2012/13 Assessment of ASX Clearing and Settlement Facilities 2. Summary of Ratings and Recommendations

The following tables summarise the Reserve Bank's 2012/13 Assessment of ASX's CS facilities against the Financial Stability Standards (FSS). In setting out its Assessment, the Bank has applied the rating system used in the Principles for Financial Market Infrastructures: Disclosure Framework and Assessment Methodology produced by the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) in December 2012.^[1] Under this rating system a facility's observance of a standard may be rated as:

Observed – Any identified gaps and shortcomings are not issues of concern and are minor, manageable and of a nature that the facility could consider taking them up in the normal course of its business.

Broadly observed – The assessment has identified one or more issues of concern that the facility should address and follow up on in a defined timeline.

Partly observed – The assessment has identified one or more issues of concern that could become serious if not addressed promptly. The facility should accord a high priority to addressing these issues.

Not observed – The assessment has identified one or more serious issues of concern that warrant immediate action. Therefore, the facility should accord the highest priority to addressing these issues.

Not applicable – The standard does not apply to the type of facility being assessed because of the particular legal, institutional, structural or other characteristics of the facility.

Section 821A(aa) of the Corporations Act requires that a CS facility licensee, to the extent reasonably practicable to do so, comply with the FSS and do all other things necessary to reduce systemic risk. The Bank has assessed how well each CS facility has complied with each CCP or SSF Standard, and applied a single overall rating to each standard, reflecting this assessment.

Where a facility has been assessed to observe a CCP or SSF Standard, the Bank nevertheless expects ASX to work towards continual strengthening of its observance of the standard. ASX recognises this and has governance arrangements in place to motivate and encourage continuous improvement. The tables include some recommendations encouraging such improvement in some specific areas. These are not exhaustive, and ASX is encouraged to continue to seek further improvements to its observance of the FSS over the coming Assessment period. This is in accordance with the general obligation on CS facilities to do all things necessary to reduce systemic risk.

Where a facility has been assessed to broadly observe a CCP or SSF Standard, the Bank will have sought evidence that a plan is in place to address the identified issue of concern within a clear, defined and reasonable timeframe, and that it would not be reasonably practicable for the facility to take such actions immediately in order to fully observe the standard. The tables include recommendations that identify the steps required by ASX to address the relevant issues of concern and fully observe the applicable CCP or SSF Standard.

The recommendations in the tables [1, 2, 3 and 4] are discussed in more detail in Section 3 and in Appendix B.

Footnote

Available at <http://www.bis.org/publ/cpss106.htm>. [1]