The ASX said on Monday it would pay smaller dividends to raise another $150 million it was required to hold until the Australian Securities and Investments Commission is convinced it has reformed its ways.
ASIC convened a probe into the ASX after a series of embarrassing events for the bourse, including a December 20, 2024, settlement failure caused by a decades-old coding error and a full-day outage on November 16, 2020.
The ASX also spent seven years and $250 million on an effort to replace its ageing settlement system with blockchain technology, only to write off the entire project in 2022.
The report found the ASX's focus on short-term financial performance and shareholder returns had compromised its obligations to operate critical national market infrastructure and its strategy lacked the vision necessary for the critical role it plays.
"While there is a significant amount of remediation activity under way, it is the panel's view that the current activities will not resolve the serious shortcomings that have been identified through this inquiry," the 21-page preliminary report says.
Urgent steps were required, it added.
ASX chief executive Helen Lofthouse said the report was "tough reading".
"It shows that we've fallen short in many areas, and we've agreed to a strategic package of action with ASIC to address these findings and recommendations," she said on a conference call on Monday.
The ASX's shares finished down 5.7 per cent to $53.66, their lowest level since February 2018.
ASIC chairman Joe Longo called the package of reforms a circuit-breaker but said they would not immediately fix the ASX's issues.
"ASX needs to embrace a new era of accountability, investment, and stewardship to increase confidence and meet the expectations of the market and the Australian public," he said.
Many of the problems identified in the independent expert report took years to develop and would take time and resources to fix, he said.
The expert panel was chaired by former Westpac executive Rob Whitfield and included Team Global Express chief executive Christine Holman and economist Guy Debelle.
As part of the reform package, the ASX has agreed boards that govern four of its settlement and clearing functions will be comprised of only independent directors who are not part of ASX Limited.
Ms Lofthouse said the report would reset the ASX's relationship with regulators and give it a clear path forward.
Federal Treasurer Jim Chalmers welcomed the agreement between the commission and the ASX, saying the issue was urgent.
The final report of the inquiry is due to be delivered by ASIC by March 31, although Ms Lofthouse noted substantive recommendations were contained in Monday's report.
