments
Payments for equity accounted investments
Payments for investments at fair value through profit or loss
Payments for other non-current assets
Net cash inflow from investing activities
Cash flows from financing activities
Dividends paid
Net cash (outflow) from financing activities
Net increase in cash and cash equivalents1
Increase/(decrease) in the fair value of cash and cash equivalents
Increase/(decrease) in cash and cash equivalents due to changes in foreign exchange rates
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year1
Cash and cash equivalents consists of:
ASX Group funds
Participants’ margins and commitments
Total cash and cash equivalents1
Note
C2
B3, C3
A2
B2
B1
B2
2018
$m
891.7
(248.0)
643.7
169.1
(101.9)
14.2
(196.4)
528.7
404.5
-
(7.0)
(4.6)
(48.3)
344.6
(400.6)
(400.6)
472.7
0.4
6.6
9,085.6
9,565.3
1,069.5
8,495.8
9,565.3
2017
$m
835.4
(257.4)
578.0
150.4
(83.9)
13.9
(174.8)
483.6
2,018.9
(16.2)
-
-
(61.0)
1,941.7
(388.8)
(388.8)
2,036.5
(1.3)
(22.4)
7,072.8
9,085.6
1,000.9
8,084.7
9,085.6
1 Available-for-sale financial assets pledged as security under repurchase agreements are excluded from cash and cash equivalents. Short-term repurchase
agreements are used to support the investment of participants’ margins.
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 (loss)/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
FX revaluation on investments at fair value through profit or loss
Change in fair value on equity accounted investments
Changes in operating assets and liabilities:
Increase in tax balances
(Increase) in receivables1
(Increase) in prepayments
Increase in payables1
Increase in revenue received in advance
Increase/(decrease) in provisions
Net cash inflow from operating activities
445.1
434.1
47.6
2.9
0.4
0.4
(0.5)
(0.2)
20.2
0.5
(3.3)
(0.1)
11.1
4.2
0.4
528.7
46.0
-
(0.1)
0.2
0.2
-
-
7.1
(0.1)
(5.0)
0.3
1.8
(0.9)
483.6
1 Receivables and payables excludes the movement in margins receivable/payable. Payables also excludes the securities pledged under repurchase agreements.
Cash and cash equivalents includes all cash and funds on deposit and available-for-sale financial assets other than those pledged as security under
reverse repurchase agreements (refer to note B2). Cash flows are reported on a gross basis and inclusive of GST. 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.
58
/ ASX Annual Report 2018 Consolidated statement of cash flows
Preface to the notes to the financial statements
ASX Limited (ASX or the Company) is a company limited by shares, incorporated and domiciled in Australia and is a for-profit entity for
the purposes of preparing the financial statements.
The financial statements for the consolidated entity which consists of ASX and its subsidiaries (together referred to as the Group) for the
year ended 30 June 2018 were authorised for issue by the Board of Directors on 16 August 2018. The directors have the power to amend
and reissue the financial statements.
The financial statements are general purpose financial statements that:
• have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements issued by the Australian Accounting Standards Board (AASB) and International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board (IASB)
• include the assets and liabilities of all subsidiaries of the Company as at 30 June 2018 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 measured and presented in Australian dollars which is ASX’s functional and presentation currency with all values rounded to the
nearest hundred thousand dollars unless otherwise stated, in accordance with ASIC Legislative Instrument 2016/191.
Significant accounting policies and key judgements and estimates are contained in shaded text and are included in 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 accounting policies, Management has made a number of judgements and applied estimates concern-
ing future events.
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
• C3 Investments at fair value through profit or loss
• D2 Intangible assets.
Reclassification or restatement of prior year balances
Certain prior year amounts in the following notes to the financial statements have been reclassified or restated to conform to current period
presentations:
• B3 Financial risk
• D3 Property, plant and equipment
• E5.1 Commitments.
ASX Annual Report 2018 Preface to the notes to the financial statements / 59
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 described 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.
• Derivatives and OTC Markets includes revenue from trading and
clearing of futures and equity options, and clearing of OTC inter-
est 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. Austraclear and ASX Collateral services revenue is recog-
nised over the period the service is provided. This may involve
deferring a portion of the revenue to future reporting periods.
• 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). Accordingly, revenue for trades transacted
in the last two days prior to period end are recognised in the
subsequent reporting period. Revenue in relation to information
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 securi-
ties, warrants and exchange-traded funds. Cash market clear-
ing and settlement revenue is recognised at settlement date.
Accordingly, clearing and settlement fees for trades transacted
in the last two days prior to period end are recognised in the
subsequent reporting period.
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 rate method.
Interest expense is recognised as a finance cost in the statement
of comprehensive income using the effective interest rate method.
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 an integrated organisation that provides a multi-asset class
product offering which includes:
• 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
• Information and technical services supporting the Group's
activities.
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. In the current reporting period,
the impairment to the carrying value of the equity investment in
Yieldbroker has been treated as a significant item and excluded
from underlying profit after tax.
Group performance measures, including earnings before inter-
est and tax (EBIT) and earnings before interest, tax, depreciation
and amortisation (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 reclassified
within operating expenses; and interest income is presented net
of interest expense.
(b) Segment results
The information provided on a regular basis to the CODM, along with
a reconciliation to statutory profit after tax for the period attributa-
ble to owners of the Company, are presented on the following page.
ASX derives all external customer revenue within Australia with
some services accessible, and some customers located, offshore.
No single customer generates revenue greater than 10% of the
Group’s total revenue.
60
/ ASX Annual Report 2018 Performance of the Group
Performance of the Group continued
2018
2017
Segment
information
$m
Adjustments
$m
Consolidated
income statement
$m
Segment
information
$m
Adjustments
$m
Consolidated
income statement
$m
171.4
49.2
220.6
21.9
212.5
52.0
286.4
45.7
90.1
74.1
209.9
51.9
52.9
104.8
1.0
822.7
(114.6)
(16.4)
(27.9)
(22.4)
(7.9)
(6.3)
(195.5)
627.2
-
(47.6)
-
(47.6)
579.6
18.2
50.3
14.2
82.7
662.3
(197.0)
465.3
(20.2)
445.1
2.3
-
2.3
0.2
-
0.1
0.3
0.3
-
1.6
1.9
0.4
0.1
0.5
0.6
170.9
14.2
(0.4)
190.3
-
-
(1.5)
(17.9)
7.9
6.3
(102.4)
-
(20.2)
(127.8)
(18.2)
(50.3)
(14.2)
(82.7)
(20.2)
-
(20.2)
20.2
-
173.7
49.2
222.9
22.1
212.5
52.1
286.7
46.0
90.1
75.7
211.8
52.3
53.0
105.3
1.6
170.9
14.2
(0.4)
1,013.0
(114.6)
(16.4)
(29.4)
(40.3)
-
-
(102.4)
(47.6)
(20.2)
(370.9)
-
-
-
-
642.1
(197.0)
445.1
-
445.1
150.3
42.4
192.7
21.7
197.4
50.0
269.1
46.3
82.5
67.2
196.0
53.3
51.1
104.4
1.9
764.1
(110.6)
(14.6)
(27.9)
(18.2)
(6.7)
(2.9)
(180.9)
583.2
-
(46.0)
-
(46.0)
537.2
17.8
47.5
13.9
79.2
616.4
(182.3)
434.1
-
434.1
2.1
-
2.1
0.2
-
0.1
0.3
-
-
1.1
1.1
-
-
-
-
150.5
13.9
0.1
168.0
-
-
(1.4)
(11.8)
6.7
2.9
(85.2)
-
-
(88.8)
(17.8)
(47.5)
(13.9)
(79.2)
-
-
-
-
-
152.4
42.4
194.8
21.9
197.4
50.1
269.4
46.3
82.5
68.3
197.1
53.3
51.1
104.4
1.9
150.5
13.9
0.1
932.1
(110.6)
(14.6)
(29.3)
(30.0)
-
-
(85.2)
(46.0)
-
(315.7)
-
-
-
-
616.4
(182.3)
434.1
-
434.1
For the year ended 30 June
Revenue
Listings
Issuer Services
Listings and Issuer Services
Equity Options
Futures and OTC Clearing
Austraclear
Derivatives and OTC Markets
Cash Market Trading
Information Services
Technical Services
Trading Services
Cash Market Clearing
Cash Market Settlement
Equity Post-Trade Services
Other
Operating revenue
Interest income
Dividend income
Share of net (loss)/profit of
equity accounted investments
Total revenue
Expenses
Staff
Occupancy
Equipment
Administration
Variable
ASIC levy
Operating expenses
EBITDA
Finance costs
Depreciation and amortisation
Other
Total expenses
EBIT
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 items1
Net profit after tax
1 Refer to note C2 for further details.
ASX Annual Report 2018 Performance of the Group / 61
Performance of the Group continued
A2 Dividends
A3 Capital management
The Board's policy is to pay a dividend based on 90% of underlying
net profit after tax. This policy is unchanged from the prior year.
The following table includes information relating to dividends recog-
nised and paid by ASX during the financial year.
For the year ended 30 June 2018
Final dividend for the year ended
30 June 2017
Interim dividend for the year ended
30 June 2018
Total
For the year ended 30 June 2017
Final dividend for the year ended
30 June 2016
Interim dividend for the year ended
30 June 2017
Total
Cents per
share
Total amount
$m
99.8
107.2
207.0
99.0
102.0
201.0
193.2
207.5
400.7
191.7
197.5
389.2
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 $0.1 million (2017:
$0.4 million) has been eliminated on consolidation.
Since the end of the financial year, the directors have determined
a final dividend of 109.1 cents per share totalling $211.2 million. The
dividend will be fully franked based on tax paid at 30%.
A liability is recognised for the amount of any dividends determined
on or before the balance date but not yet paid. Typically, the final
dividend in respect of a financial year is determined after balance
date, and therefore no provision is recognised.
Dividend franking account
As at 30 June
Franking credits available for future
years at 30% adjusted for the
payment of current income tax
2018
$m
268.6
2017
$m
239.2
Adjusting for the payment of the final dividend for the year ended
30 June 2018, the franking balance would be $178.1 million (2017:
$156.4 million).
62
/ ASX Annual Report 2018 Performance of the Group
At 30 June 2018, equity of the Group totalled $3,945.5 million (2017:
$3,908.1 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:
• the level of goodwill recognised from business combinations.
This goodwill may be impacted by the performance of the
Group and subsequent impairment leading to a reduction in
capital
• regulatory standards, both domestic and international, which
may impact the level of capital supporting the clearing and
settlement 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 undertaken in markets and
clearing and settlement facilities operated by ASX. Generally
a higher level of activity may result in higher capital require-
ments, 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 capi-
tal held by the Group can be impacted by any revision to future
loss assessments and regulatory requirements
• the level of investments made, their fair value and the potential
movement in their market values. Capital requirements are
also impacted by ASX’s level of investment in existing or new
services. These investments are predominantly in intangible
software assets and other equity investments which may be
subject to write-down under certain circumstances.
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 interna-
tional regulations, 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
significant allocation of capital supports the activities 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 appropriate 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.
The Group's objective is also to maintain its credit rating at the current
AA- long-term and A-1+ short-term as rated by Standard & Poor’s (S&P).
Performance of the Group continued
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 avail-
able-for-sale financial 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 performance rights issued under ASX equity plans.
Refer to the consolidated statement of changes in equity for details
of movements in the reserves.
A4 Earnings per share
As at 30 June
Basic and diluted earnings
per share (cents)
Weighted average number of ordi-
nary shares used in calculating basic
and diluted earnings per share
2018
230.0
2017
224.5
193,507,104
193,415,430
The increase in weighted average number of ordinary shares reflects
lower treasury shares held during the current financial year. The
basic and diluted earnings per share (EPS) amounts have been
calculated on the basis of net profit after tax of $445.1 million
(2017: $434.1 million).
Basic EPS is calculated by dividing the consolidated profit attribut-
able 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 potential 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.
(a) Ordinary share capital
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 2018, 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.
As at 30 June 2018, the closing balance of ordinary share capital was
$3,027.2 million (2017: $3,027.2 million) and the number of shares
outstanding was 193,595,162 (2017: 193,595,162). There were no
movements in the balance of ordinary share capital or the number
of shares outstanding in the current or prior financial year.
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 reinvestment plan (DRP) at the DRP allocation
price are classified as fully paid ordinary shares.
(b) Treasury shares
The following table presents the movement in treasury shares
during the financial year:
For the year ended 30 June
Opening balance
Issue of shares under the LTIP
Issue of deferred shares under
employee equity plans
Shares transferred to the LTIP
Closing balance
2018
No. of shares
2017
No. of shares
183,218
(8,065)
(116,801)
2,708
61,060
181,269
(5,419)
-
7,368
183,218
Treasury shares are shares in ASX held by a trust for the benefit of
employees under the ASX Long-Term Incentive (LTI) plan as described
in the remuneration report. The original purchase price of the shares,
net of any tax effect, is deducted from the equity compensation reserve
in equity.
Shares allocated to employees under the deferred short-term incentive
(DSTI) plan are held as treasury shares when forfeited until such time
that they are reallocated under another DSTI or LTI plan.
(c) Reserves
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 support.
ASX Annual Report 2018 Performance of the Group / 63
Performance of the Group continued
As at 30 June
2018
$m
2017
$m
Deferred tax (liability) comprises the estimated future expense at an income tax
rate of 30% (2017: 30%) of the following items:
Fixed assets
Revaluation of cash flow hedges
Revaluation of available-for-sale
financial assets
Revaluation of available-for-sale
investments – listed entities
Revaluation of available-for-sale
investments – unlisted entities
Long-term incentive plan
Deferred tax (liability)
Net deferred tax (liability)
(9.4)
(0.2)
-
(70.9)
(1.4)
(0.3)
(82.2)
(64.7)
(9.2)
-
(0.2)
(77.2)
-
(0.3)
(86.9)
(69.3)
1 A deferred tax asset has not been recognised on the $20.2 million
impairment to the carrying value of Yieldbroker.
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 determined 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 prob-
able 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 enforce-
able right to offset current tax liabilities and assets, and when the
deferred tax balances relate to income taxes levied by the same tax
authority.
Further information on the Group's tax obligations can be found in
the Tax Transparency Report available on ASX's website.
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 comprehensive income.
As at 30 June
(a) Income tax expense
Profit before income tax expense
Prima facie income tax expense calculated
at 30% (2017: 30%) on the profit before tax
Movement in income tax expense due to:
Non-deductible items
Non-assessable items
Equity accounted investments impairment1
Franking credit offset
Research and development tax 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 to current tax for
prior periods
Total income tax expense
(c) Income tax on items recognised directly
in equity
Deferred STI shares returned to trust
Total
(d) Income tax on items recognised directly
in other comprehensive income
Revaluation of available-for-sale
financial assets
Revaluation of available-for-sale
investments – listed entities
Revaluation of available-for-sale
investments – unlisted entities
Revaluation of cash flow hedges
Total
(e) Deferred tax asset/(liability)
2018
$m
642.1
(192.6)
(1.2)
(0.1)
(6.1)
2.5
0.4
0.1
2017
$m
616.4
(184.9)
(0.2)
0.1
-
2.4
0.2
0.1
(197.0)
(182.3)
(197.3)
(181.2)
(0.2)
0.4
0.1
0.4
(1.6)
0.1
(197.0)
(182.3)
0.2
0.2
0.4
6.3
(1.9)
(0.5)
4.3
-
-
0.2
(17.2)
0.2
0.2
(16.6)
Deferred tax asset comprises the estimated future benefit at an income tax
rate of 30% (2017: 30%) of the below items:
Doubtful debts provisions
Employee entitlements provisions
Premises provisions
Accrued expenses
Revenue received in advance
Revaluation of cash flow hedges
Revaluation of available-for-sale
financial assets
Revaluation of available-for-sale
investments – unlisted entities
Deferred tax asset
0.2
9.6
2.0
0.5
4.9
-
0.3
-
17.5
0.3
9.8
2.0
1.0
3.7
0.3
-
0.5
17.6
64
/ ASX Annual Report 2018 Performance of the Group
Risk management
The Group is subject to a variety of risks including clearing and
settlement risk, and operational risk.
B1 Clearing risk
The Group undertakes central counterparty (CCP) clearing and
collects margins and other balances (commitments) from clearing
participants as security for clearing risk undertaken.
Sub-sections (a) and (b) below discuss participants’ obligations and
the nature of collateral and commitments lodged, as well as ASX’s
recognition principles concerning these liabilities.
(a) Novation
The Group has two wholly owned subsidiaries 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.
As a CCP, transactions between two clearing participant organisa-
tions are novated to the CCPs. This makes the CCPs contractually
responsible for the obligations entered into by clearing partici-
pants 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. These margins are based on risk parameters attached to
the underlying security or contract at trade date and may include
additional margins called on participants. 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 lodged and
recognised on balance sheet comprised of the following:
As at 30 June
Current
Cash
Debt securities
Total current amounts owing
to participants
Non-current
Cash commitments
Total non-current amounts owing
to participants
2018
$m
7,884.6
411.2
8,295.8
200.0
200.0
2017
$m
7,671.6
213.1
7,884.7
200.0
200.0
Total amounts owing to participants
8,495.8
8,084.7
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 lodged by participants as commitments
to clearing guarantee funds, which at reporting date had no deter-
mined repayment date.
Margins that are settled by cash or debt securities are recognised
on balance sheet at fair value and are classified as amounts owing
to participants 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 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.
In addition to the initial margin, participants must also settle changes
in the fair value of derivatives contracts (variation margin), and in
certain circumstances must lodge additional margins. Participants
must settle both initial and variation margins daily, including possi-
ble intraday and additional margin calls. The amounts owing to
participants are repayable on settlement or closure of the contracts.
In the event of default by a clearing participant, ASX Clear and ASX
Clear (Futures) are required to provide funds or settle securities
of the defaulting participant. The CCPs also have the authority to
retain collateral and commitments deposited by the defaulting
clearing participant to satisfy its obligations. As at 30 June, collat-
eral and commitments lodged by clearing participants comprised
the following:
As at 30 June
Cash
Equity securities
Debt securities
ASX Clear
ASX Clear (Futures)
2018
$m
567.3
2017
$m
672.3
3,333.2
3,398.3
-
-
2018
$m
7,517.3
-
411.2
2017
$m
7,199.3
-
213.1
All net delivery and net payment obligations relating to cash market
and derivative securities owing to or by participants as at 30 June
2018 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 participants 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 clear-
ing default funds shown in the next two tables as well as eligible
collateral and commitments. 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 clearing default funds after depletion
caused by a default loss. The replenished fund, which may be less
than the original fund, is then available to support new activity post
the loss. To comply with this obligation, the Group has undertaken,
in certain circumstances, to provide funds up to pre-determined
levels for replenishment of the clearing default funds. The Group
may utilise a number of alternative funding sources to contribute
to an increase in or replenishment 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.
ASX Annual Report 2018 Risk management /
65
Risk management continued
The CCPs’ operating rules also provide for the CCPs to undertake
certain actions to deal with events of default and utilisation of
collateral, commitments and clearing default funds. These include
the ability to call recovery assessments, impose payment reductions
or implement termination of positions.
The following tables show the financial resources available to the
CCPs to support their clearing activities (over and above the collateral
lodged by participants).
A participant may be either a futures or OTC participant or both.
The order of application with respect to items 3 and 5 above will
depend on the status of the defaulting participant. Where a partic-
ipant default is only a single category (i.e. futures or OTC), then the
non-defaulting participants’ commitments from the same category
are utilised in item 3, with the other category utilised in item 5.
Where a defaulting participant is both a futures and OTC participant,
the other non-defaulting participants’ commitments are apportioned
for the purposes of 3 and 5.
ASX Clear
As at 30 June
Restricted capital reserve
Equity provided by the Group
Paid-in resources
Recovery assessments
Total financial resources
2018
$m
71.5
178.5
250.0
300.0
550.0
2017
$m
71.5
178.5
250.0
300.0
550.0
B2 Cash and cash equivalents
The cash and funds on deposit and available-for-sale financial assets
(other than those assets pledged as security under repurchase
agreements) 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 and commitments lodged by
participants in accordance with note B1.
The financial resources at 30 June 2018 available to ASX Clear in the
event of a participant default would be applied in the following order:
As at 30 June
Cash at call
1. collateral, other margin or contributions lodged by the defaulting
Reverse repurchase agreements
Deposits
Cash and funds on deposit
Money market instruments - at cost
Revaluation recognised in equity
Available-for-sale financial assets
Total cash and cash equivalents
2018
$m
447.2
4,790.7
326.0
5,563.9
4,002.3
(0.9)
4,001.4
9,565.3
2017
$m
504.3
4,958.5
221.0
5,683.8
3,401.3
0.5
3,401.8
9,085.6
The cash and cash equivalents above includes $71.5 million of
restricted cash that is available for use by the entity in specific
circumstances as described in note A3(c) and is also recognised
as a restricted capital reserve within equity on the balance sheet.
Available-for-sale financial assets comprise short-term money
market investments, including negotiable certificates of deposit,
bonds, floating rate notes, promissory notes and treasury notes,
and are traded in active markets.
Reverse repurchase agreements are recognised within cash and
funds on deposit at the amount of the cash consideration paid. The
securities purchased under the agreement are not recognised on the
balance sheet as substantially all the risks and rewards of ownership
are retained by the counterparty to the agreement.
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 recogni-
tion, available-for-sale financial assets continue to be measured at fair
value as determined by valuation techniques outlined in note B3(d)(i).
Fair value gains or losses are recognised directly in the asset revaluation
reserve in equity until the asset is derecognised, at which time the
cumulative gain or loss previously recognised in equity is recognised
in profit or loss.
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 transferred to profit or loss.
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 (no amounts were levied in the current or prior year).
ASX Clear (Futures)
Equity provided by the Group
Cash commitments
Equity provided by the Group
Cash commitments
Equity provided by the Group
Paid-in resources
Recovery assessments1
Total financial resources
120.0
100.0
150.0
100.0
180.0
650.0
200.0
850.0
120.0
100.0
150.0
100.0
180.0
650.0
200.0
850.0
1 $200m for a single default event and up to $600m for more than one default event.
The financial resources at 30 June 2018 available to ASX Clear (Futures)
in the event of a participant default would be applied in the following
order:
1. collateral lodged by the defaulting participant
2. equity capital of $120.0 million
3. commitments lodged 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 by participants, totalling $100.0 million
6. equity capital of $180.0 million
7. recovery assessments of $200.0 million which can be levied on
participants (no amounts were levied in the current or prior year).
66
/ ASX Annual Report 2018 Risk management
Risk management continued
B3 Financial risk
The Group’s activities expose it to a variety of financial risks including market risk (comprising interest rate, foreign currency and equity
price risk), credit risk and liquidity risk.
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,
liquidity and cash flow interest rate risk, and manages clearing default credit risk with counterparties in accordance with approved Board
mandates with ongoing reporting to the respective boards.
The Group holds the following financial assets and liabilities by category:
2018
2017
Fair value
through
profit or loss
$m
Note
Available-
for-sale
$m
Amortised
cost
$m
Total
$m
Available-
for-sale
$m
Amortised
cost
$m
As at 30 June
Financial assets
Cash and funds on deposit
Available-for-sale financial assets
Receivables
Available-for-sale investments
Investments at fair value through profit
or loss
Total financial assets
Financial liabilities
Payables
Amounts owing to participants
Total financial liabilities
B2
B2
D1
C1
C3
D4
B1
-
-
-
-
4.8
4.8
-
-
-
Total
$m
5,683.8
3,401.8
1,124.9
431.1
-
-
5,563.9
4,001.4
-
416.4
-
-
373.2
-
-
5,563.9
4,001.4
373.2
416.4
4.8
-
5,683.8
3,401.8
-
431.1
-
-
1,124.9
-
-
4,417.8
5,937.1
10,359.7
3,832.9
6,808.7
10,641.6
-
-
-
348.2
8,495.8
8,844.0
348.2
8,495.8
8,844.0
-
-
-
1,085.7
8,084.7
9,170.4
1,085.7
8,084.7
9,170.4
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets (excluding
available-for-sale investments) as detailed in the previous table.
(a) Market risk
Market risk is the risk of loss arising from movements in observable market variables such as interest rates, foreign exchange rates and
other market prices.
(i) Interest rate risk
Exposure arising from
Variable rate cash investments and money
market instruments expose the Group to cash
flow interest rate risk.
Risk management
• The Boards of the relevant subsidiaries have set limits with respect to maximum and weighted aver-
age maturity and value at risk.
• Managed by policies that enable the Group to pay a variable rate of interest to participants 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 aver-
age maturity and value at risk.
Interest bearing assets comprise the investment of the Group’s cash resources (participant collateral lodged in cash and Group funds).
Interest bearing liabilities comprise collateral and commitment funds lodged by participants.
The Group’s receivables, available-for-sale investments and payables 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 (directly) due to a change in market interest rates.
ASX Annual Report 2018 Risk management /
67
Risk management continued
The following table presents the Group’s interest bearing financial assets and liabilities at 30 June.
As at 30 June
Interest bearing financial assets
Cash and funds on deposit
Available-for-sale financial assets
Investments at fair value through profit or loss
Total interest bearing financial assets
Weighted average interest rate at period end
Interest bearing financial liabilities
Amounts owing to participants
Total interest bearing financial liabilities
Weighted average interest rate at period end
2018
Fixed
interest
rate
$m
5,116.7
3,499.9
4.8
8,621.4
1.99%
Total
$m
5,563.9
3,590.2
4.8
9,158.9
-
-
8,495.8
8,495.8
Floating
interest
rate
$m
447.2
90.3
-
537.5
1.49%
8,495.8
8,495.8
1.05%
Floating
interest
rate
$m
504.3
267.8
-
772.1
1.20%
8,084.7
8,084.7
1.06%
2017
Fixed
interest
rate
$m
5,179.5
2,920.9
-
8,100.4
1.78%
Total
$m
5,683.8
3,188.7
-
8,872.5
-
-
8,084.7
8,084.7
Net interest bearing financial (liabilities)/assets
(7,958.3)
8,621.4
663.1
(7,312.6)
8,100.4
787.8
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 instruments where the interest rate is fixed up to maturity – predominantly term deposits, negotiable
certificates of deposit, promissory notes, treasury notes, reverse repurchase agreements, bonds and convertible notes.
Sensitivity analysis (net of tax)
Changes in interest rates affect the Group's profit or loss due to higher/lower interest income earned on its cash, available-for-sale financial
assets and investments at fair value through profit or loss while equity is affected due to the change in fair values of available-for-sale
financial assets. The Group does not account for any interest bearing financial liabilities at fair value through profit or loss.
An analysis of this sensitivity and its impact on the Group's profit or loss and equity net of tax for the year is provided in the table below.
The analysis is based on a hypothetical 25 basis point change in interest rates at 30 June and has been applied to the interest rate risk
exposures that exist at that date. All other variables have been held constant.
+25 basis point change in interest rates
-25 basis point change in interest rates
2018
2017
Impact on profit
$m
Impact on equity
$m
Impact on profit
$m
Impact on equity
$m
(1.0)
1.0
(1.6)
1.6
(0.7)
0.7
(1.3)
1.3
As interest paid on financial liabilities reference overnight official cash rates and interest earnt on financial assets reference a range of
rates such as BBSW, the sensitivity on a 25 basis point increase/decrease could result in an overall impact on profit of ($2.0) million/$2.0
million respectively. This assumes all variables remain constant.
(ii) Foreign currency risk
Exposure arising from
Cash flow commitments in foreign currencies
entered into by the Group.
Risk management
• Where the Group enters into material cash flow commitments in foreign currencies, its policy is to
enter into hedging arrangements to mitigate the exchange risk where possible.
Collateral on clearing participants’ derivatives
exposures lodged in foreign currency and held
by the Group's CCPs.
• 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. Where non-match-
ing currency is lodged as collateral, a discount is applied to its value.
The majority of the Group’s net foreign currency risk is associated with foreign denominated cash, net interest income and exchange fees
receivable. Such exposure is converted to AUD on a regular basis.
At 30 June 2018, USD 16.7 million (2017: USD 12.4 million) was designated by the Group as the hedging instrument in qualifying cash flow
hedges for committed expenditure to be paid in USD. These amounts are included in the following table within cash and funds on deposit.
During the current financial year, the use of cash flow hedges resulted in a $0.5 million (2017: $0.3 million) increase in cash flow required
for committed capital and operating expenses.
Available-for-sale investments denominated in USD are subject to foreign currency risk, impacting their carrying value.
68 / ASX Annual Report 2018 Risk management
Risk management continued
The table below shows the Group’s exposure on its balance sheet to foreign currency risk at the end of the year, expressed in AUD.
2018
2017
As at 30 June
Financial assets
Cash and funds on deposit
Receivables
Available-for-sale investments
Investments at fair value through profit
or loss
Financial liabilities
Payables
Amounts owing to participants
Net exposure
NZD
$m
131.4
0.7
-
-
0.2
130.5
1.4
USD
$m
113.7
-
28.9
4.8
-
90.3
57.1
EUR
$m
JPY
$m
1.6
105.5
-
-
-
-
1.6
-
-
-
-
-
104.6
0.9
81.23
NZD
$m
143.6
0.5
-
-
0.2
143.2
0.7
USD
$m
17.6
-
22.7
-
-
1.3
39.0
EUR
$m
1.5
-
-
-
-
1.5
-
1.0524
0.7683
0.6716
JPY
$m
173.4
0.1
-
-
-
172.9
0.6
86.19
Exchange rate for conversion AUD 1:
1.0878
0.7352
0.6355
Sensitivity analysis (net of tax)
Changes in exchange rates affect the Group's profit or loss due to the gain/loss recognised on translation of foreign currency denominated
financial assets and liabilities at balance date. Equity is affected due to USD foreign currency cash flow commitments designated as cash flow
hedges and the valuation of foreign currency investments.
An analysis of this sensitivity and its impact on the Group's profit or loss and equity net of tax for the year is provided in the table below. The
analysis is based on a hypothetical 10% change in the market exchange rate of the AUD against other currencies at 30 June and has been applied
to the foreign currency risk exposures that exist at that date. All other variables, including interest rates, have been held constant. The impact
is expressed in AUD.
Impact on equity
+10% strengthening of AUD
-10% weakening of AUD
2018
2017
Impact on profit
$m
Impact on equity
$m
Impact on profit
$m
Impact on equity
$m
USD
$m
(0.3)
0.4
USD
$m
(3.6)
4.4
USD
$m
-
-
USD
$m
(2.5)
3.0
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 designated 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 profit or loss.
(iii) Price risk
Exposure arising from
Equity securities price movements with respect
to the Group’s investments in listed entities of
$387.5 million (2017: $408.4 million).
Price movements of the Group's unquoted secu-
rities of $28.9 million (2017: $22.7 million) and
convertible notes of $4.8 million (2017: nil).
Risk management
• Ongoing monitoring of values with respect to any impairment, with consideration given to financial
and other implications of holding the instruments.
• Strategic investment to support the Group's distributed ledger technology development. Reports
are submitted to the Group's senior management and Board of Directors on a regular basis.
Other price movements associated with under-
lying equities and derivatives on trades novated
to the CCPs.
• 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).
Sensitivity analysis (net of tax)
Changes in quoted market prices affect the Group's equity due to the change in fair value of the Group's listed equity investment (refer to note C1). As
the Group does not account for any equity investments at fair value through profit or loss, any change in fair value resulting from a change in price
would only affect profit or loss if the investment was subsequently sold. If the price of the listed equity investment increased/decreased by 10%
at 30 June 2018, with all other variables held constant, equity would have increased/decreased by $27.1 million (2017: $28.6 million), net of tax.
ASX Annual Report 2018 Risk management /
69
Risk management continued
(b) Credit risk
Exposure arising from
Through its CCP activities, 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 partic-
ipants 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’ expo-
sure 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. Refer to note B1(c).
• Margin calls outside of Australian business hours.
Investment counterparty credit risk arises on
certain financial assets including cash, funds
on deposit, 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.
• Recovery rules that address the allocation of losses between the Group and clearing participants.
• Active debt collection procedures and regular review of trade receivables ageing.
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, enable it to manage its central counterparty credit risk and meet its regulatory
obligations. Further information on the resources available to the CCPs in the event of a participant default is shown in note B1.
S&P credit ratings are used in determining the credit quality of the counterparty with whom cash and funds on deposit, and current
available-for-sale financial assets are held.
Counterparties are limited to the Commonwealth of Australia, foreign governments and banks, and Australian state governments and
banks with a minimum short-term credit rating of A2. The Group’s largest single counterparty exposure at the end of the reporting period
was $2,285.4 million (2017: $1,876.2 million) to an Australian licensed bank with a S&P short-term credit rating of A1+. The majority of this
exposure was secured against Commonwealth Government securities. The risk ratings of the counterparties that the Group has exposure
to at the end of the period are shown in the following table.
As at 30 June
Cash at call
Reverse repurchase agreements1
Deposits
Total cash and funds on deposit
Negotiable certificates of deposit
Promissory notes
Treasury notes
Floating rate notes
Bonds
Total available-for-sale financial assets
2018
2017
A1+
$m
177.8
3,933.7
110.0
4,221.5
442.4
2,555.6
99.7
90.3
438.5
3,626.5
A1
$m
269.4
857.0
216.0
1,342.4
374.9
-
-
-
-
374.9
A2
$m
-
-
-
-
-
-
-
-
-
-
Total
$m
447.2
4,790.7
326.0
5,563.9
817.3
2,555.6
99.7
90.3
438.5
4,001.4
A1+
$m
323.3
3,770.4
25.0
4,118.7
172.4
1,926.2
-
265.8
842.4
A1
$m
180.9
-
196.0
376.9
193.0
-
-
2.0
-
3,206.8
195.0
A2
$m
0.1
1,188.1
-
1,188.2
-
-
-
-
-
-
Total
$m
504.3
4,958.5
221.0
5,683.8
365.4
1,926.2
-
267.8
842.4
3,401.8
1 Reverse repurchase agreements are collateralised by Commonwealth, foreign government or Australian state government securities.
The Group uses other measures to monitor the credit of other financial assets, which includes trade receivables, margins receivable from partic-
ipants, accrued revenue, interest receivable and available-for-sale investments. 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.
(c) Liquidity risk
Exposure arising from
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 undiscounted contractual cash flows of the Group's financial assets and liabilities are shown in the following table. 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 following table due to the difference in fair value at balance
date compared to the contractual cash flows up to maturity.
70 / ASX Annual Report 2018 Risk management
Risk management continued
As at 30 June 2018
Financial assets
Cash and funds on deposit
Available-for-sale financial assets
Receivables
Available-for-sale investments
Investments at fair value through profit or loss
Total financial assets
Financial liabilities
Payables
Amounts owing to participants
Total financial liabilities
Commitments
Capital and operating commitments
Operating lease commitments
Total commitments
As at 30 June 2017
Financial assets
Cash and funds on deposit
Available-for-sale financial assets
Receivables
Available-for-sale investments
Total financial assets
Financial liabilities
Payables
Amounts owing to participants
Total financial 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 year
$m
No specific
maturity
$m
3,276.7
703.2
372.2
-
-
2,297.3
1,880.5
-
1,437.6
0.7
-
-
0.1
-
-
4,352.1
4,178.5
1,437.7
337.8
8,295.8
8,633.6
0.9
0.7
1.6
8.7
-
8.7
2.7
1.4
4.1
0.9
-
0.9
16.2
6.4
22.6
2,651.7
728.6
1,123.3
-
2,971.0
1,241.5
1.5
-
72.4
1,448.8
0.1
-
4,503.6
4,214.0
1,521.3
1,076.6
7,884.7
8,961.3
0.3
0.8
1.1
4.5
-
4.5
2.0
1.5
3.5
2.6
-
2.6
18.4
5.8
24.2
-
-
0.2
-
4.8
5.0
-
-
-
69.2
62.7
131.9
-
-
-
-
-
1.0
-
1.0
46.5
68.0
114.5
Total
$m
5,574.0
4,021.3
373.2
416.4
4.8
-
-
-
416.4
-
416.4
10,389.7
0.8
200.0
200.8
348.2
8,495.8
8,844.0
-
-
-
-
-
-
431.1
431.1
1.0
200.0
201.0
-
-
-
89.0
71.2
160.2
5,695.1
3,418.9
1,124.9
431.1
10,670.0
1,085.7
8,084.7
9,170.4
67.2
76.1
143.3
With respect to amounts owing to participants, while contractually some balances may be more than one month, they have been classified
as having maturities up to one month on the basis of the shortest possible obligation for repayment.
(d) Fair value measurements
(i) Fair value hierarchy and valuation techniques
The following table presents the Group’s financial assets measured and recognised at fair value at 30 June. The Group does not have any
financial liabilities measured at fair value.
2018
2017
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
As at 30 June
Financial assets
Available-for-sale financial assets:
- Negotiable certificates of deposit
- Promissory notes
- Treasury notes
- Floating rate notes
- Bonds
Available-for-sale investments
Investments at fair value through profit
or loss
-
-
-
-
389.6
387.5
-
817.3
2,555.6
99.7
90.3
48.9
-
-
Total financial assets
777.1
3,611.8
-
-
-
-
-
28.9
4.8
33.7
817.3
2,555.6
99.7
90.3
438.5
416.4
4.8
-
-
-
-
192.2
408.4
-
365.4
1,926.2
-
267.8
650.2
-
-
-
-
-
-
-
22.7
-
365.4
1,926.2
-
267.8
842.4
431.1
-
4,422.6
600.6
3,209.6
22.7
3,832.9
ASX Annual Report 2018 Risk management /
71
Risk management continued
There were no transfers between levels for recurring measurements
during the year. The Group did not measure any financial assets at
fair value on a non-recurring basis as at 30 June 2018.
(iii) Level 3 fair value instruments
The following table presents the changes in Level 3 fair value instru-
ments during the year:
The classification of financial instruments within the fair value
hierarchy and the valuation techniques used to determine their
values are detailed below.
Level 1
Level 1 inputs are unadjusted quoted prices in active markets at
the measurement date for identical assets and liabilities. Financial
instruments included in this category are the Group's listed equity
investment and Australian Government bonds. The fair value of listed
investments is determined by reference to the ASX-quoted closing
price at reporting date and the fair value of Australian Government
bonds are determined by reference to readily observable quoted
prices for identical assets in active markets.
Level 2
Level 2 inputs are 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). All current available-for-sale
financial assets other than Australian Government bonds as noted
above are classified as Level 2 financial instruments as their fair
values are determined using discounted cash flow models or observ-
able market prices for identical assets that are not actively traded.
Level 3
Level 3 inputs are based on unobservable market data. The fair
value of the Group's unlisted equity investment is determined using
a discounted cash flow model which includes unobservable inputs
and therefore is classified as a Level 3 instrument. The investments
held at fair value through profit and loss have also been classified
as a level 3 instrument.
(ii) Fair values of other financial instruments
The Group has a number of financial instruments which are not meas-
ured at fair value on the balance sheet. Due to their short-term nature,
the carrying amounts of current receivables, current payables and
current amounts owing to participants are assumed to approximate
their fair value. The carrying amount of non-current amounts owing to
participants approximates their fair value as the impact of discounting
is not significant.
Investments
in unlisted
entities1
$m
Investments
at fair value
through profit
or loss2
$m
22.7
-
5.0
0.9
-
0.3
28.9
23.3
-
-
(0.4)
(0.2)
22.7
-
4.6
-
-
0.2
-
4.8
-
-
-
-
-
-
For the year ended
30 June 2018
Opening balance
at 1 July
Additions
Price revaluation
FX revaluation gain:
– Recognised in
equity
– Recognised in
profit or loss
– Recognised in
deferred tax
Closing balance at
30 June
For the year ended
30 June 2017
Opening balance
at 1 July
Additions
Price revaluation
FX revaluation loss:
– Recognised in
equity
– Recognised in
deferred tax
Closing balance at
30 June
Total
$m
22.7
4.6
5.0
0.9
0.2
0.3
33.7
23.3
-
-
(0.4)
(0.2)
22.7
1 The revaluation gain/(loss), net of tax, has been recognised within the asset
revaluation reserve.
2 The (loss), net of tax, has been recognised within administration expenses in
the statement of comprehensive income.
A change in the unobservable inputs used to determine the fair
value of the unlisted equity investment would not have a material
impact on the financial statements.
(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 and commitments 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 and commitments lodged by participants at 30 June 2018
was $8,495.8 million (2017: $8,084.7 million).
72 / ASX Annual Report 2018 Risk management
Investments
C1 Available-for-sale investments
As at 30 June
Investments in listed entities
Investments in unlisted entities
Total available-for-sale investments
2018
$m
387.5
28.9
416.4
2017
$m
408.4
22.7
431.1
(a) Investments in listed entities
As at 30 June 2018, ASX held 19% (2017: 19%) of the share capital
in IRESS Limited (IRESS), whose principal activities consist of the
provision of financial planning and associated tools, in addition to
an equity information and trading platform for financial market and
wealth management participants.
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
As at 30 June 2018, ASX held 7% (2017: 8%) equity interest in Digital
Asset Holdings LLC (DAH), which specialises in the development
of distributed ledger technology solutions. The investment was
revalued upwards by $5.0m during the year to align with the Level
3 estimated current market value.
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 refer-
ence to quoted market prices at the close of business on the balance
sheet date. Refer to note B3(d)(i).
The fair value of investments in unlisted entities is determined by
reference to unobservable market data at balance date. Refer to
note B3(d)(iii).
C2 Equity accounted investments
As at 30 June 2018, ASX held a 49% (2017: 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.
During the year, the carrying amount was reduced by $20.2 million
to recognise the decline in current market value based on value-
in-use using projected future cash flows. This impairment follows
financial under-performance compared to expectations due to
slower growth in certain products moving to electronic trading.
The pre-tax discount rate used is 12.0% and the growth rate used
to extrapolate cash flow projections beyond five years is 3.5%. The
impairment loss is included in other expenses in the consolidated
statement of comprehensive income. The carrying amount of the
investment in Yieldbroker is $46.5 million (2017: $66.7 million).
On 31 May 2018, ASX invested $7 million (comprises 50% share-
holding) in a joint venture named Sympli Australia Pty Ltd (Sympli).
Sympli's principal place of business is Australia. Sympli intends to
offer electronic conveyancing solutions for property settlements,
known as a Electronic Lodgment Network Operator (ELNO).
The table below provides financial information for ASX's interest in
equity accounted investments, Yieldbroker (49%) and Sympli (50%):
For the year ended 30 June
(Loss)/profit from continuing
operations
Impairment charge recognised
Total comprehensive income
2018
$m
(0.4)
(20.2)
(20.6)
2017
$m
0.1
-
0.1
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 each equity accounted investment is tested
for impairment whenever events or changes in circumstances indi-
cate that the carrying amount may not be recoverable. Where the
recoverable amount is less than the carrying amount, an impairment
loss is recognised as an expense in the statement of comprehensive
income. The recoverable amount is the higher of the assets' fair value
less costs of disposal and value in use, and is assessed at the end of
each reporting period.
C3 Investments at fair value through profit or loss
In December 2017, ASX acquired USD3.5 million of convertible
notes issued by DAH. ASX has the right to convert these notes to
DAH shares at any time up to maturity in 2027, and under certain
circumstances the notes mandatorily convert to DAH shares.
Refer to note B3(d)(iii) for the movement and balance of investments
at fair value through profit or loss at period end.
The convertible notes have been designated at fair value through
profit or loss on initial recognition. After initial recognition, any
change in fair value will be recognised in the Group's profit and loss. If
the notes are converted to equity prior to or at maturity date, the
converted shares along with existing shares held will be classified
as fair value through other comprehensive income (FVTOCI) follow-
ing irrevocable election to measure equity investment at FVTOCI.
ASX Annual Report 2018 Investments /
73
Other balance sheet assets and liabilities
(a) Impaired trade receivables
As at 30 June 2018, the Group provided $0.8 million (2017: $0.8
million) for trade receivables that were identified as being impaired.
The individually impaired receivables relate to debts that remain
unpaid for a prolonged period despite active debt collection
procedures.
The movements in the provision for impairment of trade receivables
are as follows:
For the year ended 30 June
Opening balance at 1 July
Provision for impairment
recognised during the year
Receivables written-off during the
year as uncollectable
Provisions subsequently reversed
Closing balance at 30 June
2018
$m
(0.8)
(0.8)
0.2
0.6
(0.8)
2017
$m
(1.1)
(0.9)
0.4
0.8
(0.8)
(b) Past due but not impaired
As at 30 June 2018, $3.9 million (2017: $4.7 million) of trade receiv-
ables 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.
D1 Receivables
As at 30 June
Current
Trade receivables
Less: provision for impairment
Margins receivable
Accrued revenue
Interest receivable
Other debtors
Total receivables
2018
$m
93.7
(0.8)
92.9
266.6
5.4
6.9
1.4
2017
$m
92.8
(0.8)
92.0
1,021.6
6.1
5.1
0.1
373.2
1,124.9
Trade receivables aged analysis
The following table shows the aged analysis for trade receivables
of the Group.
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due 91 days and over
Trade receivables not impaired
Trade receivables impaired
Total trade receivables
89.0
2.9
0.1
0.6
0.3
92.9
0.8
93.7
87.3
0.9
3.1
0.4
0.3
92.0
0.8
92.8
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 uncollectable 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 statement
of comprehensive income in administration expenses.
Margins receivable represents collateral receivable 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.
74
/ ASX Annual Report 2018 Other balance sheet assets and liabilities
Other balance sheet assets and liabilities continued
D2 Intangible assets
The movements in the intangible asset balances are as follows:
2018
Trade-
marks
$m
Customer
lists
$m
Software
$m
Goodwill
$m
Total
$m
Software
$m
2017
Trade-
marks
$m
Customer
lists
$m
For the year ended 30 June
Opening balance:
Cost
Accumulated amortisation
and impairment
Net book value at 1 July
Movement:
Additions
Disposals – cost
Disposals – accumulated
amortisation
Amortisation expense
Impairment
Write-offs
Net book value at 30 June
Closing balance:
Cost
Accumulated amortisation
and impairment
Net book value at 30 June
359.7
(247.1)
112.6
33.5
(44.1)
44.1
(31.6)
(1.1)
(1.6)
111.8
347.5
(235.7)
111.8
7.9
-
7.9
-
-
-
-
-
-
1.2
(0.1)
2,317.6
2,686.4
321.6
-
(247.2)
(218.5)
1.1
2,317.6
2,439.2
103.1
-
-
-
41.8
7.9
-
-
-
(0.3)
-
-
-
-
-
-
-
-
33.5
(44.1)
44.1
(31.9)
(1.1)
(1.6)
7.9
0.8
2,317.6
2,438.1
-
-
(28.6)
(3.7)
-
112.6
7.9
-
7.9
1.2
2,317.6
2,674.2
359.7
(0.4)
-
(236.1)
(247.1)
0.8
2,317.6
2,438.1
112.6
-
-
-
-
-
7.9
7.9
-
7.9
Goodwill
$m
Total
$m
2,317.6
2,639.2
-
(218.5)
2,317.6
2,420.7
-
-
-
-
-
-
50.9
-
-
(28.7)
(3.7)
-
2,317.6
2,439.2
2,317.6
2,686.4
-
(247.2)
-
-
-
1.2
-
-
(0.1)
-
-
1.1
1.2
(0.1)
1.1
2,317.6
2,439.2
(a) Software
The impairment expense recognised in the current and prior financial
year relates to certain software intangible assets that were identi-
fied as having no future economic benefit to the Group. Impairment
charges were recognised within depreciation and amortisation in
the statement of comprehensive income.
Costs incurred in developing products or systems, and acquiring soft-
ware and licences that will contribute to future benefits, are capitalised
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 attributed to 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 indicate the carry-
ing value may be impaired. Where the recoverable amount is less
than the carrying 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 of disposal
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.
The estimated useful lives of significant computer software systems
is as follows:
Trading platforms
Clearing platforms
Depository/registry platforms
5 years
5 years
10 years
(b) Trademarks and customer lists
There was no impairment expense recognised during the year for
trademarks or customer lists.
Trademarks and customer lists have been externally acquired and
are measured at cost. Customer lists are amortised on a straight-line
basis over their estimated useful life of five years while the registered
trademark has an indefinite useful life and is not amortised. The
trademark is assessed for impairment at each reporting date or when
there are indicators of impairment.
(c) Goodwill
(i) Impairment test for goodwill
The Group consists of two cash generating units (CGUs), namely
exchange-traded and non exchange-traded. The goodwill attribut-
able 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 financial year.
(ii) Key assumptions used for value-in-use calculations
Management has determined the budgeted operating results based
on past performance and expectations 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 9.25% (2017: 9.25%) for all CGUs.
The growth rate used to extrapolate cash flow projections beyond
five years is 3.5% (2017: 3.5%) per annum for the exchange-traded
CGU and 3.5% (2017: 3.5%) per annum for the non exchange-traded
CGU. These calculations support the carrying value of goodwill.
ASX Annual Report 2018 Other balance sheet assets and liabilities / 75
Other balance sheet assets and liabilities continued
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 contingent liabilities of the acquiree. Following initial recognition, goodwill is measured at cost less any accumulated
impairment losses.
Goodwill has an indefinite useful life and as such is not subject to amortisation and is tested semi-annually for impairment, or more frequently if
events or changes in circumstances indicate that they might be impaired. For the purpose of assessing impairment, assets are grouped at the lowest
levels for which they 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 recognised as an expense in the statement of comprehensive
income.
The recoverable amount of each CGU is determined 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 started in note D2(c)(ii). The growth rate does not exceed
the long-term average growth rate for the business in which the CGU operates.
D3 Property, plant and equipment
The movements in the property, plant and equipment asset balances are as follows:
For the year ended 30 June
Opening balance:
Cost
Accumulated depreciation
Net book value at 1 July
Movement:
Additions
Disposals – cost
Disposals – accumulated
depreciation
Depreciation expense
Write-offs
Net book value at 30 June
Closing balance:
Cost
Accumulated depreciation
Net book value at 30 June
2018
2017
Leasehold
improvements
$m
Plant and
equipment
$m
Computer
equipment
$m
Leasehold
improvements
$m
Total
$m
Plant and
equipment
$m
Computer
equipment
$m
34.1
(23.2)
10.9
0.4
(1.5)
1.5
(2.6)
-
8.7
33.0
(24.3)
8.7
47.9
(36.6)
11.3
1.8
(19.6)
19.6
(2.6)
(0.2)
10.3
29.9
(19.6)
10.3
126.3
(101.9)
24.4
18.6
(59.7)
59.7
(7.6)
-
35.4
85.2
(49.8)
35.4
208.3
(161.7)
46.6
20.8
(80.8)
80.8
(12.8)
(0.2)
54.4
148.1
(93.7)
54.4
33.3
(19.9)
13.4
0.8
-
-
(3.3)
-
10.9
34.1
(23.2)
10.9
46.5
(33.6)
12.9
1.4
-
-
(3.0)
-
11.3
47.9
(36.6)
11.3
119.9
(94.6)
25.3
6.4
-
-
(7.3)
-
24.4
126.3
(101.9)
24.4
Total
$m
199.7
(148.1)
51.6
8.6
-
-
(13.6)
-
46.6
208.3
(161.7)
46.6
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. Repairs and maintenance are recognised in profit or loss during the financial period in which they are incurred.
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.
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 time an asset is implemented and available 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
Plant and equipment
Computer equipment
The shorter of minimum lease term and useful life
3 – 10 years
3 – 5 years
76
/ ASX Annual Report 2018 Other balance sheet assets and liabilities
Other balance sheet assets and liabilities continued
D4 Payables
As at 30 June
Trade creditors
Margins payable
Interest payable
Rebates payable
Transaction taxes payable
Employee-related payables
Accrued expenses
Other payables
Total
2018
$m
7.7
266.6
8.8
12.3
6.1
17.2
28.3
7.3
2017
$m
2.2
1,021.6
8.3
14.4
6.7
20.9
17.2
1.1
354.3
1,092.4
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 collat-
eral and commitments lodged. Interest is recognised as a finance
cost in the statement of comprehensive income using the effective
interest rate method.
D5 Provisions
As at 30 June
Current
Employee provisions
Premises provisions
Total
Non-current
Employee provisions
Premises provisions
Total
14.1
0.5
14.6
3.0
5.5
8.5
The movements in the premises provision are as follows:
For the year ended 30 June
Opening balance at 1 July
Provisions used during the period
Additions during the period
Unwinding of discount
Closing balance at 30 June
6.1
(1.0)
0.8
0.1
6.0
13.6
2.2
15.8
2.9
3.9
6.8
8.1
(2.2)
0.1
0.1
6.1
The provisions for employee benefits predominantly 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, that it is probable
the obligation will be settled and the amount can be reliably 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
unconditional right to defer for 12 months after the reporting date
are recognised as a current provision, 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.
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.
For short-term cash incentives offered to staff the Group recognises
a liability and an expense. A provision is recognised 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.
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 clauses.
Lease incentives received or receivable, such as rent-free periods
and premises fit-out allowances, 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.
ASX Annual Report 2018 Other balance sheet assets and liabilities / 77
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.
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 is also the sole member of the
Securities Exchanges Guarantee Corporation (SEGC) which is respon-
sible 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, in
accordance with the Corporations Act 2001.
ASX Division 3 Compensation Fund, Sydney Futures Exchange
Limited Fidelity Fund and SEGC are not consolidated into the Group.
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 potential 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.
The Group has two established 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.
Group disclosures
E1 Subsidiaries
Parent entity1: ASX Limited
Subsidiaries of ASX Limited:
ACN 611 659 664 Limited2
ASX Acceler8 Pty Limited
ASX Benchmarks 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 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 Clearing Corporation Limited:
ASX Clear (Futures) Pty Limited
ASX Clear Pty Limited
ASX Clearing Corporation Trust
Subsidiaries of ASX Settlement Corporation Limited:
ASX Settlement Pty Limited
Austraclear Limited
Subsidiaries of ASX Settlement Pty Limited:
CHESS Depositary Nominees Pty Limited
Subsidiaries of Austraclear Limited:
Austraclear Services Limited
Subsidiaries of Australian Securities Exchange Limited:
Australian Securities Exchange (US) Inc
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% (2017: 100%).
2 These subsidiaries are parties to the Deed of Cross Guarantee (the Deed) and
have been granted relief from preparing financial statements in accordance
with ASIC Legislative Instrument 2016/785. Refer to note E2 for details of the
Deed.
78
/ ASX Annual Report 2018 Group disclosures
Group disclosures continued
E2 Deed of Cross Guarantee
Pursuant to ASIC Legislative Instrument 2016/785, the wholly
owned subsidiaries listed below are relieved from the requirement
to prepare financial reports and directors’ reports.
It is a condition of the instrument that the Company and each of
the participating subsidiaries enter into 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
ASX Operations Pty Limited
Australian Clearing Corporation Limited
Australian Securities Exchange Limited
ASX Settlement Corporation Limited
SFE Corporation Limited
ABN/ACN
611 659 664
42 004 523 782
068 624 813
83 000 943 377
48 008 617 187
74 000 299 392
The above entities represent a ‘closed group’ for the purposes of
the instrument, and as there are no other parties to the Deed that
are controlled by the Company, they also represent the ‘extended
closed group’.
No entities were added or removed from the Deed during the year.
(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 movements in consolidated retained earnings
for the closed group consisting of ASX Limited and the previously
mentioned parties to the Deed.
For the year ended 30 June
Statement of comprehensive income
Total revenue
Total expenses
Profit before income tax expense
Income tax expense
Net profit for the period
Items that may be reclassified to
profit or loss:
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
2018
$m
892.8
(268.5)
624.3
(177.7)
446.6
(10.3)
1.2
(9.1)
2017
$m
829.5
(231.5)
598.0
(163.4)
434.6
39.6
(0.4)
39.2
Total comprehensive income for the period
437.5
473.8
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
619.8
(400.7)
446.6
665.7
574.4
(389.2)
434.6
619.8
(b) Balance sheet
Set out below is a consolidated balance sheet for the closed
group.
As at 30 June
Current assets
Cash and funds on deposit
Available-for-sale financial assets
Receivables
Prepayments
Total current assets
Non-current assets
Investments in subsidiaries
Available-for-sale investments
Equity accounted investments
Investments at fair value through profit or
loss
Intangible assets
Property, plant and equipment
Prepayments
Total non-current assets
Total assets
Current liabilities
Payables
Current tax liabilities
Provisions
Revenue received in advance
Total current liabilities
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
2018
$m
142.6
191.3
85.5
17.4
436.8
731.1
416.4
53.1
4.8
2017
$m
159.6
88.7
102.4
16.6
367.3
731.1
431.1
66.7
-
2,374.3
2,375.2
54.4
0.3
46.6
1.0
3,634.4
3,651.7
4,071.2
4,019.0
70.1
17.0
14.6
22.4
124.1
64.9
8.5
0.1
73.5
197.6
58.9
16.2
15.8
18.2
109.1
69.2
6.8
0.1
76.1
185.2
3,873.6
3,833.8
3,027.2
3,027.2
665.7
169.0
11.7
619.8
178.0
8.8
3,873.6
3,833.8
ASX Annual Report 2018 Group disclosures / 79
Group disclosures continued
E3 Related party transactions
E4 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the
following aggregate amounts:
(a) Transactions between subsidiaries
ASX Operations Pty Limited provides operational support for the
majority of the Group’s activities. 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, other than trust balances.
Transactions between the Company and subsidiaries are eliminated
on consolidation.
Balances receivable by the Company from wholly owned subsidiaries
within the Group are as follows:
As at 30 June
Current
Amounts due from subsidiaries
2018
$000
2017
$000
245,543
182,114
The following transactions occurred between subsidiaries and the
Company during the year:
For the year ended 30 June
Dividends paid to the parent entity
451,000
421,000
(b) Transactions with other related entities
The following transactions occurred with other related entities
during the year:
Purchase of services from associates
162
60
For the year ended 30 June
Statement of comprehensive income
Total revenue
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
As at 30 June
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
2018
$m
465.0
(20.4)
444.6
(1.7)
442.9
(10.3)
432.6
245.9
3,657.3
3,903.2
17.0
72.3
89.3
3,813.9
3,027.2
608.3
168.5
9.9
3,813.9
2017
$m
435.2
(0.6)
434.6
(1.5)
433.1
39.6
472.7
190.7
3,680.8
3,871.5
16.1
76.2
92.3
3,779.2
3,027.2
566.2
178.8
7.0
3,779.2
These transactions are on an arms length basis and under normal
commercial terms and conditions.
Asset revaluation reserve
Equity compensation reserve
Total equity
(c) Key Management Personnel (KMP) remuneration
KMP compensation (including non-executive directors) provided
during the financial year is set out in the table below. Further details
are disclosed in the Remuneration Report on pages 39 to 50.
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Total
9,943
284
231
1,894
12,352
10,067
279
517
560
11,423
The share-based payments reflects the expense for performance
rights issued under the ASX long-term incentive plan, shares issued
under equity plans 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.
80
/ ASX Annual Report 2018 Group disclosures
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.
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
statements of the members of the tax group using the ‘separate
taxpayer within group’ approach.
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 subsidiaries 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
subsidiaries 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.
Group disclosures continued
(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.
(c) Contractual commitments and contingencies
ASX has an agreement with ASX Clear for a $150.0 million (2017:
$150.0 million) standby liquidity loan facility that may be used in
limited and specific circumstances following the default of clearing
participants.
ASX has an agreement with CHESS Depositary Nominees Pty Limited
(CDN) which provides $10.0 million (2017: $10.0 million) in funds to
support CDN’s licence obligations if required. No payments were made
under either facility in the current or prior financial year.
The NGF, which is administered by SEGC, is maintained to provide
compensation for prescribed claims arising from dealings with
market participants as set out in the Corporations Act 2001. If the
net assets of the NGF fall below the minimum amount determined
by the Minister, SEGC may determine that ASX or participants must
pay a levy to SEGC. No levies were called on ASX in the current or
prior financial year.
In accordance with the Financial Stability Standards recovery rules
the parent entity, ASX, is obligated in certain circumstances to
replenish a shortfall in the financial resources available to the CCPs
up to predetermined levels for any one participant default. No
replenishments were made in the current or prior year.
In accordance with the Australian Financial Services Licence of ASX
Collateral Management Services Pty Limited, ASX Limited has an
obligation to fund any amounts required by the subsidiary.
E5 Other disclosures
E5.1 Commitments
(a) Capital commitments
Capital commitments contracted for but not yet incurred as at
balance date are as follows:
As at 30 June
Intangible assets – software
2018
$m
24.5
2017
$m
10.0
(b) Operating lease commitments
Commitments for minimum lease payments of non-cancellable
leases are as follows:
Due:
Not later than one year
Later than one year but not later than
five years
Later than five years
Total
8.5
35.4
27.3
71.2
8.1
31.6
36.4
76.1
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 10 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 $10.2 million (2017: $9.6 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.
ASX Limited did not have any other contractual commitments or
contingent liabilities for the years ended 30 June 2018 or 2017.
E5.2 Share-based payments
(d) Borrowings
The Group did not have any drawn borrowings during the current
or prior 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 participant default. The facility
limit is $100.0 million (2017: $100.0 million) and remained undrawn
at the date of this report.
(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 perfor-
mance, skills and behaviours that deliver sustainable long-term
shareholder value. They entitle certain KMP to performance rights
over ASX Limited shares.
Under the plans, participants are granted performance 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 following table.
During the year, 8,065 performance rights vested following the
partial attainment of performance hurdles under the September
2014 LTI plan. The remaining 19,367 performance rights under this
plan lapsed. In the prior year, 5,419 performance rights vested
following the partial attainment of performance hurdles under the
September 2013 LTI plan. The remaining 24,689 performance rights
under this plan lapsed.
ASX Annual Report 2018 Group disclosures / 81
Group disclosures continued
Grants outstanding at the end of the reporting period:
Grant date/employees entitled
Performance rights granted to
KMP on 26 September 2017
Performance rights granted to
KMP on 28 September 2016
Performance rights granted to
KMP on 30 September 2015
Total
Number of
instruments granted
28,463
31,334
13,041
72,838
Vesting conditions
4 years service; 50% of performance rights
require relative TSR and 50% of performance
rights require growth in EPS above the target
4 years service; 50% of performance rights
require relative TSR and 50% of performance
rights require growth in EPS above the target
4 years service; 50% of performance rights
require relative TSR and 50% of performance
rights require growth in EPS above the target
Contractual
life of the award
Weighted average
fair value
4 years
$34.30
4 years
$29.68
4 years
$23.34
(b) Deferred equity plans
The Group operates deferred equity plans for KMPs and other employees. Under the plan, an employee may receive a portion of their STI,
which is deferred for 2 to 4 years in equity. If the employee ceases employment during the deferred share period, the shares are forfeited,
except in certain limited circumstances.
Employees have full ownership rights of the shares under the schemes including voting rights and entitlement to dividends. Provided
the employee remains employed by the ASX Group and maintain satisfactory individual performance, the shares are subject to a holding
lock until vesting. Post vesting, employees can only deal with the shares in accordance with ASX's dealing rules. The shares cannot be
transferred to another person or disposed of during this period.
The number of shares allocated to each eligible employee is the amount of the STI award deferred into shares divided by the volume
weighted average price (VWAP) over the five business days up to and including the offer close date, rounded to the nearest share.
The shares are recognised at their fair value, being the market price on purchase date. The average fair value of the shares issued under
the deferred equity plans during the year was $53.07 (2017: $51.45).
(c) Employee share purchase plan
The ASX employee share purchase plan offers the opportunity for employees to purchase fully paid ordinary shares in ASX through salary
sacrifice up to the value of $1,000 at a discount of 10%. All Australian permanent full-time and part-time employees, and maximum-term
contractors with end dates beyond 30 June are eligible to participate in the scheme.
Employees have full ownership rights of the shares under the scheme including voting rights and entitlement to dividends. The shares
are subject to a three-year holding lock and as such cannot be transferred to another person or disposed of until the earlier of cessation
of employment or three years from grant date, and subject to compliance with ASX's dealing rules.
The number of shares allocated to each employee is the offer amount divided by the VWAP over the five business days up to and including
the offer close date, rounded down to the nearest share.
The shares are recognised at their fair value, being the market price on the purchase date. In 2018, the fair value was $57.85 (2017: $51.97).
Deferred equity plans
Employee share purchase plan
2018
No. of shares
issued
116,801
2017
No. of shares
issued
93,928
5,627
6,403
82
/ ASX Annual Report 2018 Group disclosures
Group disclosures continued
(e) 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
Deferred equity plans
Employee share purchase plan
Other share-based payments
Total
2018
$m
0.5
4.7
0.3
-
5.5
2017
$m
-
1.7
0.3
0.2
2.2
The fair value of the performance rights for the EPS component is calculated using the share price at market close on the grant date, less the pres-
ent value of the expected dividends over the performance period. The fair value of performance rights for the TSR component is calculated by an
independent valuer using a Black-Scholes option valuation model.
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 performance 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 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 year:
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
Other review services
Total remuneration for PricewaterhouseCoopers Australia
2018
$'000
627
184
-
90
105
55
1,061
2017
$'000
612
180
152
90
74
-
1,108
ASX Annual Report 2018 Group disclosures / 83
Group disclosures continued
E5.4 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 financial year commenced on 1 July 2017 do
not affect any amounts recognised in the current or prior years, and are not likely to materially affect amounts in future years. The Group
has not elected to apply any pronouncements before their operative date in the financial year ended 30 June 2018.
(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
financial year ended 30 June 2018 and have not been early adopted by the Group. The Group’s assessment of the impact of these stand-
ards and interpretations is set out below.
Title
AASB 9
Financial
Instruments
AASB 15
Revenue from
Contracts with
Customers
Mandatory and anticipated
date of application
Periods beginning on or
after 1 January 2018
Nature of change and impact on the Group
The new standard changes the criteria 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.
• The Group's current debt securities are classified as available-for-sale and measured at fair value through
other comprehensive income. On initial adoption of the standard all debt securities other than those
lodged by participants to cover margin obligations will be reclassified and measured at amortised cost.
The current balance of the asset revaluation reserve will be reversed. This is because the contractual cash
flows of the securities are solely payments of principal and interest and the Group's business model for
managing the portfolio is primarily to hold the securities in order to collect these contractual cash flows.
The opening asset revaluation reserve for the comparative period (1 July 2018) will be restated to reverse
fair value impact resulting in an increase, net of tax of $0.6 million (refer to note B2).
• Debt securities lodged by participants to satisfy margin obligations will be reclassified to fair value through
profit and loss as they do not meet the criteria for amortised cost or fair value through other comprehen-
sive income. This will have no material impact on the financial statements on the date of adoption and are
expected to have an immaterial impact in future financial periods.
• The Group's investments in equity instruments will continue to be measured at fair value through other
comprehensive income. There will only be an impact on future financial periods when the investments are
disposed as the gain or loss can no longer be recycled to profit or loss and must remain in equity. This will
have no material impact on the financial statements on the date of adoption.
• The new impairment requirements will not have a material impact on the financial statements on the date
of adoption.
• The new standard only impacts financial liabilities designated at fair value through profit or loss and
the Group does not have any such liabilities. Therefore there will be no impact on the accounting for the
Group's financial liabilities.
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.
Periods beginning on or
after 1 January 2018
On initial adoption of the standard, applicable customer revenue from previous years under the standard's
requirements will be reversed from retained earnings and will be amortised into profit and loss. This amorti-
sation methodology also applies to future revenue received from customers.
Under the current interpretation of the standard there will be an impact on how listing fee revenue will
be recognised. From 1 July 2018 initial listing fee revenue will be deferred over a period of 5 years and
subsequent listing fee revenue will be deferred over a period of 3 years. The impact to retained earnings on
adoption of this standard will be approximately $84.7 million. The profit and loss for the comparative period
(30 June 2018) will be restated by approximately $8.2 million. However the Group understands the inter-
pretation of this standard with respect to listing fees is currently under review by the International Financial
Reporting Interpretation Committee (IFRIC) and the final outcome of that interpretation at the date of this
report is unknown. Subject to the final interpretation, the impact of this standard could be different to that
disclosed above, or could result in no change in revenue recognition for the Group.
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.
Periods beginning on or
after 1 January 2019
On initial adoption of the standard, the Group will be required to recognise a right of use asset and a corre-
sponding lease liability measured at the present value of future lease payments on the balance sheet for all
leases. A depreciation and finance charge will be recognised over the term of the lease. Certain performance
metrics and ratios will be impacted as a result of these changes.
If adopted at year end, it would have the affect of recognising a right-of-use asset of approximately $59.1
million and lease liability of approximately $58.4 million with respect to premises leases the Group has
entered into. The Group’s assessment of the accounting, disclosure and financial impact on adoption of the
standard will continue up to the date of application.
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.
E5.5 Subsequent events
From the end of the reporting period to the date of this report, no 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.
84
/ ASX Annual Report 2018 Group disclosures
Directors’ declaration
In the opinion of the directors of ASX Limited (the Company):
a. the financial statements and notes that are contained in pages 55 to 84 and the Remuneration Report set out on pages 39 to 50 in
the Annual Report, are in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 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 Chief Executive Officer
and Chief Financial Officer for the financial year ended 30 June 2018.
Signed in accordance with a resolution of the directors:
Rick Holliday-Smith
Chairman
Dominic Stevens
Managing Director and Chief Executive Officer
Sydney, 16 August 2018
ASX Annual Report 2018 Directors’ declaration / 85
Independent auditor’s report to the members of ASX Limited
Report on the audit of the financial report
Our audit approach
Our opinion
In our opinion:
The accompanying financial report of ASX Limited (the Company) and
its controlled entities (together the Group) is in accordance with the
Corporations Act 2001, including:
a) giving a true and fair view of the Group's financial position as at
30 June 2018 and of its financial performance for the year then
ended; and
b) complying with Australian Accounting Standards and the Corporations
Regulations 2001.
What we have audited
The Group financial report comprises:
• the consolidated balance sheet as at 30 June 2018;
• the consolidated statement of comprehensive income for the year
then ended;
• the consolidated statement of changes in equity for the year then
ended;
• the consolidated statement of cash flows for the year then ended;
• the notes to the consolidated financial statements, which include a
summary of significant accounting policies; and
• the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing
Standards. Our responsibilities 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.
Independence
We are independent of the Group in accordance with the auditor inde-
pendence requirements of the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia.
We have also fulfilled our other ethical responsibilities in accordance
with the Code.
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.
We tailored the scope of our audit to ensure that we performed enough
work to be able to give an opinion on the financial report as a whole,
taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which
it operates. The accounting processes are structured around a Group
Finance function at its head office in Sydney, where we predominantly
performed our audit procedures.
Materiality
• For the purpose of our audit we used overall Group materiality
of $33 million, which represents approximately 5% of the Group’s
profit before tax, adjusted for impairment.
• We applied this threshold, together with qualitative considera-
tions, to determine the scope of our audit and the nature, timing
and extent of our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
• We chose Group profit before tax because, in our view, it is the
benchmark against which the performance of the Group is most
commonly measured, and is a generally accepted benchmark.
We excluded impairment as this is an unusual or infrequently
occurring item.
• We utilised a 5% threshold based on our professional judgement,
noting it is within the range of commonly acceptable thresholds.
Audit scope
• Our audit focused on areas where the Group made subjective
judgements; for example, significant accounting estimates involving
assumptions and inherently uncertain future events.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000 F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
86
/ ASX Annual Report 2018 Independent auditor’s report to the members of ASX Limited
Independent auditor’s report to the members of ASX Limited
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. 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. We communicated the key audit matters to the Audit and Risk Committee.
Key audit matter
Impairment of assets
A) Goodwill impairment assessment
Page 75 note D2 for details of the asset.
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).
We focused on this area due to the size of the goodwill balance
($2,317.6 million as at 30 June 2018), 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 has performed an annual impairment assessment
over the goodwill balance, as required by AASB 136 Impairment
of assets (AASB 136), by:
1. Calculating the value in use for each CGU using a discounted
cash flow model. These models use cash flows (revenues,
expenses and capital expenditure) for each CGU for five
years, with a growth rate used to extrapolate cash flow
projections beyond 5 years (terminal growth rate) applied to
the 5th year. These cash flows were then discounted to net
present value using the discount rate as determined by the
Group; and
2. Comparing the resulting value in use of each CGU to their
respective carrying values.
The Group also performed a sensitivity analysis over the value in
use calculations, by varying the assumptions used (terminal growth
rate and discount rate) to assess the impact on the valuations.
How our audit addressed the key audit matter
We performed testing over both CGUs (exchange –traded and non-ex-
change traded) within the Goodwill balance, which included the
following procedures, amongst others:
• We evaluated the Group’s cash flow forecasts and the process by
which they were developed, including considering the mathemat-
ical accuracy of the underlying calculations in the model. We also
compared the forecasts to the latest Board-approved budgets.
We found that the budgets used in the value-in-use calculations
were consistent with the Board-approved budgets, and that the
key assumptions were subject to oversight by the directors.
We also challenged:
1. The Group’s key assumptions for growth rates in the forecasts by
comparing them to historical results and economic and industry
forecasts; and
2. The discount rate used in the model by assessing the cost of capital
for the Group by comparing it to market data and industry research.
We engaged experts to agree that the discount and growth rates
were within a range of reasonableness. We found that the growth
rate assumptions were consistent with historic results adjusted for
current economic outlook and industry forecasts.
We found that the discount rate used by the Group of 9.25% pre-tax
was consistent with market data and industry research.
We stress-tested the assumptions used by the Group to establish
the impact on results from using other possible growth rates and
discount rates which were within a reasonably foreseeable range.
We found that the headroom remained between the stress-tested
value-in-use calculations and the carrying value of the CGUs in the
financial statements. 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.
ASX Annual Report 2018 Independent auditor’s report to the members of ASX Limited / 87
Independent auditor’s report to the members of ASX Limited
Key audit matter
How our audit addressed the key audit matter
Impairment of assets – continued
B) Yieldbroker impairment assessment
Page 73 note C2 for details of the asset.
At 30 June 2018, the Yieldbroker investment (Yieldbroker) is
carried at $46.5m (2017: $66.7m), which reflects an impairment
charge in the current year of $20.2m.
We focused on this area due to the financial significance of the
impairment charge and the level of judgement involved in deter-
mining the recoverable amount of Yieldbroker.
In line with AASB 136, where there is an indication that an asset
may be impaired, the Group is required to estimate the recov-
erable amount and where this is less than its carrying amount,
recognise any impairment loss immediately in the profit or loss.
The Group determined that indicators of impairment existed as at
year end and, following an estimation of the recoverable amount
of Yieldbroker, has recorded an impairment loss in relation to
the investment of $20.2m. This was determined by the Group
as follows:
1. Calculating a value-in-use for Yieldbroker, using a discounted
cash flow model as required by AASB 136. The key assumptions
in this model include estimated cash flows over a five-year
period based on the Yieldbroker board-approved FY19 budget,
a growth rate used to extrapolate cash flow projections beyond
five years (terminal growth rate) of 3.5% and a discount rate
of 12%. The output of the model is the net present value of the
future cashflows.
We performed testing over the impairment assessment of Yieldbroker,
which included the following procedures, amongst others:
• We engaged experts to assess the methodology used by the
Group.
• We evaluated the cash flow forecasts used in the discounted
cash flow model and the process by which they were determined,
including considering the mathematical accuracy of the under-
lying calculations in the model. We compared them to the most
recent Yieldbroker board-approved FY19 budget and proposed
FY20 and FY21 Yieldbroker forecasts. We found that the esti-
mated cashflows used in the value-in-use model were consistent
with budgeted amounts proposed, amended following board
review.
We challenged key assumptions, including:
1. The appropriateness of estimated cash flows (including surplus
cash available for distribution immediately) by comparing them
to historic earnings and economic and industry forecasts; and
2. The discount rate (12%) and terminal growth rate (3.5%), assisted
by experts.
We assessed the sensitivity of the recoverable amount by stress-test-
ing the key assumptions, including cash flow growth rates, the
discount rate and terminal growth rate.
The impairment loss recognised of $20.2m was consistent with the
Group’s calculations using the discounted cash flow model subject
to our audit procedures.
2. Comparing the recoverable amount to Yieldbroker’s carrying
amount at 30 June 2018 value and recognising the difference
of $20.2m immediately in profit or loss.
We assessed the disclosure included in the financial statements,
relating to the impairment, against the requirements of AASB 136
and found it to be appropriate.
88
/ ASX Annual Report 2018 Independent auditor’s report to the members of ASX Limited
Independent auditor’s report to the members of ASX Limited
Key audit matter
How our audit addressed the key audit matter
Valuation and existence of available-for-sale debt securities
To test valuation, we first developed an understanding and evaluated
the controls in place over the valuation of available-for-sale securities.
Page 67 note B3 for details of the assets and page 71 note B3 for the
level 1 or 2 classification.
We focused on this area due to the size of the balance and the inher-
ent judgement involved in determining the fair value of financial
instruments.
As at 30 June 2018, the available-for-sale assets were valued at
$4,001.4 million (2017: $3,401.8 million).
Of these assets, $389.6m 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 $3,611.8m were classified as ‘level 2’ financial
instruments in accordance with the classification under Australian
Accounting Standards where values are derived from observable
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.
Available-for-sale debt securities are held within Austraclear, which
is owned and operated by the Group and provides depository, regis-
tration, cash transfer and settlement services for debt instruments
securities in financial markets in Australia.
We engaged experts to develop an independent expectation of the
valuation for 100% of securities held at 30 June 2018. We then 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.
To test existence, our audit procedures included the following, amongst
others:
1. Performed tests of key controls used to manage the information
technology activities and computer environments, covering the overall
IT computer environment, program development, program changes,
access to programs and data, and computer operations in place at
Austraclear;
2. Performed tests over the operation of the Austraclear control that
matches trade details between counterparties, by inputting a range
of test trades, with both correct and incorrect details, to test that
only the correct sample trades were processed by the system; and
3. Assessed generation of the Austraclear holdings reports by running
test reports and comparing the output to the observed data in the
system.
We found these controls could be relied upon for the purposes of
our audit.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report
for the year ended 30 June 2018, including FY18 highlights; Vision, strategy, execution; Letter from the Chairman; Letter from the CEO; Operating
and financial review; Corporate responsibility and sustainability; Corporate governance; Directors’ report; Key financial ratios; Transaction levels
and statistics; Shareholder information; and Directory, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider
whether the other information 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.
ASX Annual Report 2018 Independent auditor’s report to the members of ASX Limited / 89
Independent auditor’s report to the members of ASX Limited
Responsibilities of the directors for the
financial report
Report on the Remuneration 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 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 ability of the Group to continue as a going concern,
disclosing, as applicable, 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.
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 assur-
ance, but is not a guarantee 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 aggre-
gate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of
the financial report is located at the Auditing and Assurance
Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our auditor's report.
Our opinion on the Remuneration report
We have audited the Remuneration report included in pages 39 to
50 of the Directors’ report for the year ended 30 June 2018.
In our opinion, the Remuneration report of ASX Limited for the year
ended 30 June 2018 complies with section 300A of the Corporations
Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation
and presentation of the Remuneration 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.
PricewaterhouseCoopers
Matthew Lunn
Partner
Voula Papageorgiou
Partner
Sydney, 16 August 2018
90
/ ASX Annual Report 2018 Independent auditor’s report to the members of ASX Limited
Key financial ratios
Year ended 30 June 2018
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 partic-
ipants’ balances)
Share price at end of period
Ordinary shares on issue at end of period
Weighted average number of ordinary shares
(excluding treasury shares)
Market value of ordinary shares on issue at end of period ($m)
Market to book ratio at end of period
Full-time equivalent permanent staff
Number at period end
Average during the period
Notes
1
1
2
3
4
5,6
5,6
5,6
FY14
198.5c
198.5c
198.5c
88.2c
89.9c
10.6%
10.6%
76.7%
71.5%
28.5%
$43,235
$6.53
$18.96
91.3%
45.8%
$35.64
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
220.4c
99.1c
99.0c
11.4%
11.4%
77.1%
71.4%
28.6%
FY17
224.5c
224.5c
224.5c
102.0c
99.8c
11.4%
11.4%
76.3%
70.3%
29.7%
$44,404
$50,237
$50,329
$6.97
$19.42
90.1%
46.7%
$39.90
$7.25
$19.75
87.6%
36.6%
$45.76
$7.59
$20.19
76.2%
29.6%
$53.61
FY18
230.0c
230.0c
240.4c
107.2c
109.1c
11.5%
12.0%
76.2%
70.5%
29.5%
$54,132
$7.79
$20.38
89.1%
30.5%
$64.39
193,595,162
193,595,162
193,595,162
193,595,162
193,595,162
7
193,022,315
193,413,893
193,413,893
193,415,430
193,507,104
$6,900
1.88
526
534
$7,724
2.05
515
524
$8,859
2.32
$10,379
2.66
$12,466
3.16
546
534
554
556
587
560
Notes
1. Based on statutory net profit after tax (NPAT) including significant items and weighted average number of shares.
2. Based on underlying NPAT excluding significant items and weighted average number of shares.
3. Based on statutory NPAT including significant items.
4. Based on underlying NPAT excluding significant items.
5. Operating revenue excludes interest and dividend revenue (underlying).
6. EBITDA – earnings before interest, tax, depreciation and amortisation; EBIT – earnings before interest and tax.
These metrics along with total expenses exclude significant items.
7. Weighted average number of ordinary shares used to calculate EPS.
ASX Annual Report 2018 Key financial ratios / 91
Transaction levels and statistics
Year ended 30 June 2018
Listings and Issuer Services
Total domestic market capitalisation ($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 initial capital
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 ($m)
Number of new warrant series quoted
Total warrant series quoted
Number of CHESS holding statements issued (m)
Cash market
Trading days
Total cash market trades (‘000)
Average daily cash market trades
Continuous trading ($bn)
Auctions ($bn)
Centre Point ($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
Average trading 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.
FY14
FY15
FY16
FY17
FY18
$1,552
2,192
107
$28,333
$166,786
$645
$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
$1,008.897
$3.284
$3.988
$5,548
0.33
78%
15.2
$1,612
2,220
120
$31,859
$174,080
$537
$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
0.32
82%
15.7
$1,620
2,204
124
$34,101
$150,199
$790
$819
$23,587
$45,299
$9,704
$78,590
2,959
2,886
14.0
$1,777
2,239
152
$35,419
$105,680
$1,096
$1,124
$14,652
$37,160
$4,156
$55,968
1,828
2,827
13.6
$1,957
2,285
137
$37,569
$135,273
$721
$1,051
$25,693
$43,022
$12,998
$81,713
1,967
2,976
14.6
254
253
252
235,923
928,829
$770.805
$209.412
$78.941
$144.991
266,433
1,053,096
$735.447
$236.983
$107.043
$167.377
$1,204.149
$4.170
$1,246.850
$4.267
$4.741
$5,104
0.33
92%
17.1
$4.928
$4,680
0.37
88%
17.8
292,528
1,160,826
$677.893
$262.126
$106.481
$185.316
$1,231.816
$4.153
$4.888
$4,211
0.37
83%
17.9
92
/ ASX Annual Report 2018 Transaction levels and statistics
Transaction levels and statistics continued
Year ended 30 June 2018
Equity options (excluding ASX SPI 200)
Trading days (exchange-traded options)
Total contracts traded – equity options (‘000)
Single stock options
Index options and futures
Average daily single stock options contracts
Average daily index options contracts
Average fee per derivatives contract
Futures
Trading days (futures and options)
Total contracts traded – futures (‘000)
ASX SPI 200
90 day bank bills
3 year bonds
10 year bonds
20 year bonds
30 day interbank cash rate
Agricultural
Electricity
Other1
NZ$ 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
Intraday 3 year bonds
10 year bonds
Electricity
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 Other includes VIX and sector futures.
2 Other includes overnight and intraday 10 year bonds and agricultural.
3 Cleared notional value is double sided.
FY14
253
116,343
8,249
459,854
32,606
$0.18
FY15
254
109,546
10,958
431,283
43,143
$0.20
FY16
254
88,701
12,768
349,218
50,269
$0.23
FY17
253
93,295
10,388
368,755
41,060
$0.21
FY18
252
80,091
12,461
317,822
49,449
$0.24
256
256
257
256
255
9,715
25,903
47,886
25,520
N/A
3,517
181
165
20
1,157
114,064
473
4
416
1,523
1,527
23
20
4
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
24
27
8
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
4
356
579
660
4
23
2
1,991
136,823
532,386
$1.42
12,255
28,931
53,233
41,697
545
2,455
91
344
102
1,422
141,075
202
2
152
478
460
19
27
3
1,343
142,418
556,321
$1.39
13,782
33,226
56,041
47,729
383
1,952
84
371
149
1,697
155,414
140
-
85
314
344
32
36
4
955
156,369
613,211
$1.36
$124.413
$120.409
$805.869
$440.506
$2,742.002
$5,165.949
$1,600.194
$2,924.287
$6,314.322
$3,773.703
ASX Annual Report 2018 Transaction levels and statistics / 93
Transaction levels and statistics continued
Year ended 30 June 2018
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)
FY14
FY15
FY16
FY17
FY18
253
600
800
162
21
10
1,593
6,298
$1,475.5
$1,571.8
254
602
774
157
22
9
1,564
6,156
$1,671.5
$1,752.5
254
590
717
150
11
2
253
582
741
146
9
1
252
605
770
146
9
1
1,470
5,786
$1,857.6
$1,895.6
1,479
5,844
$1,915.4
$1,860.3
1,531
6,076
$1,908.5
$1,948.8
Average settlement and depository fee (including portfolio holdings)
per transaction (excludes registry services revenue)
$14.18
$14.88
$15.60
$16.34
$16.63
System uptime (period average)
ASX trade
CHESS
Futures trading
Futures clearing
Austraclear
Technical Services (number at period end)
ASX distribution platform
Australian Liquidity Centre cabinets
Other data centre cabinets
Connection services
ASX Net connections
ASX Net service feeds
Australian Liquidity Centre service connections
ASX service access
ASX trader/ASX best terminals
ASX ITCH access
Futures ITCH access
ASX market access
ASX sessions
ASX gateways
ASX liquidity cross-connects
ASX OUCH access
Futures gateways
Futures liquidity cross-connects
99.97%
100.00%
100.00%
100.00%
99.95%
100.00%
100.00%
99.97%
100.00%
100.00%
100.00%
99.98%
99.96%
100.00%
99.93%
99.79%
100.00%
100.00%
100.00%
99.98%
100.00%
99.99%
100.00%
100.00%
99.98%
142
7
122
356
622
318
31
25
1,431
233
61
31
241
297
188
8
126
358
679
277
31
36
1,185
207
55
44
228
357
231
8
116
382
819
251
39
45
1,113
192
57
58
208
306
285
13
123
437
871
230
43
74
1,033
179
60
73
199
334
301
13
112
444
984
150
49
80
922
160
64
82
251
381
94
/ ASX Annual Report 2018 Transaction levels and statistics
Shareholder information
ASX Limited – ordinary shares
Largest 20 shareholders at 27 July 2018
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.
Name
1. HSBC Custody Nominees (Australia) Limited
2. JP Morgan Nominees Australia Limited
3. BNP Paribas Nominees Pty Limited
At a general meeting, every shareholder present in person or by
direct vote, proxy, attorney or representative 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.
The ASX constitution classifies default shares as any shares held
above the 15% voting power limit by one party and its associates.
Distribution of shareholdings at 27 July 2018
Number of shares
held
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Number of
holders
39,362
Number of
shares
14,256,929
% of issued
capital
7.36
10,332
20,377,460
792
629
94
5,543,210
19,792,438
133,625,125
10.53
2.86
10.23
69.02
51,209
193,595,162
100.00
On-market buy-back
There is no current on-market buy-back.
Substantial shareholders at 27 July 2018
The following organisations have disclosed a substantial share-
holder notice to ASX.
Name
UniSuper Limited
BlackRock Group
Number
of shares
% of voting
power
23,280,620
9,701,163
12.03%
5.01%
Number
of shares
47,173,487
% of issued
capital
24.37
27,804,675
25,761,086
12,229,878
6,029,038
708,685
604,843
548,965
377,000
333,084
308,999
278,369
256,637
241,559
195,000
183,474
183,474
183,474
183,474
183,474
14.36
13.31
6.32
3.11
0.37
0.31
0.28
0.19
0.17
0.16
0.14
0.13
0.12
0.10
0.09
0.09
0.09
0.09
0.09
123,768,675
63.89%
4. Citicorp Nominees Pty Limited
5. National Nominees Limited
6. Australian Foundation Investment
Company Limited
7. AMP Life Limited
8. Milton Corporation Limited
9. BKI Investment Company Limited
10. Senior Master of the Supreme Court
11. Law Venture Pty Ltd
12. Navigator Australia Limited
13. Pacific Custodians Pty Limited
14. Gwynvill Trading Pty Limited
15. Mr George Carrington
16. Mr Michael Briody
17. Mr Leslie Paynter
18. Mr Kevin Troy
19. Raffael Pty Limited
20. Mr Gilles Kryger
Total
Shareholders’ calendar
FY18
Full-year financial results announcement
16 August 2018
Full-year final dividend
Ex-dividend date
Record date for dividend entitlements
Payment date
Annual General Meeting
FY191
6 September 2018
7 September 2018
26 September 2018
4 October 2018
Half-year financial results announcement
14 February 2019
Half-year interim dividend
Ex-dividend date
Record date for dividend entitlements
Payment date
7 March 2019
8 March 2019
27 March 2019
Full-year financial results announcement
15 August 2019
Full-year final dividend
Ex-dividend date
Record date for dividend entitlements
Payment date
Annual General Meeting
1 Dates are subject to final ASX Board approval.
5 September 2019
6 September 2019
25 September 2019
24 September 2019
95
ASX Annual Report 2018 Shareholder information /
Shareholder information continued
Annual General Meeting 2018
The ASX AGM will be held in the ASX Auditorium, lower ground floor,
Exchange Square, 18 Bridge Street, Sydney, New South Wales, at
10am (Sydney time) on Thursday 4 October 2018.
ASX’s Notice of Annual General Meeting has been released on the
Market Announcements Platform. Shareholders will receive a copy
of the Notice of Meeting in accordance with their communications
election.
The AGM will be webcast live on the internet. Please visit
www.asx.com.au/agm
A copy of the webcast will be placed on the ASX website after the
event.
The external auditor will be present at the AGM to answer questions
relevant to the external audit.
Electronic communication
ASX encourages shareholders to receive information 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 information becomes
available such as financial results, dividend statements, notice of
meetings, voting forms and annual reports.
Electronic communication allows ASX to communicate with share-
holders quickly and reduces ASX’s paper usage.
For further information, please contact ASX’s share registry, Link
Market Services, on 1300 724 911 or asx@linkmarketservices.com.au
Important information about dividend payments
Australian and New Zealand shareholders receive their dividend
payments by direct credit only. No cheque payments are made to
these shareholders.
If you have not already done so, please provide direct credit
instructions by visiting www.linkmarketservices.com.au
96
/ ASX Annual Report 2018 Shareholder information Directory
Shareholder enquiries
ASX’s offices around Australia
Enquiries about shareholdings in ASX Limited
Sydney (ASX’s registered office)
Please direct all correspondence to ASX’s share registry:
Link Market Services
Level 12, 680 George Street
Sydney NSW 2000
Telephone
1300 724 911
Email
asx@linkmarketservices.com.au
Website
www.linkmarketservices.com.au
Questions to the ASX Chairman, Managing Director and CEO,
or auditor
These may be emailed to:
company.secretariat@asx.com.au
Or mailed to ASX’s registered office (details in right-hand
column), marked to the attention of the Company Secretary.
For further information
Website
www.asx.com.au
ASX customer service
Telephone from within Australia
131 279 (for the cost of a local call from anywhere in Australia)
Exchange Centre
20 Bridge Street
Sydney NSW 2000
Telephone
(61 2) 9227 0000
Perth
Level 40, Central Park
152-158 St George’s Terrace
Perth WA 6000
Telephone
(61 8) 9224 0000
Melbourne
Level 4, North Tower, Rialto
525 Collins Street
Melbourne VIC 3000
Telephone
(61 3) 9617 8611
ASX’s auditor
PricewaterhouseCoopers
GPO Box 2650
Sydney NSW 2001
Telephone
(61 2) 8266 0000
Website
www.pwc.com.au
Telephone from overseas
(61 2) 9338 0000
General enquiries email
info@asx.com.au
Investor relations
Telephone
(61 2) 9227 0646
Email
investor.relations@asx.com.au
Media
Telephone
(61 2) 9227 0218
Email
media@asx.com.au
ASX Annual Report 2018 Directory / 97
asx.com.au
© Copyright 2018 ASX Limited ABN 98 008 624 691
The information in this publication does not consti-
tute investment, financial or legal advice and
must not be relied on as such. You should obtain
independent professional advice tailored to your
specific circumstances and needs prior to making
any investment and/or financial decisions. The
information in this document is not, and must not
be construed as, an offer or recommendation of
securities or other financial products.