2015/16 Assessment of ASX Clearing and Settlement Facilities Appendix A2.2 Austraclear

A2.2 Austraclear

Austraclear is a wholly owned subsidiary of ASX Settlement Corporation Limited, itself a wholly owned subsidiary of ASX Limited (see ‘ASX Group Structure’ in Appendix A). It is an SSF that provides settlement and depository services for debt securities, and settlement services for derivatives traded on the ASX 24 market and for margin payments in ASX Clear and ASX Clear (Futures).

Summary of Ratings and Recommendations

The following table summarises the Bank's 2015/16 Assessment of Austraclear against the FSS using the rating system set out in the Principles for Financial Market Infrastructures: Disclosure framework and assessment methodology. The table includes the recommendations made by the Bank for Austraclear to observe or continue observing the requirements under the FSS, as well as recommendations to further strengthen Austraclear's observance of the FSS.

Table 14: Austraclear Ratings and Recommendations
Standard Rating Recommendation
1. Legal basis Observed  
2. Governance Observed  
3. Framework for the comprehensive management of risks Observed Austraclear is encouraged to continue to refine the documentation of its recovery plans, including considering further elaborating: stress scenarios; communications procedures; the methodology for determining critical services; how structural weaknesses are identified and addressed; and links to other FMIs.
4. Credit risk Not applicable  
5. Collateral Not applicable  
6. Liquidity risk Observed  
7. Settlement finality Observed  
8. Money settlements Observed  
9. Central securities depositories Observed  
10. Exchange-of-value settlement systems Observed  
11. Participant default rules and procedures Observed In order to continue to observe SSF Standard 11, Austraclear should carry out further work to enhance its DMF documentation, including the documents that set out the specific procedures to be followed in the event of default of an Austraclear participant or Participating Bank. In particular, these documents should provide guidance on the discretionary decisions that may need to be taken by the PIRC and other relevant parties, including elaborating on relevant factors for consideration in making these decisions.

Austraclear should formalise the review of its default management procedures within ASX's broader framework for testing and review of the DMF.

Austraclear should carry out its plans to enhance participant and client education and communication regarding its default management arrangements. As part of this, Austraclear should complete its planned updates of participant disclosures on the key aspects of its default management arrangements, including releasing a Guidance Note on the suspension and termination of Austraclear participants which explains the potential implications of the default of a participant or Participating Bank on other ASX CS facilities. Any disclosures should be easily accessible, preferably in a centralised location.

Austraclear should continue enhancing its approach to the testing and review of its default management arrangements. Such enhancements should include increasing the complexity and scope of the ASX default management fire drills. Austraclear should also ensure that these fire drills involve all relevant internal stakeholders and committees, and test the interaction between all relevant stakeholders.

As part of the annual ASX default management fire drills, consideration should be given to the implications of the default of an Austraclear participant or Participating Bank for other ASX CS facilities.

Austraclear is encouraged to complete its review of the DMF and finalise planned enhancements to the relevant documents, including the SSF default procedures documents.
12. General business risk Observed Austraclear is encouraged to review its assumptions in respect of the reliability and timeliness of payments under its insurance policies in calculating its general business risk capital.
13. Custody and investment risks Observed  
14. Operational risk Observed In order to continue to observe SSF Standard 14, Austraclear should review its cyber risk management arrangements in light of forthcoming CPMI-IOSCO guidance on cyber resilience for FMIs. As part of this review, Austraclear should:
  • consider developing participant requirements in the area of cyber resilience, liaising as appropriate with the Bank and other relevant authorities
  • develop concrete plans to improve its capability to meet the two-hour recovery time objective following an extreme cyber attack.
Austraclear will also need to review its operational arrangements in light of the proposed special resolution regime for FMIs in Australia, once the regime has been finalised. In particular, Austraclear will need to ensure that its operations are organised in such a way as to facilitate effective crisis management actions under that regime.
15. Access and participation requirements Observed  
16. Tiered participation arrangements Observed  
17. FMI links Observed  
18. Disclosure of rules, key policies and procedures, and market data Observed  
19. Regulatory reporting Observed