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A spokesperson for the ASX declined to comment. Attia didn’t respond to a request for comment.
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ASX’s board is betting that Attia’s background and expertise gives him the foundations to revamp the firm, and they’re willing to pay for it. His remuneration package includes A$6.3 million ($4.3 million) in bonuses he’s foregoing from his previous role on top of other payments if certain performance criteria are met.
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But Australia’s capital markets are a far cry from the European landscape that Attia is used to dealing with. A core part of navigating one of the country’s most hotly anticipated corporate turnarounds will mean appeasing regulators.
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“The ASX has different functions and operates within a very different regulatory structure to what we see in Europe,” said Amit Singh, managing partner at Melbourne-based economic consultancy firm Mandala Partners. While Europe has a supranational framework where exchanges largely implement preset EU law, ASX’s regulators have been relatively hands-off, he added.
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Another key challenge for Attia is successfully upgrading the exchange’s clearing house electronic subregister system, or CHESS, that keeps track of investor holdings and personal details. Previous efforts from earlier CEOs have been derailed by technical errors, cost blowouts and delays. The first phase of the current upgrade was only implemented in April, nearly four years after the program was announced, with completion expected around 2029.
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“Part of the problem ASX has is that they’re replacing a piece of infrastructure that they have let get to a very mature state,” said David Ferrall, founder and CEO of Sydney-based market infrastructure firm FinClear Pty. “The ASX are replacing CHESS with a fairly traditional technology stack, and the danger is that most global exchanges are looking at moving” to newer technologies, he added.
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ASX has increased its cost forecast for the next two fiscal years as it ramps up investment in its technology upgrade, a move which led to a series of earnings downgrades by several brokers. The updated guidance, combined with the cut in analyst estimates, pulled the stock down to its lowest in almost a decade in May.
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Attia will also need to get investors on side when he starts on Sept. 1. ASX’s relationship with its shareholders was a key criticism of the joint inquiry by ASIC and the RBA. The report said the firm prioritized shareholder returns over its role as a market steward. While earnings before interest and tax consistently topped its global peers, its operational expenditure as a share of operating revenue fell below peers, the report found.
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“Shareholders understand that critical market infrastructure requires ongoing investment,” said Rachel Waterhouse, CEO at the Australian Shareholders Association. However, they will also want “evidence that the additional spending is translating into a more resilient, reliable and competitive market operator while protecting long-term shareholder value.”
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In order to meet its capital charge obligations, ASX lowered its dividend payout ratio to between 75% and 85% of underlying net income in December, down from between 80% and 90%. With shareholders historically favoring the firm for its high payouts, that move also sparked a plunge in its share price.
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“There is more cost pressure to come, so the risk-reward remains unattractive,” said Jun Bei Liu, co-founder and portfolio manager at Ten Cap, an investment management firm where she oversees about A$1.65 billion. “ASX should be one of the cleanest monopoly-style businesses in the market, but instead investors are dealing with rising costs, regulatory remediation, CHESS execution risk and poor returns on technology spend.”
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