Cloud Hosting

Today, ASIC and the Reserve Bank of Australia (RBA) (the Regulators) acknowledged ASXs announcementof a solution design to replace CHESS.

The product-based solution and vendor announced by ASX is a foundational step in getting the CHESSreplacement program back on track.

This follows advice provided by the ASX Cash Equities Clearing and Settlement Advisory Group (AdvisoryGroup), a small group of recognised industry leaders established to advise ASX Clear and ASX Settlementon strategic clearing and settlement issues led by independent chair Alan CameronAO.

ASIC Chair Joe Longo said, `This is an important decision by ASX, but there is still a long way to go todeliver a CHESS replacement. It will be critical for ASX to now focus on engaging with the market on thedetailed design of the CHESS Replacement program with a realistic and achievable timeline forimplementation.

The Advisory Group considered that a product-based solution, presented by ASX, and assessed by it, is anappropriate option to support a safe and timely replacement of CHESS. In addition, the Advisory Groupresponded with recommendations to ASX to provide clear statements on the industry impact, including thebenefits to the market of the selected solution and ASXs commitment to building a system that isinteroperable. The Advisory Group also noted the importance of the competition in clearing and settlementlegislation, and supporting ASIC rules to provide regulatory backing for interoperability.

I would like to thank Alan Cameron and the members of the Advisory Group for their work and advice.I look forward to the Advisory Groups ongoing role in providing input throughout the CHESSreplacement program, and on other strategic clearing and settlement issues, Mr Longo added.

RBA Governor Michele Bullock said, Todays announcement sets a new direction for the CHESSReplacement program. The Advisory Group, under Independent Chair Alan Cameron, has played an importantrole in bringing the interests of the market as a whole into todays decision.

The Advisory Groups input will remain critical throughout the implementation phase of thereplacement solution. It will also be critical for ASX to address the findings from various externalaudits and reviews so that past issues with the program are not repeated.

In the coming weeks, the Regulators expect ASX to publish its special report covering the ASXLicensees current portfolio, program and project management frameworks, and an assessment of thoseframeworks against internationally recognised standards. In addition, ASX will publish the external auditof this report undertaken by Ernst & Young.

ASX will also need to ensure existing CHESS continues to be maintained to meet ongoing resilience,reliability, integrity, and security requirements. This will be a continued focus for ASIC and the RBA.

The replacement of CHESS is a complex and technical program of work. It is critically important thatrobust and transparent governance arrangements are put in place by ASX to manage the risks associatedwith such an implementation.

ASIC and the RBA are co-regulators of licensed clearing and settlement (CS) facilities.

The RBA and ASIC have separate but complementary supervisory responsibilities for the four CS facilitiesin the ASX Group: two central counterparties ASX Clear Pty Ltd and ASX Clear (Futures) Pty Ltd and two securities settlement facilities ASX Settlement Pty Ltd and Austraclear Limited.

The RBA has determined standards for the purposes of ensuring that CS facility licensees conduct theiraffairs in a way that promotes the overall stability of the Australian financial system. The RBA conductsannual assessments of how well the ASX CS facilities are complying with their statutory obligations tocomply with those standards and to do all other things necessary to reduce systemic risk.

ASIC has separate, but complementary, responsibilities for the licensing and supervision of CS facilitieslicensed under Part 7.3of the Act. ASIC is responsible for assessing whether a CS facilitysservices are provided in a fair and effective way. ASIC also has regulatory responsibilities foroperators of licensed markets, including the ASX market. In carrying out supervision and assessments ofCS facilities, the RBA and ASIC work closely as appropriate.

Continue reading here:
ASIC and RBA Acknowledge ASX's CHESS Solution Design ... - Reserve Bank of Australia