The Reserve Bank today released the October
2020 Assessment of the ASX Clearing and
Settlement Facilities. The Assessment concludes that ASX’s clearing and settlement (CS)
facilities ‘observed’ or ‘broadly observed’ all relevant requirements under the Reserve
Bank’s Financial Stability Standards (FSS) as at 30 June 2020, with the exception of the
standard relating to margin, which was rated as ‘partly observed’ in ASX Clear
(Futures), and the standard relating to operational risk, which was rated as ‘partly
observed’ in ASX Clear and ASX Settlement.
The Reserve Bank is responsible for the supervision of Australian-licensed CS facilities
focusing on the reduction of systemic risk. Systemically important CS facilities are
assessed on a regular basis against the FSS set by the Reserve Bank.
A key finding of the Assessment is that ASX should implement its new system for the clearing
and settlement of cash equities trades as soon as this can safely be achieved by ASX and
users of the existing CHESS system. The importance of replacing CHESS in a safe and timely
manner was highlighted by processing delays experienced in March during record trading
volumes, which contributed to the downgraded ratings on operational risk.
The Reserve Bank has continued to work closely with the Australian Securities and Investment
Commission (ASIC) as the co-regulator of the ASX CS facilities in supervising the CHESS
replacement project. ASIC and the Reserve Bank today announce
the two regulators’ expectations of ASX as it replaces CHESS. Details of these expectations
are also included in the Assessment.
On balance, the Reserve Bank has concluded that the facilities have conducted their affairs in a way
that causes or promotes overall stability in the Australian financial system. However, ASX
will need to place a high priority on addressing recommendations related to margin at ASX
Clear (Futures) and operational risk at ASX Clear and ASX Settlement, including via the
replacement of CHESS.
The Assessment also describes progress made by the ASX CS facilities in addressing
recommendations from the 2019 Assessment.
In the case of the ASX Group, the Reserve Bank conducts annual assessments of its four CS
facilities: two central counterparties – ASX Clear Pty Limited and ASX Clear (Futures) Pty
Limited – and two securities settlement facilities – ASX Settlement Pty Limited and
Austraclear Limited. These assessments include a rating of the CS facilities’ observance
of each of the FSS.
For more information on the Bank’s approach to assessing CS facilities, see:
Financial Stability Standards.
ASIC has separate, but complementary, responsibilities for the supervision of CS facilities
focused on the fair and effective provision of services.
ASIC and the Reserve Bank, with the broader Council of Financial Regulators (CFR) and the Australian
Competition and Consumer Commission, are also closely supervising ASX’s conduct in the CHESS
replacement program of change in accordance with the CFR’s
Conduct in Operating Cash Equities Clearing and Settlement. These Regulatory Expectations
apply to ASX’s engagement with, and provision of services to, users of its monopoly cash
equity CS services.