Assessment of ASX Clearing and Settlement Facilities – October 2023 2. Overview of Ratings, Recommendations and Areas of Supervisory Focus

The Bank's Assessment of the ASX CCPs and SSFs has been undertaken against the Bank's Financial Stability Standards for Central Counterparties and Financial Stability Standards for Securities Settlement Facilities, as well as the CS facilities' more general obligation to do all other things necessary to reduce systemic risk.

The Bank has conducted this Assessment in accordance with its Approach to Supervising and Assessing Clearing and Settlement Facility Licensees.^[1]

2.1 Ratings

The ratings for the current assessment period are set out in Table 1 below.

2.2 Recommendations

The Bank has made new recommendations for the CS facilities to address. A complete list of open recommendations is provided in Appendix A. There are several recommendations that the Bank requires ASX to prioritise. These are as follows:

• ASX should redouble its efforts to ensure that key issues are appropriately raised with the ASX boards to enable a robust level of challenge and focus. ASX should undertake a review of its board agendas, papers and minutes to strengthen the ability of the boards to debate and provide direction on the key issues raised in this Assessment.
• ASX should assess and implement cultural changes required to remediate the relationship between Internal Audit and the executive, while ensuring that Internal Audit remains an independent source of challenge.
• ASX should prioritise the implementation of short-term controls to mitigate the immediate risks of ageing assets. The Bank also recommends that ASX promptly devise and implement a comprehensive roadmap to remediate its currently identified ageing assets. ASX should also develop and implement a robust long-term strategy to ensure that technology assets are proactively managed and renewed well before they approach obsolescence.
• ASX should implement a robust annual process of updating the CHESS Roadmap (ASX's plan for addressing support and maintenance requirements for the current CHESS) to ensure that all planned upgrades and material changes to CHESS are incorporated.
• ASX should facilitate effective stakeholder engagement. In particular, it should actively consult stakeholders on the solution redesign, project and implementation timeline for CHESS replacement.

Following the ASX announcement of a pause in the CHESS Replacement Program in November 2022, the Bank published a letter on 15 December 2022 (the Letter of Expectations) setting out its expectations for the current CHESS and the CHESS replacement.^[2] These expectations have been updated as appropriate to reflect developments and restated as recommendations in this Assessment.

2.3 Supervisory focus for the year to June 2024

The Bank has identified several areas of supervisory focus for the next assessment period (Table 2). The Bank also intends to carry out detailed reviews on segregation and portability and selected aspects of operational risk as part of its 2024 Assessment.

Footnotes

See RBA (2021), ‘The Reserve Bank's Approach to Supervising and Assessing Clearing and Settlement Facility Licensees’, 25 February. [1]

See RBA (2022), ‘RBA Expectations for the Current CHESS and CHESS Replacement’, 15 December. [2]