2006/07 Assessment of Clearing and Settlement Facilities in Australia 5.4 Austraclear

It is the Bank's assessment that Austraclear complied with the Financial Stability Standard for Securities Settlement Facilities in the nine months to June 2007.

Background on Austraclear arrangements

Austraclear operates within a sound legal framework, based on its Regulations, which under s822B of the Corporations Act have effect as a contract under seal between Austraclear and each of its participants, and between each participant and each other participant. Among other things, the Regulations specify the rights and obligations of Austraclear and each of its participants, including in the event of default or suspension. The finality of settlements undertaken by Austraclear is reinforced by its approval as a real-time gross settlement (RTGS) system under Part 2 of the Payment Systems and Netting Act. This approval protects the finality of payments made through Austraclear in the event of a participant entering external administration (See Attachment 2).

Austraclear addresses settlement risk by the use of a model 1 delivery-versus-payment (DVP) mechanism, involving individual settlement of transactions on a gross basis. The interbank cash leg is paid through the Reserve Bank's RTGS system, with simultaneous transfer of securities title in Austraclear.

Developments during the assessment period

Austraclear introduced a new settlement system, EXIGO, in August 2006 to replace the FINTRACS system, which had operated for more than 20 years. During the assessment period EXIGO was operationally available for 99.33 per cent of the required time. Over this period, nine outages occurred, including three in excess of two hours – in October and November 2006 and February 2007. These outages were caused by a range of factors, including insufficient initial hardware capacity, database problems and software faults. During its early months of operation, EXIGO also at times performed slowly or participants had difficulty connecting. These problems were in part driven by higher than expected use of the system. The number of users of the new system was well in excess of the number that had been able to access FINTRACS and new functionality offered in EXIGO led to more intensive use of data query functions.

Austraclear has responded in a number of ways to these issues. It has upgraded and reconfigured system hardware and has modified its database management processes. A number of software patches have been implemented to address faults and streamline querying functionality. At a higher level, Austraclear has also conducted a review of system architecture and software code.

At times during the assessment period, loads on EXIGO were in excess of some of the key maximum performance indicators set out in the service level agreement between ASX and its outsourcing partner, OMX. These excesses included the peak volume of settlement instructions processed by EXIGO, both in daily and hourly terms. Although there were no apparent performance issues as a result of these higher than agreed loads, it is important that Austraclear and its users be confident that the system can accommodate peak volumes and that this is reflected in contractual arrangements. Austraclear has recognised this and significantly higher performance standards have now been established in a revised service level agreement, implemented in July 2007.

Austraclear has announced its intention to bring key levels of operational support for EXIGO in-house. This work is expected to be completed in mid 2008.

The Bank recognises that Austraclear has taken the post-implementation problems with EXIGO very seriously and has devoted considerable resources to overcoming them. Recent availability experience has been much better than in late 2006 and early 2007.

Austraclear has arrangements in place to allow the timely recovery of its usual operations in the event of a contingency. Austraclear tests back-up arrangements quarterly. Due to the operational issues discussed above, Austraclear utilised its back-up systems as the production environment during the assessment period and did not undertake further testing of this type.


While the operational reliability of the EXIGO system during its early months of operation was a concern, the Bank is satisfied that the issue has been given a very high priority within the ASX group and that responses – including bringing key levels of support in-house – have been appropriate. It is the Bank's assessment that Austraclear has complied with the Financial Stability Standard for Securities Settlement Facilities during the assessment period. The detailed assessment provided in the attachment indicates how Austraclear has met the various measures that the Bank has set out as the minimum it considers relevant for meeting the standard.