Growth versus governance: navigating the ASX’s HY26 results

Growth versus governance: navigating the ASX’s HY26 results

Following the release of its 2026 half-year results (HY26), the Australian Stock Exchange (ASX) finds itself at a crossroads, balancing record volumes with significant regulatory and management hurdles.

Volumes and new models

Despite the noise, the ASX’s core business is flourishing. The HY26 results showed significant growth, mainly driven by cash volumes, clearing and bonds, with daily trading volumes exceeding $8 billion.

There is also a major structural shift on the horizon as the ASX moves to a Regulated Asset Base (RAB) model for clearing and settlement. This move is expected to deliver a stabilized return of approximately 11.5 percent, providing a clearer financial path forward as the exchange modernizes its infrastructure. In addition, the exchange is diversifying into new areas, including a gold options product, a ‘datasphere’ offering and ownership and decarbonization initiatives.

Growth comes at a high price. Total costs increased by 20 percent during the period, attributed to higher depreciation and amortization (D&A) and costs associated with the ongoing ASIC investigation. This regulatory scrutiny has had a direct impact on shareholders, with the dividend payout ratio once again reduced to 75-85 percent.

FY26 costs are expected to increase by another 20-23 percent, while capital expenditure (capex) is expected to remain stable at $170-$180 million. This focus on spending is necessary as the exchange addresses the findings of the Australian Securities and Investments Commission (ASIC) interim review and manages Phase 1 of the Clearing House Electronic Subregister System (CHESS) replacement project in April.

Governance in transition

The exchange’s board is under significant pressure, leading to the announcement that the CEO will leave following the ASIC review and the initial rollout of CHESS.

This leadership transition is not unique to the ASX, but the ASX’s new leadership will need to stabilize a team that has grown to 1,360, while fending off potential competition from a New Zealand or Singaporean newcomer.

The ASX’s internal battle is also unfolding amid broader market euphoria, prompting some analysts to warn of a market bubble. While speculative assets are soaring, actual profits for ASX 200 companies are expected to fall by 1.7 per cent in the current reporting season.

Valuation

Despite a 20 percent cost increase and management turnover, several analysts view the fundamental value of the ASX as attractive to long-term investors. While monopoly status is compelling, investors should note that the ASX cannot open a new exchange on every street corner, limiting growth engines to volume, new products and price increases for existing products. Analysts currently value the ASX at $65 to $70 per share, implying a 25x multiple for FY26. This valuation can be justified by the monopoly status of the exchange, the high regulatory barriers to entry and the sustainable growth expected from derivatives trading, the latter however dependent on continued market power.

Between the final ASIC report and CHESS going live, the ASX must prove it can turn its high volumes into stable long-term returns without further regulatory stumbling blocks. If this doesn’t happen, the ASX will become leveraged to the direction of the stock market.

Disclaimer:

The Montgomery Fund, The Montgomery [Private] Fund, The Australian Eagle Trust and the Australian Eagle Equities Fund own shares in the Australian Securities Exchange (ASX). This article was prepared on February 14, 2026 with the information we have today, and our opinions may change. It does not constitute formal advice or professional investment advice. If you want to trade ASX you will need to seek financial advice.

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Roger Montgomery is the founder and chairman of Montgomery Investment Management. Roger has more than three decades of experience in fund management and related activities, including equity analysis, equity and derivatives strategy, trading and securities brokerage. Before founding Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

He is also the author of the best-selling investing guide to the stock market, Value.able – how to value and buy the best stocks for less than they are worth.

Roger regularly appears on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.

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