ASIC, RBA take action over ASX CHESS failure
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More news: ASX chairman David Clarke said he is "absolutely committed to rebuilding confidence" in the bourse operator after the Reserve Bank of Australia and the Australian Securities and Investments Commission (ASIC) issued a joint letter outlining concerns over the management of operational risk at ASX.
What they said: "There is no question that the settlement incident was very serious," Clarke said. "The directors of ASX and the clearing and settlement boards are highly engaged on this matter; we understand how disappointing it was and we are absolutely committed to rebuilding confidence in ASX."
ASX chief executive Helen Lofthouse said: "Taking action to increase confidence in the reliable operation of CHESS is an ongoing priority for ASX. We will now engage with ASIC on the selection of an appropriately qualified external expert to review the work we have already undertaken and advise on what more we can do."
ASIC, RBA take action over ASX CHESS failure
The news: The Reserve Bank of Australia is reassessing ASX's compliance while the corporate regulator has directed the bourse to undertake a technical review of CHESS as they teamed up to express their concerns over the exchange's operational risks.
The context: The two steps by the central bank and the Australian Securities and Investments Commission (ASIC) follow a CHESS batch settlement failure on 20 December 2024.
In a joint letter to ASX, they said they were “increasingly concerned and deeply disappointed” over the management of operational risk at ASX.
The RBA will reassess the compliance of ASX Clear and ASX Settlement with the RBA’s Financial Stability Standards outside the annual assessment cycle. Meanwhile, ASIC has directed ASX to engage an expert approved by the regulator to undertake a technical review of CHESS. The report is expected to be made public.
They said there were concerns about:
- The potential for such an incident to occur. This includes the implications for the ability of the CHESS system to reliably service the Australian equities market until CHESS is replaced, consistent with ASX’s public undertaking to the RBA of 15 December 2022;
- The management of the incident during its occurrence. This includes communications to stakeholders and the regulators; and
- The speed and nature of ASX’s remediation actions following the incident.
What they said: “However, in the regulators’ view, the incident and ASX’s response demonstrates that the pace of change at ASX is too slow, and broader improvements are needed to more comprehensively address these foundational issues,” the letter said.
“... If not addressed with the urgency required, the regulators are prepared to take further regulatory action.”
The sources: ASIC media release, ASIC and RBA joint letter
