ASX: From System Error to System Upgrade
ASX (ASX:ASX) is a high-quality market infrastructure business with strong competitive advantages across listings, cash equities, derivatives, clearing and settlement and data services. Historically, these businesses generated attractive margins and relatively resilient earnings but the investment case deteriorated as years of underinvestment in technology became increasingly apparent. The most visible failure was the original CHESS (Clearing House Electronic Subregister System) replacement program, which was abandoned in 2022 after significant delays and write-offs, while subsequent operational incidents and regulatory scrutiny further damaged confidence in management and execution. The company also went through considerable leadership turnover with the most recent appointment being ASX’s third CEO in relatively quick succession.
The consequence of correcting that historical underinvestment has been a necessary step-up in technology and operational investment but more importantly, the benefits are beginning to become more visible. The CHESS program reset has now progressed through a successful launch of Release 1, with the platform handling periods of elevated trading activity, including strong volumes in May, without disruption. This is important evidence that execution and operational resilience are beginning to improve. Technology investment is also being directed toward areas that had previously been under-resourced, suggesting the business is moving from a period of deterioration and remediation toward a more stable and higher-quality operating platform.
At the same time, the underlying businesses are performing increasingly well. Financial year 2026 (FY26) delivered revenue growth across all four divisions, supported by strong cash-market trading, clearing and settlement activity, interest-rate futures volumes and a recovery in listings. Stronger volumes provide operating leverage against the temporarily elevated cost base and earnings and margins should begin to improve more meaningfully when remediation and transformation spending eventually normalise.
The next leg of the thesis is management change. Anthony Attia joined as CEO in September with extensive global exchange, clearing, post-trade and technology transformation experience from Euronext and has already begun reshaping the executive leadership team, including appointing a new CFO and changing senior responsibilities.
For Australian Eagle, the attraction is not simply that ASX is a high-quality monopoly-like asset, but that the quality of the business appears to be improving. Underlying volumes are accelerating, all divisions are growing, technology investment is addressing historical weaknesses and a new leadership team is bringing greater accountability and execution focus. The key remaining evidence we need is that this operational improvement can ultimately translate into better cost control, improved margins and stronger returns for shareholders. Further, given our increase in portfolio weight at what was an historically attractive valuation provided significant upside optionality with minimal downside risk.
Disclaimer:
The Montgomery [Private] Fund, The Montgomery Fund, and The Australian Eagle Equities Fund, own shares in ASX. This article was prepared 13 October 2026 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade ASX, you should seek financial advice.
Sean Sequeira jointly established Australian Eagle Asset Management in 2004. Sean was appointed Australian Eagle’s Chief Investment Officer in 2016. In addition to stock selection and analysis, Sean is responsible for all aspects of the investment process. Sean is head of Australian Eagle’s portfolio risk committee and process integrity committee. He is also one of the three investment team members that make up the portfolio construction committee.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
