ASX Limited Annual Report ASX Limited ABN 98 008 624 691 Who We Are
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2009 ASX Limited Annual Report ASX Limited ABN 98 008 624 691 Who We Are ASX Limited (ASX) was created by the merger of the Australian Stock Exchange and SFE Corporation, holding company for the Sydney Futures Exchange, in July 2006. ASX operates under the brand name Australian Securities Exchange and is one of the world’s top-10 listed exchange groups measured by market capitalisation. ASX is a multi-asset class, vertically integrated exchange group. Its activities span the primary market and capital formation process, secondary market trading and price discovery, central counterparty risk transfer, and securities settlement for both the equities and fixed income (including over-the-counter) markets. ASX functions as a market operator, supervisor, clearing house and payments system facilitator. It promotes good corporate governance among Australia’s listed companies and helps educate retail investors. The diverse domestic and international customer base of ASX includes issuers (such as corporations and trusts) of a variety of listed securities, investment and trading banks, fund managers, hedge funds, commodity trading advisers, proprietary and retail traders, and retail investors. Underpinning ASX’s activities as a market operator is the quality of the supervision performed by its wholly-owned subsidiary, ASX Markets Supervision (ASXMS). The long-term sustainability of ASX as a market operator is inextricably linked to operating markets of maximum integrity. Quality supervision is critical to market confidence and the maintenance of fair, orderly and transparent markets. ASX’s commitment to supervision is deeper than the fulfilment of a licence obligation. Confidence in the integrity of ASX markets and its clearing and settlement facilities is reinforced by the regulatory oversight of the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA). ASIC also supervises ASX’s own compliance as a public listed company with the ASX listing rules. More information on ASX – the Australian Securities Exchange – can be found at: www.asx.com.au Australian Securities Exchange 2009 Annual Report 1 Contents ANNU AL REPORT Chairman’s Letter 03 Managing Director and CEO’s Report 05 Chief Financial Officer’s Report 12 Key Financial Ratios 25 Transaction Levels and Statistics 26 ASX Activity Drivers 29 Markets Supervision Report 33 Corporate Governance 37 Corporate Responsibility 48 STATUTORY REPORT Contents 52 FINANCIAL REPORT Directors’ Report 53 Financial Statements 73 Shareholder Information 124 Directory 127 2 Australian Securities Exchange 2009 Annual Report Chairman’s Letter My fellow shareholders, regulatory agencies deserve commendation. ASX has played its part too, working harmoniously with Treasury, ASIC and the Commentators ran out of adjectives to describe the turbulence RBA to strengthen Australia’s regulatory framework in areas of the financial year ending 30 June 2009 (FY09) some time like short selling, settlement efficiency and risk management. ago. Needless to say, it has been 12 months of immense ASX does not take the critical role it plays in Australia’s capital challenge. I could not have picked a more interesting year to markets lightly. begin my chairmanship of ASX Limited! The Board is delighted that Robert Elstone agreed to extend When I became Chairman almost 12 months ago the first his term as Managing Director and CEO for another two years, things I noticed were the skill, focus and hard work of ASX to July 2011. At the 2008 Annual General Meeting (AGM) staff. I came to the role with a healthy respect for ASX Maurice Newman AC retired after 18 years as a director, 14 of employees but this has been surpassed by my observations them as Chairman. His contribution to ASX was enormous and over the past year. These efforts are seldom noted, so I wanted assisted in placing the group in the excellent position it is today. to start my first Chairman’s Letter with that recognition and a We are most grateful for all of his efforts. statement of my, and the Board’s, enormous appreciation for their work. I inherited a very strong and hard working Board that is committed to a process of Board renewal. To that end: As each of our employees will attest, the pressures have been great, but I believe that there has been much with which to be • Michael Sharpe AO, a director since 1995, retired on satisfied. Interestingly, ASX’s shareholder base has grown 7.7% 1 July 2009. Michael had been the chair of the Audit and to over 52,000 investors since our last Annual Report. It is Risk Committee of the Board for many years, and we record gratifying to know that the number of those who recognise the our gratitude and best wishes to him. We have welcomed value of our efforts is increasing. Thank you for your support. Peter Marriott as Michael’s successor, who brings his own blend of skills to that important responsibility. FY09 has been one of robust performance for the ASX group, financially, operationally and by our supervisory subsidiary. • Trevor Rowe AM, as the next longest serving director on the We have continued to deliver solid returns to investors and ASX Board, has indicated his intention to step down from the functioned with exceptional systems reliability and certainty Board prior to the 2010 AGM, by which time he would be in during a tumultuous period. As the Managing Director and CEO’s his ninth year as an ASX director. This gives the Board the Report demonstrates, FY09’s result is a continuation of sustained opportunity to continue the renewal process and propose to performance over the three years since the ASX/SFE merger. shareholders a successor to Trevor at next year’s AGM. Much has been said about how well Australia has fared relative Under my chairmanship and the executive leadership of Robert to most other developed economies during the financial crisis. Elstone, ASX will not be distracted by the consequences of This truth extends to the performance of the markets and the global financial crisis from the need to innovate, to invest in services provided by ASX. our people and platforms, and to grow our business. With our myriad stakeholders and multiple responsibilities, ASX must ASX remains one of the world’s top-10 listed exchange groups prove itself everyday. It’s a good discipline to be subject to. by market capitalisation and it was the fourth most attractive market for total capital raised in FY09 (and the top ranked It has been a privilege to serve as your Chairman and I believe globally for raisings as a percentage of domestic market all our stakeholders can take comfort from ASX’s resilience capitalisation). ASX’s daily settlement performance continues and professionalism. I’ll leave the forecasting of global market to be at global best practice levels, while the Australian market confidence levels to the experts. What I will say, unequivocally, is rated one of the most competitive in the world across a is that I have strong confidence in ASX – its people, performance range of efficiency measures, including market impact costs. and prospects. I trust you will find the confidence well-placed. The strong standing of Australia’s capital markets has not David M Gonski AC happened by accident. The Australian Government and its Chairman Australian Securities Exchange 2009 Annual Report 3 Robert Elstone Managing Director and CEO David Gonski AC Chairman ASX Limited Managing Director and CEO’s Report ASX recorded sound financial, operational and supervisory It was a year of solid achievement despite extraordinary performance for the year ending 30 June 2009 (FY09), turmoil in global financial markets. That turmoil, unsurprisingly, particularly having regard to the group’s external challenges. generated some useful lessons for ASX in its pursuit of Global financial markets experienced unprecedented continuous improvement across its wide span of activities. volatility and uncertainty, several foreign banking systems were stressed (and, in some countries, partially nationalised), It is also important, though, to take a longer term view and credit markets struggled to function efficiently and, put the last 12-month period into a broader context. consequently, growth declined and unemployment rose in all the developed economies of the world. While the Australian 2006-2009 economy was not immune to these pressures, its financial Notwithstanding that FY09 coincided with the most serious system and critical financial infrastructure (including that global financial crisis of the post-war period, three years on operated by ASX and its supervision, clearing and settlement from the creation of the Australian Securities Exchange as a subsidiaries) performed robustly. multi-asset class, vertically integrated group, revenues have risen a healthy 19.5%, while cash operating expenses are Against this backdrop ASX recorded a net profit after tax 18.1% lower. of $313.6 million, down 14.3% over the prior comparable period, based on a 12.4% fall in operating revenues, a June 2009 $M June 2006 $M modest 1.2% increase in cash costs, and a 4.3% increase in Operating Revenue 538.4 450.4 interest and dividend income. Dividends to shareholders fell Operating Expenses 138.3 168.8 EBITDA 400.1 281.6 as a consequence to 164.9 cents (fully franked) per share. Depreciation and Amortisation 15.0 14.5 While disappointing from a trend perspective, ASX’s financial EBIT 385.1 267.1 performance compares favourably to several of its global Net Interest and Dividend Income 59.6 38.1 exchange peers. ASX’s payout ratio for dividends has been Normal Profit Before axT 444.7 305.2 maintained and no call on shareholders to raise equity was Tax (131.1) (90.2) necessary during FY09. Normal Profit After axT 313.6 215.0 Importantly, throughout FY09 ASX continued to invest in the Over the same three-year period risk margining practices capacity and functionality of its technology platforms.