Assessment of ASX Clearing and Settlement Facilities – October 2023 Executive Summary

The Reserve Bank of Australia (the Bank) has carried out its annual Assessment of the ASX Clearing and Settlement (CS) facilities over the period 1 July 2022 to 30 June 2023. The Assessment covers the four ASX CS facilities: two central counterparties (CCPs) – ASX Clear and ASX Clear (Futures); and two securities settlement facilities (SSFs) – ASX Settlement and Austraclear. The Bank has assessed the CS facilities’ compliance with applicable Financial Stability Standards (FSS), as well as the CS facilities’ general obligation to do all other things necessary to reduce systemic risk.

The Bank’s assessment is that the ASX CS facilities observe many of the FSS. The Bank requires that ASX place high priority on recommendations related to board oversight, the effectiveness of the Internal Audit function, stakeholder management and the management of ageing assets, including CHESS.

Key findings

The ASX CS facilities were rated as observed or broadly observed for many of the FSS. The Regulatory Reporting FSS was upgraded from broadly observed to observed for ASX Clear (Futures) and Austraclear upon completion of the Bank’s Financial Market Infrastructure (FMI) data project for these facilities and an overall improvement in regulatory reporting obligations. There are three FSS that are rated as partly observed:

• Governance: The Bank has downgraded ASX to partly observed. The Bank welcomes the progress that has been initiated under the leadership of a new Chief Executive Officer, including increased accountability for executives. However, the Bank’s assessment is that the documentation supporting clear lines of accountability should be strengthened, along with the approach to stakeholder management and the effectiveness of ASX’s Internal Audit function. The Bank has also determined that the information reported to the boards needs to be more effective in assisting their ability to oversee the management of the key issues raised in this Assessment.
• Framework for the Comprehensive Management of Risks: The Bank has downgraded ASX to partly observed. The Bank continues to hold concerns about ASX’s risk management culture and the length of time ASX has operated at a heightened overall risk position.
• Operational Risk: The Bank rated ASX as partly observed. While ASX has made some progress towards addressing previous recommendations, ASX should place a high priority on the remediatation of ageing assets. ASX should also continue to focus on the delivery of its cyber strategy and security capabilities in line with the rapidly changing threat landscape.

The Assessment also includes two detailed reviews:

• The current CHESS: While the review found that the current CHESS is broadly consistent with the FSS, high priority should be placed on the management of ageing assets supporting the current CHESS, capacity requirements and bottlenecks, management of resources and risk management.
• Credit Risk: ASX’s CCPs were rated as broadly observed. Several findings were identified relating to the adequacy of ASX’s stress testing framework.