2019
YEARS
LISTED
ASX Limited
Annual Report
A ASX Annual Report 2019
20
YEARS
LISTED
Contents
Who we are
FY19 highlights
Our Vision, Strategy and Execution
Chairman's letter
CEO's year in review
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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ASX Annual General Meeting
Tuesday 24 September 2019
10am (AEST)
ASX Auditorium, lower ground floor
Exchange Square, 18 Bridge Street, Sydney
It’s 20 years since ASX became a listed company and
we'd like to thank you, our shareholders, for your support.
You've helped ASX provide the products, services and
infrastructure that sit at the heart of Australia’s financial
markets.
1999
FINANCIAL YEAR
20
YEARS ON
$568bn
$2,069bn
Domestic market capitalisation
1,226
2,269
Number of listed entities
$2.2bn
$4.6bn
Daily equities turnover
$38.4bn
$237bn
$
Daily futures turnover
$152.1m
$863.8m
ASX revenue
$9.65
$82.37
ASX share price
ASX Limited ABN 98 008 624 691
Who we are
ASX operates at the heart
of the globally attractive,
deep and liquid Australian
financial markets.
We have a proud history as an early and successful adopter of new
technology. Today, we continue to embrace innovative solutions to
make life easier for customers, help companies grow, create value
for shareholders and support the Australian economy.
ASX is an integrated exchange offering listings, trading, clearing,
settlement, technical and information services, and other
post-trade services.
We operate markets for a wide range of asset classes including
equities, fixed income, commodities and energy. We are a top 10
global securities exchange by value and the largest interest rate
derivatives market in Asia.
Companies, corporates and issuers of capital from Australia and
around the world engage with ASX to manage risk and to raise
capital to grow. We operate liquid, transparent and reliable markets
of integrity. The certainty of our clearing and settlement activities
underpins the systemic stability of the Australian economy.
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 clients and connect
with one another.
Through the expertise, experience and passion of our people,
ASX works to ensure that our operations are built on the foundations
of quality, security, resilience and trust.
More information about ASX can be found at
www.asx.com.au.
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2
ASX Annual Report 2019 Who we are
ASX Annual Report 2019 Who we are
FY19 highlights
For our
customers
Uptime availability of
the five main trading
and post-trade systems
for Australia’s financial
markets
100%
Average value of
transactions settled
electronically every day
Bonds $56bn
Equities $4.6bn
Futures $237bn
Capital raised to help
companies grow
$86bn
Statutory net profit
after tax up 10.5% on
last year or 12.6% on a
like-for-like basis
Total ordinary dividends
up 5.7% on last year
Special dividend from
sale of stake in IRESS
$492m
228.7cps
129.1cps
For our
shareholders
For our
people
Employees proud to
work at ASX
Women as a percentage
of our workforce
Our people who feel
ASX provides a
work-life balance
88%
41%
80%
For Australia's
financial
markets
Corporate Governance
Principles and
Recommendations
4th
edition launched
ASX
Students and teachers
nationwide registered to
play ASX's sharemarket
game
%
Revitalised interest
rate benchmark with
world-leading calculation
methodology and
robustness
72,000
BBSW
ASX Annual Report 2019 FY19 highlights
3
Our Vision, Strategy
and Execution
Our vision
The world's most respected financial marketplace
Our strategy
Diverse ecosystem
Provide an open system
to support partnerships,
products and services
across the Australian
financial ecosystem
Innovative solutions
and technology
Offer innovative
solutions and technology
to drive efficiency and
deliver benefits to
customers, employees
and the wider financial
marketplace
Enduring trust, integrity
and resilience
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
Think deeply about
how we can improve
the experience for our
customers, deliver them
value and make their
lives easier
Collaborative culture
Foster collaboration
and agility within our
businesses, across our
teams and among our
customers, regulators
and other stakeholders
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ASX Annual Report 2019 Our Vision, Strategy and Execution
Our execution
FY19 progress
• Advanced reputation as a leading global exchange for mid-sized capital raisings with 23 new foreign listings and
16 new technology listings
• Maintained position as Australia’s premier equity trading exchange with 89% (on-market) market share
Diverse
ecosystem
• Broadened investor choice by adding 130 new mFund advisors and more than 60 new investment products
• Expanded the Australian Liquidity Centre (ALC) community with new customers and a 8.5% increase in the
number of customer-to-customer connections
• Strengthened ASX’s position as the home for A$ denominated derivatives trading, clearing and settlement by
growing the number of customers using our OTC Clearing, FlexClear and ASX Collateral services
Innovative
solutions and
technology
• Met all FY19 milestones for replacing our CHESS post-trade system with a new, contemporary, synchronised and
open technology solution, which remains on track for go-live in March-April 2021
• Commenced technical migration to the new and upgraded secondary data centre ahead of commissioning in FY20
• Continued to refresh technology infrastructure, including upgrading equity-related systems and ASX Net
• Launched new data science platform, ASX DataSphere, offering customers access to financial market data,
ASX’s governed, secure workspace, as well as data science tools and capabilities
• Established the DLT Solutions team to utilise ASX’s distributed ledger technology expertise and infrastructure to
deliver innovative solutions to customers in database management and workflow efficiency
Enduring trust,
integrity and
resilience
• Completed the implementation of Stronger Foundations initiatives in enterprise risk management and clearing
risk management
• Strengthened risk awareness and accountability by fostering a culture of speaking up, with 90% of employees
feeling comfortable to speak up on risk issues
• Rolled out seven training modules and new risk management dashboards to increase risk awareness and better
inform risk management decisions
• Bolstered the quality of our listings compliance framework by consulting on major listing rule changes and
helping develop the fourth edition of the ASX Corporate Governance Council’s Corporate Governance Principles
and Recommendations
• Continued investment in cyber security resilience initiatives
• Introduced five best practice principles to guide customer interactions
Customer
centric
• Rolled out phase one of ASX's digital strategy to deliver customers a market-leading digital experience
• Improved ASX Online to enhance the experience for issuers, with rollout in FY20
• Continued development of open infrastructure offerings, including ASX DataSphere and DLT Solutions, to
stimulate marketwide innovation and efficiencies
• 96% of employees assessed in their performance reviews as demonstrating ASX's BE values*
• Over 2,900 peer-to-peer acknowledgements reflecting ASX's BE values in action
Collaborative
culture
• Designed an employee development framework to build critical capabilities for current and future skill needs
• Celebrated culturally diverse events as part of the employee-led Culture and Heritage group’s inaugural year
of activities
• Engaged with Chief Executive Women and Male Champions of Change to develop senior women leaders and
promote gender equality
*See page 28 for further information on ASX's BE values.
ASX Annual Report 2019 Our Vision, Strategy and Execution
5
Chairman's letter
"Having a diversified, well-capitalised
and highly rated company at the
heart of Australia’s financial markets
bolsters the confidence of all
our stakeholders."
Rick Holliday-Smith
Chairman
Dear fellow shareholders,
The 2019 financial year (FY19) was another strong year of
achievement for ASX. We delivered solid financial performance and
continued to invest to strengthen our foundations, build trust and
confidence in our brand, and position the company for future growth.
20 years as a listed company
The structural conditions that enabled ASX to achieve its FY19 result
were put in place 20 years ago when we became the first exchange
to demutualise and list on itself.
Becoming a public company heralded a fresh era of governance,
efficiency and competitiveness for ASX. It introduced new
shareholders to the company, enhanced our focus on customers and
helped drive two decades of progress and innovation. This has
benefited the Australian economy, with ASX now established as
one of the world’s leading exchanges for capital raising, trading,
post-trade services and market quality.
Today, ASX has more than 46,000 shareholders and is one of
Australia’s leading listed companies with a value over $16 billion.
ASX has enabled investors to build wealth while providing critical
financial services infrastructure for the nation. We stand behind the
clearing houses for the equity and futures markets, both of which
are critical to Australia’s systemic stability. We operate the main
exchange-traded venues, manage the leading capital formation
listings platform and offer significant technical, data and depository
services. Having a diversified, well-capitalised and highly rated
company at the heart of Australia’s financial markets bolsters the
confidence of all our stakeholders.
Financial highlights
In FY19, ASX’s statutory profit after tax was $492 million, up 10.5%
(almost $47 million) or up 12.6% on a like-for-like accounting basis
compared to the same period last year. In FY18, we recognised a
significant item of $20.2 million for the non-cash impairment of
ASX’s long-term investment in Yieldbroker. There were no significant
items in FY19.
Underlying FY19 profit after tax was up 5.7% compared to the same
period last year, or 7.7% on a like-for-like accounting basis.
Statutory earnings per share (EPS) grew by 10.5% to 254.1 cents
and underlying EPS rose 5.7% to 254.1 cents per share, up from
240.4 cents.
Our dividend for the second half of FY19 was 114.3 cents per share
(cps), fully franked, bringing total ordinary dividends (interim
and final) for FY19 to 228.7 cps, up 5.7% on the previous year.
Our dividends remain 100% franked and we have continued to pay
out 90% of underlying profit in dividends.
Special dividend
During the year, ASX sold its 18.6% shareholding in IRESS Limited
(IRESS), realising proceeds of $381 million and a post-tax gain of
$161 million. ASX had been a shareholder in IRESS since 2000. While
it had been a good investment, the time was right to divest as both
ASX and IRESS have successfully evolved and expanded beyond
their early focus on the Australian equities market. In our view,
ASX’s shareholding no longer provided the strategic value it once did.
We are now returning the bulk of these funds, amounting to
$250 million, to our shareholders by way of a special dividend
and retaining a portion to support our multi-layered growth
strategy. The special dividend is 129.1 cps and will be paid on
25 September 2019.
Trust in our brand
Steady earnings growth and financial returns to shareholders
have been constants across ASX’s 20 years as a public company.
Another constant has been our determination to deepen the trust
stakeholders have in ASX.
ASX’s licence to operate at the heart of Australia’s financial markets
depends on providing products, services and infrastructure that are
valued, robust and reliable, while striving to make decisions that
are fair, transparent and independent. We must act with integrity
at all times.
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ASX Annual Report 2019 Chairman's letter
Chairman's letter continued
These features are part of ASX’s culture. We seek to fulfil these
objectives while evolving and adapting. The recent Hayne Royal
Commission Report highlights why this matters. While ASX was
not involved directly, the Commission’s work was relevant to the
whole business community and its findings offer lessons for all.
Foremost is to embed respect for customers and other critical
stakeholders. This is key to building a successful and sustainable
company. Businesses must be mindful of the impact our activities
have on the community and be accountable for our actions. These
are habits requiring renewal every day. And they are matters in
which your ASX Board is deeply engaged.
Culture and values are at the centre of the fourth edition of the ASX
Corporate Governance Council’s Corporate Governance Principles
and Recommendations, launched in February 2019. ASX is a member
of the independent Council, which brings together a wide range of
business, shareholder and industry groups, offering their insights
and perspectives on governance issues. The Council’s work is ‘of the
market, by the market, for the market'. ASX rules require companies
to report against the Council’s recommendations within a flexible,
non-mandatory, ‘if not why not’ disclosure framework.
The imperative that companies align their culture and values with
reasonable community expectations to help promote trust in
business, runs throughout the new edition of the Principles. Guidance
is provided to help companies achieve this. Given the level of public
interest in formulating the latest Principles, it’s clear that recognition
of this imperative is widespread.
ASX supports the adoption of best practice corporate governance
standards and the need for the Principles to keep evolving to serve
the interests of the broader community, including the millions of
Australians who are the ultimate owners of many of our listed
companies. These corporate governance Principles play an important
role in keeping the standards of our market high.
Australia’s regulators also play a vital role in maintaining
high standards. ASX has a wide range of interactions with our
regulators and we work in constructive partnership with them
across all levels of our organisation. We share objectives to improve
supervisory arrangements, strengthen systemic stability and
maintain Australia’s reputation for markets of integrity.
History of innovation
Another enduring element of ASX’s culture is our willingness to
innovate. We led the exchange world when we created the electronic
CHESS post-trade platform more than 20 years ago, and we’re
leading it again today with our project to replace CHESS with a system
enabled by distributed ledger technology (DLT). The new system
will operate on contemporary technology, use global standards,
offer new functionality, and provide the option for the market to
access the benefits of DLT. We believe this innovation will reduce
costs and complexity for the industry, and facilitate new business
opportunities for intermediaries, issuers, investors and other users.
Our progress is being watched internationally and is an important
bellwether for the technology's global adoption. In April we opened
a test environment to enable our customers to interact and
experiment with the new system. They are able to see some of the
fresh functionality and compare various access options. We continue
to work closely with our stakeholders and regulators, and remain
on track to go live in March–April 2021.
Replacing CHESS is our highest profile project but far from our
only one. Our CEO Dominic Stevens elaborates on a range of other
initiatives in his report. These growth initiatives sit alongside our
extensive work effort to strengthen our foundations and our licence
to operate activities. They include contemporising our technology
infrastructure and operational risk management practices and
processes, moving to a new secondary data centre to enhance
operational resilience, and upgrading our ASX Net communications
network.
Our balanced approach of investing in the integrity of our core
businesses and pursuing growth initiatives should allow us to deliver
appropriate returns to shareholders over the longer term without
neglecting the expectations of the broader community we serve.
Board skills and experience
Ensuring the right mix of skills, diversity and experience on the
Board is critical to overseeing a healthy, strongly performing and
risk aware culture at ASX. The right mix is also vital for navigating
the increasingly complex technology and risk environments we
face every day.
We were pleased to welcome Peter Nash to the ASX Board in June
2019. Peter has over 30 years’ experience in financial management,
reporting, risk management and auditing. He has advised some of
Australia’s largest multinationals and held key leadership positions.
He will stand for election at ASX’s Annual General Meeting on
24 September 2019.
In my view, your Board is hardworking, informed and focused
on serving the interests of ASX, its shareholders and other key
stakeholders. I thank them for their commitment.
On behalf of the Board I congratulate the ASX team on its
achievements in FY19. They have put in a strong year and are
dedicated to our future success.
I also thank you, our shareholders, for your confidence in our
company, especially the many who have been shareholders for
the past 20 years.
ASX continues to strengthen its foundations and create
opportunities for growth, while never losing sight of the important
national responsibility that comes with its role.
Rick Holliday-Smith
Chairman
ASX Annual Report 2019 Chairman's letter continued
7
CEO's year in review
"We continue to take a long-term
approach to ensure ASX remains at
the forefront of financial markets
innovation and a leader among
its peers."
Dominic Stevens
Managing Director and Chief Executive Officer
Dear fellow shareholders,
In our 20th year as a listed company, ASX delivered another
strong financial performance and made good progress on the
execution of our technology-driven, customer-focused strategy.
Alongside growing earnings, we continued to strengthen our
relationships with customers, regulators and Australia's financial
markets, while putting in place the foundations to develop both
ASX and our industry into the future.
I am confident we are investing in, and growing, our business to
deliver valuable outcomes for all our stakeholders, and importantly,
to drive long-term sustainable earnings for shareholders.
FY19 financial performance
Operating revenue (as per ASX's segment reporting) increased by
6.5% on a like-for-like accounting basis to $863.8 million, driven
by pleasing performances from each of our four core businesses,
specifically:
• Listings and Issuer Services delivered 5.5% revenue growth on
a like-for-like accounting basis due to higher annual listing fees
and a 5.3% increase in the total amount of capital raised
• Derivatives and OTC Markets was up 7.8%, reflecting the growth
in futures trading and a record year for the OTC clearing business
• Trading Services delivered the strongest growth of 9.4%, as
the number of cabinets and cross-connections within ASX’s
Australian Liquidity Centre (ALC) grew, and equities trading
benefited from higher average daily volumes and increased
use of ASX’s Auctions
• Equity Post-Trade Services revenue grew 3.5%, resulting from
the increased cash market trading activity throughout the year.
FY19 also benefited from a 25.7% increase in interest and dividend
income. The increase was driven by higher lodged capital balances
and increased investment spreads.
Operating expenses (as per ASX's segment reporting) grew by
9.9%, reflecting the injection of new people and skills to enhance
ASX's foundations and pursue growth opportunities.
As forecast, capital expenditure was $75.1 million as we continued to
strengthen and upgrade ASX’s technology capabilities through
projects such as CHESS replacement, the new secondary
data centre, upgrades relating to equities trading and our
investment in ASX DataSphere, our new open infrastructure data
analytics platform.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) for the period was $649 million, up 5.5% on the prior year,
enabling a 5.7% increase in total ordinary dividends paid in FY19.
Building an ASX for the future
Since its inception, ASX has had a core commitment to provide
innovative, critical financial markets services and infrastructure
that are resilient, functional and reliable. This creates growth
opportunities for our customers and for the wider financial services
industry.
ASX’s adoption of innovative technology in the 1980s and 1990s
generated growth opportunities across our markets for several
decades. In 1989, for example, the implementation of the
SYCOM electronic trading platform allowed the futures
exchange to offer after-hours electronic trading, giving customers
more opportunities to transact. In 1994, the introduction of our
CHESS post-trade system moved Australia from paper-based to
electronic share ownership, which continues to realise efficiencies
throughout the financial services industry to this day.
We continue to take a long-term approach to ensure ASX remains
at the forefront of financial markets innovation and a leader
among its peers. Our technology-driven, customer-focused
strategy is enabling ASX to build an exchange for the future.
We aim to make doing business easier and more efficient for
our customers. This has the flow-on effect of benefiting issuers
and investors, whom all intermediaries in the Australian financial
markets are here to serve. Many of the initiatives, which will drive
ASX in the 2020s and beyond, are outlined on the following pages.
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ASX Annual Report 2019 CEO's year in review
CEO's year in review continued
Technology-driven
A contemporary, flexible and resilient operating platform
Key to positioning ASX for the next decade is putting in place
a contemporary, flexible and resilient operating platform. This
will enable ASX to offer more value-added products, services and
infrastructure and help maintain the confidence of our users.
The success of this platform is underpinned by the technology that
powers it.
We recognise that to be successful in delivering new, technology-
driven, value-added products and services, ASX must preserve
the resiliency and reliability of our existing market infrastructure.
We are doing this through a range of investments that include our:
• New secondary data centre that is currently being commissioned
and will be rolled out during FY20, acting as a state-of-the-art
backup to our primary site
• Upgrade of ASX Net, our communications network, which is on
track to have all ASX services and third parties migrated to it by
September 2019
• Refreshed cash equities trading hardware and software,
which will be in place by 2020 and result in a more robust and
contemporary platform
• Redesign of the ASX website that will improve interacting with
ASX and enhance the experience for the five million-plus site
visits each month.
Open infrastructure solutions
ASX is creating products and services that address the needs
of our customers as well as our own. We call these 'open
infrastructure solutions' that leverage our expertise, independence
and infrastructure in multiple ways.
An example of where we’ve successfully done this is in the
commissioning of the ALC. In 2012, ASX had three options when
deciding to upgrade its primary data centre:
• Outsource to a third party specialist
• Build a data centre exclusively for ASX and to co-locate our low
latency customers
• Invest in a facility that served both ASX and the wider
marketplace.
We chose the third option, which delivered an open data centre
and connectivity infrastructure solution to the financial markets.
Seven years on, the ALC is truly the technological heart of the
Australian financial markets, with 134 financial and technology
companies connecting to ASX and to each other via ASX. This
has expanded our customer base and created additional revenue
streams adjacent to our core businesses of trading, clearing and
settlement.
ASX DataSphere, our data analytics offering launched in the
second half of FY19, is another example of ASX providing an open
infrastructure solution. Again, we could have outsourced our data
analytics capability or built such capability for ourselves only.
Instead, we chose to build a governed, secure platform, offering
access to ASX and third party data and analytical tools, as well
as the workspace, computing power and storage to facilitate
the analysis. This initiative not only enhances ASX’s data analytical
capabilities, but it also enables our customers to access that
capability without having to develop their own.
We have also applied our open infrastructure approach to our
most high profile project, the replacement of CHESS, our equity
post-trade system. Here we're creating a solution based on open,
contemporary technology, which uses global standards and
offers efficiency and innovation opportunities with permissioned,
source-of-truth, synchronised data. In addition to being able to
interact with ASX, customers (if they choose) will be able to interact
with others who are on the permissioned network knowing that
everyone is using the same accurate data.
For more detail on our CHESS replacement project, please see
pages 12 and 13.
Customer-led
Making business easier for our customers
All of our technology initiatives are designed to make business
easier for our customers. The open infrastructure solutions
mentioned earlier are capable of helping our customers create
new products and services, improve operational efficiency, and
reduce risks and costs.
Likewise, we expect our CHESS replacement system, which will
be enabled by distributed ledger technology (DLT), to provide
significant value to the industry over the next 20 years, just as the
implementation of CHESS did in the 1990s. When electronic
trading and CHESS settlement began in the late 1980s and
early 1990s respectively, few of us could have foreseen the
tremendous growth in trading volumes and the efficiencies the
dematerialisation of shares have brought about. In the same way,
we are confident our customers will leverage the benefits of
synchronised, source-of-truth data. In a system with no physicality,
if you have perfect, synchronised information, there is little you
cannot do.
Exactly how much value will be generated by this change is not yet
clear. However, we know that the cost of Australia’s $2.7 trillion
superannuation system alone is currently around $22 billion per
annum*. The annual cost to the system of settling equities via CHESS
on ASX is less than one-quarter of 1% of that number. It stands to
reason that a new system providing synchronised, source-of-truth
information securely to those who are entitled to see it, coupled
with an ability for customers to build standardised business logic
directly onto this source-of-truth, will make the whole industry
more efficient. Even if the efficiency gain is 1% – and we expect it
to be more – ASX would be adding value to our industry that is a
multiple of the current value of settlement fees.
Importantly, the value created by a DLT-enabled CHESS
replacement is not limited to reducing costs through improved
efficiency. Over the long-term, this infrastructure will provide a
platform for our customers to innovate and develop their own
value-added products and services.
* Rainmaker Consulting, Superannuation Industry Review, May 2017.
ASX Annual Report 2019 CEO's year in review continued
9
CEO's year in review continued
Leading the world
Looking to the next decade
ASX’s development of DLT is attracting attention domestically and
from across the global financial services industry. It is probably
the most watched technology project in the exchange world. Our
confidence in our ability to embrace and make new technologies
work comes from ASX’s proven track record of having done it before,
multiple times, over the last 20 years.
ASX is in a strong position as we head into the next decade. We’ve
made significant progress over the last three years, putting in
place strong foundations from which ASX can confidently operate
in the years ahead. With these in place we are pursuing exciting
new growth opportunities for ourselves, our customers and the
wider industry.
My thanks to our employees for their hard work and to our
customers for their loyalty throughout the year. And to you, our
shareholders, thanks for your ongoing support.
Dominic Stevens
Managing Director and Chief Executive Officer
People-driven
Key to ASX’s proud track record of delivering leading and
innovative solutions has been the dedication of our people, the trust
and integrity they uphold, and their skills and capabilities. These
attributes continue to define ASX’s culture.
Our BE values were introduced the previous year, having been
developed collaboratively by management and staff. Twelve
months on, I am pleased to report that our values of BE Open,
BE Trustworthy, BE Original and BE The Example accurately reflect
ASX’s culture.
Over the past year we have continued to foster an environment
that encourages innovation and accountability. For example, the
actions of all employees are now assessed in the context of our four
BE values, which have been incorporated into annual performance
assessments.
During FY19, we expanded our workforce as we continued to invest
in people and skills to maintain our strength and resilience, as well
as pursue growth opportunities. This saw important new hires in
data analytics, IT architecture and infrastructure, risk management
and customer service.
Trust-enabled
Trust and integrity have always been hallmarks of ASX. In a
post Hayne Royal Commission environment, they are even more
valuable. Preserving and growing these qualities are critical to our
success. I am determined that they will remain part of who we are.
On a daily basis we work hard to earn the trust of our customers,
regulators and the wider marketplace. We are in the business
of providing the products, services and infrastructure that allow
the Australian financial services industry to grow, innovate and
generate benefits for the whole community. I am confident we
are progressing a strategy that will allow ASX to continue this
proud tradition.
10 ASX Annual Report 2019 CEO's year in review continued
BE Awards
During FY19, 40 BE Awards were
presented, celebrating individual
and collaborative efforts to live
the ASX values. Below are four
winning examples.
2
3
1
1. BE Original
Awarded to Vini Vivo for his work to enhance data-driven
decision-making
Trading Services Analyst Vini Vivo was instrumental in delivering
a new dashboard and analysis tool that enhanced ASX's ability to
assess the trading activity of exchange-traded products (ETPs).
In developing the tool, Vini took a fresh approach to thinking
about ASX’s management of the risk and regulatory requirements
of ETPs. Vini is now employing his data science skills to develop new
analytics products and services for ASX DataSphere.
2. BE The Example
Awarded to Ali Sayed for his commitment to customer centricity
Customer service is at the heart of how Technical Support Analyst
Ali Sayed approaches every day. No matter how complicated the
case, Ali takes the time to diagnose technical issues, understand and
explain issues to the team, provide high-level detailed responses
and communicate resolutions. His commitment to act with integrity,
think deeply and broadly, and take responsibility allows ASX to
better support and address the needs of our customers.
3. BE The Example
Awarded to Sarah Redfern for improving the new employee
experience
HR Business Partner Sarah Redfern consistently goes above and
beyond in her project delivery. Sarah’s commitment to deliver
her best was evident in her work to refresh ASX’s new
starter experience and orientation program, as well as in the
implementation of a new partnership with HR OnBoard. Her efforts
have significantly advanced ASX’s employee on-boarding
experience so that every new starter is engaged in ASX’s vision
and strategy, rules and policies, and approach to risk awareness
from day one.
BE The Example team award
Awarded to ASX’s Compliance Monitor (ACM) replacement team
for making business easier for customers
The successful team replaced ASX’s ACM platform with a new,
integrated smart-form system that improved the interaction
customers have with ASX. The new solution was developed
collaboratively, blending subject matter experts from across the
business. Together they leveraged ASX Online’s functionality to
provide an integrated experience with more flexibility for users.
The new platform also enabled efficiencies in managing customer
communications to be achieved.
Congratulations to the members of the winning team: Lyn Allsop-
Guest, Chris Ansell, Michelle Cox, Rory Cunningham, Nicole
Figueroa, Stafford Gallagher, Troy Hanington, Gary Harvey, Christine
Heathcote, Upamani Hewamalage, John Johansson, Jerry Lai, Sue
Lumb, Sally Lynch, Nicole Manfred, Jonathan O'Riordan, Liz O’Toole,
Pooja Pavithran, Lisa Rubio, Neha Shrikhande, Nikki Swinson and
Bill Woods.
ASX Annual Report 2019 CEO's year in review continued
11
The replacement of CHESS
ASX has a long and proud history of innovation. We were
a leader in automating markets and embracing electronic
trading, in removing the need for paper-based share
certificates, in demutualising and self-listing, and in merging
equities and futures exchanges. We are again leading the
exchange world, this time with the replacement of CHESS
and the use of distributed ledger technology (DLT).
Optional DLT
node access
New customer
requested functions
Access via messaging
Upgraded to global
ISO 20022 standard
Existing functionality carried forward and enhanced with:
1 Modern hardware 2 Contemporary software
3 Upgraded security
Current CHESS
12 ASX Annual Report 2019 CEO's year in review continued
12 ASX Annual Report 2019 CEO's year in review continued
ASX is in the midst of a significant renewal of key information
systems and infrastructure. A major part of this transformation is
the replacement of CHESS – ASX’s 25-year-old proprietary Clearing
House Electronic Sub-register System.
We believe the replacement of CHESS, together with a DLT capability,
continues our history of innovating for the benefit of the market and
our customers, and will support the growth of Australia’s financial
system for the next 25 years.
What is DLT and DAML?
Distributed ledger technology – DLT, often referred to as ‘blockchain’
– is a suite of technologies that collectively create a new database
architecture for record-keeping and the mutualisation of workflows
across industries.
A distributed ledger is a database architecture that enables users
to remain perfectly synchronised to source-of-truth data without
the need for messaging and associated reconciliation.
Why replace CHESS?
It is usual for ASX, and for any exchange, to upgrade its core
infrastructure. The current CHESS system is 25 years old and it
needs to be replaced. It is written in COBOL and uses a set of
proprietary message formats (CHESS messages) for communication
with market users. While the performance and availability of CHESS
continues to serve the market well, the age of the application and
the challenges associated with maintaining and developing it led
ASX to start evaluating replacement options in 2015.
After significant exploration of the options, including using DLT, we
are replacing CHESS with a contemporary solution that delivers
new functionality, will reduce risks and improve the efficiency of
clearing and settlement, and other post-trade services, which our
regulated businesses provide.
What system is replacing CHESS?
ASX is developing a new system that will provide the clearing
and settlement services offered by CHESS today and other new
services – including those requested by the market. It is being built
in conjunction with Digital Asset (DA), a New York-based software
company, on contemporary, open technology using the Digital
Asset Modelling Language (DAML) – a new computer programming
language.
The new system will provide upgraded security, resilience
and performance; the ability to more efficiently implement
enhancements; and will use the ISO 20022 protocol, which is the
messaging standard being adopted by regulators and market
infrastructures globally.
The new system also carries through the functionality of the existing
equities clearing and settlement system, with the addition of new
customer requested functions that were identified following an
intensive 18-month stakeholder consultation process. Examples of
new functions include the standardisation of investor registration
details, additional bilateral settlement options, a range of improved
automated corporate actions, and the option to receive investor
CHESS statements electronically.
How can users access the new system?
There are a number of different connection choices. Users can
choose to connect via global standard ISO 20022 messaging, which
will be an upgrade to the current suite of CHESS messages. Or they
can connect through a web browser, which will be the option
most suitable for low activity users. Both of these options allow
access to the new system in a way that is very similar to accessing
CHESS today.
ASX’s distributed ledger will be secure, privately permissioned and
operate behind ASX’s perimeter firewalls. Users will be required
to meet licence and regulatory obligations, and will only be able to
access the information to which they are legally entitled. Through
the design of the ledger, the privacy and security of users’ data
will be enhanced, with the system resiliency, tamper detection and
cryptographic features of our DLT infrastructure making the ledger
even more secure.
DAML, an acronym for the Digital Asset Modelling Language, is an
open source smart-contracting computer programming language
built to model assets and their workflows. DAML is particularly
suitable for driving efficiency and innovation in financial markets,
and enables rapid and efficient software development and delivery.
Why did ASX choose to provide DAML and build a distributed
ledger connection option?
Having thoroughly explored and tested the benefits of DLT since
2015 – including the performance, security, scalability and resilience
requirements necessary to operate critical market infrastructure
– we believe that the option of connecting to a distributed ledger
allows the market to use DAML to develop new services that improve
the efficiency and standardisation of processes, reduce operational
risk, and create new opportunities for growth and innovation.
Put simply, applications can be written more efficiently and will
work on any DLT node. This is a powerful capability that can leverage
investments in technology, reduce errors, simplify workflows and
foster innovation for the benefit of the whole market.
What is the status of the CHESS replacement project?
Following the decision to replace CHESS in December 2017 and the
finalisation of business requirements in September 2018, we are now
in the build and test phase, and on track to deliver the replacement
system and the distributed ledger in March-April 2021.
We are working closely with our regulators and customers, as well
as their service providers, to help them get ready for the go-live
of the new system.
What DLT-enabled opportunities exist beyond CHESS
replacement?
We are using the insights and experience of the CHESS replacement
project to think about how DLT-enabled solutions can deliver
efficiencies and innovation to other areas of the Australian financial
services industry. This work is being done by our newly created
DLT Solutions team.
Users also have the option to choose to connect to the distributed
ledger by taking a DLT node, a new managed service that will be
offered by ASX. Importantly, while the features of the new system
are accessible through a DLT node, users do not need to take a DLT
node if they prefer to access the system the traditional way.
We believe in the transformative potential of DLT and want to
help our customers unlock its value by developing better products
and services and improving operational efficiency. This extends
beyond equities into other asset classes and beyond clearing and
settlement processes.
For the moment, however, our primary focus is on implementing
the CHESS replacement system.
ASX Annual Report 2019 CEO's year in review continued
13
ASX DataSphere
Unlocking the potential of financial markets data through
shared infrastructure
Building on ASX’s record of operating independent, reliable and resilient financial market infrastructure and systems, ASX’s DataSphere
is our data science platform.
Using ASX and third party data, ASX DataSphere gives ASX and our customers the ability to unlock value through insights and analysis
in a secure and governed ecosystem.
Just like ASX’s Australian Liquidity Centre, ASX DataSphere is an open infrastructure solution offering customers access to capabilities,
systems and products without the sizeable upfront, start-up investment they would need to do it on their own.
Data governance
The latest data management
technologies and industry-leading
best practices ensure content is
only used as approved by its owner.
Contributors get access to
advanced capabilities in data
ingestion, curation, discovery
and security.
Content in
By placing data sets on ASX DataSphere’s
governed and trusted platform, ASX and third
parties can enhance their value by offering them
for analysis by ASX DataSphere customers.
14 ASX Annual Report 2019 CEO's year in review continued
Insights out
ASX DataSphere products provide customers with insights
and analysis to help them gain competitive advantage, cost
efficiencies and risk reduction. Using individual product-based
pricing, ASX DataSphere products range from web-based
dashboards and downloaded analytics-ready datasets to
bespoke solutions for specific problems.
Commercial framework
A comprehensive licensing
structure protects the rights and
preferences of participants.
Contributors can participate in a
revenue share scheme that scales
with the success of a product.
Two ways to engage
1
Commercial framework
A comprehensive licensing structure
protects the rights and preferences
of participants.
Contributors can participate in a
revenue-share scheme that scales
with the success of a product.
Billing and payments for products
are all managed by DataSphere.
Bring your content
Create new revenue opportunities
by commercialising your data and
analytical models with DataSphere,
broadening your reach through
ASX’s extensive distribution into
the fi nancial markets community.
ASX DataSphere web store
Access new insights and analytics-
ready data from ASX and third
parties.
Browse a growing catalogue
of trading, clearing, settlement,
reference, company and economic
data and analytics across all
ASX markets.
Securely analyse your own data
alongside content from DataSphere
to seek new insights. Build models
yourself or in collaboration with the
DataSphere team.
Key benefi ts
Product development
ASX DataSphere’s product team
can take a model and transform it
into a finished product that can be
easily consumed by end users.
> Enhance the value of your
data assets
Products are run, monitored and
supported on the platform.
> License your content confi dently
> Access rich data to build
valuable analytics
Data science
Connect to the state-of-the-art
big data platform via scalable
workspaces loaded with the
latest data science tools.
You can perform comprehensive
analytics from visualisations
through to advanced machine
learning and artificial intelligence.
Key
ASX
You
ASX Annual Report 2019 CEO's year in review continued
15
Data governance
The latest data management
technologies and industry-
leading best practices
ensure content is only used
as approved by its owner.
Contributors get access to
advanced capabilities in data
ingestion, curation, discovery
and security.
Key benefi ts
> Rich source of insights and
data to help your business
> Have solutions built for your
data problems
> Individual product-based pricing
2
Access insights
Subscribe to data products from
ASX and third parties – using
insights to seek competitive
advantage, cost effi ciencies,
risk reduction and compliance.
Get immediate insights from
web-based dashboards, download
analytics-ready datasets or access
feature-rich APIs to incorporate
new and unique data into your
own workfl ow.
If you have a specifi c problem to
solve, the DataSphere team can
build a repeatable solution you
can subscribe to.
With pricing based on individual
product subscriptions, you only
pay for what you need.
Product development
DataSphere’s product team
can take a model and transform
it into a fi nished product that
can be easily consumed by
end users.
Products are run, monitored
and supported on the platform.
DataSphere Webstore
Access new insights and
analytics-ready data from
ASX and third parties.
Browse a growing catalogue
of trading, clearing, settlement,
reference, company and
economic data and analytics
across all ASX markets.
Data science
Connect to the state-of-the-art big data
platform via scaleable workspaces loaded with
the latest data science tools.
You can perform comprehensive analytics,
from visualisations through to advanced
machine learning and AI.
Operating and financial
review
16 ASX Annual Report 2019 CEO's year in review continued
Operating and financial review
The Operating and Financial Review outlines ASX’s activities,
performance, financial position and main business strategies. It
also discusses the key risks and uncertainties that could impact on
ASX and its subsidiaries (together referred to as the Group), and its
ability to achieve its financial and other objectives. 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).
For the purposes of the Operating and Financial Review, the Listings
and Issuer Services revenue, income tax expenses and all resulting
profit measures for the prior comparative period (pcp) have been
restated to retrospectively apply AASB 15 Revenue from Contracts
with Customers. All analysis in this report is based on these restated
numbers. The pcp has not been restated in the financial statements.
The pcp has been restated in the Operating and Financial Review
to provide greater comparability of the company’s performance
in the year ending 30 June 2019 (FY19), as both the current
and restated pcp reflect the new accounting policy to defer the
recognition of initial and subsequent listing revenue over five
and three years respectively. Prior to the adoption of AASB 15,
this revenue was recognised on the date of the capital raising.
The impact of the change in accounting policy is a decrease of $11.8
million in Listings and Issuer Services revenue and the resulting
EBITDA, EBIT and underlying profit before tax, a decrease in income
tax expense of $3.5 million and a decrease in the underlying profit
after tax of $8.3 million.
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,
registry, 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.
Group financial performance
Net profit after tax
Statutory net profit after tax (NPAT) for FY19 increased 10.5% on the
prior year to $492.0 million. Statutory earnings per share (EPS) were
254.1 cents, up 10.5% from the un-restated and previously reported
EPS of 230.0 cents per share, reflecting the growth in earnings. FY18
included the non-cash impairment of $20.2 million on the Group’s
investment in Yieldbroker. There were no significant items in FY19.
The Group’s underlying NPAT, which excludes significant items,
increased 5.7% on the prior year. Underlying EPS was up 5.7%.
After restatement for AASB 15 for FY18, statutory NPAT increased
12.6% and underlying NPAT increased 7.7%.
Dividends
The Board’s dividend policy is to pay 90% of underlying profit after
tax. This is reviewed each time the Board considers payment of
a dividend. Underlying profit reflects NPAT adjusted for any
significant revenues or expenses such as those associated with
major restructuring, transactions or other material items that are
not commonly recurring.
ASX paid an interim dividend of 114.4 cents per share in March 2019
and directors have determined a final dividend of 114.3 cents per
share. Total interim and final dividends per share for FY19 of 228.7
cents are 5.7% higher than the prior year (un-restated), and reflect
the increase in underlying earnings. Proceeds from the sale of ASX’s
investment in IRESS Limited will be paid to shareholders as a special
dividend of 129.1 cents per share. Both the final dividend and special
dividend will be paid on 25 September 2019.
Statutory net profit after tax ($million)
397.8
426.2
434.1
445.1
492.0
FY15
FY16
FY17
FY18
FY19
Statutory earnings per share (EPS) (cents)
205.7
220.4
224.5
230.0
254.1
FY15
FY16
FY17
FY18
FY19
Dividends per share (DPS) (cents)
95.1
92.3
FY15
99.0
99.1
FY16
Interim
99.8
102.0
FY17
Final
109.1
107.2
FY18
Special
129.1
114.3
114.4
FY19
ASX Annual Report 2019 Operating and financial review
17
Operating and financial review continued
Summary income statement for the year ending 30 June 2019
Operating revenue
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
Interest and dividend income
Profit before tax
Tax expense
Underlying profit after tax
Significant items after tax
Statutory profit after tax
Statutory earnings per share (cents)
Underlying earnings per share (cents)
FY191
$m
863.8
(214.8)
649.0
(47.8)
601.2
103.9
705.1
(213.1)
492.0
-
492.0
254.1
254.1
FY182
$m
810.9
(195.5)
615.4
(47.6)
567.8
82.7
650.5
(193.5)
457.0
(20.2)
436.8
230.03
240.43
216.3³
Variance fav/(unfav)
$m
52.9
(19.3)
33.6
(0.2)
33.4
21.2
54.6
(19.6)
35.0
20.2
55.2
%
6.5
(9.9)
5.5
(0.5)
5.9
25.7
8.4
(10.2)
7.7
-
12.6
10.5
5.7
Dividends per share (cents)
1 FY19 is in line with the Group segment reporting note.
² The comparative has been restated for the adoption of AASB 15. A reconciliation of the income statement and the restated comparative is provided in the table
228.7
5.7
below.
³ The comparative has not been restated.
Operating revenues
Operating expenses
EBITDA
Depreciation and amortisation
EBIT
Interest and dividend income
Profit before tax
Tax expense
Underlying profit after tax
Significant items after tax
Statutory profit after tax
Operating revenue
Operating revenue in FY19 increased 6.5% to $863.8 million.
The key components of operating revenue:
• Listings and Issuer Services revenue increased 5.5%, resulting
from strong capital raising in prior periods, higher market
capitalisation and fee changes
• Derivatives and OTC Markets revenue increased 7.8%, reflecting
a significant increase in activity, particularly futures trading and
OTC Clearing
• Trading Services revenue increased 9.4%, resulting from higher
cash market trading activity and increased cabinets and
connections within the Australian Liquidity Centre (ALC)
• Equity Post-Trade Services revenue increased 3.5%, reflecting
higher value cleared and settlement messages.
FY18
$m
822.7
(195.5)
627.2
(47.6)
579.6
82.7
662.3
(197.0)
465.3
(20.2)
445.1
Change in
accounting policy
$m
(11.8)
Restated FY18
$m
810.9
-
(11.8)
-
(11.8)
-
(11.8)
3.5
(8.3)
-
(8.3)
(195.5)
615.4
(47.6)
567.8
82.7
650.5
(193.5)
457.0
(20.2)
436.8
Listing and Issuer
Services
Derivatives and
OTC Markets
Trading Services
Equity Post-Trade
Services
Other revenue
Total operating
revenues
FY19
$m
FY18
$m
220.2
208.8
308.6
229.6
108.4
(3.0)
286.4
209.9
104.8
1.0
863.8
810.9
Variance fav/(unfav)
$m
11.4
22.2
19.7
3.6
(4.0)
52.9
%
5.5
7.8
9.4
3.5
-
6.5
18 ASX Annual Report 2019 Operating and financial review continued
Operating and financial review continued
Cash Market
Clearing
6%
Cash Market
Settlement
6%
Equity
Post-Trade
Services
12%
Technical
Services
9%
Trading Services
26%
Information
Services
11%
Derivatives and
OTC Markets
36%
Cash Market
Trading
6%
Listings and
Issuer Services
26%
Issuer Services
6%
Equity Options
2%
• Equipment costs increased 10.2% to $30.7 million, due to
additional licensing and support costs associated with
the development of ASX’s data analytics platform (ASX
DataSphere) and digital initiatives (redesign of ASX website).
Listings
20%
• Administration costs were broadly flat.
• Variable costs increased 5.6% due to higher postage costs
and the number of envelopes containing CHESS statements
increased by 4%.
• Regulatory fees increased 19.3% compared to pcp. During the
second half of FY19, ASIC provided further guidance on the
level of cost recovery for FY19, which resulted in a higher level
of accruals in the current half. ASIC invoices the market six
months after year-end close.
• Depreciation and amortisation expenses increased 0.5% to
$47.8 million, reflecting ASX’s investment in technology of
recent years.
Austraclear
7%
Futures and
OTC Clearing
27%
Capital expenditure
Operating expenses
Operating expenses in FY19 were slightly above guidance provided
to the market as a result of updated ASIC cost recovery charges.
As reflected in the segment note, underlying operating expenses
(excluding finance costs, depreciation and amortisation, and
significant items) increased 9.9% to $214.8 million.
Staff
Occupancy
Equipment
Administration
Variable
ASIC levy
Total operating
expenses
Variance fav/(unfav)
FY19
$m
127.7
17.9
30.7
22.5
8.4
7.6
FY18
$m
114.6
16.4
27.9
22.4
7.9
6.3
$m
(13.1)
(1.5)
(2.8)
(0.1)
(0.5)
(1.3)
214.8
195.5
(19.3)
%
(11.5)
(9.5)
(10.2)
(0.4)
(5.6)
(19.3)
(9.9)
• Staff costs increased 11.5% to $127.7 million. This reflects the
hiring of 102 additional full-time equivalent (FTE) employees
throughout the year, partly offset by higher levels of staff
costs capitalised on projects compared to pcp. As at 30 June
2019, there were 689 FTE staff compared to 587 a year earlier.
Additional headcount relates to the implementation of Stronger
Foundations and licence to operate initiatives, as well as project
demand hires to support both capital (including CHESS
replacement) and operational projects.
• Occupancy costs increased 9.5% to $17.9 million, primarily
due to the increase in our international data centre footprint
and additional floor space as a result of higher FTEs.
The Group invested $75.1 million in capital expenditure during the
year, compared to $54.1 million in the pcp. The increase on pcp is
reflective of our ongoing investment in upgrading technology to
support various initiatives and strengthen the resiliency of ASX
services. FY19 expenditure included the continued investment in
distributed ledger technology (DLT) for CHESS replacement, a new
secondary data centre, and ASX DataSphere.
Net interest income
ASX Group net interest
income
Net interest on collateral
balances
Total net interest income
Dividend income
Interest and dividend
income
FY19
$m
23.4
75.4
98.8
5.1
103.9
FY18
$m
18.2
50.3
68.5
14.2
82.7
Variance fav/(unfav)
$m
5.2
25.1
30.3
(9.1)
21.2
%
28.7
49.7
44.1
(63.6)
25.7
Net interest and dividend income increased 25.7% to $103.9 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 increased 28.7% to
$23.4 million due to higher balances and increased earning rates.
Net interest earned from the investment of participant balances
increased 49.7% to $75.4 million. This increase was driven by a 18.4%
increase in average collateral balances to $8.2 billion, reflective of
larger positions. Investment earnings on this portfolio averaged
51 basis points compared to 34 basis points above the official
overnight cash rate.
Dividend revenue was down 63.6% to $5.1 million due to the sale
of ASX's shareholding in IRESS in February 2019.
ASX Annual Report 2019 Operating and financial review continued
19
Operating and financial review continued
Financial position
Listings and Issuer Services
At 30 June 2019, the net assets of the Group were $3,916.4 million,
down 0.7 % from 30 June 2018.
Summary balance sheet for year ending 30 June 2019
30 June
2019
$m
30 June
2018
$m
Variance increase/
(decrease)
$m
%
Assets
Cash
333.1
Other financial assets*
11,937.2
377.2
9,192.9
(44.1)
2,744.3
Intangibles
(excluding software)
Investments
Other assets
Total assets
Liabilities
Amounts owing to
participants
Other liabilities
Total liabilities
Equity
Capital
Retained earnings
Reserves
2,326.1
2,326.3
(0.2)
76.3
657.6
469.5
557.1
(393.2)
100.5
15,330.3
12,923.0
2,407.3
10,801.0
8,495.8
2,305.2
612.9
481.7
131.2
11,413.9
8,977.5
2,436.4
3,027.2
3,027.2
801.7
87.5
666.7
251.6
-
135.0
(164.1)
(11.7)
29.9
(0.0)
(83.7)
18.0
18.6
27.1
27.2
27.1
-
20.2
(65.2)
Total equity
* Includes other financial assets at amortised cost, financial assets at fair
3,945.5
3,916.4
(29.1)
(0.7)
value through profit or loss, and available-for-sale financial assets.
Investments
Investments for the period were down $393.2 million or 83.7% on
the prior year, primarily due to the sale of our shareholding in IRESS.
Investments are detailed below. The movement reflects the change
in fair value of these investments:
• 19% shareholding in IRESS was sold in February 2019. IRESS
is a listed entity providing financial market and wealth
management technology solutions
• 46% shareholding in Yieldbroker Pty Limited, an unlisted entity
operating licensed electronic markets for trading Australian and
New Zealand debt securities
• 7% shareholding in Digital Asset Holdings LLC, an unlisted
US-domiciled technology entity
• 49% shareholding in Sympli, a joint venture established to provide
electronic property conveyancing and settlement services.
Amounts owing to participants
Amounts owing to participants were up $2,305.2 million or
27.1% compared to the prior year, reflecting an increase in the open
positions held in interest rate and equity index futures, as well
as equity margins and OTC derivative positions. ASX holds these
collateral positions to cover cash market and derivatives exposures
as part of its clearing operations.
The increase in participant balances results in a corresponding
increase in cash and other financial assets, as the balances are
invested by ASX.
Business model and operating environment
ASX, through its listing rules and infrastructure, provides a facility
for companies to list, raise capital and have their securities publicly
traded.
The Group provides a range of services to issuers of capital, including
the generation of issuer holding statements and other shareholder
and sub-register services. ASX also lists debt securities (including
government debt securities) 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.
Results of operations
Listings and Issuer Services revenue was $220.2 million, up 5.5%
reflecting:
• Annual listing revenue up 9.3% to $93.8 million. An increase in
the number of listed entities billed, along with growth in market
capitalisation and annual fee changes resulted in the increase
in revenue
• Initial listing revenue up 11.6% to $19.2 million. With the
adoption of AASB 15, revenue was primarily initial listings
revenue generated over the last five years. Historical revenues
accounted for $16.6 million and $2.6 million of revenue related
to strong capital raising in the current period. While there were
fewer IPOs, 111 compared to 137 in the pcp, the amount of
capital raised was up 45.6% to $37.4 billion which generated
$22.1 million in revenue, which will be amortised over five years
• Secondary capital raisings revenue up 5.8% to $51.2 million.
With the adoption of AASB 15, revenue was primarily
secondary listings revenue generated over the last three years.
Historical revenues accounted for $41.2 million, weaker capital
raising in the current period contributing a further $10.0 million.
Secondary capital raised was down 13.2% compared to pcp
generating revenue of $54.4m (down 7.6% on pcp), which will
be amortised over three years
• Other listings revenue down 14.8% to $6.9 million. Fewer
re-instatements, 11 compared to 31 in the pcp, resulted in
revenue being down $1.5 million. Initial and secondary debt
raisings were also down $0.2 million on pcp. This is offset
by stronger exchange-traded products (ETP) revenues, up
$0.5 million as funds under management (FUM) balances
increased year-on-year
• Issuer services revenue marginally down 0.2% to $49.1 million.
The number of CHESS holding statements was down 2.5%.
Other issuer-related CHESS messages were also down
compared to pcp.
20 ASX Annual Report 2019 Operating and financial review continued
Operating and financial review continued
Total capital raised ($billion)
88.9
78.6
56.0
81.7
86.0
FY15
FY16
FY17
FY18
FY19
Market cap of new listings
Scrip-for-scrip
Secondary capital
Initial listing fee revenue contribution per year under AASB 15
($million)
15.2
17.3
$1.8
19.2
$2.6
13.8
11.7
In order to broaden the choice for customers, 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 exchange in the same way as equity
trading
• ETPs – in recent years ASX has increased the number and
range of ETPs. The value of ETPs listed on ASX increased
30.0% to $50.9 billion in FY19
• Managed funds (mFund) – mFund allows investors to apply
for and redeem unlisted managed funds using their broker
platform. At 30 June 2019, there were 219 funds available on
mFund with a market capitalisation of $937.2 million, 38.4%
up on the pcp.
Derivatives and OTC Markets
$15.5
$16.6
Business model and operating environment
FY15
FY16
FY17
FY18
FY19
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Colours represent the year in which revenue was generated and the periods over which
it will be amortised.
Secondary listing fee revenue contribution per year under
AASB 15 ($million)
41.3
44.2
38.0
48.4
51.2
$10.8
$37.6
$10.0
$41.2
FY15
FY16
FY17
FY18
FY19
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Colours represent the year in which revenue was generated and the periods over which
it will be amortised.
Business strategies
ASX has implemented a range of initiatives in recent years aimed
at enhancing the attractiveness of Australia as a place to list and
raise capital. These include updates to the listing rules to maintain
the high standards of being listed on ASX.
ASX has been successful in increasing the number of foreign companies
and those from the technology sector listed on the exchange. ASX
has 275 foreign entities and 202 technology companies listed.
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 ASX Clear (Futures), ASX provides central
counterparty clearing (CCP) of these exchange-traded derivatives
as well as clearing of over-the-counter (OTC) derivatives. This entity
provides risk management services supported by clearing participant
collateral and funds provided by both ASX and participants, which
are available in the event participants fail to meet their obligations.
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.
Austraclear provides settlement, depository and registry services
for debt securities and cash transactions. ASX’s model for debt
securities settles transactions on a trade-by-trade basis, which
provides for certainty of settlement. The number of transactions
is the main revenue driver.
Depository services are provided through the Austraclear central
securities depository (CSD). These securities consist of fixed income
securities including government bonds. Settlement of transactions
on these securities occurs through real-time gross settlement (RTGS).
The value of securities held is the main revenue driver.
Registry services are provided whereby Austraclear facilitates
security registration and the subsequent cash transfers associated
with the terms of the individual securities. The main drivers of
registry revenue are the number and value of securities held in
the registry.
ASX Collateral service allows customers of ASX to utilise collateral
held in Austraclear to meet obligations to other customers or to
ASX’s clearing subsidiaries. The value of collateral balances managed
is the main revenue driver.
ASX Annual Report 2019 Operating and financial review continued
21
Operating and financial review continued
Results of operations
Derivatives and OTC Markets revenue was $308.6 million, up 7.8%
reflecting:
• Futures and OTC revenue up 9.6% to $232.9 million. The increase
in revenue was due to a 9.9% rise in futures volumes and 53.8%
growth in OTC clearing value. Proprietary trading volume rose
following increased activity by existing traders and the addition
of new trading participants. The value cleared through the
OTC clearing service was $9.7 trillion, compared to $6.3 trillion
in pcp. Proprietary trading and interest rate and OTC rebate
schemes were up 14.1%, or $11.2 million, following higher
trading activity
• Equity options revenue down 9.2% to $19.9 million. Subdued
activity resulted in lower index options volumes, down 9.5%,
and single stock option volumes, down 7.8%
• Austraclear revenue up 7.4% to $55.8 million. The increase
was primarily due to higher balances in the depository, and
increased transactions and growth in the ASX Collateral service
across the period. At 30 June 2019, the value of assets in the
ASX Collateral service was down marginally to $22.4 billion
compared to $23.5 billion in the pcp. Average balances throughout
the year however were up 9.9% on pcp to $21.9 billion.
ASX futures and options on futures contract volume (million)
Cash market comprises the trading of equities, warrants,
exchange-traded funds and listed debt securities. The value of
turnover transacted 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, and the provision of indices,
company news, and index and other reference data. The main revenue
drivers are the number of end users accessing real-time market
data and customer enterprise agreements for the provision of data.
Technical services consists of four main categories of services to
facilitate market connectivity and access to ASX and third-party
services by customers. These are:
• ASX's distribution platform, hosting of customer infrastructure
within the ALC and ASX Net site management
• Connection services to facilitate connectivity to the ALC
• ASX service access including access and sessions for market
data products and clearing and settlement systems
• Market access to 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.
126
137
142
156
172
Results of operations
Trading Services revenue was $229.6 million, up 9.4% reflecting:
• Cash market trading revenue up 12.9% to $51.7 million.
The increase in revenue resulted from:
FY15
FY16
FY17
FY18
FY19
- Higher on-market trading value of $4.6 billion per day, up
Business strategies
Through ASX’s Austraclear platform, ASX delivers collateral
efficiency to customers with its collateral management service.
This service allows customers to utilise collateral held in ASX’s
Austraclear debt registry to meet obligations to other customers
(mainly repo transactions) or to ASX’s clearing subsidiaries.
The OTC Clearing service includes A$ and NZ$ interest rate swaps
and client clearing. Notional open interest at the end of June 2019
was $7.2 trillion, up 91% on the pcp.
In FY18, ASX invested in a joint venture, Sympli, which
has been established as an electronic lodgement network
operator (ELNO). Sympli is approved to operate as an ELNO in
Victoria, Queensland and New South Wales, and is targeting
integration with the first bank for the purposes of document
lodgement with financial settlement in the third quarter 2019.
Trading Services
11.7%. ASX’s share of on-market trading averaged 88.6% in
FY19, up 2% on the average of 86.6% in the pcp
- Auctions and Centre Point value was up 21.3% on pcp, both of
which have higher associated revenues. Auctions accounted
for 28.6% of the on-market value while Centre Point usage
was 9.7%. Together, these accounted for 55.7% of ASX trading
revenue, up from 53.3% in the pcp
• Information services revenue up 6.9% to $96.3 million.
The increase in revenue resulted from:
- Additional revenues from futures data pricing and fee changes
to certain data services
- Increased index royalties from S&P, additional bank bill swap
rate (BBSW) distribution, annual fee increases and one-off
audit recovery revenue
• Technical services revenue up 10.3% to $81.6 million.
The increase in revenue was due to:
- Increased cabinet hosting with 324 cabinets at 30 June 2019,
up from 301 a year earlier, and strong growth in the number
of cross-connections within the ALC. The number of ALC
cross-connections grew from 984 to 1,068 during the year.
Business model and operating environment
Business strategies
Trading Services comprises the trading of securities in the cash market,
as well as the information and technical services offered by ASX.
The Trading Services strategy is to provide innovative services to
maximise the attractiveness of trading on ASX, and to meet the
needs of a varied customer base. This includes providing leading
price discovery and liquidity access execution types, such as Auctions
and Centre Point.
22 ASX Annual Report 2019 Operating and financial review continued
Operating and financial review continued
The Centre Point order type is an example of ASX innovation
following feedback from end investors. The various Centre Point
order types provide customers with optionality and control over
how their orders are executed.
Auctions and Centre Point value traded ($billion)
78.9
209.4
107.0
237.0
106.5
262.1
113.0
334.0
FY16
FY17
FY18
FY19
74.9
193.3
FY15
Auctions
Centre Point
ASX DataSphere is ASX’s open data infrastructure solution offering
customers the ability to unlock value through insights and analysis
in a secure and governed ecosystem. ASX’s broad range of data
combined with other data sources, provides the ability to offer
additional data and analytics to a range of users.
In January 2017, ASX expanded its data offerings when it became
the administrator for, and provider of, the BBSW interest rate
benchmark. During FY18, ASX strengthened the integrity of
this benchmark by introducing a new calculation methodology
following consultation with the market and regulators. In FY19,
ASX explored new benchmark data opportunities to expand our
current service offering.
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 the hosting of hardware
and 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 market
activity and the number of users accessing ASX market data. ASX’s
services are 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
investment in the ALC and communications network (ASX Net).
ASX will continue to invest in its product and service offerings in
order to become the leading provider for the financial community.
Equity Post-Trade Services
Business model and operating environment
ASX’s clearing and settlement infrastructure provides risk
management services through its 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 funds in the clearing
guarantee fund. These collateral and guarantee fund resources can
be called upon if 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
transactions and the netting efficiency.
Results of operations
Equity Post-Trade operating revenue was $108.4 million, up 3.5%
reflecting:
• Cash market clearing revenue up 4.9% to $54.4 million.
This resulted from an increase in the value of trades centrally
cleared in the market of 9.0%, as the total value traded in the
market was higher. An average of $4.9 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. Strong year-on-year activity resulted in a clearing revenue
rebate of $2.5 million. No rebate was paid in the pcp
• Cash market settlement revenue up 2.1% to $54.0 million.
The number of messages increased year-on-year, with the
main message type 10.1% higher than the previous year.
The settlement revenue rebate was $0.9 million compared
to $0.6 million in the pcp.
Business strategies
ASX is the sole provider of cash market clearing and settlement
services to the Australian market.
ASX’s Equity Post-Trade strategy is to innovate to improve the
efficiency of clearing and settlement, so to allow our customers to
offer new products and services to benefit issuers and investors.
In December 2017, ASX announced it would replace the CHESS
post-trade platform using distributed ledger technology. In 2018,
the New Scope and Implementation Plan consultation paper set
out the enhancements that ASX plans to deliver, which include new
functional business requirements captured through the stakeholder
working group process. The customer development environment
(CDE) was opened at the end of April 2019. CDE supports early access
development and low volume transaction and functional testing.
The next milestone will be industry-wide testing, expected in July
2020. Further details on this initiative are included on page 12.
ASX Annual Report 2019 Operating and financial review continued
23
Operating and financial review continued
Risk
Like any business, ASX faces risks and uncertainties. Some come
from outside the organisation, some from within. Some we can
control by 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
operations 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 may have.
ASX has a Board-approved Risk Appetite Statement that describes the types of risk we encounter in our business, along with our
tolerance for outcomes that impact on our customers, shareholders and the wider financial market community. Complementing this is a
governance structure, commencing at the Board and flowing down through executive level management committees to individuals, which
clearly articulates roles and responsibilities for managing risk within the organisation. This is underpinned by the 3 Lines of Defence risk
management framework.
The table below describes ASX’s key risks and how we respond to them.
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
diversification of revenue streams.
• We have been growing those services that have annuity-style revenue
streams.
• We have been focusing on enhancing our reputation as a listing venue
with emphasis on both technology and foreign companies.
• We continually look to introduce new domestic and international
participants to our trading markets and clearing and settlement facilities.
Risk
Regulation,
market structure
and competition
The risk and its impact
ASX operates in highly regulated markets.
Changes in regulations and/or market structure
can impact on ASX or its customers and the
environment in which we operate.
Economic
environment and
market activity
Examples of how ASX’s business could be
impacted include if:
• New competitors commenced operation in
Australia
• Regulatory requirements were changed for
certain 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.
24 ASX Annual Report 2019 Operating and financial review continued
Operating and financial review continued
Operational
excellence
The resilience, continuity and quality of our
operational processes are critical to our ability
to operate.
This risk arises when failures in our people,
processes, systems or controls impact on the
delivery of our products or 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, fines
or regulatory issues.
• 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.
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 where infrastructure and
technology are unreliable and have slow
recoverability. Issues that would heighten this
risk are the prevalence of ageing infrastructure,
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
inability to deliver ASX’s trading, clearing and
settlement services, reduced customer service,
reduced revenues, unplanned remediation or
replacement costs or further licence conditions.
This risk arises in our licensed clearing and
settlement 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
management strategy, will determine the size
of any 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
facilities pre-funded default capital resources.
ASX also makes equity investments in support
of its broader business objectives (e.g. Yieldbroker,
Digital Asset, Sympli).
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, 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 extreme default scenarios.
• We have investment limits in place under which ASX is required to invest its
funds in highly rated counterparties, 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 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 our reputation and protecting it is at the
centre of everything we do.
Reputation risk arises in a wide variety of
situations, 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
reputation 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
stakeholders to seek feedback on our performance.
• We have regular interaction with our regulators and government at
management, CEO and Board level to facilitate thorough coverage of issues.
• We regularly engage with media so they understand the role ASX plays.
ASX Annual Report 2019 Operating and financial review continued
25
Corporate responsibility and
sustainability
26 ASX Annual Report 2019 Operating and financial review continued
Corporate responsibility and sustainability
Our corporate responsibility and
sustainability approach
Our approach
For ASX, sustainability is about taking steps today to ensure that
our strong financial and operational performance and commitment
to integrity continue into the future, and that we are prepared for
the opportunities and challenges ahead.
ASX’s vision is to be the world’s most respected financial marketplace.
This requires balancing sustainable action with the pursuit of financial
returns. To achieve this vision, ASX needs the trust and support of all
its stakeholders and the wider Australian community.
Trust and integrity
The level of trust our customers, shareholders, regulators,
governments and the broader community have in ASX’s products,
services and infrastructure is critical to our ability to support a
stable and sustainable business.
ASX earns the trust of its stakeholders by:
• Providing products, services and infrastructure that are valued,
robust and reliable
• Making decisions that are fair, transparent and independent
• Being accountable and acting with integrity at all times.
Affirming, preserving and deepening that trust is the role of each
ASX employee.
Re-establishing the market's confidence in Australia’s bank bill
swap rate (BBSW) through the implementation of a new,
world-leading calculation methodology, is one example of how
we have strengthened the integrity of Australia’s financial
markets in recent years.
ASX implemented the new methodology with the cooperation
of customers and regulators to revitalise this important interest
rate benchmark.
Robust and resilient markets
ASX provides services and infrastructure that are critical to the
operation of Australia’s financial markets and economy. Ensuring
their robustness and resilience, including the reliability of our
systems to remain open despite external shocks, is key to creating
long-term value for our customers and shareholders. This requires
contemporary and capable technology, skilled and dedicated people,
as well as having in place comprehensive, clear and communicated
processes and policies to support the running of fair, orderly and
transparent markets.
Our commitment to robustness and resilience is evident by
our continued investment to upgrade and evolve our technology
infrastructure. Recent investments include the rollout of ASX’s new
futures trading platform, the replacement of CHESS and a new
secondary data centre.
Risk management
Assessing our risk position for the short, medium and long-term
is crucial to managing our business. We believe that our ability to
deliver long-term value to all stakeholders is influenced by our risk
management activities. ASX's risk management and internal control
framework is tailored to reflect our business operations, so that we
can identify, consider and manage risks as they arise.
Over the past two years, ASX has enhanced our clearing risk
management tools and processes as part of the Stronger
Foundations program. This has included working constructively with our
regulators. These improvements strengthen our internal risk
management capability and help promote stability and confidence
within Australia’s financial markets.
Details of our material business risks and our response to them are
set out in the Operating and Financial Review on pages 16 to 25.
Corporate governance
Corporate governance is a broad-ranging term which, among
other things, encompasses the rules, relationships, policies,
systems and processes whereby authority within organisations is
exercised and maintained1. Delivering our stakeholders transparency
and good governance is essential to the long-term sustainability
of ASX. Well-executed corporate governance increases organisational
accountability and drives company performance. Good corporate
governance promotes shareholder confidence and is crucial for our
ability to compete for capital.
See page 32 to learn more about ASX’s involvement in the
development of the fourth edition of the ASX Corporate Governance
Council's Corporate Governance Principles and Recommendations
released in February 2019.
Our corporate responsibility and sustainability activities aim to:
• Create an engaged and supported workforce
• Adopt responsible business practices
• Build enduring trust, integrity and resilience in Australia's
financial markets
• Minimise our impact on the environment.
We believe that ongoing assessment and management of our
environmental, social and governance (ESG) risks have a meaningful
impact on our ability to create long-term value for all stakeholders.
Around the world, investors are increasingly focused on how companies
manage their ESG activities and reporting. In meeting the evolving
ESG environment, ASX is reviewing and refreshing its reporting
approach. We look forward to updating you on this work in FY20.
Our people
Achieving ASX’s vision to be the world’s most respected financial
marketplace requires our employees to be accountable and to
act with integrity. By investing in ASX’s workforce and employee
experience we can enable our people to do and be their best.
1 As defined by Australian Institute of Company Directors.
ASX Annual Report 2019 Corporate responsibility and sustainability
27
Corporate responsibility and sustainability continued
We do this by providing our people with:
• A strong set of values that guides behaviours and the way we
interact with each other, our customers, regulators and other
stakeholders
Management and the Board monitor ASX’s culture and employee
behaviour through regular staff surveys and our performance review
process. Results are reviewed by the Remuneration Committee of
the Board.
• An accountable culture that is inclusive and respectful of the
customers we serve and the broader Australian community
Some of the key findings of the staff surveys undertaken in FY19
included:
• The skills and capabilities required to execute our strategy now
and in the future
• An opportunity to develop and progress their careers and to
contribute to our vision.
• 80% of employees believe the BE values reflect what it means
to work at ASX
• 95% of employees are confident they know how to live the
BE values
A values-based organisation
ASX is committed to building an engaged, skilled and responsible
workforce guided by our company values and focused on executing
our strategy. To do this we:
• Make clear the behaviours we expect of employees
• Commit to protecting the confidentiality 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
remuneration practices and training and development programs
• Provide a safe, enjoyable workplace and programs that support
employee wellbeing.
Values-driven behaviour
ASX’s BE values articulate the types of behaviours and personal
interactions we expect at ASX. They represent what we stand for
as an organisation and help guide the actions and decision-making
of our people. They are BE Open, BE Trustworthy, BE Original,
BE The Example.
Our 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.
Our BE values are turned into actions through the behaviours
mentioned in the graphic below and are celebrated through our
BE Awards program.
FOR THE BENEFIT OF OURSELVES,
OUR CUSTOMERS AND THE MARKETS
• 83% of employees see the BE values demonstrated in their teams.
Maintaining a high standard of integrity in our workforce and
engendering trust among our stakeholders are central to our
ability to operate successfully at the heart of Australia's financial
marketplace. We work hard to instill and reinforce a culture of acting
lawfully, ethically and responsibly.
ASX’s Code of Conduct, Anti-bribery and Corruption, and Whistle-
blower Protection policies set out the conduct we expect of our
staff to meet our standards and those of our stakeholders and the
broader Australian community. They are available on ASX’s website.
Code of Conduct
ASX has a Code of Conduct underpinned by our values. The Code
of Conduct applies to all our people, including directors, employees
and contractors. It sets the standards for how we work at ASX
and outlines the importance of our values to anyone dealing with
ASX. The Code requires our people 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.
Anti-bribery and corruption
ASX’s Anti-bribery and Corruption policy states our requirements
for the management of gifts and benefits. It requires employees
to report all gifts above a specified threshold. The Audit and Risk
Committee receives periodic reports on these disclosures.
To enhance our position of trust and independence, during the annual
review of this policy in FY19 the threshold for declaring gifts was
lowered from $200 to $100. In addition, gifts over $400 are now
prohibited unless approved by the CEO.
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
28 ASX Annual Report 2019 Corporate responsibility and sustainability continued
Corporate responsibility and sustainability continued
Whistleblower Protection policy
ASX’s Whistleblower Protection policy supports employees who
report non-compliant, suspicious or unethical conduct. It formalises
ASX’s commitment to protecting the confidentiality and position
of employees who wish to raise matters concerning the integrity
of ASX.
The FY19 review concluded that there was no systematic pay
gap between male or female employees performing the same
roles. While this is a positive outcome overall, there are always
individual cases where this is not true and ASX identified a few men
and women in this category. These gaps were closed in the 2019
remuneration review.
During FY19, this policy was updated to reflect proposed new
legislation, with the remaining changes to be implemented in FY20.
Training
ASX requires staff to complete regular training and attest to their
understanding of, and compliance with, ASX’s policies including the
Code of Conduct and Anti-bribery and Corruption policy.
During FY19, over 2,500 hours of mandatory e-learning modules
were undertaken. Topics assessed included:
• Code of Conduct*
• Conflicts*
• Licence to operate
• Data breach
• Workplace diversity and inclusion
• Workplace health and safety.
*Included material relating to gifts and entertainment/anti-bribery
and whistleblowing.
In addition to undertaking training, ASX's Executive team and
General Managers are required to provide a 'policy adherence'
attestation in areas including ASX's Code of Conduct, Conflicts
Handling, Group Dealing Rules, Use of Social Media and Internet
and Email Use.
A diverse and inclusive work environment
ASX knows that a diverse and inclusive work environment improves
performance.
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.
ASX was again recognised as an Employer of Choice for Gender
Equality by the Australian Government's Workplace Gender Equality
Agency (WGEA), a citation we have held since 2014.
We have a target of 40% female representation for all management
levels. ASX is working towards achieving this target, with an overall
representation of females in management of 39% at 30 June 2019.
ASX reviews the pay of employees each year to ensure that males
and females are paid equitably.
The issue of gender pay is a part of a larger challenge to achieve
true diversity within our organisation. 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 Program that
provides individual coaching for participants
• Support Male Champions of Change
• Support ASX's Our Women's Network, an employee-led
networking group that champions equal opportunities and
representation in the workforce.
The following table illustrates ASX’s gender diversity at various
levels within the organisation as at 30 June 2019.
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
FY19
FY18
40%
40%
40%
40%
40%
40%
50%
40%
30%
29%
42%
39%
39%
38%
79%
41%
33%
21%
46%
42%
41%
41%
83%
44%
Supporting working families
ASX implements gender-neutral policies to help build an
inclusive workplace, such as offering flexible working conditions
to allow employees to 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.
In FY19, 80% of employees said they had the flexibility to balance
work life responsibilities.
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.
ASX Annual Report 2019 Corporate responsibility and sustainability continued
29
Corporate responsibility and sustainability continued
In FY19, two-thirds of the employees who took parental leave were
female and one third were male. Graduated return to work options
are available to support employees’ transition back to the workplace.
ASX’s FY19 lost-time injury frequency rate (the number of lost time
injuries per one million hours worked) was very low at less than
0.04. This is in line with FY18.
Attracting and retaining talent
We continue to evolve our offerings to employees to ensure we
attract and retain high performing professionals. In addition to
remuneration, we offer flexible working arrangements, learning,
development and leadership training, a wide range of employee
benefits, and opportunities for employees to contribute to their
broader community.
ASX’s market competitiveness as an employer was tested through-
out the year as we recruited for a diverse range of roles. Pleasingly,
the strength of our brand and the opportunity to work on industry-
leading projects continues to sustain our ability to attract talented
employees, particularly in the competitive technology sector.
Remuneration
ASX employees receive a competitive fixed remuneration 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 48 to 62.
ASX provides the opportunity for all employees to be shareholders.
During the year, ASX employees had the opportunity to acquire ASX
shares under a $1,000 General Employee Share Plan. In FY19, this
offer was accepted by 60% of staff.
Learning and development
We believe that our long-term sustainability is supported by
high performing individuals who seek to improve their skills and
performance. ASX offers learning and development programs
at all levels of the organisation to help staff advance their skills
and careers.
Over the last three years, ASX has taken a neuroleadership approach
to personal and leadership development. In FY19, we provided
opportunities for 58 leaders, approximately 10% of the workforce, to
participate in three programs, which are aligned with ASX’s values
and designed to positively influence our culture.
ASX also participates in the Chief Executive Women Leaders
Program, which provides development and networking opportunities
and individual coaching for participants. In FY19, two participants
completed the program, taking our overall participation in the
program to 43 since its inception in 2006.
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.
Our WHS performance was audited in FY19 by an independent third
party, with no adverse findings. ASX's management commitment,
continual improvement and wellbeing were acknowledged as good
practices.
Prevention of harassment and discrimination
ASX works to prevent discrimination and harassment in the
workplace through education and awareness. Each year, employees
must complete regular online training and assessments.
Employee-led networking groups
Employee-led networking groups (ENG) are developed, chaired
and run by employees. Each group raises awareness and provides
education for ASX employees.
There are two ENGs currently:
• Our Women’s Network (OWN) champions equal opportunities
and representation in the workforce. This group has been
instrumental in securing ASX's accreditation as an Employee
of Choice for Gender Equality
• The Culture and Heritage group, formed in FY19, celebrates and
promotes the diversity of ASX by encouraging employees to tell
their personal stories, share their heritage and history at work,
and celebrate diverse cultural events.
A third ENG is soon to be established focused on ASX’s community
engagement and giving activities.
ASX supports the development of these groups through:
• The provision of resources and guidance on the governance,
structure and goals of the group
• Financial support to enable events, communication and raising
awareness of the aims of the ENG
• Executive sponsorship to advocate for the ENG and provide
mentorship to ENG leaders.
Charitable giving
ASX understands that the engagement of our employees can
be strengthened by helping them support their communities.
ASX encourages its employees to make donations to their chosen
charities through a workplace giving program, with ASX matching
the donations. In FY19, the workforce giving program was utilised
by 10% of the ASX workforce.
Wellbeing
ASX has a wellbeing program to support employees balance their
work, personal and family life. Wellness programs are designed to
improve the physical or mental health of our employees, which in
turn strengthens their resilience as employees. We offer subsidised
activities such as yoga, pilates, meditation, lunchtime sport and a
walking club.
Our workforce
We recognise that balancing costs and productivity influences
employee workloads and motivation levels, as well as the
ability for management to operate the business and pursue growth
opportunities.
30 ASX Annual Report 2019 Corporate responsibility and sustainability continued
Corporate responsibility and sustainability continued
In FY19, our permanent workforce grew 17% as we added
resources in the areas of change and risk management, IT
engineering and infrastructure, customer service, compliance, data
analytics and business development. These resources have been
deployed across the business allowing the execution of a range of
technology enhancements and growth opportunities.
ASX also augmented our project delivery capability with an uplift in
contractors, which now stands at approximately 7% of the permanent
workforce. Strategic partnerships with technology consulting firms
further enhanced the skills and capabilities of the organisation.
FY19 voluntary turnover remained consistent with the
previous year at 12%, which is slightly below the diversified financials
industry average of 13% as measured by the Australian-based
Financial Institutions Remuneration Group.
Voluntary turnover is at a level that allows workforce stability while
enabling ASX to introduce new skills and talent.
Having the right resources in place is also an important factor
to build an engaged workforce. In FY19 we saw an increase in
the number of our workforce who were born between 1980 and
1995. This group is often described as Millennials. The increase is
consistent with the technology-led aspect of our strategy.
The below chart outlines the demographic split of the organisation as at 30 June 2019.
48.8
40.8
45.6
43.7
l
s
e
e
y
o
p
m
e
f
o
e
g
a
t
n
e
c
r
e
P
9.2
8.0
1.2
2.7
FY18
FY19
Baby Boomers
(1945-1964)
Gen X
(1965-1979)
Millennials
(1980-1995)
Gen Z
(1996-)
ASX in the community
Volunteering
ASX provides opportunities for employees to volunteer in their local
community. This may be through the choice of the employee or via
organised ASX volunteer days.
One of the ASX-organised volunteer days in FY19 was at the
Exodus Foundation, which included preparing and serving food and
beverages, creating emergency food parcels, and cleaning for
disadvantaged and homeless people at the Ashfield Mission.
Another, was at Hammond Care, where ASX volunteers visited
dementia patients and helped with gardening, mulching and painting.
Fundraising
Throughout the year, ASX held a range of fundraising activities,
bringing together employees from all areas of the business.
The activities provide financial support for organisations aligned
to the values of our employees, while also raising awareness
about issues that impact on their lives. In 2019, we hosted the
Biggest Morning Tea and Loud Shirt Day on behalf of the Cancer
Council and the Shepherd Centre. These are two organisations that
have helped our employees, their friends and families significantly.
From left to right: Lisa Banh (ASX), Phil Burge (Cancer Council), Dan
Chesterman (ASX), Tim Hogben (ASX), Radim Zajicek (ASX), Angela Moffatt
(Shepherd Centre), Hannah Phillips (Shepherd Centre) and Elly Unicomb
(Shepherd Centre).
From left to right: Christopher Noone, Andrew McLeod, Ben Jackson, Sanjay
Mistry, Christina D’Amico, Renee Service, Nehali Dani and Michelle Wang.
ASX Annual Report 2019 Corporate responsibility and sustainability continued
31
Corporate responsibility and sustainability continued
ASX in our industry
Good governance is a significant driver of shareholder value. ASX
is committed to maintaining and promoting high standards of
corporate governance for ourselves and for the 2,200 plus entities
listed on our exchange.
Leadership in corporate governance
ASX convenes the ASX Corporate Governance Council. The Council was
established in 2002 and is an independent body that brings together
various business, shareholder and industry groups. ASX nominates
the Chair (currently Elizabeth Johnstone), contributes one
member to the Council and provides executive support.
ASX
Corporate
Governance
Council
FINANCIAL
SERVICES
COUNCIL
New edition of the Corporate
Governance Principles
The ASX Corporate Governance Council's Corporate Governance
Principles and Recommendations were introduced in 2003.
A second edition was published in 2007 and a third in 2014.
In February 2019, the Council released a fourth edition of
the Principles and Recommendations to ensure they continue
to reflect local and international expectations about good
corporate governance. The new edition included changes to
address culture and values
issues, and expanded
recommendations and commentary on gender diversity and
environmental and social risks, especially risks associated
with climate change.
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 companies, can enhance corporate
transparency on ESG issues and encourage sustainable development.
ASX proudly supports International Women’s Day by participating
in SSE’s global ‘ringing the bell for gender equality’ initiative. For
the fifth year in a row, ASX was the first of the 75 participating
exchanges to ring the bell in celebration of International Women’s
Day. The bell ringing took place at an event hosted by ASX and 100
Women in Finance, Sydney branch, which brought together senior
female leaders in the investment management industry to share
their experiences and advice with future leaders.
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
transparency to the corporate governance practices of listed
companies which in turn enables investors to make informed
investment decisions.
From left to right: Alicia Vidler and Louise Walker, co-chairs of the Sydney
Committee for 100 Women in Finance, ringing the bell for International
Women’s Day 2019.
32 ASX Annual Report 2019 Corporate responsibility and sustainability continued
Corporate responsibility and sustainability continued
Responsible and ethical business
practices
Fraud and security
Across the global financial services industry, fraud-related incidents
and cyber attacks are on the rise. At ASX, our dedicated information
security and risk team proactively monitor, manage and mitigate
these threats.
ASX employs a range of risk-based security controls and procedures,
as well as prevention strategies. These activities occur at various
levels throughout the organisation.
As a market 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 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.
Supporting ASX’s efforts are our employees, who are given training
and support to actively help mitigate the impact of cyber crime,
particularly in relation to phishing emails and ransomware attacks.
Employee-focused activities undertaken in FY19 included:
• Workshops on how to identify phishing emails
• Quarterly emails reminding employees what to look for
• Simulation-based face-to-face training
• Induction training for new employees.
Taxation
Taxation is an important component of our corporate responsibility
and enterprise risk management framework.
We adopt a low risk tax strategy with our activities and tax
compliance obligations, and apply the following principles:
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 FY19
was $335.5 million.
Our suppliers
ASX aims to partner with suppliers that share our ESG standards.
We are committed to fostering responsible practices in our supply
chain, while ensuring that our sourcing and supplier relationships
deliver value.
Material suppliers must comply with ASX’s Supplier Code of Conduct,
which includes minimum expectations across key ESG areas. These
expectations include:
• Compliance with all relevant laws and regulations relating
to bribery and corruption, workplace health and safety,
environmental management, employment practices,
diversity and regulatory requirements
• Be an Equal Employment Opportunity employer providing fair
pay and working conditions for employees, and not use forced,
bonded or involuntary labour
• Regular, public reporting of environmental measures
• Have a business continuity plan that is maintained and tested
to minimise business impacts in the event of a major disruption.
ASX reserves the right to carry out assessments of the practices of
our suppliers to ensure alignment with this Code.
All material procurement tenders incorporate an ESG assessment.
This reduces third party risk by requiring that minimum ESG practices
are in place and it supports ASX’s ability to partner with suppliers
who actively pursue responsible supply chain practices.
As part of our Stronger Foundations initiative, ASX has begun
a program to update and enhance its supply chain management
policies and processes. Expected to be completed in FY20,
this work will reflect the Board and management’s principle to
respect human rights across all of ASX’s operations, including its
supply chain. This work will also enable ASX to meet the reporting
requirements of the Australian Government’s Modern Slavery Act
in 2020.
• Meet all taxation obligations in accordance with applicable
legislation and requirements
Recognition
• Adopt a conservative approach in the interpretation of applicable
taxation legislation
• Seek professional tax advice or a tax ruling from the Australian
Tax Office 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 has been independently assessed
according to the FTSE4Good criteria, and
has satisfied the requirements to become a
constituent of the FTSE4Good Index Series.
The FTSE4Good Index Series is designed
to measure the performance of companies
demonstrating strong Environmental, Social
and Governance (ESG) practices.
ASX is a signatory to the voluntary Tax Transparency Code issued
by the Australian Government Board of Taxation.
ASX Annual Report 2019 Corporate responsibility and sustainability continued
33
Corporate responsibility and sustainability continued
Supporting the transition to a low carbon economy
ASX helps to play a role in the smooth and orderly transition to a
low carbon economy. We are committed to providing a marketplace
with a framework that enables companies to consider and disclose
their material risks adequately (including to climate change) and
which allows investors to make informed decisions about where
to allocate funds and build wealth for the long-term.
ASX supports companies that identify climate change as
a material risk by endorsing best practice disclosure. Through
the framework of the fourth edition of the ASX Corporate
Governance Council's Corporate Governance Principles and
Recommendations, ASX encourages companies to report
material risks using the Task Force on Climate-related Financial
Disclosure. The framework provides useful guidance to help
listed entities produce information for investors and other
stakeholders to assess and price climate-related risks and
opportunities.
FY19 environmental outcomes
ASX’s electricity and paper usage outcomes are set out below:
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.
FY18
FY19
Change from
prior year
0.0099 0.0097
(2)%
0.0121 0.0125
3%
Conflict and compliance handling
arrangements
Managing conflicts of interest
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.
Arrangements are also in place for handling competitively sensitive
information about other market operators that use services provided
by ASX’s clearing and settlement facilities. ASIC is ASX’s listing
authority and monitors ASX’s own compliance with the listing rules.
ASX has an enterprise compliance function whose responsibilities
include reviewing ASX’s compliance with our conflict and information
handling standards and reporting on these matters to the Audit
and Risk Committee.
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.
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 the boards of ASX licensed
entities have oversight of the performance of these functions.
Environment
ASX is committed to minimising its own environmental footprint and
supporting a smooth and orderly transition to a low carbon economy.
Climate change
As a technology-based services and infrastructure company, ASX
is not materially exposed to direct climate change risks.
We are a diverse, customer-orientated organisation offering a
range of activities that include the issuance, trading, clearing and
settlement of equity, debt, futures and other derivative instruments,
as well as the provision of technical and data services.
ASX’s equity market has over 2,200 listed companies that
participate in a wide-range of activities throughout Australia
and across the world. The aggregate mix of activities undertaken
by listed companies is continually changing as economic forces
influence a company’s ability to attract capital and the preparedness
of investors to take on risk and outlay funds.
Like other companies, ASX is exposed to the risk of changes in
regulatory pricing related to climate change. For example, increases
in electricity costs. However, our view is that these risks are not
material to ASX.
34 ASX Annual Report 2019 Corporate responsibility and sustainability continued
Corporate responsibility and sustainability continued
Electricity usage
ASX’s total electricity consumption increased by 5% in FY19 and
decreased 2% 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 is a state-of-the-art facility, offering customers productivity
efficiencies by having their data centre operations co-located
with ASX.
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.
While ALC's energy consumption has increased as the business
has grown, ASX believes that co-location results in a net reduction
overall in energy usage by the Australian financial services
industry when compared to customers each having their own
data centre.
ASX has processes in place so that if there is a disruption to the
supply of electricity to our sites (including to our data centres) there
will be no 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 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) increased by 3% in FY19.
ASX management continues to reduce paper usage in our
business and we encourage our shareholders to receive electronic
communications instead of hardcopy communications via the 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 of 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
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
CHESS statements and notifications
1 Tonnes of carbon dioxide equivalent.
2 GHG emissions reported are inclusive of carbon offset. ASX commenced using 100% carbon neutral paper in 2015.
tonnes
75
2016
11
2017
48
2018
52
2019
3
14,435
14,262
14,330
15,065
2016
14
10,105
4,332
1,021
02
02
2016
7.35
2017
48
9,983
4,279
613
0
0
2017
6.82
74
2018
52
10,030
4,299
660
0
0
2018
6.80
79
2019
3
10,545
4,520
758
0
0
2019
8.12
77
ASX Annual Report 2019 Corporate responsibility and sustainability continued
35
Corporate governance
Corporate governance
Directors (from left to right): Melinda Conrad, Damian Roche, Yasmin Allen, Ken Henry, Dominic Stevens (CEO), Peter Marriott, Rick Holliday-Smith (Chairman),
Peter Warne, Heather Ridout and Peter Nash.
ASX Limited Board
Rick Holliday-Smith
Independent, Non-Executive Chairman
BA (Hons), FAICD
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 and Trading (CRT), President responsible for global
trading and sales at Nations Bank-CRT (a predecessor of Bank of
America), both based in Chicago, and Managing Director of Hong
Kong Bank Limited (a wholly owned merchant banking subsidiary
of HSBC Bank) based in London.
Mr Holliday-Smith was appointed Chairman of Cochlear Limited in
July 2010, having joined the Board in March 2005. He has been a
director of Servcorp Limited since October 1999 and is a Member
of the Macquarie University Faculty of Business and Economics
Advisory Board.
Dominic Stevens
Managing Director and CEO, Executive Director
BCom (Hons)
Dominic Stevens was appointed Managing Director and Chief
Executive Officer (CEO) of ASX 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 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 the global metals and agricultural
commodity derivatives businesses.
Mr Stevens is also a director of the Murdoch Children’s Research
Institute.
ASX Annual Report 2019 Corporate governance
37
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
Yasmin Allen was appointed a director of ASX in February 2015.
She is a member of the Audit and Risk Committee.
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 clearing and settlement licensees 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 Chair of Advance, a director of the George Institute
for Global Health and the National Portrait Gallery, and Acting
President of the Australian Government Takeovers Panel.
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, 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.
He has announced his intention to retire as Chairman this year.
Melinda Conrad
Independent, Non-Executive Director
MBA, FAICD
Peter Marriott
Independent, Non-Executive Director
BEc (Hons), FCA, MAICD
Melinda Conrad was appointed a director of ASX in August 2016.
Peter Marriott was appointed a director of ASX and Chair of the
Audit and Risk Committee in July 2009.
She has over 20 years’ experience in business strategy and marketing,
and brings skills and insights as an executive and director from a
range of industries, including retail, financial services and healthcare.
He is a director of each ASX clearing and settlement facility licensee
and their intermediate holding companies.
Ms Conrad has been a strategy and marketing adviser, an executive
with Colgate-Palmolive, and founded and managed a retail business.
Mr Marriott has spent over 30 years in senior management roles
in the finance industry, spanning international banking, finance
and auditing.
She was appointed a director of Stockland Corporation Limited and
Stockland Trust in May 2018 and Caltex Australia Limited in March
2017. Ms Conrad’s previous appointments include director of OFX
Group Limited between September 2013 and September 2018, 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 and the AICD Corporate Governance
Committee.
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. He is a member of the Council of Monash
University and is Chairman of the Resources and Finance Committee
of the Monash University Council.
38 ASX Annual Report 2019 Corporate governance continued
Corporate governance continued
Peter Nash
Independent, Non-Executive Director
BCom, FCA, F Fin
Damian Roche
Independent, Non-Executive Director
BCom
Peter Nash was appointed a director of ASX on 19 June 2019.
Damian Roche was appointed a director of ASX in August 2014.
Mr Nash was a Senior Partner with KPMG until September 2017,
having been admitted to the partnership in 1993. Mr Nash served
as National Chairman of KPMG Australia from 2011 until August
2017. In this role, he also served as a member of the Global Board of
KPMG and was the Chair of KPMG’s Global Investment Committee.
Mr Nash is Chairman of Johns Lyng Group Limited and a
non-executive director of Westpac Banking Corporation and Mirvac
Group Limited. He is a board member of Reconciliation Australia,
Koorie Heritage Trust, Migration Council Australia and Golf Victoria.
Mr Nash’s previous appointments include member of the Business
Council of Australia and member of its Economic and Regulatory
Committee.
Mr Roche is also Chairman of ASX Clear (Futures) Pty Limited and
a director of Austraclear Limited, the ASX clearing and settlement
licensees for Australia’s derivatives, OTC and debt markets, and
their intermediate holding companies.
Mr Roche has 20 years’ experience in global investment banks, with
extensive 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.
Mr Roche is a director of the Kaldor Public Arts Projects and HRL
Morrison & Co Limited.
Heather Ridout AO
Independent, Non-Executive Director
BEc (Hons)
Peter Warne
Independent, Non-Executive Director
BA, FAICD
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 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, the Henry Tax Review panel, the Climate
Change Authority and the Prime Minister’s Taskforce on
Manufacturing.
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 also Chairman of
Austraclear Limited and a director of ASX Clear (Futures) Pty Limited,
the ASX clearing and settlement licensees for Australia’s derivatives,
OTC and debt markets, and 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, NSW Treasury Corporation and Allens. He is also a
member of the ASIC External Advisory Panel.
Mr Warne has been Chairman of Macquarie Group Limited and
Macquarie Bank 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.
ASX Annual Report 2019 Corporate governance continued
39
Corporate governance continued
ASX is committed to maintaining and promoting high standards
of corporate governance. By corporate governance we mean
our structures for accountability and the framework of rules,
relationships, systems and processes within and by which authority
is exercised and managed within our company.
This report outlines our principal governance arrangements and
practices for effective decision-making and accountability. It is
current as at 15 August 2019 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
reporting period and this statement reports compliance with the third
edition. In FY20, ASX intends to report against the fourth edition of
the Corporate Governance Principles and Recommendations, which
was launched in February 2019.
The ASX Board and its committees regularly review ASX’s
governance 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. More information on ASX’s corporate governance is
available on ASX’s website.
Laying solid foundations for
management and oversight
The role of the Board
The Board is accountable to shareholders for the performance
of ASX. It is mindful that the company's long-term success depends
on maintaining the trust and goodwill of various stakeholders,
including our customers, regulators and employees.
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 including 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
• Reviewing and overseeing systems of risk management,
internal control and regulatory compliance.
The Board’s responsibilities are detailed in the Board charter. The
Board’s conduct is also governed by ASX’s constitution. The Board
charter and ASX's constitution are available on ASX's website.
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.
Executives attend and regularly report at Board meetings.
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
directors on the Board and considers whether the composition,
mix of those skills and succession plans remain appropriate for
ASX’s strategy. It makes recommendations to the Board based on
its reviews.
The Nomination Committee also considers and makes
recommendations to the Board about the process for nomination
and selection of directors for the Board and Board committees, and
about the performance of directors.
The Nomination Committee is currently comprised of three
independent, 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 FY19
and the individual attendance of its members at those meetings
are disclosed on page 43.
Before appointing a director, ASX undertakes comprehensive
reference 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.
40 ASX Annual Report 2019 Corporate governance continued
Corporate governance continued
Non-executive director tenure
Board gender diversity
Age of directors
0-3 years
4-6 years
>10 years
22%
33%
Female directors
Male directors
CEO
10%
30%
44-55
56-65
66-70
10%
50%
40%
45%
60%
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.
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
Directors are generally elected for three years. Retiring directors are
not automatically re-appointed. Melinda Conrad and Ken Henry will
retire by rotation in 2019. They are standing for re-election at the
2019 AGM and are unanimously supported by all other directors.
Peter Nash was appointed a director of ASX on 19 June 2019. He is
standing for election at the 2019 AGM and is unanimously supported
by all other directors.
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 these bring.
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 achievements in FY19 are set
out on page 29, along with further details on ASX's initiatives to
support diversity.
The Board is committed to maintaining its diversity of membership.
The Board has adopted a target of a minimum of 40% female
directors. Currently, 30% percent of ASX’s directors are female and
33.3% 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.
Board renewal
Performance reviews
The Board, in consultation with the Nomination Committee, regularly
reviews its composition and succession plans and the process for
nominating and selecting ASX directors.
As noted above, the most recent appointment to the ASX
Board was Peter Nash in June 2019. Details about Mr Nash’s
skills and experience are set out on page 39 and are also
in the Notice of Annual General Meeting (AGM) 2019. The
Board considers that Mr Nash’s leadership skills and his
extensive business and audit experience as a senior partner with
KPMG complement and add value to the Board’s existing skills
and experience.
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 63.
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 FY19 with the support of an external
consultant.
The Board takes this evaluation into consideration when
recommending 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 executive performance and
remuneration is set out in the Remuneration Report on pages 48
to 62. Performance evaluations for the CEO and ASX’s executives
took place in FY19 in accordance with the process disclosed in the
Remuneration Report.
ASX Annual Report 2019 Corporate governance continued
41
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 nine independent,
non-executive directors and the CEO.
The directors have elected 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 name,
qualifications and tenure of each director are set out on pages 37 to
39. 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
understand 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
9
Strategy
Define strategic objectives, constructively question
business plans and implement strategy
Financial acumen
Accounting and reporting, corporate finance and internal
controls, including assessing quality of financial controls
Risk and compliance
Forward looking, able to identify the key risks to the
organisation and monitor effectiveness of risk
management frameworks and practices
Public policy
Public and regulatory policy, including impact on
markets and corporations
Information technology/
digital
Use and governance of critical information technology
infrastructure, digital disruption and information
monetisation
Business
development and
customer management
Commercial and business experience, including
development of product, service or customer
management strategies, and innovation
People and change
management
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 relationships with
financial markets participants
Financial services
experience
Broking, funds management, superannuation and/or
investment banking activities
42 ASX Annual Report 2019 Corporate governance continued
Corporate governance continued
Director independence
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 considers
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 as a whole rather than of an individual security
holder or other party.
The Board has adopted a policy to assess a director’s indepen-
dence. The policy includes guidelines for assessing the materiality of
directors’ relationships that may affect their independence.
This policy is available on ASX’s website.
Aligning interests of the Board with
shareholders
To underscore the alignment of the Board with shareholders’
interests, the Board has adopted a policy that all non-executive
directors should accumulate a number of ASX shares equivalent in
value to their base level annual director fee (and in the case of the
ASX Chairman, the base level annual director fee plus the Chairman
fee) within three years of their appointment. All directors other
than the most recently appointed director comply with this policy.
Details regarding director remuneration and ASX’s remuneration
policies and practices are set out in the Remuneration Report on
pages 48 to 62.
Access to information and advice
Directors have access to management to request information.
The Board regularly assesses the independence of its directors. The
Board has assessed each non-executive director as independent.
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.
There is no fixed limit on director tenure. The tenure of each director
is set out on pages 37 to 39. Rick Holliday-Smith (ASX’s Chairman)
and Peter Warne have been directors of ASX Limited for more
than 13 years. In FY19, the Board reviewed and determined that
their tenure has not impacted on their independence. The mix of
directors’ tenure is shown in a diagram on page 41.
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).
Attendance at meetings
Details of director attendance at Board and committee meetings
in the 12 months up to 30 June 2019 are set out below. Provided
there is no conflict of interest, directors are also invited to, and
frequently attend as observers, 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.
Board meetings
Audit and Risk
Committee meetings
Nomination
Committee meetings
Remuneration
Committee meetings
Director name
Rick Holliday-Smith
Held
10
Attended
10
Held
4
Dominic Stevens
Yasmin Allen
Melinda Conrad
Ken Henry
Peter Marriott
Peter Nash
Heather Ridout
Damian Roche
Peter Warne
10
10
10
10
10
1
10
10
10
10
10
10
10
10
1
10
10
10
-
4
-
4
4
-
-
-
4
Attended Observed
4
-
4
-
4
4
-
-
-
4
-
4
-
4
-
-
-
4
4
-
Held
5
-
-
-
-
-
-
5
-
5
Attended Observed
5
-
-
-
-
-
-
5
-
5
-
5
5
5
5
5
1
-
5
-
Held
5
-
-
-
-
-
-
5
-
5
Attended Observed
5
-
-
-
-
-
-
5
-
5
-
5
5
5
5
5
1
-
5
-
ASX Annual Report 2019 Corporate governance continued
43
Corporate governance continued
Similar to previous years, in FY19 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.
The Board sets the policy regarding payments to political parties,
including limits on the amounts paid. Payments within those limits
are approved by the CEO and the General Counsel. All payments to
political parties are disclosed by ASX.
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 is supported in this regard
by the Audit and Risk Committee.
The role of the Audit and Risk Committee in safeguarding the
integrity of ASX’s corporate reporting includes reviewing ASX’s
financial reports and the adequacy of the Group’s corporate
reporting processes.
Additional information on the role and responsibilities of the Audit
and Risk Committee, its membership, and the number of times the
Committee met in FY19 are detailed on pages 43 and 46.
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 (CFO) 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 the Chief Risk Officer (CRO)
that ASX’s risk management and internal control systems
are operating effectively for the management of material
business risks.
Act ethically and responsibly
ASX is committed to conducting business in an open and accountable
way. We believe that ethical and responsible business practices are
a driver of shareholder value, and that ASX plays 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 28.
Our Corporate Responsibility and Sustainability report on pages
26 to 35 details other ASX polices, 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 staff. The
dealing rules:
• Document the procedure for dealing in securities
• Are designed to help prevent directors and staff from
contravening laws on insider trading.
Additional dealing restrictions apply to staff working in specified
functions (including our Listings Compliance, Market Announcements
and Surveillance functions).
Derivatives and hedging arrangements for unvested ASX securities,
or vested ASX securities subject to a holding lock, are prohibited.
A copy of ASX's dealing rules is available on ASX's website.
Payments to political parties
ASX has a responsibility to its stakeholders to articulate the
opportunities and challenges facing its business, communicate its
position on relevant public policy issues and contribute to
well-informed decision-making by government.
We actively engage with government and political decision-
makers about our role, the investments we're making to build
world-class infrastructure, and the dynamic and globally competitive
market environment in which ASX's operates.
44 ASX Annual Report 2019 Corporate governance continued
Corporate governance continued
External auditor
Respecting the rights of security holders
ASX has appointed PricewaterhouseCoopers (PwC) as its external
auditor. The appointment was approved by shareholders at the
2008 AGM. In accordance with auditor rotation requirements, the
PwC lead audit partner for ASX changed in FY19.
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 FY19 financial report is on pages 109 to 113.
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 contraventions
of the auditor independence requirements of the Corporations Act
2001 and no contraventions of any applicable code of professional
conduct in relation to its audit (refer to page 65). The fees paid to PwC
for non-audit services are disclosed on page 107.
PwC’s lead audit partner will attend the 2019 AGM to answer
questions relevant to the external audit.
Making timely and balanced disclosure
Continuous and periodic disclosure
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
updated in FY19 and is available on ASX's website.
ASX will not disclose market sensitive information to any analyst
or investor unless it has first provided that information to the
market and received an acknowledgement that the information
has been released.
Key periodic shareholder communications include our Annual
Report, full-year and half-year financial results, and monthly
activity reports.
Shareholder engagement
ASX is committed to communicating promptly, accurately and in
plain language with shareholders. This commitment is detailed in
our shareholder communications policy available on our website.
All market announcements (including financial results and Annual
Reports) are published on ASX’s website after they have been
released on the Market Announcements Platform. 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
webcasting and social media, to communicate promptly, transparently
and widely. We encourage shareholders to participate in
shareholder meetings and we deal 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.
Electronic communications
We encourage shareholders to receive communications from
us electronically. Electronic communication allows ASX to
communicate with shareholders quickly, and reduces ASX’s
paper usage. ASX emails shareholders when important
information becomes available such as financial results, dividend
statements, 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 communications electronically.
Annual General Meetings
Details about ASX’s 2019 AGM are provided on page 119.
The AGM is an opportunity for shareholders 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.
ASX Annual Report 2019 Corporate governance continued
45
Corporate governance continued
Recognising and managing risk
ASX’s risk management framework
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.
Audit and Risk Committee
As outlined above, the Board has established an Audit and Risk
Committee. The Audit and Risk Committee reports to the ASX Board
and its responsibilities include:
• Reviewing the enterprise risk management framework
• Overseeing 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 CFO
on financial matters, the CRO on enterprise risks, the Chief
Operating Officer (COO) on operational, technology and cyber
security risks, the Chief Compliance Officer on compliance
matters as well as reports from ASX’s Internal Audit and
Enterprise Compliance functions, and from our external auditor.
In addition to the responsibilities listed above, the Audit and Risk
Committee has a role in safeguarding the integrity of ASX’s corporate
reporting. Further details about that role are set out on page 44.
The Audit and Risk Committee charter is available on ASX’s website.
The Committee is currently comprised of five independent,
non-executive directors. Its members are Peter Marriott (Committee
Chair), Rick Holliday-Smith, Yasmin Allen, Ken Henry and Peter
Warne. The number of times the Committee met in FY19 and the
individual attendance of its members at those meeting are detailed
on page 43.
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.
ASX’s risk management function has day-to-day responsibility for
the implementation of the enterprise risk management framework.
The Audit and Risk Committee reviews the enterprise risk
management framework annually. This review took place in FY19.
Management committees
ASX has established the following management committees
comprised of senior executives to assist with the oversight and
management of risks:
• Risk Committee chaired by the CRO. The Risk Committee
has oversight of the implementation of ASX’s enterprise
risk management framework, approves risk policies and
considers general risk matters consistent with the ASX Board’s
risk appetite
• Regulatory Committee chaired by the Group General Counsel.
The Regulatory Committee has oversight of licence compliance
matters, develops and approves policies, considers updates
on regulatory and government engagement and on ASX rule
changes
• Technology Operations and Security Committee (TOSC) chaired
by the COO. TOSC has oversight of IT security matters, systems
updates and incident management, and considers emerging
technology, operational and security risks.
Internal Audit
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 CRO for other purposes. The Audit and Risk
Committee determines the Internal Audit function’s scope, function
and budget each year.
Internal Audit has full access to the Audit and Risk Committee. It also
has unrestricted access to all ASX records, property and personnel.
The Internal Audit function is independent of ASX’s external auditor.
46 ASX Annual Report 2019 Corporate governance continued
Corporate governance continued
Enterprise Compliance
ASX’s Enterprise Compliance function maps the compliance
framework for ASX regulatory obligations, oversees ASX’s conflict
handling arrangements and provides training to the business to
ensure key Australian and international obligations are understood
and complied with. It also undertakes compliance reviews and report-
ing to regulators. The General Manager of Enterprise Compliance
has a direct reporting line to the Audit and Risk Committee and
ASX’s clearing and settlement (CS) boards for key licence obligations
and conflict handling arrangements, and reports to the CRO 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 16 to 25 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 26 to 35.
Clearing and settlement boards
ASX has four subsidiary companies that hold licences to operate
clearing and settlement facilities, and two intermediate holding
companies.
The CS boards focus on risk management and oversight of the operation
of the clearing and settlement licensees. 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 committee
for the CS boards where such matters relate to clearing and settlement
operations outside of those matters carried out by the CS boards
(and detailed in the CS boards' charter).
Remunerating fairly and responsibly
ASX aims to attract and retain high quality directors and senior
executives.
The Board oversees executive and non-executive director
remuneration arrangements and has established a Remuneration
Committee to assist it in this regard. The Remuneration Committee
helps bring the focus and independent judgement needed for
remuneration 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 Chair be an independent director who
is not the Chairman of the ASX Board.
The number of times the Committee met in FY19 and the individual
attendance of its members at those meetings are detailed on page 43.
Details of executive and director remuneration and ASX’s
remuneration polices are disclosed in the Remuneration Report
on pages 48 to 62.
ASX Annual Report 2019 Corporate governance continued
47
Remuneration report
48 ASX Annual Report 2019 Corporate governance continued
Remuneration report
Dear fellow shareholders,
ASX's performance and remuneration framework is designed to
focus our employees on delivering the company's strategy, which
will create enduring value for our customers, our shareholders,
our communities and other stakeholders. The Board undertakes
reviews to ensure the performance and remuneration framework
meets these aims by:
• Being aligned to the creation of shareholder value
• Being regularly and rigorously measured
• Using a mix of financial and non-financial metrics
• Being able to attract, retain and motivate talent
• Promoting integrity within our workforce.
These reviews also allow us to assess the impact of the remuneration
approach on our culture and the conduct of our employees.
ASX has previously recognised the importance of risk management
through Vision, Strategy and Execution goals set across the Group
and in the behavioural expectations of our people. During FY19,
we enhanced how we incorporate financial and non-financial risk
considerations into the performance and reward framework by
mandating individual goals relating to risk awareness and risk
culture for General Managers and above. This reinforces ASX’s
commitment to risk management and highlights the importance
of individual accountability for managing risk.
To inform our assessment of overall performance, the Board sought
assessments of risk and conduct from the Chief Risk Officer, as
well as input from the Audit and Risk Committee and clearing and
settlement boards. This approach ensures that each Executive's¹
reward outcome reflects their performance, how they have
discharged the accountabilities of their role, their management of
risk and their conduct.
The Board will continue to review ASX’s performance and reward
practices to ensure they uphold our remuneration principles, remain
fit for purpose and reward Executives for the value they create for
customers, shareholders and other stakeholders.
FY19 company performance
FY19 saw solid performance across the Group. ASX grew its
statutory revenues by 5.0% and its statutory NPAT by 10.5%.
During the year, we continued to invest to strengthen our risk
management capabilities and the resilience of our technology
platform. In parallel, ASX progressed its growth initiatives including
the rollout of ASX DataSphere, our open data analytics platform,
and continued to explore how we might use our expertise and
experience in distributed ledger technology to benefit customers, the
industry and ultimately our shareholders. Further details of ASX’s
performance are provided in section 3.2 of this report.
FY19 Group remuneration outcomes
Fixed remuneration outcomes
The fixed remuneration for Executives is reviewed annually to
ensure it remains competitive and reflects the accountabilities of
each role. There were no changes to the fixed remuneration for the
five disclosed Executives in FY19.
For FY20, the Board determined that the Chief Operating Officer
and Chief Risk Officer will receive fixed remuneration increases of 7%
and 9% respectively, to reflect market rates for these roles. The fixed
remuneration for these roles was unchanged for the last two financial
years. These changes will be disclosed in the FY20 Remuneration Report.
No other Executive received a fixed remuneration increase for FY20.
Short-term incentive (STI) outcomes
The Board assesses the performance of the Group against the
Balanced Scorecard, achievement of Vision, Strategy and Execution
goals, and management of risk. This performance informs the
maximum value available under the Group incentive pool.
Based on the Group’s performance, the Board determined that
the Group incentive pool will be 105% of target. Further detail
regarding how the Group incentive pool was determined is discussed
in section 3.2 of this report.
An Executive's individual performance is assessed against their goals
drawn from the Group Balanced Scorecard, the Vision, Strategy and
Execution goals, division-specific goals and individual goals based
on the accountabilities of that Executive’s role. The ASX values
and financial and non-financial risk management are explicitly
considered in the individual performance assessment, as they guide
the conduct of employees by encouraging them to focus on the way
they behave, the risks they manage and the results they achieve.
In FY19, the STI outcomes for Executives ranged from 105% to
125% of their target STI, with the average STI outcome being 109%.
Long-term incentive (LTI) outcomes
The performance rights granted under the LTI Plans are measured
against earnings per share (EPS) targets and relative total shareholder
return (TSR) targets.
In FY19, no awards were tested. This reflects the Board's decision to
extend the performance period of the LTI to four years for awards
made in the 2016 financial year onwards. As such, the next test of
the LTI will occur in August 2019 and will be disclosed in the 2020
Remuneration Report. Further details of the LTI Plan can be found
in section 5.5 of this report.
Consistent with the continuous improvement approach we take
to remuneration practices at ASX, we have sought to enhance
our remuneration disclosure in this Remuneration Report.
We hope you find the new layout an improvement on last year.
The Board believes the remuneration outcomes for FY19 are
consistent with the value generated for our customers, shareholders
and the communities in which the Group operates.
Thank you for your support.
Heather Ridout
Chair, Remuneration Committee
1 Executives refer to the CEO, Deputy CEO, Chief Financial Officer, Chief Operating
Officer and Chief Risk Officer.
ASX Annual Report 2019 Remuneration report
49
Remuneration report continued
Contents
1. Key Management Personnel covered in this report
2. Glossary of key terms
3. Snapshot of FY19 Group performance and reward
4. Remuneration governance
5. Executive remuneration framework
6. Statutory remuneration disclosure – Executives
7. Non-executive director remuneration arrangements
50
50
51
54
56
59
61
1. Key Management Personnel covered in this report
This Remuneration Report details the performance and remuneration of Key Management Personnel (KMP) for FY19. KMP is defined
as persons having authority and responsibility for planning, directing and controlling the activities of an entity, directly or indirectly.
The KMP comprise of:
• Non-executive directors of ASX Limited
• The CEO and members of the executive team who are accountable for managing critical operational activities, financial control or risk
functions (collectively termed Executives).
Name
Non-Executive Directors
R Holliday-Smith
Y A Allen
M B Conrad
K R Henry
P R Marriott
P S Nash
H M Ridout
D Roche
P H Warne
Executives
D J Stevens
P D Hiom
T J Hogben
G L Larkins
H J Treleaven
Former Executive
R Aziz
Role
Chairman
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Managing Director and Chief Executive Officer (CEO)
Deputy Chief Executive Officer (Deputy CEO)
Chief Operating Officer
Chief Financial Officer
Chief Risk Officer
Term as KMP
Full year
Full year
Full year
Full year
Full year
Commenced 19 June 2019
Full year
Full year
Full year
Full year
Full year
Full year
Commenced 29 October 2018
Full year
Chief Financial Officer
Ceased 31 October 2018
2. Glossary of key terms
Term
EPS
Meaning
Earnings per share, defined as 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.
Executives
The CEO, Deputy CEO, Chief Financial Officer, Chief Operating Officer and Chief Risk Officer.
KMP
TSR
Key Management Personnel are those people with authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly. KMP comprise non-executive directors, as well as Executives as defined above.
Relative total shareholder return, 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 2019 Remuneration report continued
Remuneration report continued
3. Snapshot of FY19 Group performance and reward
3.1 Remuneration received or available in the financial year
This section provides a snapshot of the performance of the Group and the corresponding remuneration outcomes. The remuneration table
below has been provided as additional non-statutory information to assist in understanding the total value of remuneration received by
Executives in the current and prior financial years.
Total fixed
remuneration1
a
Other
remuneration2
b
STI awarded
and paid3
c
Year
Total
payments
d=a+b+c
Deferred STI
vested4
e
LTI vested5
f
Total
remuneration
received
g=d+e+f
Previous year awards that
vested during the year
Current
D J Stevens
Managing Director and CEO
P D Hiom
Deputy CEO
T J Hogben
Chief Operating Officer
G L Larkins
Chief Financial Officer
H J Treleaven
Chief Risk Officer
Former
R Aziz6
Chief Financial Officer
Total
2019
2018
2019
2018
2019
2018
2019
2019
2018
2019
2018
2019
2018
2,000,000
2,000,000
1,000,000
1,000,000
675,000
675,000
538,462
800,000
800,000
206,394
600,000
5,219,856
5,075,000
2,610
2,610
2,610
2,610
2,610
2,610
1,757
868,000
800,000
434,000
420,000
195,300
189,000
2,870,610
2,802,610
1,436,610
1,422,610
872,910
866,610
225,534
765,753
202,610
202,610
133,334
133,334
1,135,944
1,135,944
-
-
395,767
-
138,535
-
-
-
-
-
-
-
424,945
-
-
-
-
-
2,870,610
2,802,610
1,832,377
1,847,555
1,011,445
866,610
765,753
1,135,944
1,135,944
403,305
7,570
615,502
218,010
-
80,000
1,856,168
1,622,334
609,699
687,570
7,691,526
6,915,344
118,696
-
652,998
-
-
-
-
424,945
728,395
687,570
8,344,524
7,340,289
1 Base salary, superannuation, non-monetary benefits and benefits that have been salary sacrificed such as participation in the employee share plan.
² Salary continuance insurance for all Executives. Benefits to specific Executives include: Hamish Treleavan: deferred cash payments were made in FY18 and FY19
in connection to the commencement of his employment, which were subject to his service and sufficient performance standards being met. Ramy Aziz: $3,901 of
fringe benefits tax on gifts and a payment of $396,841 in lieu of notice upon termination.
³ The portion of STI awarded for the financial year in cash. The remaining portion of STI in respect of FY19 but deferred for two and four years, is shown in table 6.1
Statutory remuneration.
4 This relates to the vesting of STI awarded in prior years, which was provided in the form of restricted ASX ordinary shares. The value disclosed is based on the
five-day volume weighted average price of ASX ordinary shares up to and including the vesting date.
5 The FY18 value for Peter Hiom 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 five-day volume weighted average price of ASX ordinary shares up to and including the vesting date. No LTI was tested during FY19.
6 Ramy Aziz was not eligible for an STI award in FY19.
ASX Annual Report 2019 Remuneration report continued
51
Remuneration report continued
3.2 FY19 Group performance
The Board assesses the performance of the Group against the Balanced Scorecard, the achievement of Vision, Strategy and Execution
goals, and management of risk. This assessment informs the Board’s determination of the Group incentive pool, which limits the total
value of STI payments available.
In FY19, the Board determined a Group incentive pool of 105% of target. This took into account the following:
Financial
objectives1
Link to strategy
Measure
Revenue
Expenses
Statutory net profit after tax (NPAT)
Actual outcome
Target met. $863.8m, up 5.0% on FY18
Target not met. 9.9% growth, slightly higher than guidance
impacted by higher supervision levies
Target met. Statutory NPAT up 10.5% (prior year included an
impairment charge of $20.2m)
Non-financial
objectives
Enduring trust,
integrity and
resilience
Underlying net profit after tax (NPAT)
Target met. Underlying NPAT up 5.7%
Underlying earnings per share (EPS)
Target met. Underlying EPS up 5.7%
Dividends per share (DPS)
Target met. Full-year DPS 228.7 cents, fully franked, up 5.7%,
plus special dividend of 129.1 cents per share, fully franked
Capital expenditure (capex)
Target met. Capex approximately $75.1m
Increase employees' focus on risk awareness,
accountability and speaking up survey
Target exceeded. Year-on-year improvement in risk management
practices and awareness as measured by internal risk survey
Complete implementation of FY19 Stronger
Foundations recommendations
Near real-time risk management capability for
ASX Clear (Futures) and ASX Clear
Implement improvements to company listings
and compliance processes
No significant regulatory breaches in the key
areas of legal, compliance, finance, tax and
operations
All systems meet availability targets
Innovative
solutions and
technology
Delivery of CHESS replacement program
milestones
Favourable outcome achieved through implementation of the
Board-approved risk strategy and risk culture action plan
Target met. All recommendations scheduled for FY19 have been
implemented by the agreed timeline, with initiatives across risk,
technology and leadership delivered
Target met. Near real-time risk management visualisation
tool developed and demonstrated to the RBA for ASX Clear
(Futures). Development of a similar tool for ASX Clear is in
progress
Target met. Major listing rules consultation underway.
4th edition of Corporate Governance Principles and
Recommendations released in February. Substantial regulatory
action taken against various listed companies and major
improvements to documentation, processes, rules and guidance
Target met.
Target met. Average system uptime for our critical systems over
the past 12 months was 100%
Target met. Project milestones throughout FY19 were
delivered to target, including opening the Customer
Development Environment on schedule
Establish secondary data centre and commence
migration in Q4 FY19 (multi-year project)
Target not met. Migration delayed, however on track for
commissioning secondary data centre in FY20
Build new data and analytic products for internal
and external use
Target met. ASX DataSphere platform launched. Improved
approach to clearing risk through enhanced analytical tools
Customer centric
Complete customer consultation on CHESS
replacement day-one scope and functionality
Improve customer experience through ASX
Online
Target met. Consultation successfully completed with a total of
41 written submissions received. ASX response to consultation
feedback released to the market in September 2018
Target met. New participants’ compliance portal integrated in
ASX Online platform, providing a refreshed platform, single
sign-on experience, and streamlined lodgement, notification
and self-service compliance management for participants
Diverse ecosystem Diversified listings strategy to attract foreign
and technology listings
Target met. In excess of 40 new foreign and technology listings
in FY19
Deliver new growth opportunities in
multi-currency (US$) and benchmarks
(roadmap for new products)
Embed ASX values at all levels of ASX
Collaborative
culture
Develop a refreshed Diversity and Inclusion
strategy by June 2019
1 Financial objective outcomes are per the Group’s segment note.
Target met. US$ payments live, on-boarding foundation
customers/benchmarks roadmap delivered as part of
five-year plan
Target met. BE values embedded in all HR operating processes
with 96% of employees demonstrating these values
Target met. Strategy developed and diversity initiatives rollout
commenced, which will continue in the FY20
52 ASX Annual Report 2019 Remuneration report continued
Remuneration report continued
3.3 FY19 Executive STI outcomes
The STI for Executives is based on a combination of the Group’s performance (the Group incentive pool) and an individual’s performance.
An individual’s performance is assessed against goals that are cascaded from the Group Balanced Scorecard, the Vision, Strategy and
Execution goals, and division-specific goals drawn from the accountabilities of an Executive’s role. Both the ASX values and non-finan-
cial risk management are explicitly considered in the individual performance assessment, as they guide the conduct of employees by
encouraging them to focus on the way they behave, the risks they manage and the results they achieve.
Total STI awarded1
Cash payment paid
August 2019
STI deferred for 2 years
(vesting August 2021)2
STI deferred for 4 years
(vesting August 2023)2
Current
D J Stevens
P D Hiom
T J Hogben
G L Larkins
$
2,170,000
1,085,000
488,250
563,836
%
108.5%
108.5%
108.5%
105.0%
$
$
$
868,000
434,000
195,300
225,534
651,000
325,500
146,475
169,151
100,000
651,000
325,500
146,475
169,151
100,000
H J Treleaven
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.
333,334
133,334
125.0%
3.4 Long-term performance
The following charts illustrate the long-term performance of the Group against key financial metrics. No LTI grants were tested in FY19, as
the Board determined to increase the performance period from three to four years for grants of LTI from the 2016 financial year onwards.
Statutory earnings per share (cents)
Dividends per share (cents) and
share price ($ at end of financial year)
Statutory net profit after tax ($million)
and STI outcome (% of target) for
Executives
101%
77%
92%
99%
109%
397.8
426.2
434.1
445.1
492.0
205.7
FY14
220.4
224.5
230.0
254.1
64.39
82.37
129.1
53.61
45.76
99.0
99.8
109.1
114.3
99.1
102.0
107.2
114.4
39.9
FY14
95.1
92.3
FY15*
FY16
FY17
FY18*
FY19
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
STI outcome % for executives
* Underlying profit in FY18 $465.3 million,
FY15 $403.2 million
Interim Final
Special
Share price ($)
ASX Annual Report 2019 Remuneration report continued
53
Remuneration report continued
4. Remuneration governance
The diagram below provides an overview of our governance arrangements relating to remuneration.
The Chief Risk Officer
provides an independent
assessment of risk
management
The Audit and Risk
Committee and the
clearing and settlement
boards provide input to the
Remuneration Committee
External advisers provide
independent advice
Remuneration
Committee
ASX Board
Shareholders
4.1 Role of the ASX Board
The Board oversees and approves the non-executive director remuneration and Executive remuneration arrangements. The Board has
established a Remuneration Committee for recommending remuneration policy for the Group. The ultimate responsibility for remuneration
policy matters rests with the Board.
4.2 Role and responsibilities of the Remuneration Committee
The Remuneration Committee develops the remuneration principles, framework and policies for the Group. The Remuneration Committee’s
responsibilities are outlined below.
Recommend to the Board:
• Remuneration arrangements and all reward outcomes for Executives
• Performance against goals and targets for Executives, incorporating an evaluation of risk management performance
• Remuneration for Executive appointments and retention matters
• ASX’s remuneration and incentive framework, including STI and LTI arrangements and participation
• Non-executive director fees.
Conduct reviews of:
• The effectiveness of the reward policy in supporting ASX’s values while complying with regulatory requirements
• Executive succession and key staff succession plans
• Progress against gender diversity objectives and actively promoting a collaborative and inclusive culture
• The capabilities required to deliver the organisation’s strategy.
54 ASX Annual Report 2019 Remuneration report continued
Remuneration report continued
4.3 Board discretion relating to variable remuneration
The Board understands that to make good remuneration decisions it needs both a robust framework and the ability to exercise judgement.
Therefore, the Board retains discretion to adjust variable remuneration outcomes in certain cases so that awards are appropriate, support
sound and effective risk management, and are aligned to shareholder interests.
The Remuneration Committee provides recommendations to the Board for approval of all Executives’ remuneration arrangements. The
Board may use its discretion to adjust any individual variable reward outcome. In determining remuneration outcomes for Executives,
the Board takes into account information from a range of sources. The Board seeks feedback on Executive performance from the Audit
and Risk Committee and the clearing and settlement boards, as well as reports on risk management performance from the Group Chief
Risk Officer. This approach ensures independence, objectivity, fairness and consistency in the overall process, and provides sufficient
information to inform the use of Board discretion in determining appropriate remuneration outcomes.
4.4 Clawback policy
The Board retains discretion to adjust performance-based remuneration that has not yet been realised or vested without restrictions,
for any employee or group of employees within the ASX Group, if it considers that such remuneration would be an inappropriate benefit.
The Board has absolute discretion to determine what constitutes an ‘inappropriate benefit’. Examples that may lead to an inappropriate
benefit include:
• Mismanagement of material risk issues for the Group
• Fraudulent or dishonest behaviour
• A material misstatement or omission in ASX’s financial statements
• A breach of obligations to ASX
• Acting in a manner that brings ASX into disrepute.
4.5 External advice
When an external perspective is needed, the Remuneration Committee may seek professional advice from remuneration advisers.
Remuneration advisers are engaged by the Committee independently of management when receiving remuneration recommendations,
as defined by the Corporations Act 2001.
During FY19, the Committee engaged EY to provide general information on remuneration market trends. No remuneration
recommendations were made by EY in FY19.
4.6 Engagement with external stakeholders
Each year, the ASX Chairman meets with investors and proxy advisers. These meetings provide an opportunity to discuss remuneration
practices and policies and any issues raised by the investor or proxy adviser.
4.7 Share ownership
Share ownership is encouraged among non-executive directors to strengthen the alignment between their interests and the interests of
shareholders.
In June 2019, the Board revised the guideline that determines the appropriate number of shares each non-executive director should hold.
It is expected that all ASX non-executive directors hold a number of ASX shares equivalent in value to their base level annual director fee (and
in the case of the ASX Chairman, the base level annual director fee plus the Chairman fee), by the first 30 June after the third anniversary
of their appointment. For directors appointed before 19 June 2019, the applicable number of shares is 3,107 (or 6,935 for the Chairman).
The applicable number of shares is calculated based on the market price of ASX shares as at the date of the non-executive director’s
appointment, rounded up to the nearest share.
All eligible non-executive directors currently hold a number of shares at or in excess of this level.
ASX Annual Report 2019 Remuneration report continued
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5. Executive remuneration framework
5.1. Executive remuneration principles
ASX’s remuneration framework provides a clear link between individual and Group performance, and aims to align rewards with shareholder
interests and our business strategy. To achieve this, the executive remuneration framework incorporates five guiding principles that
deliver reward which is:
Aligned
Measured
Competitive
Link rewards to the
achievement of the
strategy and the creation
of shareholder value
Apply rigorous
performance measures
to variable remuneration
Remain competitive by using
relevant market surveys
and benchmark against
industry peers
Financial and
non-financial
Assess and reward
performance on
both financial and
non-financial metrics
Integrity
Promote integrity in
the workforce
• Aligned – creating shareholder value: STI is based on the achievement of goals aligned to ASX’s strategy. The LTI is aligned to the
creation of shareholder value through the relative TSR and EPS hurdles. A portion of an Executive's total variable award is managed
through the compulsory deferral in ASX shares, creating alignment with shareholders through the performance of ASX’s share price.
• Regularly and rigorously measured: Each year, Executives undergo a performance assessment process including a self-assessment
and a manager assessment that factors in subsidiary board or committee feedback where appropriate. Performance and
remuneration recommendations take into account an assessment of an Executive’s management of risk. This is informed via an
independent assessment by the Chief Risk Officer. ASX defers a portion of STI awards over two and four years to ensure risks are
appropriately considered over the longer term before value is received by the Executive. ASX measures the LTI over a period of four
years. All variable remuneration is subject to satisfactory performance and the Board has discretion to make adjustments to the
deferred remuneration. Adjustments can include partial reductions or complete forfeiture of deferred awards.
• Competitive – attracting, retaining and motivating talent: ASX provides competitive total remuneration that is benchmarked against
market data for comparable roles in companies of a similar size and other publicly available market information.
• Apply the right mix of financial and non-financial metrics: By balancing financial goals with quantifiable non-financial goals and
measuring adherence to the ASX values, Executives are rewarded for driving both the immediate and long-term performance of
the Group.
• Promote integrity in the workforce: ASX’s values are designed to encourage and support our people to act and make decisions with
integrity. An assessment is made about how well an individual has exemplified ASX’s values, which then has a direct outcome on their
overall STI payment.
5.2. Executive remuneration components
The remuneration arrangements for Executives are made up of both fixed and variable remuneration. Variable remuneration is provided
through the STI and LTI.
5.3 Fixed remuneration
ASX provides competitive fixed remuneration to attract, retain and motivate talent. Fixed remuneration is paid as cash and comprises
salary, superannuation, and salary sacrificed items including non-monetary benefits and share-based payments. 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. Fixed remuneration is reviewed annually.
56 ASX Annual Report 2019 Remuneration report continued
Remuneration report continued
5.4. Short-term incentive
STI considerations in determining the STI outcomes for Executives are illustrated in the following diagram.
Group incentive pool %
Determines the available pool based on Group performance
Target STI in $
Target reward model
On-target STI as % of total reward
Individual performance rating
Individual goals linked to ASX strategy
determine the individual performance
outcome and range of STI outcomes
Behaviours and risk management
used as a ‘moderator’ to determine
the initial STI recommendation
STI outcome
Board determines the final STI outcome
60% of STI award is deferred into
equity for between two and four years
The following table outlines the key elements of the STI Plan.
Purpose
Performance
• Encourage the achievement of financial and non-financial goals that support the Group's strategy.
• Deferral periods extend the reward time frame to consider risks being managed.
• Reflects behaviours to ensure employees act in accordance with ASX’s values.
Group performance
• The target STI pool for Executives is calculated as the sum of
individual target STIs.
• Following an assessment of the Group’s performance, the
Board determines what percentage of the pool may be
released. This is referred to as the Group incentive pool.
• The Group incentive pool represents the maximum amount
available for STI payments across employees under the STI
Plan, however less than this amount may be spent depending
on individual performance.
Individual performance
• Individual performance is based on a holistic assessment
of an Executive's performance and behaviours across
their core accountabilities and their delivery of strategic
projects.
• An Executive's goals are cascaded from the Group
Balanced Scorecard, the Vision, Strategy and Execution
goals, and the division-specific goals drawn from the
accountabilities of an Executive’s role.
• An Executive’s performance rating determines what
percentage of individual STI targets are received.
The range is 0% to 150%.
Evaluation and
approval
• The CEO presents the Board with an assessment of the Group’s
• The Chief Risk Officer makes an assessment of risk
performance based on achievement against the Balanced
Scorecard, the Vision, Strategy and Execution goals, and
management of risk.
management for Executives and provides this to the CEO.
The Chief Risk Officer subsequently provides this assessment
directly to the Remuneration Committee.
• The Board incorporates feedback from the CEO and the Chief
• The Group CEO recommends to the Remuneration
Risk Officer to determine the Group incentive pool.
Committee the individual performance ratings and the
percentage of STI target to be applied for Executives
reporting to him, considering feedback from the Chief Risk
Officer, the Audit and Risk Committee and clearing and
settlement boards where appropriate.
• The Remuneration Committee considers the CEO’s
Instrument
Treatment upon
departure
recommendations and the Chief Risk Officer's assessment,
and then determines the final recommendations for all
Executives that will be submitted for Board approval.
• 40% of the STI is delivered in cash, with 60% deferred into restricted ordinary shares. Half of the deferred portion vests
after two years of ongoing employment, with the remainder vesting after four years of ongoing employment. Dividends
are accrued during the restricted period and paid to the Executive upon vesting.
• 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.
ASX Annual Report 2019 Remuneration report continued
57
Remuneration report continued
5.5 Long-term incentives
Key features of the plan are summarised below.
Purpose
• Encourage performance that creates long-term value for shareholders. The combination of relative TSR and EPS hurdles
Performance
Performance
measures
provides balance to the plan by measuring performance on a relative and absolute basis:
- Relative: rewards participating Executives for performance that exceeds that of peer companies
- Absolute: ensures there is a continued focus on providing positive growth, even when the market is declining.
Participation is limited to the CEO and Deputy CEO.
The face value of the maximum potential LTI award for the CEO and Deputy CEO is 50% of their fixed remuneration.
External performance measure
Relative 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 or de-listings. The plan
rules determine the adjustments of the peer group following
such events.
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.
Vesting schedule
Performance
Less 51st percentile
51st percentile
Vesting
0%
25%
Greater than 76th percentile
100%
Calculation
Vesting occurs in a straight line between the 51st and 76th
percentile
• TSR is calculated as the movement in share price and
dividends received, assuming re-investment of dividends.
• The TSR is calculated over a four-year period, using the
three-month volume weighted average price up to (and
including) the start date and end date of the performance
period.
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%
• 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.
• To arrive at underlying profit after tax, significant items may
be excluded. These items are determined by the Board and
may include revenues and expenses associated with specific
events or the results of corporate actions. Exclusion of these
items would be clearly identified and explained if such action
impacted any vesting outcome.
Performance period
Four years
Instrument
Determining
the number of
performance rights
Expiry
Dividends
Retesting
Treatment upon
departure
Performance rights over ASX ordinary shares. For grants made from FY19 onwards, the Board may, at its discretion, elect to
settle vested LTI allocations with a cash equivalent payment. The value of the cash payment will be determined based on the
number of rights that have vested, multiplied by volume weighted average price over the 20 trading days prior to the vesting
date.
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.
Dividends are not paid on performance rights.
No
Performance rights will lapse if an Executive’s employment is terminated for cause or poor performance, or if the Executive
resigns. If an Executive ceases employment in other circumstances (for example, by mutual agreement with ASX, termination of
employment by ASX on notice, redundancy or retirement), 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.
5.6 Executive remuneration mix
The Executives' remuneration is aligned to the executive remuneration principles set out in section 5.1. All Executives receive fixed
remuneration and STI. In addition, the CEO and Deputy CEO also receive an LTI component.
The chart below sets out the remuneration structure and mix for the CEO and Deputy CEO.
At-risk
Fixed remuneration
40%
Target STI
40%
Equity deferred 2 years
30%
Cash
40%
LTI grant face value
20%
Equity deferred 4 years
30%
TSR (50%
of award)
EPS (50%
of award)
58 ASX Annual Report 2019 Remuneration report continued
Remuneration report continued
The chart below sets out the remuneration structure and mix for Executives other than the CEO and Deputy CEO. These Executives consist
of the Chief Financial Officer, Chief Operating Officer and Chief Risk Officer.
Fixed remuneration
50-75%
At-risk
Target STI
25-50%
Equity deferred 2 years
30%
Cash
40%
Equity deferred 4 years
30%
6. Statutory remuneration disclosure – Executives
6.1 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
payments
³
y
r
a
t
e
n
o
m
-
n
o
N
e
v
a
e
l
l
a
u
n
n
A
4
l
a
u
r
c
c
a
6
l
a
u
r
c
c
a
e
v
a
e
l
e
c
i
v
r
e
s
g
n
o
L
5
r
e
h
t
O
7
n
o
i
t
a
u
n
n
a
r
e
p
u
S
d
e
s
a
b
-
e
r
a
h
s
r
e
h
t
O
0
1
s
t
n
e
m
y
a
p
8
n
a
P
l
I
T
S
9
n
a
P
l
I
T
L
–
e
c
n
a
m
r
o
f
r
e
P
l
a
t
o
T
r
a
e
Y
¹
y
r
a
a
S
l
²
I
T
S
1
1
d
e
t
a
e
r
l
Current
D J Stevens
Managing Director
and CEO12
P D Hiom
Deputy CEO
T J Hogben
Chief Operating
Officer
G L Larkins
Chief Financial
Officer
2019
2018
2019
2018
2019
2018
1,962,590
1,962,192
868,000
800,000
16,878
17,759
-
(76,134)
2,610
2,610
7,709
6,673
20,531
20,049
820,603
370,603
220,172
277,029
962,590
962,192
434,000
420,000
16,878
17,759
67,809
(11,302)
2,610
2,610
(44,002)
16,292
20,531
20,049
513,750
427,500
43,503
226,917
644,978
649,780
195,300
189,000
9,490
5,171
(15,139)
(8,576)
2,610
2,610
10,761
32,370
20,531
20,049
227,819
174,006
-
-
-
-
-
-
-
-
3,919,093
3,380,781
49%
43%
2,017,669
2,082,017
49%
52%
1,096,350
1,064,410
39%
34%
2019
522,610 225,534
-
34,251
1,757
1,044
15,851
-
- 355,678
1,156,725 19%
H J Treleaven
Chief Risk Officer
2019
2018
769,335
779,013
133,334
133,334
10,133
938
(12,047)
14,990
64,833
175,944
2,870
2,366
20,531
20,049
94,877
19,877
Former
R Aziz
Chief Financial
Officer
Total13
2019
2018
2019
2018
196,128
579,951
-
80,000
-
-
15,021
(11,060)
403,305
7,570
3,121
9,542
10,266
20,049
148,500
148,500
5,058,231
4,933,128
1,856,168
1,622,334
53,379
41,627
89,895
(92,082)
477,725
191,344
(18,497)
67,243
108,241
100,245
1,805,549
1,140,486
263,675
503,946
355,678
-
10,050,044
8,508,271
39%
38%
¹ Base salary excluding payments made under the compulsory superannuation guarantee.
² The cash component of the STI earned over FY19, paid in cash in August 2019.
³ Salary-sacrificed items paid over the year including car parking (and associated fringe benefits tax) and participation in the employee share plan.
4 Annual leave accrued over the year.
5 The value of salary continuance insurance provided by the company. This column also shows the amortised value of payments to Hamish Treleaven relating to his
commencement of employment and the payment in lieu of notice to Ramy Aziz upon cessation.
6 Long service leave accrued over the year.
7 Post-employment benefits, comprising the compulsory superannuation guarantee.
8 Annual share-based payments expense for restricted shares issued under the deferred STI Plan.
9 Reflects annual share-based payments expense for performance rights issued under the LTI Plan. The expense is calculated using the fair value of performance
rights at grant date, less any write-back for performance rights lapsed as a result of non-market hurdles not attained. The LTI may be either equity or cash
settled, as determined by the Board. FY19 values reflect the reversal of the accrued expense of previous awards which did not vest.
10The amortised value of 11,604 restricted shares granted to Gillian Larkins on 15 February 2019, with a volume weighted average price of $58.38. The restriction
on half of this allocation of shares will lift on 1 September 2019 with the restriction on the remaining half lifting on 1 September 2020, subject to ongoing
employment and satisfactory performance.
11Reflects 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).
12The increase in total remuneration for the CEO in FY19 is primarily due to deferred STI expenses being amortised over four years. In FY18 this reflects amortisation
of the FY17 award and in FY19 this reflects amortisation of both the FY17 and FY18 awards.
13The total FY19 remuneration shown in table 6.1 is higher than the prior year. This is primarily due to: a) the change to the amortised expense of the CEO’s deferred
STI described in footnote 12; and b) payments relating to the change in Chief Financial Officer described in footnote 5 (Mr Aziz) and footnote 10 (Ms Larkins).
Note regarding the preparation of prior year information:
Prior year amounts have been restated to include additional benefits received for annual and long service leave and salary continuance insurance while other long-
term benefits has been restated to reflect the expense recognised in the year rather than the cash received. In addition, the salary sacrifice employee share plan
has been reclassified as a short-term 'non-monetary' benefit.
ASX Annual Report 2019 Remuneration report continued
59
-
-
-
-
-
-
-
-
1,083,866
1,146,511
21%
13%
776,341
834,552
19%
27%
Remuneration report continued
6.2 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 FY19.
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.
FY19
FY18
FY17
FY161
4 October 2018
26 September 2017
28 September 2016
30 September 2015
5 October 2018
– 4 October 2022
27 September 2017
– 26 September 2021
28 September 2016
– 29 September 2020
30 September 2015
– 1 October 2019
4 October 2022
26 September 2021
29 September 2020
1 October 2019
4 years
2
4 years
2
4 years
2
CEO
15,843
Deputy CEO
7,921
CEO
18,975
Deputy CEO
9,488
CEO
20,889
Deputy CEO
10,445
4 years
1
Deputy CEO
13,041
50% EPS and 50% TSR
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
5.1% compound growth
51st percentile
51st percentile
51st percentile
51st percentile
No
No
$62.01
16%
2.2%
3.70%
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
Fair value of performance rights
(EPS awards)
Fair value of performance rights
(TSR awards)
Weighted average AASB 2 share-based
payment fair value
1 The grants for FY16 exclude the former CEO Elmer Funke Kupper who resigned 21 March 2016.
$53.48
$24.34
$38.91
As is customary, ASX will submit Dominic Stevens' FY20 LTI grant for shareholder approval at the 2019 Annual General Meeting (AGM).
6.3 FY19 Executive 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 Executives, including their personally related parties.
Held as at
1 July 2018
Granted as
compensation
during the year
Vested during
the year
Lapsed during
the year
Held at
30 June 2019
Current
D J Stevens
P D Hiom
No other KMP had performance-related rights over issued ordinary shares in ASX directly, indirectly or beneficially.
39,864
32,974
15,843
7,921
-
-
-
-
55,707
40,895
6.4 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:
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
5 October 2018
4 October 2022
Min $1
Max $2
Min $1
Max $2
Current
D J Stevens
P D Hiom
1 Since the performance rights are issued with a zero exercise price, their minimum total value is nil, on the basis that they will not vest if the applicable
650,843
325,438
619,986
310,008
N/A
304,377
N/A
-
-
-
-
-
-
-
616,451
308,206
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.
60 ASX Annual Report 2019 Remuneration report continued
Remuneration report continued
6.5 Holdings of ordinary shares
Current
D J Stevens
P D Hiom
T J Hogben
G L Larkins1
H J Treleaven
Held at 1 July
2018
Received on vesting
of rights over
deferred shares
Allocated under
deferred STI Plan
Other changes
Held at 30 June
2019
29,754
60,444
8,820
-
996
-
-
-
-
-
17,886
9,390
4,226
-
2,981
-
-5,845
14
11,604
14
47,640
63,989
13,060
11,604
3,991
Former
R Aziz1
37,831
1 Opening balance for Gillian Larkins is effective from her date of commencement on 29 October 2018. Closing balance for Ramy Aziz is effective from his cessation
36,042
1,789
-
-
date of 31 October 2018.
6.6 Service agreements
Minimum notice periods (months)
Name
D J Stevens
P D Hiom
T J Hogben
G L Larkins
Position held
Managing Director and CEO
Contract effective date
1 August 2016
Executive
6
Deputy CEO
Chief Operating Officer
Chief Financial Officer
1 July 2015
1 April 2010
29 October 2018
1 March 2017
6
3
6
6
H J Treleaven
Chief Risk Officer
Former
R Aziz 2
3
1 The notice period for termination for poor performance requires an initial written notice of one month.
2 R Aziz resigned on 31 October 2018.
Chief Financial Officer
19 July 2010
ASX
12
12
6
12
12
6
Poor performance
3
31
11
31
31
11
7. Non-executive director remuneration arrangements
Non-executive directors receive fees for their contribution on the boards and associated committees on which they serve. The Remuneration
Committee reviews and recommends to the Board the fees provided to non-executive directors.
Non-executive director fees are set to ensure:
• 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.
7.1 Remuneration structure
ASX reviewed its non-executive director fees in August 2017 and made changes that became effective in October 2017. These were
determined with regards to the changed responsibilities of non-executive directors across ASX's governance forums. These fees remained
unchanged through FY19.
Under the non-executive director fee structure, remuneration comprises one base fee (plus superannuation) in respect of a non-executive
director appointment to the ASX Board and any board committee and/or its subsidiaries. An additional amount is paid to the Chairperson
of the ASX Limited Board or a committee or subsidiary board.
The aggregate amount paid to non-executive directors is approved by shareholders at the AGM. The maximum aggregate amount
that may be paid to all ASX non-executive directors in their capacity as members of the ASX Limited Board and its committees, and as
non-executive directors of subsidiary boards, is $3 million per annum. This was approved by shareholders at the 2017 AGM. The amount
paid in FY19 was $2.49 million. Non-executive directors of independent subsidiary boards who do not serve on the ASX Limited Board
are not included in the fee pool.
Non-executive directors have no entitlement to any performance-based remuneration or participation in any share-based incentive schemes.
ASX does not have a non-executive director retirement scheme.
ASX Annual Report 2019 Remuneration report continued
61
Remuneration report continued
7.2 Non-executive director fee schedule
The following table summarises the fees received for each role on the Board.
Fees excluding superannuation ($)
Board/Committee
Board1
Audit and Risk Committee
Remuneration Committee
Role
Chair
Member
Chair
Chair
2019
550,000
235,000
45,000
20,000
1 ASX Limited Board fees include payment for membership of ASX Limited Board committees and clearing and settlement boards.
7.3 Director fees for FY18 and FY19
The following table sets out the statutory remuneration details for non-executive directors for FY18 and FY19.
Current
R Holliday-Smith
Y A Allen
M B Conrad
K R Henry
P R Marriott
P S Nash
H M Ridout
D Roche1
P H Warne²
Year
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2019
2018
2019
2018
2019
2018
Short-term salary
and fees
Post-employment
superannuation
550,000
556,250
235,000
235,000
235,000
213,750
235,000
235,000
280,000
285,000
6,603
255,000
250,000
270,000
270,000
255,000
257,500
20,531
20,049
20,531
20,049
20,531
18,599
20,531
20,049
20,531
20,049
627
20,531
20,049
20,531
20,049
20,531
20,049
2018
550,000
235,000
45,000
20,000
Total
570,531
576,299
255,531
255,049
255,531
232,349
255,531
255,049
300,531
305,049
7,230
275,531
270,049
290,531
290,049
275,531
277,549
1 Fees disclosed for Damian Roche include $35,000 per annum for his role as Chairman of ASX Clear (Futures) Pty Ltd.
2 Fees disclosed for Peter Warne include $20,000 per annum for his role as Chairman of Austraclear Ltd.
7.4 Equity holdings
The table below sets out current equity holdings for non-executive directors.
R Holliday-Smith
Y A Allen
M B Conrad
K R Henry
P R Marriott
P S Nash
H M Ridout
D Roche
P H Warne
Held as at
1 July 2018
12,000
Other changes
-
Held at
30 June 2019
12,000
5,000
5,000
5,000
5,316
-
5,000
10,000
6,000
-
-
-
-
-
-
-
-
5,000
5,000
5,000
5,316
-
5,000
10,000
6,000
62 ASX Annual Report 2019 Remuneration report continued
Directors' report
The directors present their report, together with the financial
statements of ASX Limited (ASX or the Company) and its
subsidiaries (together referred to as the Group), for the year ended
30 June 2019 (FY19) and the auditor’s report thereon. The financial
statements have been reviewed and approved by the directors on
the recommendation of the ASX Audit and Risk Committee.
The FY19 consolidated net profit after tax attributable to the owners
of ASX was $492.0 million (2018: $445.1 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:
• Rick Holliday-Smith (Chairman)
• Dominic J Stevens (Managing Director and CEO)
• Yasmin A Allen
• Melinda B Conrad
• Ken R Henry AC
• Peter R Marriott
• Peter S Nash (appointed 19 June 2019)
• Heather M Ridout AO
• Damian Roche
• Peter H Warne.
Directors’ meetings and attendance at those meetings for FY19
(including meetings of committees of directors) are disclosed on
page 43. The qualifications and experience of directors, including
current and recent directorships, are detailed on pages 37 to 39.
Company secretaries
Daniel Moran
Group General Counsel and Company Secretary,
BA (UTS) LLB (UNSW)
Daniel Moran is Group General Counsel and Company Secretary.
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.
Daniel Csillag, BA LLB (UNSW), General Manager Company
Secretariat and Senior Legal Counsel, is also 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 disclosed in the
Operating and Financial Review on pages 16 to 25.
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 disclosed in note B3 of the financial statements
on page 82.
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 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
operations of the Group, refer to the Operating and
Financial Review on pages 16 to 25. 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 ASX's 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 Federal, State or
Territory law.
ASX Annual Report 2019 Directors' report
63
Directors' report continued
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 liabilities
insured against and the amount of the premiums.
The constitution of ASX provides that every person who is or has
been a director, secretary or executive officer of the Company,
and each other officer or former officer of the Company (or of its
related bodies corporate as the directors in each case determine),
is indemnified by the Company to the maximum extent permitted
by law. The indemnity covers losses or liabilities incurred by the
person as a director or officer, including but not limited to liability
for negligence and for legal costs on a full indemnity basis.
Performance rights over issued shares
At the date of this report, ASX had 96,602 performance rights
outstanding (2018: 72,838). For further details on the performance
rights including performance hurdles for vesting, refer to the
Remuneration Report on pages 48 to 62.
During the year, no performance rights vested or lapsed under any
Long-Term Incentive Plan (LTIP). In the prior year, 8,065 performance
rights vested as a result of partial attainment of hurdles under the
September 2014 LTIP and 19,367 rights lapsed.
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 48 to 62.
Non-audit services
Details of the amounts paid or payable to the Group's auditor
PricewaterhouseCoopers (PwC) and its related practices for non-audit
services provided during the year are set out in note F5.3 of the
financial statements on page 107.
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 written
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 requirements
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 65.
Rounding of amounts
ASX is a company of the kind referred to in ASIC Legislative
Instrument 2016/191. Amounts in the financial statements and
the Directors' Report have been rounded to the nearest thousand
or hundred thousand dollars in accordance with that instrument,
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, 15 August 2019
64 ASX Annual Report 2019 Directors' report continued
Auditor’s independence declaration
As lead auditor for the audit of ASX Limited for the year ended 30 June 2019, 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.
Voula Papageorgiou
Partner
PricewaterhouseCoopers
Sydney, 15 August 2019
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 2019 Auditor’s independence declaration
65
Statutory report – financial statements
Other balance sheet assets and liabilities
E1 Trade and other receivables
E2 Intangible assets
E3 Property, plant and equipment
E4 Trade and other payables
E5 Provisions
Group disclosures
F1 Subsidiaries
F2 Deed of Cross Guarantee
F3 Related party transactions
F4 Parent entity financial information
F5 Other disclosures
F5.1 Commitments
F5.2 Share-based payments
F5.3 Auditor’s remuneration
F5.4 Subsequent events
Directors’ declaration
Independent auditor’s report
98
98
100
101
101
102
103
104
104
105
105
105
107
107
108
109
Contents
Consolidated financial statements
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Significant accounting policies
A1 Significant accounting policies
A2 New and amended standards
A3 Reclassification of prior year balances
A4 Changes in accounting policies
Performance of the Group
B1 Segment reporting
B2 Revenue from contracts with customers
B3 Dividends
B4 Capital management
B5 Earnings per share
B6 Taxation
Risk management
C1 Clearing risk
C2 Cash
C3 Financial risk
Investments
D1 Investments in equity instruments
D2 Equity accounted investments
D3 Financial assets at fair value through profit or loss
67
68
69
70
72
73
73
75
78
80
82
82
83
84
85
86
87
96
96
97
66 ASX Annual Report 2019 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
Share of net (loss) of equity accounted investments
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 assets¹
Change in the fair value of investments in equity instruments²
Change in the fair value of cash flow hedges
Items that cannot be reclassified to profit or loss
Change in the fair value of investments in equity instruments
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)
Note
B2
B2
B2
B2
D2
B2
E2, E3
D2
B6
B5
2019
$m
222.5
309.5
230.9
108.4
216.2
5.1
(5.1)
1.9
1,089.4
(127.7)
(17.9)
(32.2)
(41.3)
(117.4)
(47.8)
-
(384.3)
705.1
(213.1)
492.0
-
-
-
(7.9)
(7.9)
484.1
254.1
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
Diluted earnings per share (cents per share)
1 In the prior year, $0.2 million was reclassified from equity to profit or loss following the sale of available-for-sale (AFS) financial assets prior to their maturity.
The AFS financial assets have been reclassified to financial assets at amortised cost and financial assets at fair value through profit or loss (FVTPL) on 1 July
2018 following the adoption of AASB 9 Financial Instruments. Therefore there will no longer be any fair value movements recognised in equity and subsequently
reclassified to profit or loss on sale.
254.1
230.0
B5
² The AFS investments have been renamed to investments in equity instruments on the balance sheet. Following the adoption of AASB 9 Financial Instruments,
these have been designated at fair value through other comprehensive income (FVTOCI) and any gain on sale remains within equity.
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
ASX Annual Report 2019 Consolidated statement of comprehensive income
67
Consolidated balance sheet
As at 30 June
Current assets
Cash1
Other financial assets at amortised cost
Financial assets at fair value through profit or loss²
Available-for-sale financial assets³
Trade and other receivables
Prepayments
Total current assets
Non-current assets
Investments in equity instruments4
Equity accounted investments
Financial assets at fair value through profit or loss²
Intangible assets
Net deferred tax asset
Property, plant and equipment
Prepayments
Total non-current assets
Total assets
Current liabilities
Amounts owing to participants
Trade and other 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
A3,C2
A3,A4,C3
C3,D3
A4,C3
E1
D1
D2
D3
E2
B6
E3
C1
E4
E5
B2
C1
B6
E5
B2
B4
2019
$m
333.1
10,825.4
1,111.8
-
390.6
17.5
12,678.4
24.3
52.0
-
2,458.3
45.3
61.5
10.5
2,651.9
15,330.3
10,601.0
349.3
89.9
15.2
83.1
2018¹
$m
377.2
5,186.7
-
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
11,138.5
8,704.2
200.0
-
9.6
65.8
275.4
11,413.9
3,916.4
3,027.2
801.7
71.5
0.4
15.6
3,916.4
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
¹ The cash and other financial assets at amortised cost line items were previously reported as cash and funds on deposit in the prior year financial statements.
Refer to note A3 for further details.
² In the current year, the convertible note included within financial assets at fair value through profit or loss has been reclassified to current assets.
³ The AFS financial assets were reclassified to financial assets at amortised cost and financial assets at FVTPL on 1 July 2018 following the adoption of AASB 9.
Refer to note A4 for further details.
4 This line item was called available-for-sale investments in the prior year.
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
68 ASX Annual Report 2019 Consolidated balance sheet
Consolidated statement of changes in equity
For the year ended 30 June
Opening balance at 1 July 2018
Change in accounting policies
Restated balance at 1 July 2018
Profit for the year
Other comprehensive income
for the year
Note
A4
Transfers within equity
D1
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
F5.2
B3
Issued
capital
$m
3,027.2
-
3,027.2
-
-
-
-
-
-
Closing balance at 30 June 2019
3,027.2
Opening balance 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
F5.2
B3
3,027.2
-
-
-
-
-
Closing balance at 30 June 2018
3,027.2
Retained
earnings
$m
666.7
(85.0)
581.7
492.0
-
160.7
652.7
-
(432.7)
801.7
622.2
445.1
-
445.1
-
(400.6)
666.7
Restricted
capital
reserve
$m
Asset
revaluation
reserve
$m
Equity
compensation
reserve
$m
71.5
-
71.5
-
-
-
-
-
-
71.5
71.5
-
-
-
-
-
168.4
0.6
169.0
-
(7.9)
(160.7)
(168.6)
-
-
0.4
178.4
-
(10.0)
(10.0)
-
-
71.5
168.4
11.7
-
11.7
-
-
-
-
3.9
-
15.6
8.8
-
-
-
2.9
-
11.7
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Total
equity
$m
3,945.5
(84.4)
3,861.1
492.0
(7.9)
-
484.1
3.9
(432.7)
3,916.4
3,908.1
445.1
(10.0)
435.1
2.9
(400.6)
3,945.5
ASX Annual Report 2019 Consolidated statement of changes in equity
69
Consolidated statement of cash flows
For the year ended 30 June
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Increase in participants’ margins and commitments
Net movement in financial assets at amortised cost
Interest received
Interest paid
Dividends received
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Receipts from the sale of equity instruments
Payments for equity accounted investments
Payments for financial assets at fair value through profit or loss
Payments for other non-current assets
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Dividends paid
Net cash (outflow) from financing activities
Net decrease in cash
Increase in the fair value of cash
Increase in cash due to changes in foreign exchange rates
Cash at the beginning of the year
Cash at the end of the year
Total funds available for the Group to invest comprises the following
As at 30 June
ASX Group funds
Participants’ margins and commitments
Less: non-cash collateral
Total
Cash
Other financial assets at amortised cost
Available-for-sale financial assets (excluding non-cash collateral lodged by participants)
Total
Note
D1
D3
B3
C2
C1
C1
C2
C3
2019
$m
941.8
(297.3)
644.5
1,603.3
(1,969.7)
133.5
(116.2)
5.1
(210.6)
89.9
380.7
(4.0)
-
(84.6)
292.1
(432.7)
(432.7)
(50.7)
-
6.6
377.2
333.1
1,464.0
10,801.0
(1,106.5)
11,158.5
333.1
10,825.4
-
11,158.5
2018¹
$m
891.7
(248.0)
643.7
208.3
(323.1)
122.2
(101.9)
14.2
(196.4)
367.0
-
(7.0)
(4.6)
(48.3)
(59.9)
(400.6)
(400.6)
(93.5)
1.8
4.7
464.2
377.2
1,069.5
8,495.8
(411.2)
9,154.1
377.2
5,186.7
3,590.2
9,154.1
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
70 ASX Annual Report 2019 Consolidated statement of cash flows
Consolidated statement of cash flows continued
Reconciliation of the operating profit after income tax to the net cash flows from operating activities
For the year ended 30 June
Net profit after tax
Non-cash items:
Depreciation and amortisation
Share-based payments
Share of net (loss) of equity accounted investments
Foreign currency revaluation
Impairment of equity accounted investments
Total non-cash items
Changes in operating assets and liabilities:
(Increase) in other financial assets at amortised cost²
(Increase) in financial assets at FVTPL
Increase in tax balances²
(Increase) in receivables3
(Increase) in prepayments
Increase in amounts owing to participants
Increase in trade and other payables3
Increase in revenue received in advance2
Increase in provisions3
2019
$m
492.0
47.8
3.9
5.1
(6.8)
-
50.0
(2,048.0)
(695.3)
2.5
(15.6)
(10.3)
2,305.2
2.5
5.3
1.6
2018¹
$m
445.1
47.6
2.9
0.4
(4.9)
20.2
66.2
(370.0)
(198.1)
0.4
(3.3)
(0.1)
411.1
11.1
4.2
0.4
Net cash inflow from operating activities
¹ The prior year has been restated to reflect the change in classification of certain assets as cash equivalents. Refer to note A3 for further details.
² Adjustments for changes in accounting policies are excluded, refer to note A4 for details.
³ Changes in assets and liabilities from investing and financing activities such as margins receivable/payable, certain accruals, makegood provisions and securities
89.9
367.0
pledged under repurchase agreements are excluded.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
ASX Annual Report 2019 Consolidated statement of cash flows continued
71
Notes to the consolidated financial statements
Significant accounting policies
A1 Significant accounting policies
(a) Basis of preparation
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 year ended 30 June 2019 are for the consolidated
entity which consists of ASX and its subsidiaries (together referred
to as the Group) and were authorised for issue by the Board of
Directors on 15 August 2019. 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 2019 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 financial
assets at FVTPL and investments in equity instruments which
have been measured at FVTOCI (refer to notes C3, D1 and D3)
• are measured and presented in Australian dollars which is
ASX’s functional and presentation currency with all values
rounded to the nearest thousand or hundred thousand dollars
in accordance with ASIC Legislative Instrument 2016/191, unless
otherwise indicated.
(b) Key judgements and estimates
In the process of applying the Group’s accounting policies,
management has made a number of judgements and applied
estimates concerning future events. Judgements and estimates that
are material to the financial report are found in the following notes:
• B2 Revenue from contracts with customers
• D1 Investments in equity instruments
• D2 Equity accounted investments
• D3 Financial assets at fair value through profit or loss
• E2 Intangible assets.
Key judgements and estimates are contained in shaded text and
included in the relevant note.
(c) Accounting policies
Foreign currency translation
Foreign currency transactions are translated into Australian
dollars, 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 C3) and investments
in equity instruments (refer to note D1).
Goods and Services Tax (GST)
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.
Assets are recognised net of the amount of GST, except where the
amount of GST is not recoverable from the taxation authority. In
these circumstances the GST is recognised as part of the 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.
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.
Other accounting policies
Other significant accounting policies 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.
(d) Reclassification of prior year balances
In the current year, the classification of certain amounts on the
balance sheet and statement of cash flows have been reassessed
and determined to no longer be cash equivalents. The comparatives
have been restated to align with the new classification. Refer to
note A3 for further details.
72 ASX Annual Report 2019 Notes to the consolidated financial statements
Notes to the consolidated financial statements continued
Significant accounting policies
A2 New and amended standards
(a) New and amended standards and interpretations
adopted by the Group
The AASB has issued a number of standards and amendments to
standards that are mandatory for the first time in the reporting
period commenced 1 July 2018. The following standards have been
identified as having a material impact on adoption and in future
reporting periods:
• AASB 9 Financial Instruments (AASB 9)
• AASB 15 Revenue from Contracts with Customers (AASB 15).
The impact of adopting AASB 9 and AASB 15 are disclosed in note
A4. All other standards and amendments to standards issued
by the AASB do not materially affect the amounts recognised
in prior, current or future periods. The Group did not apply any
pronouncements before their operative date in the financial year
ended 30 June 2019.
(b) New and amended standards and interpretations
not yet adopted by the Group
The AASB has issued a number of new or amended accounting
standards and interpretations that are not mandatory for the first
time in the reporting period commenced 1 July 2018. The Group has
assessed these standards and interpretations and determined that
AASB 16 Leases (AASB 16) will have a material impact on the Group in
future reporting periods. The impact of this standard is set out below.
AASB 16 is mandatory for periods beginning on or after 1 January
2019 and will be adopted by the Group on the mandatory date of
1 July 2019. It replaces AASB 117 Leases (AASB 117) and contains
a revised definition of a lease and has removed the distinction
between operating and finance leases by lessees. Under the new
standard, a non financial asset that represents the right to use the
leased item and a financial liability that represents the obligation to
pay rent will be recognised on the balance sheet. The asset will be
depreciated over the lease term on a straight-line basis and interest
expense will be charged on the lease liability. The interest charge
will result in a higher expense in the early years of the lease which
will impact certain ratios and metrics. EBITDA will be impacted as
the expense will be recognised within depreciation and amortisation
and finance costs rather than operating expense. Short-term leases
or leases of low value assets are exempted from the application of
this standard and will continue to be expensed on a straight-line
basis within occupancy expense.
The Group intends to apply the modified retrospective approach
on transition. Under this approach, comparative amounts will not
be restated and the right of use (ROU) asset will be equal to the
amount of the lease liability less any accrued amounts under AASB 117.
On adoption of the standard, the Group will recognise a ROU asset
of $80.6 million and a lease liability of $84.4 million. The lease
provisions of $3.8 million as at 30 June 2019 recognised under AASB
117 will be reversed and adjusted against the ROU asset. As a result
of the adoption of the new standard, the Group expects the FY20 net
profit after tax to be $1.6 million lower due to the front loading of the
expense. The EBITDA reported in the segment results is expected to
be approximately $11.5 million higher as the lease expense that is
included within operating expenses under AAB 117 will instead be
recognised within depreciation and amortisation and finance costs
which are excluded from this measure. Operating cash flows are
expected to increase as the lease payments will be recognised within
financing cash flows.
There are no other standards or amendments to standards that are
not yet effective that are expected to have a material impact on the
Group in the current or future reporting periods.
A3 Reclassification of prior year balances
In the current year, the Group reassessed the classification of its
cash and cash equivalents and determined that certain funds on
deposit and debt and money market instruments no longer meet
the criteria to be classified as a cash equivalent.
In prior years, all cash and funds on deposit and all AFS
financial assets were classified as cash and cash equivalents on the
basis that they were readily convertible to known amounts of cash,
subject to insignificant risk of changes in value and the weighted
average maturity of the investment portfolio was considered to be
short-term. The Group has now determined that the term deposits,
reverse repurchase agreements and notice deposits previously
included within cash and funds on deposit and the negotiable certif-
icates of deposit, bonds, promissory notes, treasury notes, and
floating rate notes that were previously classified as AFS financial
assets in the prior years do not meet the criteria to be classified as
cash equivalents. This is because the maturity of the instruments
at the acquisition date in some instances is greater than 3 months
and they are ultimately held for investment purposes rather than
to meet short-term cash commitments. For comparability purposes,
the prior year balances have been reclassified in the balance sheet
and statement of cash flows.
The following tables show the reclassifications for each individual line
item in the financial statements. Line items that were not affected
by the change have not been included. As a result, the sub-totals and
totals disclosed cannot be recalculated from the numbers provided.
ASX Annual Report 2019 Notes to the financial statements continued
73
Notes to the consolidated financial statements continued
Significant accounting policies
Consolidated balance sheet (extract)
As at 30 June
Cash
Cash and funds on deposit
Other financial assets at amortised cost
Total current assets
Consolidated statement of cash flows (extract)
For the year ended 30 June
Cash flows from operating activities
Increase in participants' margins and commitments
Net movement in other financial assets at amortised cost
Interest received
Net cash inflow from operating activities
Cash flows from investing activities
Increase in participants' margins and commitments
Net cash inflow from investing activities
Net increase in cash
Increase in the fair value of cash
Increase in cash due to changes in foreign exchange rates
Cash at the beginning of the year
Cash at the end of the year
Total funds available for the Group to invest comprises the following
As at 30 June
ASX Group funds
Participants' margins and commitments
Less: non-cash collateral
Total
Reported 2018
$m
-
5,563.9
-
9,955.9
Adjustment
377.2
(5,563.9)
5,186.7
-
Restated 2018
$m
377.2
-
5,186.7
9,955.9
-
-
169.1
528.7
404.5
344.6
472.7
0.4
6.6
9,085.6
9,565.3
1,069.5
8,495.8
-
9,565.3
208.3
(323.1)
(46.9)
(161.7)
(404.5)
(404.5)
(566.2)
1.4
(1.9)
(8,621.4)
(9,188.1)
-
-
(411.2)
(411.2)
208.3
(323.1)
122.2
367.0
-
(59.9)
(93.5)
1.8
4.7
464.2
377.2
1,069.5
8,495.8
(411.2)
9,154.1
Reconciliation of the operating profit after income tax to the net cash flows from operating activities (extract)
For the year ended 30 June
Non-cash items:
Foreign currency revaluation
Changes in operating assets and liabilities:
(Increase) in other financial assets at amortised cost
(Increase) in financial assets at FVTPL
Increase in amounts owing to participants
Net cash inflow from operating activities
(0.2)
(4.7)
(4.9)
-
-
-
528.7
(370.0)
(198.1)
411.1
(161.7)
(370.0)
(198.1)
411.1
367.0
74 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Significant accounting policies
A4 Changes in accounting policies
The Group has adopted AASB 9 and AASB 15 from 1 July 2018. This has resulted in changes in accounting policies and adjustments to the
amounts recognised in the financial statements. In accordance with the transition provisions in AASB 9 (7.2.15) and (7.2.22) and AASB 15(C3)
(b), the Group has applied both standards retrospectively, however comparative periods have not been restated. The opening balance
sheet on 1 July 2018 has been adjusted to recognise the cumulative effect of applying the standard retrospectively.
The following table shows the adjustments recognised for each individual line item in the financial statements on 1 July 2018 on adoption of
AASB 9 and AASB 15. This is following the reclassification of prior year balances as described in note A3. Line items that were not affected
by the changes have not been included. As a result, the sub-totals and totals disclosed cannot be recalculated from the numbers provided.
Consolidated balance sheet (extract)
As at
Current assets
Cash
Cash and funds on deposit
Other financial assets at amortised cost
Available-for-sale financial assets
Financial assets at FVTPL
Total current assets
Total assets
Current liabilities
Revenue received in advance
Total current liabilities
Non-current liabilities
Net deferred tax liabilities
Revenue received in advance
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Retained earnings
Asset revaluation reserve
30 June 2018
Reported
$m
Reclassifications¹
$m
30 June 2018
Restated¹
$m
AASB 9
$m
AASB 15
$m
1 July 2018
Restated
$m
-
5,563.9
-
4,001.4
-
9,955.9
12,923.0
22.4
8,704.2
64.7
0.1
273.3
8,977.5
3,945.5
666.7
168.4
377.2
(5,563.9)
5,186.7
-
-
-
-
-
-
-
-
-
-
-
-
-
377.2
-
5,186.7
4,001.4
-
9,955.9
12,923.0
22.4
8,704.2
64.7
0.1
273.3
8,977.5
3,945.5
666.7
168.4
-
-
3,590.7
(4,001.4)
411.2
0.5
0.5
-
-
0.2
-
0.2
0.2
0.3
(0.3)
0.6
-
-
-
-
-
-
-
57.8
57.8
(36.4)
63.3
26.9
84.7
(84.7)
(84.7)
-
377.2
-
8,777.4
-
411.2
9,956.4
12,923.5
80.2
8,762.0
28.5
63.4
300.4
9,062.4
3,861.1
581.7
169.0
Total equity
¹ The 30 June 2018 balances above were restated for the reclassification of certain cash balances as described in note A3 prior to the adoption of AASB 9 and
3,945.5
3,945.5
(84.7)
0.3
-
3,861.1
AASB 15 on 1 July 2018.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
75
Notes to the consolidated financial statements continued
Significant accounting policies
(a) AASB 9
The new standard replaces AASB 139 Financial Instruments: Recognition and Measurement (AASB 139). It has changed the criteria for
classifying and measuring financial instruments and introduces a new expected credit loss (ECL) model for calculating impairment. It also
aligns hedge accounting more closely with common risk management practices.
Classification and measurement
There has been no impact on the accounting for the Group's financial liabilities which continue to be classified and measured at amortised
cost under the new standard. The classification and measurement model of financial assets has been revised and is now based on an entity’s
business model for managing the assets and their contractual cash flow characteristics as described in the accounting policy within note C3
on page 87.
The Group has assessed all financial assets to determine the characteristics of the contractual cash flows (CCFs) and the business model
that applies and reclassified them accordingly. The following table summarises the reclassification of financial instruments made on
1 July 2018 following the adoption of AASB 9.
Measurement category
New
(AASB 9)
Original
(AASB 139)
Classification
Original
(AASB 139)
Carrying value
New
$m
Original
$m
Variance
$m
As at 1 July 2018
Current financial assets
Cash
Funds on deposit
Debt and money market instruments
Debt instruments lodged by participants
FVTPL
Trade and other receivables
Amortised cost
Amortised cost
Loans and receivables
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Loans and receivables
Amortised cost
Loans and receivables
FVTOCI
FVTOCI
AFS
AFS
377.2
5,186.5
3,590.9
411.2
373.2
377.2
5,186.7
3,590.2
411.2
373.2
Non-current financial assets
Equity securities
Convertible notes
Current financial liabilities
Amounts owing to participants
Trade and other payables¹
FVTOCI
FVTPL
FVTOCI
FVTPL
AFS
FVTPL
416.4
4.8
416.4
4.8
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
8,295.8
8,295.8
348.2
348.2
Non-current financial liabilities
Amounts owing to participants
1 Excludes transaction taxes payable which are not financial instruments as they are statutory obligations.
Amortised cost
Amortised cost
Amortised cost
200.0
200.0
-
(0.2)
0.7
-
-
-
-
-
-
-
(i) Reclassification from AFS to amortised cost
Prior to the adoption of the standard, the Group's debt and money market instruments were classified as AFS and measured at FVTOCI.
On initial adoption of AASB 9 all debt securities, other than those lodged by participants to cover margin obligations, were reclassified and
measured at amortised cost. This is because the Group intends to hold the securities to maturity to collect the CCFs and these CCFs are solely
payments of principal and interest (SPPI).
As allowed by AASB 9, the comparative period has not been restated and the adjustments have been reflected in the opening balance
sheet. The 30 June 2018 fair value impact of $0.9 million was reversed on adoption and adjusted against the opening carrying value of
the securities. Corresponding adjustments of $0.6 million and $0.3 million were made to the asset revaluation reserve and net deferred
tax liability respectively. The opening carrying value of the securities was adjusted by ($0.4) million to recognise the ECL allowance.
Corresponding adjustments of ($0.3) million and ($0.1)million were made to retained earnings and net deferred tax liability.
The fair value of the other financial assets at amortised cost that were previously measured at FVTOCI as at 30 June 2019 is $4,400.7
million (refer to note C3(d)(ii)). A fair value gain of $3.2 million net of tax would have been recognised in other comprehensive income if
the financial assets had not been reclassified.
(ii) Reclassification from AFS to FVTPL
Debt securities lodged by participants to satisfy margin obligations have been reclassified from AFS to FVTPL as these are not held to
collect the CCFs and therefore do not meet the criteria for amortised cost or FVTOCI. This has not had a material impact on the current
year financial statements and is not expected to have a material impact in future financial periods.
(iii) Reclassification from AFS to FVTOCI
The Group has made the election to designate its investments in equity instruments at FVTOCI. As these investments were previously
classified as AFS and measured at FVTOCI there is no impact to their measurement on adoption of AASB 9. There will only be an impact
when the investments are sold as any gain or loss on sale must remain in equity and can no longer be recycled to profit or loss. The gain
or loss can however be transferred from the asset revaluation reserve to other components of equity.
76 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Significant accounting policies
(b) AASB 15
Under AASB 15, revenue is recognised using a five step approach to
depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. Refer to the
accounting policy in note B2 on page 80 for details of the five steps.
The recognition of initial and subsequent listing fees have been
impacted by the new approach outlined above. These fees were
previously recognised on the date of admission or quotation of
the shares. Under AASB 15, these listing fees are deferred and
recognised over the period in which it is estimated that the listing
service will be provided. This is because the services provided in
relation to the initial or subsequent listing are not considered to be
distinct from the ongoing listing service provided throughout the
period which the entity is listed.
Based on historical data, the Group has determined that the revenue
will be deferred and recognised over the following periods:
Initial listing fees
Subsequent listings fees
5 years
3 years
The Group has applied the above accounting policies retrospectively
but has not restated the prior year. This resulted in an adjustment
to opening retained earnings of $84.7 million net of tax. The Group
has recognised an additional contract liability of $121.1 million upon
adoption, which is represented within revenue received in advance
on the Group’s balance sheet. This additional contract liability relates
to listing fees recognised in prior years for which the performance
obligations had not been satisfied at 30 June 2018. The adoption
of AASB 15 did not have a material impact on the measurement
or timing of revenue recognition on other revenue from contracts
with customers.
Revenue from contracts with customers is measured at the
transaction price specified in the contract and is net of amounts
expected to be refunded to the customer such as rebates. Revenue
also excludes any taxes collected on behalf of third parties. Further
details of the Group’s accounting policies in relation to revenue from
contracts with customers are provided in note B2.
Impairment of financial assets
AASB 9 introduces a new model for calculating impairment which
impacts both the measurement and the timing of the provision
recognised. Under this new model, the Group recognises an expected
credit loss on day 1. The measurement of the ECL depends on the
level of credit risk. If there has been no significant increase in credit
risk since initial recognition, the Group recognises a 12 month ECL
which is the total credit losses from expected defaults in the next
12 months. If there has been a significant increase in credit risk
since initial recognition or if the asset is credit impaired then the
Group recognises a lifetime ECL which is the total credit losses
from all expected defaults. As a result of this change in impairment
methodology, the Group adjusted the opening retained earnings on
1 July 2018 by $0.3 million net of tax.
The Group’s financial assets that are subject to AASB 9’s new
expected credit loss model include:
• Cash
• Trade and other receivables
• Other financial assets at amortised cost.
Cash and other receivables
Cash and other receivables are subject to the new impairment
requirements under AASB 9 however the impact is not material
and no impairment allowance has been recognised on adoption
of the standard.
Trade receivables
The Group applies the simplified approach to measuring ECLs for
trade receivables where the lifetime ECL is recognised. To measure
the ECLs, the trade receivables have been grouped by days past
due and default rates have been applied to each group. The default
rates have been estimated based on historical rates over a 4 year
period. On adoption of AASB 9, the resulting ECL calculated under
this method was compared to the existing provision recognised
under AASB 139. As this did not result in a material difference, no
adjustment was made on adoption of the standard.
Other financial assets at amortised cost
Other financial assets at amortised cost include:
• Fixed term deposits
• Notice deposits
• Reverse repurchase agreements
• Negotiable certificates of deposit (NCDs)
• Bonds
• Floating rate notes (FRNs)
• Promissory notes (P-Notes)
• Treasury notes (T-Notes).
The new ECL model when applied, resulted in the recognition of a
loss allowance of $0.3 million net of tax on 1 July 2018 (previous
allowance was nil). The adjustment was made through retained
earnings. There has been no material movement in the year ended
30 June 2019.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
77
Notes to the consolidated financial statements continued
Performance of the Group
B1 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 prior reporting period, the
impairment to the carrying value of the equity investment in Yieldbroker was treated as a significant item and excluded from underlying
profit after tax.
Group performance measures, including earnings before interest and tax (EBIT) and earnings before interest, tax, depreciation and amor-
tisation (EBITDA), are also reviewed by the CODM. In assessing performance, ECL allowances 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 attributable
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.
78 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Performance of the Group
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) 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 D2 for further details.
2019
2018
Segment
information
$m
Adjustments
$m
Consolidated
income statement
$m
Segment
information
$m
Adjustments
$m
Consolidated
income statement
$m
171.1
49.1
220.2
19.9
232.9
55.8
308.6
51.7
96.3
81.6
229.6
54.4
54.0
108.4
(3.0)
863.8
(127.7)
(17.9)
(30.7)
(22.5)
(8.4)
(7.6)
(214.8)
649.0
-
(47.8)
-
(47.8)
601.2
23.4
75.4
5.1
103.9
705.1
(213.1)
492.0
-
492.0
2.3
-
2.3
0.3
0.5
0.1
0.9
-
-
1.3
1.3
-
-
-
4.9
216.2
5.1
(5.1)
225.6
-
-
(1.5)
(18.8)
8.4
7.6
(117.4)
-
-
(121.7)
(23.4)
(75.4)
(5.1)
(103.9)
-
-
-
-
-
173.4
49.1
222.5
20.2
233.4
55.9
309.5
51.7
96.3
82.9
230.9
54.4
54.0
108.4
1.9
216.2
5.1
(5.1)
1,089.4
(127.7)
(17.9)
(32.2)
(41.3)
-
-
(117.4)
(47.8)
-
(384.3)
-
-
-
-
705.1
(213.1)
492.0
-
492.0
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
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 2019 Notes to the consolidated financial statements continued
79
Notes to the consolidated financial statements continued
Performance of the Group
Refer to note A4 for details on the changes in accounting policies
following the adoption of AASB 15.
The Group expects 55% of the transaction price allocated to the
above contract liabilities to be recognised as revenue within the next
financial year. The remaining 45% all relates to initial and subsequent
listings and will be recognised as revenue between FY21 and FY25.
(i) Significant changes in contract liabilities
The opening balance of the revenue received in advance at 1 July 2018
was $143.5 million. The increase in the contract liabilities in the
current year is largely related to initial listing activities. The Group
bills companies upfront and recognises this amount as a contract
liability for unsatisfied performance obligations. Revenue recognition
commences from the date the company lists on the exchange and is
amortised over the estimated period the listing service is expected
to be provided as set out in the accounting policy.
(ii) Revenue recognised in relation to carried forward
contract liabilities
The following table shows the revenue recognised in the current year
that relates to the opening balance of revenue received in advance.
For the year ended 30 June
Listings and Issuer Services
Austraclear
Information services
Memberships
Total
2019
$m
60.2
10.5
3.2
1.2
75.1
(b) Contract assets
The Group did not have any contract assets at 30 June 2019.
B2 Revenue from contracts with customers
As allowed by AASB 15, the prior year has not been restated and
comparative disclosures have not been provided in this note.
(a) Disaggregation of revenue
The Group derives its revenue from the transfer of services over time
and at a point in time. The following table provides a breakdown of
revenue by the timing of when performance obligations are satisfied
and by major business line.
For the year ended
30 June 2019
Listings and Issuer Services
Derivatives and OTC Markets
Trading Services
Equity Post-Trade Services
Other
Total revenue from contracts
with customers
Services
satisfied at a
point in time
$m
43.4
Services
satisfied
over time
$m
179.1
280.3
56.4
108.2
0.1
488.4
29.2
174.5
0.2
1.8
384.8
Total
$m
222.5
309.5
230.9
108.4
1.9
873.2
As disclosed in note B1, the Group has one operating segment,
the disaggregated revenue in this note differs from the reportable
segment as the expected credit loss allowance and certain reve-
nue share agreements with external parties are reclassified from
expenses to operating revenue.
(b) Revenue received in advance
The Group has recognised the following revenue received in advance
related to contracts with customers as at 30 June 2019. The balances
represent the aggregate transaction price allocated to contract
liabilities for performance obligations that are partially unsatisfied
at reporting date. There is no consideration that has been excluded
from the transaction price.
As at 30 June
Current
Listings and Issuer Services
Austraclear
Information services
Memberships
Total current revenue received in advance
Non-current
Listings and Issuer Services
Austraclear
Total non-current revenue received in advance
Total revenue received in advance
2019
$m
65.9
11.7
4.3
1.2
83.1
65.7
0.1
65.8
148.9
80 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Performance of the Group
Revenue from contracts with customers is recognised using a five
step approach to depict the transfer of promised goods or services
to customers. It is measured at the transaction price specified in
the contract and is net of amounts expected to be refunded to the
customer such as rebates. Revenue also excludes any taxes collected
on behalf of third parties.
The following five steps are applied to determine when revenue is
recognised:
1.
Identify the contract with a customer
2. Identify the separate performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the separate performance
obligations in the contract
5. Recognise revenue when (or as) the entity satisfies a
performance obligation.
Performance obligations that have not been satisfied at the reporting
date are recognised as revenue received in advance on the balance
sheet.
There are no contracts with customers that have significant
financing components. The Group has considered the time difference
between when it provides the initial and subsequent listing service to
the customer and when the customer pays for the service and
determined that this does not result in a significant financing
component.
All contracts have standard 30 day payment terms.
The transaction price is based on the price specified in the contract
or in accordance with published fee schedules and is net of any
applicable rebates. Rebates are calculated based on actual
transactions or trading, clearing or settlement volumes.
Where this information is not immediately available within the
relevant accounting period, the expected amount is estimated based
on previous experience with the customer and revenue is only
recognised to the extent that it is highly probable that a significant
reversal will not occur. A liability for the rebates is recognised within
trade and other payables and typically have payment terms of 30
days following the end of the relevant period.
Revenue is recognised for the major revenue lines as described below.
Listings and Issuer Services
Initial and subsequent listing fees are recognised evenly over
the period the listing service is expected to be provided which
is five years for initial listings and three years for subsequent
listings. These fees are billed prior to the quotation of initial or
secondary capital and are recognised within receivables and
revenue received in advance at the time of billing. The recognition of
revenue commences from the date that the entity is admitted to the
official list or on quotation of the secondary capital.
Annual listing fees are billed at the commencement of the financial
year or prior to an entity listing on the exchange, at which point the
fee is recognised within receivables and revenue received in advance.
The revenue is recognised evenly over the financial year as the service
is provided.
Issuer services revenue includes revenue for the provision of holding
statements and other related activities, and is recognised at the point
that the service is provided.
Derivatives and OTC Markets
Revenue from trading and clearing of futures and equity options,
and clearing of OTC interest rate derivatives is recognised at the
point the service is provided which is the trade date. The revenue
includes variable consideration for rebates on certain volumes traded.
A liability for rebates is recognised at trade date and they are paid in
the following month.
Fees for registry services for debt securities are billed upfront
and are net of rebates. They are recognised within receivables and
revenue received in advance and the revenue is recognised evenly over a
12 month period in which the service is provided.
Fees for Austraclear settlement and cash transactions are billed
monthly net of rebates and are recognised at the point the service is
provided which is the transaction date. Fees for depository services for
debt securities are billed monthly net of rebates and are recognised
as the service is provided during the month.
Austraclear membership fees are billed at the commencement
of the calendar year or at the time an entity becomes a member.
The revenue is recognised evenly over the calendar year in which the
service is provided.
ASX Collateral service fees are recognised over the period the service
is provided.
Trading Services
Cash market trading revenue is recognised at the point the service
is provided which is the 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 is deferred and recognised in the subsequent
reporting period.
Memberships for cash market trading participants are billed at the
commencement of the financial year and recognised within receivables
and revenue received in advance. The revenue is recognised evenly
over the financial year as the service is provided.
Revenue in relation to information and technical services is
recognised over the period the service is provided.
Equity Post-Trade Services
This includes revenue from clearing and settlement of quoted securities
including equities, debt securities, warrants and exchange-traded
funds and is recognised at the point that the service is provided
which is the settlement date. Accordingly, clearing and settlement
fees for trades transacted in the last two days prior to period end
are deferred and recognised in the subsequent reporting period. The
revenue recognised is net of rebates expected to be paid which are
estimated based on prior experience with customers. The rebate is
paid in the following year.
Key judgements
The Group has applied critical judgement in determining the period
that it expects to satisfy its performance obligations in relation to
listing services. The model to determine the five and three year listing
periods has taken into account historical information in relation to the
length of time companies have been listed and excluded those outside
one standard deviation of the mean.
Prior year accounting policy
In the prior year, revenue was measured at the fair value of the
consideration received or receivable, net of rebates. Revenue was
recognised when it could be reliably measured, and when it was
probable that the economic benefits would flow to the Group.
While the approach to recognising revenue changed on adoption
of AASB 15, there has been no change in the timing of revenue
recognition except for initial and subsequent listing fees. In the prior
year, these were recognised when the initial or subsequent listing
event had taken place.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
81
Notes to the consolidated financial statements continued
Performance of the Group
B3 Dividends
B4 Capital management
The Board's policy is to pay a dividend based on 90% of underlying
net profit after tax. This is reviewed each time the Board considers
payment of a dividend. The policy is unchanged from the prior year.
The following table includes information relating to dividends
recognised and paid by ASX during the financial year.
For the year ended 30 June 2019
Final dividend for the year ended
30 June 2018
Interim dividend for the year ended
30 June 2019
Total
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
Cents per
share
Total amount
$m
109.1
114.4
223.5
99.8
107.2
207.0
211.2
221.5
432.7
193.2
207.5
400.7
The above dividends paid by the Company include amounts
attached to certain shares held by the Group's Long-Term Incentive
Plan Trust (LTIPT). The dividend revenue recognised by LTIPT has
been eliminated on consolidation. In the current year, the dividend
revenue was immaterial (less than $0.1 million). In the prior year
it was $0.1 million.
Since the end of the financial year, the directors have determined
a final dividend of 114.3 cents per share totalling $221.3 million and
a special dividend of 129.1 cents per share totalling $249.9 million.
The dividends 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
2019
$m
367.6
2018
$m
268.6
Adjusting for the payment of the final and special dividend for
the year ended 30 June 2019, the franking balance would be
$165.6 million (2018: $178.1 million).
At 30 June 2019, equity of the Group totalled $3,916.4 million (2018:
$3,945.5 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 competing
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
requirements, however the relationship is not necessarily linear
• The general economic or credit conditions that may impact on
capital requirements as the level of risk generally increases as
credit conditions deteriorate. The level of operational risk capital
held by the Group can be impacted by any revision to future
loss assessments and regulatory requirements
• The level of investments made, their 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 international
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 clearing (CCP) subsidiaries as
discussed in note C1 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
• Reflecting the risks associated with the Group's operations.
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).
82 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Performance of the Group
(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 2019, 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 2019, the closing balance of ordinary share capital was
$3,027.2 million (2018: $3,027.2 million) and the number of shares
outstanding was 193,595,162 (2018: 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.
Asset revaluation reserve
Changes in the fair value of investments in equity instruments are
recognised in the asset revaluation reserve. The cumulative gain or
loss that has been recognised within reserves is transferred directly
to retained earnings and is not recycled through profit or loss when
the associated equity instrument is sold.
The effective portion of gains or losses on assets designated as part
of a cash flow hedging relationship are recognised in the hedging
reserve which is included within asset revaluation reserves. The
ineffective portion of a hedge is recognised directly in profit or loss.
The movement in the asset revaluation reserve is primarily due
to the transfer of the accumulated fair value gain on the Group's
investment in a listed entity to retained earnings following its sale
(refer to note D1).
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.
Equity compensation reserve
The equity compensation reserve is used to recognise the fair value
of performance rights issued under ASX equity plans.
(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 Long-Term
Incentive Plan
Issue of deferred shares under
employee equity plans
Shares transferred to the LTIPT
Closing balance
2019
No. of shares
2018
No. of shares
61,060
(11,604)
183,218
(8,065)
(50,000)
(116,801)
10,388
9,844
2,708
61,060
Treasury shares are shares in ASX held by a trust for the benefit of
employees under the ASX Long-Term Incentive Plan (LTIP) 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 Plan (DSTIP) are held as treasury shares when forfeited
until such time that they are reallocated under another DSTIP or LTIP.
(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. At this point in time ASX
Clear started assuming the clearing participant default risk of
the clearing house. 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.
Refer to the consolidated statement of changes in equity for details
of movements in the reserves.
B5 Earnings per share
As at 30 June
Basic and diluted earnings
per share (cents)
Weighted average number of
ordinary shares used in calculating
basic and diluted earnings per share
2019
254.1
2018
230.0
193,576,187
193,507,104
The increase in the 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 $492.0 million
(2018: $445.1 million).
Basic EPS is calculated by dividing the consolidated net profit after
tax attributable to the owners of the Company, excluding any costs of
servicing equity other than ordinary shares, by the weighted average
number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the
year and excluding treasury shares.
Diluted EPS adjusts the figures used in the determination of basic EPS
to take into account the after income tax effect of interest and other
financing costs associated with dilutive 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.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
83
Notes to the consolidated financial statements continued
Performance of the Group
B6 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 investments in equity instruments,
cash flow hedges and in the prior year AFS financial assets, 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% (2018: 30%) on the profit before tax
Movement in income tax expense due to:
Non-deductible items
Equity accounted investments
Equity accounted investments impairment1
Franking credit offset
Research and development tax offset
Adjustments to current tax for
prior years
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 years
Total income tax expense
(c) Income tax on items recognised directly
in equity
Sale of investments in equity instruments
Deferred revenue on adoption of AASB 15
ECL allowance on adoption of AASB 9
Deferred STI shares returned to trust
Total
(d) Income tax on items recognised directly
in other comprehensive income
Revaluation of AFS financial assets
Revaluation of investments in equity
instruments – listed entities
Revaluation of investments in equity
instruments – unlisted entities
Revaluation of cash flow hedges
Total
(e) Deferred tax asset/(liability)
2019
$m
705.1
(211.5)
(1.6)
(1.5)
-
0.9
0.5
0.1
2018
$m
642.1
(192.6)
(1.2)
(0.1)
(6.1)
2.5
0.4
0.1
(213.1)
(197.0)
(214.6)
(197.3)
(1.6)
3.0
0.1
(0.2)
0.4
0.1
(213.1)
(197.0)
68.9
36.3
0.1
0.1
105.4
(0.3)
2.0
1.4
-
3.1
-
-
-
0.2
0.2
0.4
6.3
(1.9)
(0.5)
4.3
As at 30 June
2019
$m
2018
$m
Deferred tax (liability) comprises the estimated future expense at an
income tax rate of 30% (2018: 30%) of the following items:
Fixed assets
Revaluation of cash flow hedges
Revaluation of investments in equity
instruments – listed entities
Revaluation of investments in equity
instruments – unlisted entities
Long-Term Incentive Plan
Deferred tax (liability)
(11.0)
(0.2)
-
-
(0.3)
(11.5)
(9.4)
(0.2)
(70.9)
(1.4)
(0.3)
(82.2)
Net deferred tax asset/(liability)
(64.7)
1 A deferred tax asset was not recognised on the $20.2 million impairment to
the carrying value of Yieldbroker recognised in the prior year.
45.3
Income tax expense is recognised in profit or loss except to the extent
that it relates to items recognised in other comprehensive income
or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity respectively. Income tax
expense recognised in profit or loss comprises current and deferred
income tax.
Current tax is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantively enacted at the balance
sheet date, and any adjustment to tax payable in respect of previous
years. Current tax assets and tax liabilities are offset if there is a legally
enforceable right to offset and the Group intends to either settle on a
net basis, or to realise the asset and settle the liability simultaneously.
Deferred income tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes,
and the amounts used for taxation purposes. Deferred income tax is
not recognised for certain temporary differences such as the initial
recognition of goodwill.
The amount of deferred income tax is 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
probable that future taxable amounts will be available against which
the asset can be utilised, and is reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset if there is a legally
enforceable right to offset current tax liabilities and assets, and when
the deferred tax balances relate to income taxes levied by the same
tax authority.
Deferred tax asset comprises the estimated future benefit at an income
tax rate of 30% (2018: 30%) of the below items:
Further information on the Group's tax obligations can be found in
the Tax Transparency Report available on ASX's website.
Doubtful debts provisions
Employee entitlements provisions
Premises provisions
Accrued expenses
Revenue received in advance
Revaluation of AFS financial assets
ECL allowance
Deferred tax asset
0.3
9.8
2.1
0.3
44.2
-
0.1
56.8
0.2
9.6
2.0
0.5
4.9
0.3
-
17.5
84 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Risk management
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
possible 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. Clearing participants lodged
the following collateral and commitments at 30 June:
As at 30 June 2019
Cash
Debt securities
Total amounts owing to
participants
ASX Clear
$m
843.6
ASX Clear
(Futures)
$m
8,850.9
-
1,106.5
Total
$m
9,694.5
1,106.5
843.6
9,957.4
10,801.0
Equity securities¹
3,351.8
-
3,351.8
As at 30 June 2018
Cash
Debt securities
Total amounts owing to
participants
567.3
-
567.3
7,517.3
411.2
8,084.6
411.2
7,928.5
8,495.8
Equity securities¹
¹ Equity securities are not recognised on the balance sheet.
3,333.2
-
3,333.2
All net delivery and net payment obligations relating to cash market
and derivative securities owing to or by participants as at 30 June
2019 were subsequently settled.
The Group is subject to a variety of risks including clearing and
settlement risk, and operational risk.
C1 Clearing risk
The Group undertakes 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 organisations
are novated to the CCPs. This makes the CCPs contractually responsible
for the obligations entered into by clearing participants on both the
buying and selling legs of the same transaction. Through novation,
the respective CCP assumes the credit risk of the underlying clearing
participant in the event of a participant default. The novation process
results in all positions held by the CCPs being matched.
(b) Participants’ margins
Clearing participants are required to lodge an amount (initial margin)
on open cash market, derivative and OTC 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.
Clearing participants may lodge cash or certain equity and debt
securities to cover their margin obligations. In accordance with
Group policies, the cash lodged by participants may subsequently
be invested into approved products which are recognised as cash or
financial assets at amortised cost on the balance sheet. The follow-
ing table shows the form in which participants lodged margins and
commitments at 30 June. This excludes equity securities lodged by
participants which are not recognised on the balance sheet.
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
2019
$m
2018
$m
9,494.5
1,106.5
7,884.6
411.2
10,601.0
8,295.8
200.0
200.0
200.0
200.0
Total amounts owing to participants
10,801.0
8,495.8
ASX Annual Report 2019 Notes to the consolidated financial statements continued
85
Notes to the consolidated financial statements continued
Risk management
(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 clearing
default funds shown in the next two tables as well as eligible collat-
eral 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.
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).
ASX Clear
As at 30 June
Restricted capital reserve
Equity provided by the Group
Paid-in resources
Recovery assessments
Total financial resources
2019
$m
71.5
178.5
250.0
300.0
550.0
2018
$m
71.5
178.5
250.0
300.0
550.0
The financial resources at 30 June 2019 available to ASX Clear in the
event of a participant default would be applied in the following order:
1. Collateral and other margins lodged by the defaulting
participant
2. Restricted capital reserve of $71.5 million
3. Equity capital of $178.5 million
4. Contributions lodged by non-defaulting participants under the
ASX Clear operating rules (no contributions were lodged in
the current or prior year)
5. Recovery assessments of $300.0 million which can be levied
on participants (no amounts were levied in the current or
prior year).
ASX Clear (Futures)
As at 30 June
Equity provided by the Group
Cash commitments
Equity provided by the Group
Cash commitments
Equity provided by the Group
Paid-in resources
Recovery assessments1
2019
$m
120.0
100.0
150.0
100.0
180.0
650.0
200.0
2018
$m
120.0
100.0
150.0
100.0
180.0
650.0
200.0
Total financial resources
850.0
1 $200 million for a single default event and up to $600 million for more than
850.0
one default event.
The financial resources at 30 June 2019 available to ASX Clear
(Futures) in the event of a participant default would be applied in
the following order:
1. Collateral and commitments lodged by the defaulting participant
2. Equity capital of $120.0 million
3. Commitments lodged by non-defaulting participants, totalling
$100.0 million less the defaulting participants' commitments
included in item 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).
The order of application with respect to items 3 and 5 above will
depend on the market in which the defaulting participant operates.
If the defaulting participant is a futures participant, then item 3 will
comprise the cash commitments lodged by non-defaulting futures
participants and item 5 will comprise the cash commitments lodged
by OTC participants. If the defaulting participant is an OTC partic-
ipant, then item 3 will comprise the cash commitments lodged by
non-defaulting OTC participants and item 5 will comprise the cash
commitments lodged by futures participants. If the defaulting partic-
ipant is both a futures and OTC participant, then the non-defaulting
participants commitments are apportioned for items 3 and 5.
C2 Cash
The cash balance is comprised of the Group’s own cash funds as
well as cash collateral and commitments lodged by participants
in accordance with note C1 that has not been invested in debt or
money market instruments.
Cash at bank and on hand
Overnight cash deposits
Total cash
90.1
243.0
333.1
181.1
196.1
377.2
Refer to note A3 for details regarding the reclassification of prior
year balances.
Cash comprises cash on hand and deposits with banks that can be
withdrawn with no or minimal notice.
86 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Risk management
C3 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:
2019
$m
333.1
390.6
231.9
-
6,197.6
1,097.0
3,280.3
18.6
1,106.5
5.3
-
-
-
-
-
2018
$m
377.2
373.2
326.0
70.0
4,790.7
-
-
-
-
4.8
817.3
2,555.6
99.7
90.3
438.5
As at 30 June
Financial assets at amortised cost
Cash
Trade and other receivables
Note
C2
E1
Other financial assets at amortised cost
– Term deposits
– Notice deposits
– Reverse repurchase agreements
C1
D3
– NCDs
– P-Notes
– FRNs
Financial assets at FVTPL
Non-cash collateral
Convertible notes
AFS financial assets
NCDs
P-Notes
T-Notes
FRNs
Bonds
Financial assets at FVTOCI
Investments in equity instruments²
Total financial assets
Financial liabilities at amortised cost
Trade and other payables¹
Amounts owing to participants
E4
C1
342.3
348.2
10,801.0
8,495.8
Total financial liabilities
1 Excludes transaction taxes payable which are not financial instruments as
11,143.3
8,844.0
they are statutory obligations.
² This was called available-for-sale investments in the prior year.
The maximum exposure to credit risk at the end of the reporting
period for each class of financial asset, other than amounts owing
to participants, is the carrying amount as detailed in the previous
table. If the financial asset is attributed to participants’ collateral,
the maximum credit exposure to ASX is $75 million per counterparty.
However, if it is attributed to ASX’s own financial resources, the
maximum credit exposure is the carrying amount of the financial
asset.
Financial liabilities and financial assets other than trade receivables
without a significant financing component are initially measured at fair
value. This includes transaction costs that are directly attributable to
the acquisition of the asset or issue of the liability for financial assets
and liabilities not at FVTPL. Financial liabilities are subsequently
measured at amortised cost while financial assets are subsequently
measured in accordance with one of the following categories.
Amortised cost – this includes financial assets managed under a
business model to hold the assets in order to collect the CCFs and
those cash flows represent SPPI. Interest income from these financial
assets is included in interest income using the effective interest rate
method. Any gain or loss arising on derecognition is recognised directly
in profit or loss. Impairment losses are included within administration
expense in the statement of profit or loss.
FVTOCI – this includes financial assets managed under a business
model to sell the assets and collect the CCFs and those cash flows
represent SPPI. Fair value gains or losses are recognised directly in
the asset revaluation reserve in equity. Any cumulative gain or loss
recognised in equity is subsequently reclassified to profit or loss on
disposal. Interest income from these financial assets is included in
interest income using the effective interest rate method. An irrevo-
cable election can also be made to measure certain investments in
equity instruments at FVTOCI on initial recognition. In this case, fair
value gains or losses are recognised directly in the asset revaluation
reserve in equity however are not reclassified to profit or loss on
disposal but remain in equity.
FVTPL – this includes financial assets that do not meet the criteria
to be measured at amortised cost or FVTOCI. Any fair value gains or
losses are recognised in profit or loss.
Refer to the relevant note for further details of the accounting policies
for trade and other receivables, convertible notes and investments
in equity instruments.
Reverse repurchase agreements are measured 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.
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.
Prior year accounting policy
In the prior year the Group classified and measured its financial
assets as one of the following categories:
Classification
Loans and receivables
Held-to-maturity
FVTPL
AFS
Measurement
Amortised cost
Amortised cost
FVTPL
FVTOCI
The Group's debt and money market instruments were classified
as AFS and initially recognised at fair value, being the fair value of
the consideration given, plus transaction costs that were directly
attributable to acquiring the asset. After initial recognition, they
continued to be measured at fair value as determined by valuation
techniques outlined in note C3(d)(i). Fair value gains or losses were
recognised directly in the asset revaluation reserve in equity until
the asset was derecognised, at which time the cumulative gain or
loss previously recognised in equity was reclassified to profit or loss.
D1
24.3
416.4
12,685.2
10,359.7
Interest expense is recognised as a finance cost in the statement
of comprehensive income using the effective interest rate method.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
87
Notes to the consolidated financial statements continued
Risk management
(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
average 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.
In the prior year, fixed rate money market
instruments that were carried at fair value
exposed the Group to fair value interest
rate risk.
• The Boards of the relevant subsidiaries have set limits with respect to maximum and weighted
average maturity and value at risk.
Interest bearing assets is comprised of the investment of the Group’s cash resources (participant collateral lodged in cash and Group
funds). Interest bearing liabilities is comprised of cash collateral and commitments lodged by participants. Non-cash collateral lodged by
participants is non-interest bearing.
The Group’s trade and other receivables, investments in equity instruments and trade and other 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.
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
Other financial assets at amortised cost
Financial assets at FVTPL
AFS financial assets
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
2019
Fixed
interest
rate
$m
Total
$m
-
333.1
10,806.8
10,825.4
5.3
-
10,812.1
1.64%
5.3
-
11,163.8
-
-
10,801.0
10,801.0
Floating
interest
rate
$m
333.1
18.6
-
-
351.7
1.29%
10,801.0
10,801.0
0.80%
Floating
interest
rate
$m
377.2
70.0
-
90.3
537.5
1.49%
8,495.8
8,495.8
1.05%
2018
Fixed
interest
rate
$m
-
5,116.7
4.8
3,499.9
8,621.4
1.99%
Total
$m
377.2
5,186.7
4.8
3,590.2
9,158.9
-
-
8,495.8
8,495.8
Net interest bearing financial (liabilities)/assets
(10,449.3)
10,812.1
362.8
(7,958.3)
8,621.4
663.1
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 FRNs
• Fixed interest rate refers to financial instruments where the interest rate is fixed up to maturity – predominantly term deposits,
NCDs, P-Notes, T-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 and other financial assets
at amortised cost and higher/lower interest paid to clearing participants. In the prior year, equity was affected due to the change in fair
values of AFS financial assets. The interest on the Group's non-current financial assets at FVTPL are fixed, therefore there would be no
impact to profit or loss if market interest rates were to change.
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 following
table. 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.
88 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Risk management
+25 basis point change in interest rates
-25 basis point change in interest rates
2019
2018
Impact on profit
$m
(0.5)
Impact on equity
$m
-
Impact on profit
$m
(1.0)
Impact on equity
$m
(1.6)
0.5
-
1.0
1.6
Changes in interest rates affect the Group’s profit or loss due to interest income earned on the Group’s own cash resources and treasury
earnings on clearing participants balances offset by interest paid to clearing participants on margins lodged. The interest earned side
references a range of rates such as BBSW, while the interest paid side references overnight cash rates. ASX is exposed to the movement
between these two rates. The table above assumes overnight cash rates and BBSW rates move in line.
(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-matching
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. Investments in equity instruments denominated in USD are subject to
foreign currency risk, impacting their carrying value.
The following table shows the Group’s exposure on its balance sheet to foreign currency risk at the end of the year, expressed in AUD.
2019
2018
As at 30 June
Financial assets
Cash
Trade and other receivables
Other financial assets at amortised cost
Investment in equity instruments¹
Financial asset at FVTPL
Financial liabilities
Trade and other payables
Amounts owing to participants
Net exposure
NZD
$m
109.8
1.0
68.4
-
-
0.2
176.7
2.3
USD
$m
12.4
-
-
24.3
5.3
-
-
42.0
EUR
$m
17.9
-
-
-
-
-
17.8
0.1
Exchange rate for conversion AUD 1:
1.0461
0.7014
0.6168
¹ This was called available-for-sale investments in the prior year.
JPY
$m
18.1
-
66.2
-
-
-
83.0
1.3
75.57
NZD
$m
85.3
0.7
46.1
-
-
0.2
130.5
1.4
USD
$m
113.7
-
-
28.9
4.8
-
90.3
57.1
EUR
$m
1.6
-
-
-
-
-
1.6
-
1.0878
0.7352
0.6355
JPY
$m
44.0
-
61.5
-
-
-
104.6
0.9
81.23
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 other than financial assets at FVTOCI and all foreign currency denominated financial 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
equity 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 following
table. 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.
+10% strengthening of AUD
-10% weakening of AUD
2019
2018
Impact on profit
$m
(0.6)
Impact on equity
$m
(2.3)
Impact on profit
$m
(0.3)
Impact on equity
$m
(3.6)
0.8
2.7
0.4
4.4
ASX Annual Report 2019 Notes to the consolidated financial statements continued
89
Notes to the consolidated financial statements continued
Risk management
Cash flow hedges
At 30 June 2019, the Group had designated cash at bank of USD 7.9 million (2018: USD 16.7 million) as the hedging instrument in qualifying
cash flow hedges for committed expenditure to be paid in USD. These amounts are included within cash on the balance sheet. The cash
flows are 100% hedged and the weighted average hedged rate during the year was AUD 1: USD 0.7498 (2018: AUD 1: USD 0.7587). During
the current financial year, the use of cash flow hedges resulted in a $0.9 million (2018: $0.5 million) increase in cash flow required for
committed capital and operating expenses.
The following table shows the movement in the Group's hedge reserves.
For the year ended 30 June
Opening balance at 1 July
Revaluation of hedging instrument
Less: deferred tax
Closing balance at 30 June
2019
$m
0.5
-
-
0.5
2018
$m
(0.7)
1.7
(0.5)
0.5
All movements in the hedge revaluation reserve, including gains or losses in the hedging instrument and amounts reclassified from equity
to profit or loss were all immaterial (less than $0.1 million) in the current year.
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 documents its assessment, both at hedge
inception and also on an ongoing basis, of whether the hedging relationship meets the following effectiveness requirements:
- there is an economic relationship between the hedged item and the hedging instrument
- credit risk does not dominate the value changes that result from that economic relationship
- the hedge ratio is the same as that resulting from the actual quantity of both the item hedged and the hedging instrument used.
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 hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
At the time the hedged item affects the income statement or when the hedged item is no longer expected to occur, the cumulative gain or loss
recognsied in the hedge reserve is taken to finance costs in the income statement.
(iii) Price risk
Exposure arising from
Price movements of the Group’s investment
in listed equity securities of $nil (2018: $387.5
million).
Risk management
• Ongoing monitoring of values with consideration given to financial and other implications of holding
the instruments.
Other price movements associated with
underlying 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)
In the prior year, changes in quoted market prices affected the Group's equity due to the change in fair value of the Group's listed equity
investment (refer to note D1). As the Group measures the investments in equity instruments at FVTOCI, any change in fair value resulting
from a change in price does not impact profit or loss. In the prior year, 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, net of tax.
90 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Risk management
(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
participants to meet these obligations exposes
the Group to potential losses.
Risk management
• Clearing participant membership requirements and admission standards, including minimum capital
requirements.
• Participant surveillance, including capital monitoring.
• Daily and intraday counterparty credit risk control, including margining and collateral management.
• Position limits based on the capital of the participant.
• Financial resource adequacy, including fixed capital and stress-testing of clearing participants’
exposure limits against the amount and liquidity of variable and fixed financial resources available.
• Operating rules that deal with recovery and resolution of losses in the event of a clearing participant
default. Refer to note C1(c).
• Margin calls outside of Australian business hours.
Investment counterparty credit risk arises on
certain financial assets including cash, other
financial assets at amortised cost, 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 C1.
S&P credit ratings are used in determining the credit quality of the counterparty with whom cash and other financial assets at amortised
cost are held.
Counterparties are limited to the Commonwealth of Australia, Australian state governments and banks, and foreign 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 $5,215.7 million (2018: $2,285.4 million) to an Australian licensed bank with a S&P short-term credit rating of A-1+. 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.
2019
2018
As at 30 June
Cash at bank and on hand
Overnight cash deposits
Total cash
Reverse repurchase agreements¹
Notice deposits
Term deposits
NCDs
P-Notes
FRNs
Total other financial assets at amortised cost
NCDs
P-Notes
T-Notes
FRNs
Bonds
Total AFS financial assets
Bonds (lodged by participants)
A1+
$m
89.6
136.3
225.9
4,571.1
-
90.0
758.8
3,280.3
18.6
8,718.8
-
-
-
-
-
-
1,106.5
A1
$m
0.5
106.7
107.2
1,626.5
-
141.9
338.2
-
-
2,106.6
-
-
-
-
-
-
-
Total
$m
90.1
243.0
333.1
6,197.6
-
231.9
1,097.0
3,280.3
18.6
10,825.4
-
-
-
-
-
-
1,106.5
A1+
$m
90.3
87.5
177.8
3,933.7
-
110.0
-
-
-
4,043.7
442.4
2,555.6
99.7
90.3
438.5
3,626.5
-
Total financial assets at FVTPL
1,106.5
1 Reverse repurchase agreements are collateralised by Commonwealth, foreign government or Australian state government securities.
1,106.5
-
-
A1
$m
90.8
108.6
199.4
857.0
70.0
216.0
-
-
-
1,143.0
374.9
-
-
-
-
374.9
-
-
Total
$m
181.1
196.1
377.2
4,790.7
70.0
326.0
-
-
-
5,186.7
817.3
2,555.6
99.7
90.3
438.5
4,001.4
-
-
The Group uses other measures to monitor the credit of other financial assets, which includes trade and other receivables, margins
receivable from participants, accrued revenue, interest receivable and investments in equity instruments. 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. The maximum exposure to credit risk for these financial assets is the carrying value as at reporting date.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
91
Notes to the consolidated financial statements continued
Risk management
(i) Impairment of financial assets
The Group has the following financial assets that are subject to
impairment:
• Cash
• Trade and other receivables
• Other financial assets at amortised cost.
Trade receivables
The Group has used the simplified approach to measuring expected
credit losses for trade receivables whereby the lifetime ECL is
recognised. To measure the loss allowance, the receivables have
been grouped based on the number of days overdue. Expected
loss rates have been determined for each group based on historical
credit losses in the previous four years. These historical rates are
adjusted to reflect current and forward looking information on
macroeconomic factors that affect the ability of customers to settle
the receivables. These rates have been applied to the gross carrying
value of trade receivables to calculate the loss allowance. Where
this calculation results in an immaterial amount no loss allowance
is recognised. A loss allowance is also recognised for any debtors
individually identified as being credit impaired.
The following table shows the aged analysis for gross trade
receivables of the Group.
As at 30 June
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
2019
$m
102.2
3.1
0.4
0.6
1.0
107.3
2018
$m
89.3
2.8
0.1
0.6
0.9
93.7
As at 30 June 2019, the Group provided $0.9 million (2018: $0.8
million) for trade receivables that were identified as being impaired.
The Group recognised $0.2 million of impairment gains in profit or
loss during the year in accordance with AASB 9. In the prior year,
the Group recognised impairment losses of $1.2 million in profit
or loss for individually impaired receivables relating to debts that
were unpaid for a prolonged period despite active debt collection
procedures. As there was no material difference between the loss
allowance calculated under AASB 139 and AASB 9, there was no
adjustment made on adoption of the new standard.
The movement in the loss allowance for trade receivables is as
follows:
For the year ended 30 June
Closing loss allowance at 30 June
calculated under AASB 139
Amounts restated through opening
retained earnings
Opening loss allowance at 1 July calculated
under AASB 9
Increase in loss allowance recognised in
profit or loss during the year
Amounts written-off during the year
Loss allowance subsequently reversed
Closing balance at 30 June
(0.8)
(0.8)
-
(0.8)
(1.4)
0.3
1.0
(0.9)
-
(0.8)
(0.8)
0.2
0.6
(0.8)
Cash and other receivables
Other receivables includes margins receivable, accrued revenue,
interest receivable and other debtors. A default event in relation
to margin obligations is defined in the ASX Clear and ASX Clear
(Futures) operating rules. No loss allowance has been recognised for
cash and other receivables as the assessed amount is immaterial.
Other financial assets at amortised cost
The ECL model for the Group's debt and money market instruments
is based on the probability of default, loss given default and the
Group's exposure to the counterparty. The probability of default
is based on historical default rates and has been sourced from an
external study of global corporate defaults by S&P. These rates have
been adjusted for the loss given default to calculate the ECL rate.
The following table shows the gross carrying amounts of the other
financial assets at amortised cost as at 30 June 2019 and the ECL
rates that have been applied to determine the carrying amount net
of the ECL allowance.
S&P long-
term credit
rating
AAA
AA+
AA
AA-
A+
A
ECL
rate
-
-
0.01%
0.02%
0.03%
0.04%
Gross carrying
amount
$m
ECL loss
allowance
$m
Net carrying
amount
$m
7,386.7
2,025.1
-
867.5
252.5
294.0
10,825.8
-
-
-
(0.1)
(0.1)
(0.2)
(0.4)
7,386.7
2,025.1
-
867.4
252.4
293.8
10,825.4
The ECL rates have been applied to the gross carrying values of
the Group's debt and money market instruments held at amortised
cost as at 30 June 2019. As there was no material movement in the
calculated loss allowance recognised on adoption of AASB 9, no
impairment was recognised in profit or loss during the year.
A reconciliation of the loss allowance calculated under AASB 9
is provided in the following table. Comparatives have not been
provided as the prior year has not been restated and there was no
allowance previously calculated under AASB 139.
For the year ended 30 June
Closing loss allowance at 30 June
calculated under AASB 139
Amounts restated through opening retained earnings
Opening loss allowance at 1 July 2018
calculated under AASB 9
Increase in loss allowance recognised in
profit or loss during the year
Closing loss allowance at 30 June
2019
$m
-
0.4
0.4
-
0.4
There were no significant changes to estimation techniques or
assumptions made during the reporting period.
The debt and money market instruments are all considered to have
low credit risk at the reporting date as all counterparties have an
S&P long-term credit rating of A or higher. Therefore it is assumed
that the credit risk for these financial assets has not increased
significantly since initial recognition and the impairment allowance
is measured at an amount equal to 12 month expected credit losses.
92 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Risk management
Impairment
The Group recognises a loss allowance on financial assets at amortised cost.
The Group uses a three stage approach as described in the following table to determine the amount of loss allowance to be recognised for
financial assets at amortised cost other than trade receivables.
Stage
Stage 1
Stage 2
Stage 3
Credit risk
No significant increase since initial recognition
Significant increase since initial recognition
Asset is credit impaired
Recognition of ECL
12 month ECLs
Lifetime ECLs
Lifetime ECLs
A simplified approach to measuring the loss allowance is applied for trade receivables where the lifetime ECLs are recognised. Loss rates for
trade receivables are determined based on historical loss rates over a four year period and are adjusted for current and forward looking
macroeconomic factors that may affect the customers' ability to settle the receivable.
Assets are credit impaired when there is objective evidence that the Group will not be able to collect all of the original amounts due.
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. Other financial assets are written off when there is no reasonable expectation of recovery. Indicators that this may be the case
include the debtor entering bankruptcy or failure to enter into a payment plan.
Impairment losses are recognised in the statement of comprehensive income in administration expenses.
Prior year accounting policy
In the prior year, the impairment of trade receivables was assessed based on the incurred loss model and a provision was recognised when
there was objective evidence that the Group would not be able to collect all of the original amounts due. The amount of the provision was
the difference between the asset’s carrying amount and the present value of the estimated future cash flows.
Impairment indicators for AFS financial assets included a significant or prolonged decline in the fair value of the security below its cost. When the
asset was considered to be impaired, any loss that had been recognised directly in equity was transferred to profit or loss.
(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 other
financial assets at amortised cost 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.
As at 30 June 2019
Financial assets
Cash
Other financial assets at amortised cost
Financial assets at FVTPL
Trade and other receivables
Investments in equity instruments¹
Total financial assets
Financial liabilities
Trade and other 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
333.1
5,339.8
1,106.5
390.1
-
7,169.5
336.0
10,601.0
10,937.0
1.6
0.8
2.4
-
3,378.9
-
0.2
-
-
2,133.6
-
0.1
-
3,379.1
2,133.7
5.4
-
5.4
5.0
1.6
6.6
-
-
-
17.4
7.3
24.7
-
-
8.8
0.2
-
9.0
-
-
-
59.7
60.5
120.2
-
-
-
-
24.3
24.3
0.8
200.0
200.8
-
-
-
Total
$m
333.1
10,852.3
1,115.3
390.6
24.3
12,715.6
342.2
10,801.0
11,143.2
83.7
70.2
153.9
ASX Annual Report 2019 Notes to the consolidated financial statements continued
93
Notes to the consolidated financial statements continued
Risk management
As at 30 June 2018
Financial assets
Cash
Other financial assets at amortised cost
AFS financial assets
Financial assets at FVTPL
Receivables
Investments in equity instruments¹
Total financial assets
Financial liabilities
Trade and other payables
Amounts owing to participants
Total financial liabilities
Commitments
Capital and operating commitments
Operating lease 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
377.2
2,899.5
703.2
-
372.2
-
4,352.1
337.8
8,295.8
8,633.6
0.9
0.7
1.6
-
2,297.3
1,880.5
-
0.7
-
-
-
1,437.6
-
0.1
-
4,178.5
1,437.7
8.7
-
8.7
2.7
1.4
4.1
0.9
-
0.9
16.2
6.4
22.6
-
-
-
4.8
0.2
-
5.0
-
-
-
69.2
62.7
131.9
-
-
-
-
-
416.4
416.4
0.8
200.0
200.8
-
-
-
Total
$m
377.2
5,196.8
4,021.3
4.8
373.2
416.4
10,389.7
348.2
8,495.8
8,844.0
89.0
71.2
160.2
Total commitments
¹ This was called available-for-sale investments in the prior year.
While amounts owing to participants may have contractual cash flows greater 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) Financial instruments at fair value
The following table presents the Group’s financial assets measured at fair value at 30 June. The Group does not have any financial liabilities
measured at fair value.
As at 30 June
Financial assets
Investments in equity instruments¹
Financial assets at FVTPL
AFS financial assets
- NCDs
- P-Notes
- T-Notes
- FRNs
- Bonds
Level 1
$m
-
1,044.9
-
-
-
-
-
2019
Level 2
$m
Level 3
$m
-
61.6
24.3
5.3
-
-
-
-
-
-
-
-
-
-
Total
$m
24.3
1,111.8
-
-
-
-
-
Total financial assets
¹ This was called available-for-sale investments in the prior year.
1,044.9
61.6
29.6
1,136.1
Level 1
$m
387.5
-
-
-
-
-
389.6
777.1
2018
Level 2
$m
Level 3
$m
-
-
28.9
4.8
817.3
2,555.6
99.7
90.3
48.9
-
-
-
-
-
3,611.8
33.7
Total
$m
416.4
4.8
817.3
2,555.6
99.7
90.3
438.5
4,422.6
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 at 30 June in the current or prior year.
94 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Risk management
The classification of financial instruments within the fair value
hierarchy and the valuation techniques used to determine
their values are detailed below.
(iii) Level 3 fair value instruments
The following table presents the changes in Level 3 fair value
instruments during the year:
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). In the prior year, AFS
financial assets other than Australian Government bonds as noted
above were classified as Level 2 financial instruments as their
fair values were determined using discounted cash flow models
or observable market prices for identical assets that were not
actively traded.
Level 3
Level 3 inputs are based on unobservable market data. The fair
values of the Group's unlisted equity investment and convertible
note at FVTPL are determined using unobservable inputs and
therefore are classified as Level 3 instruments.
(ii) Financial instruments at amortised cost
The Group has a number of financial instruments which are not
measured at fair value on the balance sheet. The carrying amounts
of current trade and other receivables, cash, term deposits, reverse
repurchase agreements, current trade and other payables and
current amounts owing to participants are assumed to approximate
their fair value due to their short-term nature. The carrying amount
of non-current amounts owing to participants approximates their
fair value as the impact of discounting is not significant.
The fair value of other financial assets at amortised cost (exclud-
ing those mentioned above) are shown in the following table.
Comparatives are not provided as these were classified as AFS in
the prior year and have been included in the table in note C3(d)(i).
For the year ended 30 June
Opening balance at 1 July 2018
Additions
Price revaluation:
– Recognised in equity
– Recognised in deferred tax
FX revaluation gain:
– Recognised in equity
– Recognised in profit or loss
– Recognised in deferred tax
Closing balance at 30 June 2019
Opening balance at 1 July 2017
Additions
Price revaluation:
– Recognised in equity
– Recognised in deferred tax
FX revaluation gain:
– Recognised in equity
– Recognised in profit or loss
– Recognised in deferred tax
Investments
in unlisted
entities1
$m
Investments
at FVTPL2
$m
28.9
-
(4.2)
(1.8)
1.0
-
0.4
24.3
22.7
-
3.5
1.5
0.9
-
0.3
4.8
0.3
-
-
-
0.2
-
5.3
-
4.6
-
-
-
0.2
-
Total
$m
33.7
0.3
(4.2)
(1.8)
1.0
0.2
0.4
29.6
22.7
4.6
3.5
1.5
0.9
0.2
0.3
Closing balance at 30 June 2018
33.7
1 The revaluation gain/(loss), net of tax, has been recognised within the asset
28.9
4.8
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.
As at 30 June
NCDs
P-Notes
FRNs
Total
2019
$m
1,098.5
3,283.6
18.6
4.400.7
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 2019
was $10,801.0 million (2018: $8,495.8 million).
The fair values of the above financial assets are determined in
accordance with the level 2 fair value hierarchy described in note
C3(d)(i).
ASX Annual Report 2019 Notes to the consolidated financial statements continued
95
Notes to the consolidated financial statements continued
Investments
D1 Investments in equity instruments
Investments in listed entities
Investments in unlisted entities
Total investments in equity
instruments
2019
$m
-
24.3
24.3
2018
$m
387.5
28.9
416.4
The investments in equity instruments have been designated
at FVTOCI on initial recognition. The election to measure the
investments at FVTOCI rather than FVTPL has been made as the
Group considers this to be more relevant as they are held for
strategic purposes.
The 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 and any fair value gains or
losses are recognised directly in the asset revaluation reserve in
equity. Any gains or losses on disposal remain within equity.
The fair value of investments in listed entities is determined by
reference to quoted market prices at the close of business on the
balance sheet date. Refer to note C3(d)(i).
The fair value of investments in unlisted entities is determined
by reference to unobservable market data at balance date. Refer
to note C3(d)(iii).
Dividend income is recognised when the right to receive the dividend
has been established.
Prior year accounting policy
In the prior year, the investments were classified as AFS and measured
at FVTOCI. The investments were initially recognised at fair value,
being the consideration given plus transaction costs that were directly
attributable to acquiring the asset. After initial recognition, they
continued to be measured at fair value and any fair value gains or losses
were recognised directly in the asset revaluation reserve in equity.
Any accumulated fair value gains or losses previously recognised in
equity were reclassified to profit or loss on disposal.
Key judgements
The Group has applied judgement in determining if it has significant
influence or control over the investees and has concluded that it does
not have significant influence over any of its investees as it holds less
than 20% of the voting power; has no representation on the Board
of directors; and does not have the power to participate in financial
and operating policy decisions.
(a) Investments in listed entities
In February 2019, ASX sold its entire shareholding in IRESS Limited
(IRESS) for $380.7 million as the investment no longer provided stra-
tegic value. The fair value of the investment at the date of sale was
$394.6 million and the gain on sale of $160.7 million, net of tax was
transferred from the asset revaluation reserve to retained earnings.
The Group received $5.1 million (2018: $14.2 million) of dividends
from IRESS during the year. As at 30 June 2018, ASX held 19% of
the share capital of IRESS.
There was no impairment in investments in listed entities in the
prior financial year.
(b) Investments in unlisted entities
As at 30 June 2019, ASX held 7% (2018: 7%) equity interest in Digital
Asset Holdings LLC (DAH), which specialises in the development of
distributed ledger technology solutions. No dividends were received
during the current or prior year. Refer to note C3(d)(iii) for details of
the movement in the fair value in the current and prior year. Refer
to note F5.4 for details regarding the Group's investment in DAH
post balance date.
D2 Equity accounted investments
The Group has interests in the following associates and joint ventures
which are individually immaterial to the Group.
Ownership interest
Carrying amount
Nature of
relationship
2019
%
2018
%
2019
$
2018
$
Name of entity
Yieldbroker
Pty Limited
(Yieldbroker)
Associate
Sympli Australia
Pty Ltd (Sympli)
Joint
venture
46
49
47
50
46.5
46.5
5.5
52.0
6.6
53.1
The country of incorporation and principal place of business for both
entities is Australia. Both Yieldbroker and Sympli are private entities
and therefore quoted market prices are not available.
Yieldbroker operates licensed electronic markets for trading Australian
and New Zealand debt securities and interest rate derivatives.
Sympli intends to offer electronic conveyancing solutions for
property settlements, known as a Electronic Lodgement Network
Operator (ELNO).
(i) Impairment
The investments have been tested for impairment at the reporting
based on value-in-use calculations using projected future cash
flows. The pre-tax discount rate used was 12.0% (2018: 12.0%) and
the growth rate used to extrapolate cash flow projections beyond
five years was 3.5% (2018: 3.5%).
No impairment was recognised in the current year for Yieldbroker
or Sympli.
In the prior year, an impairment of $20.2 million was recognised
to reduce the carrying amount of the investment in Yieldbroker
following financial under-performance compared to expectations
due to slower growth in certain products moving to electronic
trading. The impairment loss is included in other expenses in the
consolidated statement of comprehensive income.
No impairment was recognised for Sympli in the prior year.
96 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Investments
The following table shows ASX's aggregated interests in equity
accounted investments.
D3 Financial assets at fair value through
profit or loss
For the year ended 30 June
(Loss) from continuing operations
Post-tax profit or loss from
discontinued operations
Other comprehensive income
Total comprehensive income
2019
$m
(5.1)
-
-
(5.1)
2018
$m
(0.4)
-
-
(0.4)
In December 2017, ASX acquired a convertible note (the note) issued
by DAH for USD3.5 million. ASX has the right to convert the note to
DAH shares at any time up to maturity in 2027, and under certain
circumstances the note mandatorily converts to DAH shares.
Refer to note C3(d)(iii) for the balance and movement of financial
assets at FVTPL at period end.
The convertible note is initially recognised at fair value being the
consideration given. It is subsequently measured at FVTPL as
the contractual terms of the agreement do not give rise to solely
payments of principal and interest. Any fair value gains or losses
are recognised in profit and loss. If the notes are converted to
equity prior to or at maturity date, the converted shares will be
designated at FVTOCI on initial recognition in accordance with the
Group's accounting policy for investments in equity instruments.
Prior year accounting policy
In the prior year, the convertible notes were designated at
FVTPL on initial recognition. Subsequently, the notes continued
to be measured at fair value with any fair value gain or loss
recognised in profit or loss.
Associates are entities over which the Group has significant influence
but not control.
Joint ventures are arrangements in which the Group and another party
have joint control and have rights to the net assets of the arrangement.
Investments in associates and joint ventures are accounted for using
the equity method. The investments are initially recognised at cost and
the carrying value is subsequently adjusted to recognise the Group’s
share of the investee’s post-acquisition profit or loss and movement
in 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 at each reporting date and whenever events or changes
in circumstances indicate that the carrying amount may not be
recoverable. Indicators of impairment include a significant or prolonged
decline in the fair value of the investment below its cost. 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.
Key judgements
The Group has applied judgement in determining if it has
significant influence, control or joint control of the investees. Through its
appointment of two directors to the Board of Yieldbroker, ASX
participates in the financial and operating policy decisions of the
investee. It also holds more than 20% of the voting rights so it is
presumed that ASX has significant influence over the investee. The
Group however does not have the power to unilaterally direct these
decisions to affect the returns of the investee so does not have control
of the investee. The investment in Yieldbroker has therefore been
classified as an interest in an associate.
The arrangement in relation to Sympli requires unanimous consent
from both parties about relevant activities. As ASX has joint control
over Sympli and has rights to the net assets of the arrangement the
investment has been classified as a joint venture.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
97
Notes to the consolidated financial statements continued
Other balance sheet assets and liabilities
E1 Trade and other receivables
As at 30 June
Current
Trade receivables
Margins receivable
Accrued revenue
Interest receivable
Other debtors
Less: loss allowance
Total trade and other receivables
Refer to note C3(b)(i) for further details of the loss allowance.
2019
$m
107.3
268.6
4.4
11.1
0.1
(0.9)
390.6
2018
$m
93.7
266.6
5.4
6.9
1.4
(0.8)
373.2
Trade receivables which generally have terms of 30 days are initially recognised at their transaction price and subsequently measured at amortised
cost using the effective interest method, less any loss allowance.
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. A corresponding margins payable is recognised and disclosed within trade and other payables.
E2 Intangible assets
The movements in the intangible asset balances are as follows:
For the year ended 30 June
Software
$m
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
347.5
(235.7)
111.8
54.3
(24.7)
24.7
(33.9)
-
-
Net book value at 30 June
132.2
Closing balance
Cost
Accumulated amortisation
and impairment
377.1
(244.9)
Net book value at 30 June
132.2
2019
Trade-
marks
$m
Customer
lists
$m
Goodwill
$m
Total
$m
Software
$m
2018
Trade-
marks
$m
Customer
lists
$m
Goodwill
$m
Total
$m
7.9
-
7.9
-
-
-
-
-
-
7.9
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
-
-
-
(0.2)
-
-
-
-
-
-
-
-
54.3
(24.7)
24.7
(34.1)
-
-
0.6
2,317.6
2,458.3
33.5
(44.1)
44.1
(31.6)
(1.1)
(1.6)
111.8
1.2
2,317.6
2,703.8
347.5
(0.6)
-
(245.5)
(235.7)
0.6
2,317.6
2,458.3
111.8
7.9
-
7.9
-
-
-
-
-
-
7.9
7.9
-
7.9
1.2
(0.1)
2,317.6
2,686.4
-
(247.2)
1.1
2,317.6
2,439.2
-
-
-
(0.3)
-
-
-
-
-
-
-
-
33.5
(44.1)
44.1
(31.9)
(1.1)
(1.6)
0.8
2,317.6
2,438.1
1.2
2,317.6
2,674.2
(0.4)
-
(236.1)
0.8
2,317.6
2,438.1
98 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Other balance sheet assets and liabilities
(a) Software
The impairment expense recognised in the prior financial year relates to certain software intangible assets that were identified 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 software 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 carrying 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 attributable to
each CGU at the time of acquisition is as follows:
• Exchange-traded: $2,242.2 million
• Non exchange-traded: $75.4 million.
No impairment charge arose in the current or prior financial year.
(ii) Key estimates and 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% (2018: 9.25%) for all CGUs. The growth rate used to extrapolate cash flow projections beyond five
years is 3.5% (2018: 3.5%) per annum for the exchange-traded CGU and 3.5% (2018: 3.5%) per annum for the non exchange-traded CGU.
These calculations support the carrying value of goodwill. There is no reasonably possible change in any key assumptions that management
has based its determination of the CGU's recoverable amount on that would result in an impairment charge being recognised.
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.
Goodwill is tested on an annual basis. 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 this
five year period are extrapolated using estimated growth rates that do not exceed the long-term average growth rate for the business in which the
CGU operates and are consistent with external sources of information.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
99
Notes to the consolidated financial statements continued
Other balance sheet assets and liabilities
E3 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
2019
2018
Leasehold
improvements
$m
Plant and
equipment
$m
Computer
equipment
$m
Leasehold
improvements
$m
Total
$m
Plant and
equipment
$m
Computer
equipment
$m
33.0
(24.3)
8.7
0.6
(0.9)
0.8
(2.3)
-
6.9
32.7
(25.8)
6.9
29.9
(19.6)
10.3
1.3
(0.9)
0.9
(2.8)
-
8.8
30.3
(21.5)
8.8
85.2
(49.8)
35.4
18.9
(9.2)
9.2
(8.5)
-
45.8
94.9
(49.1)
45.8
148.1
(93.7)
54.4
20.8
(11.0)
10.9
(13.6)
-
61.5
157.9
(96.4)
61.5
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
Total
$m
208.3
(161.7)
46.6
20.8
(80.8)
80.8
(12.8)
(0.2)
54.4
148.1
(93.7)
54.4
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
The shorter of minimum lease term and useful life
Plant and equipment
Computer equipment
3 – 10 years
3 – 5 years
100 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Other balance sheet assets and liabilities
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.
E4 Trade and other payables
As at 30 June
Trade payables
Margins payable
Interest payable
Rebates payable
Transaction taxes payable
Employee-related payables
Accrued expenses
Other payables
Total
2019
$m
3.4
268.6
10.0
21.4
7.0
18.6
19.4
0.9
349.3
2018
$m
7.7
266.6
8.8
12.3
6.1
17.2
28.3
7.3
354.3
Trade and other payables are initially recognised at fair value and are
subsequently measured at amortised cost using the effective interest
method. They represent liabilities for goods and services provided to
the Group prior to the end of the reporting period that are unpaid.
All trade and other payables are unsecured and usually paid within 30
days of recognition other than certain rebates and accrued expenses
which are typically paid within 3 months of recognition.
Trade and other payables are presented as current liabilities unless
payment is not due within 12 months of the reporting date.
Refer to the accounting policy in note E1 for details of the margins
payable.
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.
Rebates payable represent refund liabilities. Refer to the accounting
policies in note B2 for further details of the rebates.
E5 Provisions
As at 30 June
Current
Employee provisions
Premises provisions
Total
Non-current
Employee provisions
Premises provisions
Total
14.7
0.5
15.2
3.6
6.0
9.6
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
6.0
(0.5)
0.8
0.2
6.5
14.1
0.5
14.6
3.0
5.5
8.5
6.1
(1.0)
0.8
0.1
6.0
The provisions for employee benefits predominantly relate to annual
and long service leave obligations. Premises provisions is comprised
of lease rental amortised on a straight-line basis over the term of
the lease, and provisions for make-good and lease incentives.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
101
Notes to the consolidated financial statements continued
Group disclosures
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. LTIPT 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.
F1 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 Financial Settlements Pty Limited³
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% (2018: 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 F2 for details of
the Deed.
3 ASX Financial Settlements Pty Limited was incorporated on 4 October 2018.
102 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Group disclosures
F2 Deed of Cross Guarantee
ASX Limited and the wholly owned subsidiaries listed below are
parties to a Deed of Cross Guarantee. In accordance with the Deed,
each party guarantees the debts of the others.
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
Pursuant to ASIC Legislative Instrument 2016/785, the wholly owned
subsidiaries are relieved from the requirement to prepare financial
reports and directors’ reports.
The 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
The consolidated statement of comprehensive income and summary
of movements in consolidated retained earnings for the closed
group is set out below.
Statement of comprehensive income
For the year ended 30 June
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
investments in equity instruments
Change in the fair value of cash flow hedges
Other comprehensive income for the
period, net of tax
2019
$m
937.1
(267.3)
669.8
(186.0)
483.8
(7.9)
-
(7.9)
2018
$m
892.8
(268.5)
624.3
(177.7)
446.6
1.2
(9.1)
(b) Consolidated balance sheet
The consolidated balance sheet for the closed group is set out
below.
As at 30 June
Current assets
Cash
Other financial assets at amortised cost
AFS financial assets
Trade and other receivables
Prepayments
Total current assets
Non-current assets
Investments in subsidiaries
Investments in equity instruments
Equity accounted investments
Financial assets at FVTPL
Intangible assets
Property, plant and equipment
Net deferred tax asset
Prepayments
Total non-current assets
Total assets
Current liabilities
Trade and other 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
2019
$m
129.7
568.4
-
125.6
17.5
841.2
731.1
24.3
52.0
5.3
2018¹
$m
102.6
40.0
191.3
85.5
17.4
436.8
731.1
416.4
53.1
4.8
2,395.0
2,374.3
61.5
45.3
10.5
54.4
-
0.3
3,325.0
3,634.4
4,166.2
4,071.2
66.7
89.9
15.2
83.1
254.9
-
9.6
65.8
75.4
330.3
70.1
17.0
14.6
22.4
124.1
64.9
8.5
0.1
73.5
197.6
3,835.9
3,873.6
3,027.2
792.7
0.4
15.6
3,027.2
665.7
169.0
11.7
(10.3)
Asset revaluation reserve
Equity compensation reserve
Total equity
¹ The prior year has been restated for the reclassification of certain cash
3,835.9
3,873.6
balances as described in note A3.
Total comprehensive income for the period
475.9
437.5
Summary of movements in consolidated retained earnings
Opening retained earnings at 1 July
Adjustments on adoption of new
accounting standards
Transfers from reserves to
retained earnings
Dividends paid
Profit for the period
Closing retained earnings at 30 June
665.7
(84.8)
160.7
(432.7)
483.8
792.7
619.8
-
-
(400.7)
446.6
665.7
ASX Annual Report 2019 Notes to the consolidated financial statements continued
103
Notes to the consolidated financial statements continued
Group disclosures
F3 Related party transactions
F4 Parent entity financial information
For the year ended 30 June
Dividends paid to the parent entity
399,000
451,000
Non-current assets
(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
2019
$000
2018
$000
599,121
245,543
The following transactions occurred between subsidiaries and the
Company during the year:
(b) Transactions with other related entities
The following transactions occurred with other related entities
during the year:
Purchase of services from associates
265
162
These transactions are on an arm's length basis and under normal
commercial terms and conditions.
(c) Key Management Personnel (KMP) remuneration
KMP compensation (including non-executive directors) provided
during the financial year is set out in the following table. Further
details are disclosed in the Remuneration Report on pages 48 to 62.
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Total
9,857
273
(18)
2,425
12,537
10,044
284
261
1,892
12,481
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.
(a) Summary financial information
The individual financial statements for the parent entity show the
following aggregate amounts:
Statement of comprehensive income
For the year ended 30 June
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
Balance sheet
As at 30 June
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Asset revaluation reserve
Equity compensation reserve
Total equity
2019
$m
399.4
(0.4)
399.0
(0.6)
398.4
0.1
398.5
600.6
3,264.7
3,865.3
89.9
-
89.9
3,775.4
3,027.2
734.8
(0.1)
13.5
3,775.4
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
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 recognise 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.
104 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Group disclosures
(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 F2. 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 (2018:
$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 (2018: $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.
ASX Limited did not have any other contractual commitments or
contingent liabilities for the years ended 30 June 2019 or 2018.
(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 (2018: $100.0 million) and remained undrawn
at the date of this report.
F5 Other disclosures
F5.1 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
2019
$m
19.8
2018
$m
24.5
(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
9.7
36.1
24.4
70.2
8.5
35.4
27.3
71.2
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. Future rentals are subject to indexation and
periodical rent reviews. The operating lease expense for the year was
$9.4 million (2018: $10.2 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.
F5.2 Share-based payments
(a) Long-Term Incentive Plan
The Group provides performance rights to ordinary shares of
the Company to employees as part of the LTI Plan to recognise
performance, skills and behaviours that deliver sustainable
long-term shareholder value. They entitle certain KMP to
performance rights over ASX Limited shares.
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. Under all of
the plans, 50% of the performance rights are dependant on relative
EPS growth and 50% on relative TSR. All plans have a contractual
life of four years and do not carry rights to dividends.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
105
Notes to the consolidated financial statements continued
Group disclosures
The following table shows the movement in the number of
performance rights during the current and prior year.
For the year ended 30 June
Opening balance at 1 July
Granted during the year
Vested during the year¹
Lapsed during the year¹
2019
No. of rights
2018
No. of rights
72,838
23,764
-
-
71,807
28,463
(8,065)
(19,367)
72,838
Closing balance at 30 June
¹ The prior year relates to the September 2014 plan.
96,602
Details of each of the plans and the number of grants outstanding
at the end of the reporting period is shown in the following table.
Grant date/employees entitled
Performance rights granted to
KMP on 4 October 2018
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
Weighted
average fair
value
23,764
28,463
31,334
13,041
96,602
$38.91
$34.30
$29.68
$23.34
(b) Deferred equity plans
The Group operates deferred equity plans for KMPs and other
employees. Under the plan, an employee receives between 40% - 50%
of their STI in cash and the remainder as shares which are deferred
for two to four 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
maintains 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.
During the year, there were 100,544 (2018: 116,801) shares allocated.
The shares are recognised at their fair value, being the market price
on purchase date. The weighted average fair value of the shares
issued under the deferred equity plans during the year was $67.00
(2018: $53.07).
(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.
Under the plan, 5,852 shares (2018: 5,627) were issued. The shares
are recognised at their fair value of $70.67 (2018: $57.85), being the
market price on the purchase date.
(d) Employee expenses
The following table 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
Total
2019
$m
0.3
5.4
0.4
6.1
2018
$m
0.5
4.7
0.3
5.5
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 present 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.
106 ASX Annual Report 2019 Notes to the consolidated financial statements continued
Notes to the consolidated financial statements continued
Group disclosures
F5.3 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:
Code of Practice compliance
Non-audit services:
Tax compliance services
Other review services
Total remuneration for PricewaterhouseCoopers Australia
2019
$'000
729
191
80
154
51
1,205
2018
$'000
627
184
90
105
55
1,061
F5.4 Subsequent events
From the end of the 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.
ASX Annual Report 2019 Notes to the consolidated financial statements continued
107
Directors' declaration
In the opinion of the directors of ASX Limited (the Company):
a. the financial statements and notes that are contained in pages 67 to 107 and the Remuneration Report set out on pages 48 to 62 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 2019 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 F2 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 F2, 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 the Chief Financial Officer for the financial year ended 30 June 2019.
Signed in accordance with a resolution of the directors:
Rick Holliday-Smith
Chairman
Dominic Stevens
Managing Director and Chief Executive Officer
Sydney, 15 August 2019
108 ASX Annual Report 2019 Directors' declaration
108
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:
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.
a) giving a true and fair view of the Group's financial position as at 30
June 2019 and of its financial performance for the year then ended
b) complying with Australian Accounting Standards and the Corporations
Regulations 2001.
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.
What we have audited
The Group financial report comprises:
• the consolidated balance sheet as at 30 June 2019
• 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
• 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
independence 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.
Materiality
• For the purpose of our audit we used overall Group materiality
of $35 million, which represents approximately 5% of the Group’s
profit before tax.
• We applied this threshold, together with qualitative
considerations, 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.
• We utilised a 5% threshold based on our professional judgement,
noting it is within the range of commonly acceptable thresholds.
Audit scope
• We tailored the scope of our audit to ensure we obtained
sufficient appropriate audit evidence to express an opinion on the
financial report as a whole, taking into account the structure of
the Group, its processes and controls, and the industry in which
it operates. The accounting processes are structured around a
Group Finance function at its corporate head office in Sydney,
where we performed most of our audit procedures.
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 2019 Independent auditor’s report to the members of ASX Limited
109
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
How our audit addressed the key audit matter
Impairment of assets
A) Goodwill impairment assessment
(Refer to note E2)
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 considered this a key audit matter due to the size of the
goodwill balance ($2,317.6 million as at 30 June 2019) and because
the Group’s assessment of the value-in-use of the CGUs involves
judgements about the future results of the business and the
discount rates applied to future cash flow forecasts.
The Group performed an annual impairment assessment over the
goodwill balance, as required by Australian Accounting Standards.
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.
We performed testing over both CGUs (exchange-traded and
non-exchange 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
mathematical accuracy of the underlying calculations in the
cash flow model (the model). We assessed whether the budgets
used in the value-in-use calculations were consistent with the
Board-approved budgets and that key assumptions in the
budget were subject to oversight by the directors.
• We also:
1. Compared the Group’s assumptions, including growth rates used
in the cash flow forecasts, to historical results and economic and
industry forecasts
2. Assessed the discount rate used in the model by comparing the
cost of capital for the Group to market data and industry research
• Together with PwC valuation experts, we assessed the
reasonableness of the discount and growth rates by
comparing them to market data, comparable companies
and industry research
• We found that the discount rate used by the Group was
consistent with market data and industry research
• We performed a sensitivity analysis over the assumptions used
by the Group to establish the impact on results from using other
reasonably possible growth rates and discount rates. We found
that headroom remained between the value-in-use calculations
used in our sensitivity analysis and the carrying value of the
CGUs in the financial statements.
110 ASX Annual Report 2019 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
Impairment of assets – continued
B) Yieldbroker impairment assessment
(Refer to note D2)
At 30 June 2019, the Yieldbroker investment (Yieldbroker) is
carried at $46.5 million.
We considered this a key audit matter due to the level of judgement
required by the Group in determining the recoverable amount of
Yieldbroker.
In line with Australian Accounting Standards, where there is an
indication that an asset may be impaired, the Group is required
to estimate the recoverable amount of the asset and where this
is less than its carrying amount, recognise any impairment loss
immediately in the profit or loss. Following an estimation of the
recoverable amount of Yieldbroker, the Group determined that no
impairment loss was required as at year end. This was determined
by the Group as follows:
1. Performing a value-in-use calculation for Yieldbroker.
Key assumptions in this model include projected future
cash flows, the growth rate used to extrapolate cash flow
projections beyond five years (terminal growth rate) and the
discount rate. The output of the model is the recoverable
amount of the investment
2. Comparing the recoverable amount to Yieldbroker’s carrying
amount at 30 June 2019 value.
We performed testing over the Group’s impairment assessment of
Yieldbroker, which included the following procedures, amongst others:
• Together with PwC valuation experts, we assessed the methodology
used by the Group, to calculate the recoverable amount of the
investment, against Australian Accounting Standards
• We evaluated the cash flow forecasts used in the value-in-use
calculation and the process by which they were determined,
including considering the mathematical accuracy of the underlying
calculations in the model. We found that the estimated cash
flows used in the model were consistent with board-approved
budgets and the three year plans proposed to the Board.
• We also:
1. Compared the Group’s estimated cash flows to historic earnings
and economic and industry forecasts
2. Together with PwC valuation experts, we assessed the
reasonableness of the discount and growth rates by
comparing them to market data, comparable companies
and industry research.
• We assessed the sensitivity of the recoverable amount by
varying the key assumptions to where reasonably possible,
including cash flow growth rates, the discount rate and terminal
growth rate.
We found that the Group’s calculations are reasonable to support the
carrying value of the investment in the financial statements.
Key audit matter
How our audit addressed the key audit matter
Valuation and existence of financial instruments
A) Valuation and existence of other financial assets at
amortised cost
(Refer to note C3)
As at 30 June 2019, other financial assets at amortised cost were
$10,825.4 million and comprised of term deposits, reverse repur-
chase agreements, negotiable certificates of deposit, promissory
notes and floating rate notes.
In the current period, these financial assets were reclassified
from available-for-sale financial instruments to amortised cost, in
accordance with the classification requirements under Australian
Accounting Standards. These financial assets are held in order to collect
contractual cash flows (CCFs) and those cash flows represent
solely payments of principal and interest (SPPI).
We considered this a key audit matter due to the size of the balance
as at 30 June 2019.
We performed testing over the carrying value of other financial
assets at amortised cost, which included assessing the accuracy
of the Group’s measurement calculations through performing the
following procedures, amongst others:
• We agreed a sample of key inputs from the Group’s measurement
calculations to source documentation
• We reperformed the Group’s measurement calculations for
mathematical accuracy.
We found that the carrying value of these financial assets was consistent
with the Group’s calculations.
We performed testing over the existence of all other financial assets
at amortised cost. We confirmed the existence of all of the securi-
ties held as other financial assets at amortised cost by the Group at
30 June 2019 with counterparties.
ASX Annual Report 2019 Independent auditor’s report to the members of ASX Limited 111
Independent auditor’s report to the members of ASX Limited
Key audit matter
How our audit addressed the key audit matter
We performed testing over the valuation of financial assets at
fair value. Together with PwC valuation experts, we developed an
independent expectation of the valuation for all of the financial assets
at fair value through profit and loss held by the Group at 30 June
2019 by reference to quoted prices in active markets for those assets
classified as ‘level 1’, and by reference to observable prices other than
quoted prices for those assets classified as ‘level 2.
We found that all securities tested were recorded at values materially
consistent with our independent valuations.
We performed testing over the existence of financial assets at fair
value. We confirmed the existence of all of the securities held as
financial assets at fair value by the Group at 30 June 2019 with
counterparties.
We assessed the appropriateness of fair value disclosures in the
financial statements, including the classification of the financial assets
as ‘level 1’ due to the use of quoted prices in active markets; and as
‘level 2’ due to the use of observable prices, other than quoted prices
included within ‘level 1’, in the valuations in light of the requirements
of Australian Accounting Standards.
Valuation and existence of financial instruments –
continued
B) Valuation and existence of financial assets at fair value
(Refer to note C3)
As at 30 June 2019, financial assets at Fair Value Through Profit
and Loss (FVTPL) was $1,106.5 million and comprised of non-cash
collateral.
In the current period, these financial assets were reclassified from
available-for-sale financial instruments to FVTPL, in accordance
with the classification requirements under Australian Accounting
Standards. These financial instruments do not meet the criteria
to be measured at amortised cost or Fair Value Through Other
Comprehensive Income (FVTOCI).
Of these assets, $1,044.9 million was 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 $61.6 million were classified as ‘level 2’ 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’.
We considered this a key audit matter due to the size of the balance
classified as at 30 June 2019.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report
for the year ended 30 June 2019, 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 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 on the other information that we obtained prior to the date of this auditor’s report, 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.
112 ASX Annual Report 2019 Independent auditor’s report to the members of ASX Limited
Independent auditor’s report to the members of ASX Limited
Responsibilities of the directors for the
financial report
The directors of the Company are responsible for the preparation
of the financial report that gives a true and fair view in accordance
with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is
necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for
assessing the 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
assurance, 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 aggregate, 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.
Report on the Remuneration Report
Our opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 48
to 62 of the Directors' Report for the year ended 30 June 2019.
In our opinion, the Remuneration Report of ASX Limited for the year
ended 30 June 2019 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
Voula Papageorgiou
Partner
Sydney, 15 August 2019
ASX Annual Report 2019 Independent auditor’s report to the members of ASX Limited
113
Key financial ratios
Year ended 30 June
Basic earnings per share (EPS)
Diluted EPS
Underlying EPS
Dividend per share – interim
Dividend per share – final
Dividend per share – special
Statutory return on equity
Underlying return on equity
EBITDA/operating revenue
EBIT/operating revenue
Total expenses (including depreciation and amortisation)/
operating revenue
Capital expenditure ($m)
Net tangible asset backing per share
Net asset backing per share
Shareholders’ equity as a % of total assets (excluding
participants’ balances)
Shareholders’ equity as a % of total assets (including
participants’ balances)
Share price at end of period
Ordinary shares on issue at end of period
Weighted average number of ordinary shares
(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
FY15
205.7c
205.7c
208.4c
92.3c
95.1c
-
10.8%
10.9%
77.1%
71.6%
28.4%
$44.4
$50.2
$50.3
$54.1
$75.1
$39.90
FY16
220.4c
220.4c
220.4c
99.1c
99.0c
-
11.4%
11.4%
77.1%
71.4%
28.6%
$50.2
$7.25
$19.75
87.6%
36.6%
$45.76
FY17
224.5c
224.5c
224.5c
102.0c
99.8c
-
11.4%
11.4%
76.3%
70.3%
29.7%
$50.3
$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%
$54.1
$7.79
$20.38
89.1%
30.5%
$64.39
FY19
254.1c
254.1c
254.1c
114.4c
114.3c
129.1c
12.8%
12.8%
75.1%
69.6%
30.4%
$75.1
$7.53
$20.23
86.5%
25.5%
$82.37
193,595,162
193,595,162
193,595,162
193,595,162
193,595,162
7
193,413,893
193,413,893
193,415,430
193,507,104
193,576,187
$7,724
2.05
515
524
$8,859
2.32
$10,379
2.66
$12,466
3.16
$15,946
4.07
546
534
554
556
587
560
689
650
1. Based on statutory net profit after tax (NPAT) including significant items and weighted average number of shares.
2. Based on underlying NPAT excluding significant items and weighted average number of shares.
3. Based on statutory NPAT including significant items.
4. Based on underlying NPAT excluding significant items.
5. Operating revenue excludes interest and dividend revenue (underlying).
6. EBITDA – earnings before interest, tax, depreciation and amortisation; EBIT – earnings before interest and tax.
These metrics along with total expenses exclude significant items.
7. Weighted average number of ordinary shares used to calculate EPS.
114 ASX Annual Report 2019 Key financial ratios
Transaction levels and statistics
Year ended 30 June
Listings and Issuer Services
Total domestic market capitalisation ($bn) – period end
Total number of listed entities (includes stapled entities) – period end
Number of new listings
Average annual listing fee
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
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.
FY15
FY16
FY17
FY18
FY19
$1,612
2,220
120
$31,859
$38,916
$38,787
$11,170
$88,873
2,903
3,050
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
$23,587
$45,299
$9,704
$78,590
2,959
2,886
$1,777
2,239
152
$35,419
$14,652
$37,160
$4,156
$55,968
1,828
2,827
$1,957
2,285
137
$37,569
$25,693
$43,022
$12,998
$81,713
1,967
2,976
$2,069
2,269
111
$41,356
$37,402
$38,830
$9,783
$86,015
1,849
2,789
254
253
252
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
292,528
1,160,826
$677.893
$262.126
$106.481
$185.316
359,985
1,428,512
$722.111
$333.979
$113.030
$211.568
$1,204.149
$4.170
$1,246.850
$4.267
$1,231.816
$4.153
$1,380.688
$4.639
$4.741
$5,104
0.33
92%
17.1
$4.928
$4,680
0.37
88%
17.8
$4.888
$4,211
0.37
83%
17.9
$5.479
$3,835
0.37
87%
19.6
ASX Annual Report 2019 Transaction levels and statistics
115
Transaction levels and statistics continued
Year ended 30 June
Equity options (excluding ASX SPI 200)
Trading days (exchange-traded options)
Total contracts traded – equity options (‘000)
Single stock options
Index options and futures
Average daily single stock options contracts
Average daily index options contracts
Average fee per derivatives contract
Futures
Trading days (futures and options)
Total contracts traded – futures (‘000)
ASX SPI 200
90 day bank bills
3 year bonds
10 year bonds
20 year bonds
30 day interbank cash rate
Agricultural
Electricity
Other1
NZ$ 90 day bank bills
Total futures
Total contracts traded – options on futures (‘000)
ASX SPI 200
3 year bonds
Overnight 3 year bonds
Intraday 3 year bonds
10 year bonds2
Electricity
Other3
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 ($bn)4
Open notional cleared value ($bn) – period end
1 Other includes VIX and sector futures.
2 10 year bonds includes overnight and intraday 10 year bonds.
3 Other includes agricultural and 90 day bank bills.
4 Cleared notional value is double sided.
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
FY19
252
73,825
11,282
292,957
44,770
$0.23
256
257
256
255
255
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
356
579
660
4
23
6
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
152
478
460
19
27
5
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
36
36
-
955
156,369
613,211
$1.36
15,994
34,698
60,488
51,883
256
4,268
93
413
112
2,329
170,534
98
227
279
610
4
56
-
1,274
171,808
673,757
$1.36
$805.869
$440.506
$2,742.002
$5,165.949
$1,600.194
$2,924.287
$6,314.322
$3,773.703
$9,710.616
$7,207.582
116 ASX Annual Report 2019 Transaction levels and statistics continued
Transaction levels and statistics continued
Year ended 30 June 2018
Austraclear
Settlement days
Transactions (‘000)
Cash transfers
Fixed interest securities
Discount securities
Foreign exchange
Other
Total transactions (‘000)
Average daily settlement volume
Securities holdings ($bn) – monthly average
Securities holdings ($bn) – period end
FY15
FY16
FY17
FY18
FY19
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
253
610
812
147
9
0
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
1,578
6,239
$2,003.7
$2,054.5
Average settlement and depository fee (including portfolio holdings)
per transaction (excludes registry services revenue)
$14.88
$15.60
$16.34
$16.63
$16.88
ASX Collateral ($bn) – average
ASX Collateral ($bn) – period end
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
Connection services
ASX Net connections
ASX Net service feeds
Australian Liquidity Centre service connections
ASX service access
ASX ITCH access
Futures ITCH access
ASX market access
ASX sessions
ASX gateways
ASX liquidity cross-connections
ASX OUCH access
Futures gateways
Futures liquidity cross-connections
$3.0
$4.1
$4.9
$4.9
$10.3
$16.2
$19.9
$23.5
$21.9
$22.4
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%
100.00%
100.00%
100.00%
100.00%
100.00%
188
126
358
679
31
36
1,185
207
55
44
228
357
231
116
382
819
39
45
1,113
192
57
58
208
306
285
123
437
871
43
74
1,033
179
60
73
199
334
301
112
444
984
49
80
922
160
64
82
251
381
324
104
447
1,068
54
73
886
155
57
75
329
482
ASX Annual Report 2019 Transaction levels and statistics continued
117
Shareholder information
ASX Limited – ordinary shares
Largest 20 shareholders at 24 July 2019
ASX has ordinary shares on issue. These are listed on the Australian
Securities Exchange under code: ASX. Details of trading activity are
published daily in most major Australian newspapers (print, online
and mobile) and by electronic information vendors.
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 24 July 2019
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
36,014
Number of
shares
12,795,948
% of issued
capital
6.61
9,189
18,204,001
715
607
89
5,040,307
19,004,395
138,550,511
9.40
2.60
9.82
71.57
46,614
193,595,162
100.00
On-market buy-back
There is no current on-market buy-back.
Name
1. HSBC Custody Nominees
(Australia) Limited
Number
of shares
47,560,433
2. JP Morgan Nominees Australia Pty Limited
32,119,542
3. BNP Paribas Nominees Pty Limited
4. Citicorp Nominees Pty Limited
5. National Nominees Limited
6. Australian Foundation Investment
Company Limited
7. Milton Corporation Limited
8. AMP Life Limited
9. BKI Investment Company Limited
10. Senior Master of the Supreme Court
11. Pacific Custodians Pty Limited
12. Mutual Trust Pty Limited
13. Law Venture Pty Limited
14. Navigator Australia Limited
15. Gwynvill Trading Pty Limited
16. Netwealth Investments Limited
17. Mr Michael Briody
17. Mr Gilles Kryger
17. Mr Leslie Paynter
17. Raffael Pty Limited
17. Trevorann Investments Pty Limited
17. Mr Kevin Troy
17. Vaucluse Skyline Pty Limited
28,181,897
11,218,389
5,468,964
708,685
548,965
523,212
397,750
337,032
327,593
325,976
308,999
268,506
241,559
215,446
183,474
183,474
183,474
183,474
183,474
183,474
183,474
% of
issued
capital
24.57
16.59
14.56
5.79
2.82
0.37
0.28
0.27
0.21
0.17
0.17
0.17
0.16
0.14
0.12
0.11
0.09
0.09
0.09
0.09
0.09
0.09
0.09
Total
130,037,266
67.13%
Substantial shareholders at 24 July 2019
The following organisations have disclosed a substantial
shareholder notice to ASX.
Shareholders’ calendar
FY19
Name
UniSuper Limited
BlackRock Group
Vanguard Group Inc
Number
of shares
% of voting
power
23,280,620
9,701,163
9,684,443
12.03%
5.01%
5.00%
Full-year financial results announcement
15 August 2019
Full-year final dividend and special dividend
Ex-dividend date
Record date for dividend entitlements
Payment date
5 September 2019
6 September 2019
25 September 2019
Annual General Meeting
24 September 2019
FY201
Half-year financial results announcement
13 February 2020
Half-year interim dividend
Ex-dividend date
Record date for dividend entitlements
Payment date
5 March 2020
6 March 2020
25 March 2020
Full-year financial results announcement
20 August 2020
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.
7 September 2020
8 September 2020
30 September 2020
30 September 2020
118 ASX Annual Report 2019 Shareholder information
Shareholder information continued
Annual General Meeting 2019
The ASX AGM will be held in the ASX Auditorium, lower ground floor,
Exchange Square, 18 Bridge Street, Sydney, New South Wales, at
10am (AEST) on Tuesday, 24 September 2019.
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
shareholders 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.
ASX Annual Report 2019 Shareholder information continued
119
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
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
120 ASX Annual Report 2019 Directory
asx.com.au
© Copyright 2019 ASX Limited ABN 98 008 624 691
The information in this publication does not constitute 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.
122 ASX Annual Report 2019 Directory