Assessment of ASX Clearing and Settlement Facilities Appendix C2. Financial Stability Standards for Securities Settlement Facilities

Standard 19: Regulatory reporting

A securities settlement facility should inform the Reserve Bank in a timely manner of any events or changes to its operations or circumstances that may materially impact its management of risks or ability to continue operations. A securities settlement facility should also regularly provide information to the Reserve Bank regarding its financial position and risk controls on a timely basis.

ASX Settlement Austraclear
Observed Observed

19.1 A securities settlement facility should inform the Reserve Bank as soon as reasonably practicable if:

  1. it breaches, or has reason to believe that it will breach:
    1. an SSF Standard; or
    2. its broader legislative obligation to do, to the extent that it is reasonably practicable to do so, all things necessary to reduce systemic risk;
  2. it becomes subject to external administration, or has reasonable grounds for suspecting that it will become subject to external administration;
  3. a related body to the securities settlement facility becomes subject to external administration, or if the securities settlement facility has reasonable grounds for suspecting that a related body will become subject to external administration;
  4. a participant becomes subject to external administration, or if the securities settlement facility has reasonable grounds for suspecting that a participant will become subject to external administration;
  5. a participant fails to meet its obligations under the securities settlement facility's risk control requirements or has its participation suspended or cancelled because of a failure to meet the securities settlement facility's risk control requirements;
  6. it fails to enforce any of its own risk control requirements;
  7. it plans to make significant changes to its risk control requirements or its rules, policies and procedures;
  8. it or a service it relies on from a third party or outsourced provider experiences a significant operational disruption, including providing the conclusions of its post-incident review;
  9. any internal audits or independent external expert reviews are undertaken of its operations, risk management processes or internal control mechanisms, including providing the conclusions of such audits or reviews;
  10. its operations or risk controls are affected, or are likely to be affected, by distress in financial markets;
  11. it has critical dependencies on utilities or service providers, including providing a description of the dependency and an update if the nature of this relationship changes;
  12. it proposes to grant a security interest over its assets (other than a lien, right of retention or statutory charge that arises in the ordinary course of business);
  13. it proposes to incur or permit to subsist any loans from participants or members unless such loans are subordinated to the claims of all other creditors of the securities settlement facility; or
  14. any other matter arises which has or is likely to have a significant impact on its risk control arrangements (see also SSF Standards 1.6, 14.10 and 17.3).

ASX and the Bank have formalised cooperation arrangements through cooperation letters with each of ASX Settlement and Austraclear. The letters set out the arrangements between the SSFs and the Bank relating to the SSFs' performance of their assistance and notification obligations.

In addition to immediately notifying the Bank of significant developments (a requirement that is specified in many of ASX's key internal risk management policies), ASX and the Bank hold scheduled periodic meetings that include:

  • annual meetings with the Board and, separately, the Chair of the Board to discuss strategic issues and compliance with the FSS
  • semi-annual high-level review meetings to discuss strategy and relevant market developments, involving the Chief Executive Officer and other relevant executives
  • quarterly meetings to discuss developments relevant to compliance with the FSS
  • quarterly technology and operations meetings, involving the Chief Operating Officer and other members of the management team responsible for implementation of operational strategy, management of operational risk and business continuity planning
  • quarterly internal audit meetings with the Head of Internal Audit and other members of the internal audit team.

These meetings provide a forum for the discussion of material developments, such as issues regarding participant compliance, changes to risk management controls, and the results of internal and external reviews. Matters discussed in the formal scheduled meetings are followed up, as appropriate, in more focused targeted sessions. The Bank and ASX hold ad hoc meetings to discuss relevant matters as required. Representatives of ASIC may attend both regular and ad hoc meetings where matters of common interest are being discussed.

19.2 A securities settlement facility should also provide to the Reserve Bank, on a timely basis:

  1. audited annual accounts;
  2. management accounts on a regular basis, and at least quarterly;
  3. risk management reports on a regular basis, and at least quarterly;
  4. periodic activity, risk and operational data, as agreed with the Reserve Bank; and
  5. any other information as specified by the Reserve Bank from time to time.

Audited annual reports are published on the ASX public website. Under the Code of Practice, ASX also publishes annual management accounts for its cash equity clearing and settlement services. ASX also provides the Bank with the quarterly balance sheet for each CS facility.

ASX provides the Bank with detailed activity, risk and operational data on a quarterly basis. This includes data on settlement values and volumes, as well as system availability and capacity utilisation. The quarterly technology and operations meetings between the Bank and ASX provide a forum for discussion of developments observed in the data.

ASX also provides the Bank with two regular reports: a quarterly CRO enterprise risk report and a quarterly COO risk report prepared for ASX's Audit and Risk Committee. The CRO enterprise risk report provides updates and analysis on key risk indicators, emerging risks, and risk culture. The COO risk report includes information on project delivery, operational incidents, operational risk management, CS facility system status, disaster recovery testing and change management.

From time to time, the Bank requests additional information from ASX Settlement and Austraclear on topics of interest, particularly regarding any operational incidents or the status of projects with significant risk implications.