2014/15 Assessment of ASX Clearing and Settlement Facilities 2. Summary and Review of Regulatory Priorities

This Section summarises actions taken by the ASX CS facilities over 2014/15 in relation to regulatory priorities identified in the 2013/14 Assessment, and summarises the recommendations and other priorities identified by the Bank in its 2014/15 Assessment of the facilities against the FSS.

2.1 Progress against 2013/14 Recommendations and other Priorities

The Bank's 2013/14 Assessment of ASX Clearing and Settlement Facilities set out a number of recommendations for the ASX CS facilities to address areas of concern identified under various standards or to support continuous improvement. The 2013/14 Assessment also noted several developments that the Bank would continue to monitor and other matters arising from the Assessment that the Bank wished to further discuss with ASX. Together these matters formed the Bank's regulatory priorities for the 2014/15 Assessment period.

The following table summarises the recommendations made to ASX in the 2013/14 Assessment, and actions taken by the ASX CS facilities in relation to these recommendations over the 2014/15 Assessment period.

Table 1: Summary of Progress against 2013/14 Recommendations and other Priorities
Recommendation/Priority	Standard	Facility	Actions
Recommendations to address areas of concern
Recovery planning, loss and liquidity allocation. Implement plans to enhance the facilities' recovery plans consistent with international guidance, including mechanisms to fully address any uncovered credit losses and liquidity shortfalls, and replenish financial resources, following a participant default. Ensure that capital held continues to be sufficient to fund the enhanced plans. Review and integrate recapitalisation processes with broader recovery planning arrangements.	CCP Standards 3.5, 4.8, 7.9, 14.3 and 14.5, SSF Standards 3.5, 12.3 and 12.5	All facilities	Mostly addressed. Expected to be fully addressed in 2015/16 with enhancements to replenishment arrangements. ASX has developed a set of enhanced recovery arrangements, including loss and liquidity allocation arrangements for its CCPs, due to come into effect in October 2015. These developments are discussed in detail in Section 6.
Model review and validation. Complete the first year of the external independent model validation program. Continue to refine and enhance model validation methodologies.	CCP Standards 4, 6 and 7	Both CCPs	Fully addressed. External validations of capital stress-test, liquidity stress-test, and SPAN and OTC IRD margin models complete. External validation of cash market margining (CMM) model to be completed in 2015/16. Refinement and enhancement of model validation methodologies is ongoing, with margin backtesting and reverse stress testing integrated into daily and monthly risk management processes (see Section 3.5.1).
Liquidity stress testing. Enhance sensitivity analysis to allow systematic examination of underlying assumptions, including the degree to which timely settlement can be achieved without the use of offsetting transaction arrangements (OTAs).	CCP Standard 7	ASX Clear	Fully addressed. External review of liquidity stress-test model complete. ASX Clear has developed analytical tools to perform sensitivity analysis and reverse stress testing on its liquidity stress-testing model (see Section 3.5.1).
Investment risk. Implement plans to further reduce the concentration of unsecured exposures to the large domestic banks under the ASX Clearing Corporation (ASXCC) treasury investment policy, in line with the Bank's expectations for the credit and liquidity risk profile of the treasury investment portfolio.	CCP Standard 15	Both CCPs	Partly addressed. Expected to be fully addressed by end 2016/17. ASX has further reduced the concentration of unsecured exposures to the large domestic banks, and committed to transition to an investment policy that meets the Bank's expectations by end 2016/17 (see Section 3.5.4).
Account structure. ASX Clear to complete implementation of enhanced client protections for cash equities. ASX Clear (Futures) to implement client segregation arrangements that support the lodgement of excess client collateral.	CCP Standard 13	Both CCPs	Fully addressed. ASX Clear completed implementation of enhanced client protections for cash equities in May 2015. ASX Clear (Futures) has developed arrangements to support the segregation of excess client collateral, which will be introduced in September 2015 (see Section 3.5.3).
Resolution planning. Review operational arrangements in light of the proposed establishment of a special resolution regime for FMIs in Australia, to ensure that they are consistent with the form of the regime once finalised.	CCP Standard 16.11, SSF Standard 14.11	All facilities	Not addressed. Progress dependent on legislation to establish an Australian FMI resolution regime, which is not yet in place (see Section 3.5.1).
Recommendations to support continuous improvement
Framework for engagement with Payment Providers. Introduce a framework for formal engagement with Payment Providers on changes to settlement processes in response to regulatory or market-driven change.	CCP Standard 9, SSF Standard 8	ASX Clear, ASX Settlement	Fully addressed. ASX has engaged with APCA to establish a standing committee to address Payment Provider issues (see Section 3.5.6).
Other regulatory priorities – matters for further consideration by the Bank
User governance. Monitoring the effectiveness of user governance arrangements.	CCP Standard 2, SSF Standard 2	All facilities	ASX has introduced a participant risk committee for ASX Clear in light of the Bank's supplementary interpretation of CCP Standard 2. The Bank has continued engagement with ASX on its broader user governance arrangements (see Sections 3.5.2 and 3.6).
Risk management policies and standards. Continue monitoring the maintenance of existing risk management policies and standards, and the finalisation of new policies and standards.	CCP Standard 3, SSF Standard 3	All facilities	The Bank has received updates to policies and standards as these have been reviewed or finalised (see Section 3.5.2).
Model validation. Monitoring developments in ASX's model validation framework, including the outcome of external model validations, ongoing review of stress-testing scenarios and collateral haircut rates, and ongoing implementation of backtesting and sensitivity analysis.	CCP Standards 4, 5, 6 and 7	Both CCPs	The Bank has continued to monitor and discuss with ASX developments in its model validation framework, and receives margin backtesting and reverse stress-testing results on a monthly basis (see Section 3.5.1).
Real-time novation. Monitoring the effectiveness of the risk management of real-time novation arrangements for OTC IRD transactions.	CCP Standard 4	ASX Clear (Futures)	The Bank has received an update on the effectiveness of real-time novation arrangements for OTC IRD (see Appendix A1.2, CCP Standard 4.2).
Collateral concentration. Continuing discussion on ASX's approach to monitoring collateral concentration risks.	CCP Standard 5	Both CCPs	The Bank has further discussed collateral concentration issues with ASX (see Appendices A1.1 and A1.2, CCP Standard 5.5).
Procyclicality. Continuing discussion with ASX on the measurement and management of procyclicality in margin models.	CCP Standard 6	Both CCPs	ASX has revised its policy on procyclicality and discussed this with the Bank in November 2014 (see Section 3.5.1).
Participant liquidity risk. Monitoring planned enhancements to liquidity stress testing at ASX Clear to reflect the use of OTAs, and discussing disclosure to participants on the potential liquidity impacts, both from the use of OTAs and from addressing failed transactions in the settlement batch more broadly.	CCP Standard 7, SSF Standard 6	ASX Clear, ASX Settlement	ASX Clear has developed analytical tools to supplement its liquidity stress testing, enabling a clearer separation of equities- and derivatives-related liquidity obligations. ASX has commenced work to provide additional disclosure of potential liquidity impacts from OTAs or failed settlements to participants (see Section 3.5.1).
Foreign Currency Settlement Service. Monitoring developments and continuing to consider the appropriateness of settlement arrangements for the level of activity.	SSF Standard 8	Austraclear	The Bank has received regular updates on activity in the RMB settlement service, and considers the current settlement arrangements remain appropriate for the level of activity. The Bank will continue to monitor use of this service as part of its ongoing oversight activities (see Section 3.5.5).
Commingled pooled resources. Continuing to monitor the annual review of commingled arrangements and the adequacy of pooled resources.	CCP Standard 4	ASX Clear (Futures)	ASX has concluded that the commingled arrangements for, and sizing of, pooled financial resources in ASX Clear (Futures) remain appropriate (see Section 3.5.1).
Default management. Continuing to monitor the review of default management procedures for OTC IRD.	CCP Standard 12	ASX Clear (Futures)	The Bank has continued to monitor the activities of the OTC participant Default Management Group (DMG) and internal ASX review of OTC default procedures, including by attendance at the OTC default management fire drill in July 2015 (see Section 3.5.3).
Cyber security. Continuing to discuss with ASX its approach to cyber security.	CCP Standard 16, SSF Standard 14	All facilities	The Bank, together with ASIC, has continued to discuss with ASX its cyber resilience approach (see Section 3.5.6).
Concentration in tiering. Monitoring the operation of ASX's approach to managing concentration risks in tiered participation.	CCP Standard 18	Both CCPs	The Bank has received regular updates via ASX risk-management meetings and reports (see Appendices A1.1 and A1.2, CCP Standard 18).
Disclosure. Continuing to monitor steps to refine and enhance disclosure.	CCP Standard 21, SSF Standard 19	All facilities	ASX has released an expanded Disclosure Framework in new format, to be updated annually or as needed (see Section 3.5.8).

2.2 2014/15 Ratings and Recommendations

The following tables summarise the Reserve Bank's 2014/15 Assessment of ASX's CS facilities against the 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 CPMI and IOSCO in December 2012.^[7] 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 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 time frame, 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.

In addition, Table 6 lists other matters identified in the course of conducting the Assessment that the Bank will continue to monitor or discuss with ASX. These include areas in which ongoing review is required to ensure that emerging new risks are adequately controlled.

The recommendations and other matters in Tables 2 to 6 will form the basis for the Bank's regulatory priorities in 2015/16, and are discussed in more detail in Section 3 and in Appendix A.

Table 2: ASX Clear Ratings and Recommendations
Standard	Rating	Recommendation
1. Legal basis	Observed
2. Governance	Observed
3. Framework for the comprehensive management of risks	Observed	ASX Clear is encouraged to complete planned updates to the documentation of its recovery plans to take into account its expanded suite of recovery tools. ASX Clear is encouraged to integrate testing and review of its recovery plan into its broader framework for testing and review of risk management and default management policies and processes. The Bank will monitor the outcomes from this testing and review process.
4. Credit risk	Broadly observed	In order to fully observe CCP Standard 4, ASX Clear should complement its comprehensive loss allocation arrangements by further refining its replenishment arrangements to ensure that it is able to return to the full level of cover required under CCP Standard 4.4 on a more timely basis, while minimising the potential for procyclicality. ASX is also encouraged to test and review its capacity to replenish its own contribution to the ASX Clear default fund. ASX Clear is encouraged periodically to review its loss allocation arrangements, to ensure that these continue to strike an appropriate balance in terms of comprehensiveness, effectiveness, transparency and controllability, creating appropriate incentives and minimising negative impact. ASX Clear is encouraged to carry out plans to develop additional disclosures to assist participants in understanding their contingent exposure to the use of loss allocation tools. ASX Clear is encouraged to continue to review its interpretation of ‘extreme but plausible’ market conditions in light of evolving international best practice, including outcomes of CPMI-IOSCO work on stress testing. ASX Clear is encouraged to implement the planned second phase of enhancements to its stress-testing models, including to: make active ‘forward-looking’ hypothetical scenarios that represent macroeconomic or market-wide events, currently used for information only incorporate further scenarios based on peak historic price volatilities within the Board-approved historical look-back period, and additional scenarios for information only based on peak historic price volatilities beyond this period introduce a framework for collectively shocking individual sectors in ASX Clear that takes into account the potential for coincident broader market-wide shocks introduce additional forward-looking scenarios for information only that address the potential impact of market disruptions, multiple defaults and any dependencies on defaulting participants that might affect the default management process introduce additional scenarios for information only that address situations that may be regarded as beyond ‘extreme but plausible’. The Bank will continue to monitor ASX Clear's use, review and validation of its capital stress-testing model (see Section 5, Table 13).
5. Collateral	Observed
6. Margin	Observed	ASX Clear is encouraged to review its margining approach in light of the external validation of its margin models, experience gained from the BBY default and evolving international best practice, including outcomes of CPMI-IOSCO work on margining. The review should examine key parameter assumptions, including the holding and look-back periods, and mitigants against shortfalls in relation to individual client accounts.
7. Liquidity risk	Observed	ASX Clear is encouraged to continue to refine and enhance the sensitivity analysis of its liquidity stress-testing model and its reverse stress-testing framework for liquidity, and to continue to integrate these into its broader stress-testing and liquidity management processes. This includes examining further the sensitivity of outcomes to certain underlying assumptions. One matter in particular that ASX Clear is encouraged to consider further is how it models the degree of reliance on offsetting transaction arrangements in its liquidity risk management framework. ASX Clear is also encouraged to continue to review its approach to liquidity stress testing in light of the external validation of its liquidity stress-testing model and evolving international best practice, including outcomes of CPMI-IOSCO work on liquidity stress testing. ASX Clear is encouraged periodically to review its arrangements to address a liquidity shortfall, to ensure that these continue to strike an appropriate balance in terms of comprehensiveness, effectiveness, transparency and controllability, creating appropriate incentives and minimising negative impact. ASX Clear is encouraged to carry out plans to develop additional disclosures to assist participants in understanding their contingent exposure to the use of tools to address a liquidity shortfall.
8. Settlement finality	Observed
9. Money settlements	Observed
10. Physical deliveries	Not applicable
11. Exchange-of-value settlements	Observed
12. Participant default rules and procedures	Observed	ASX Clear is encouraged to complete its review of experiences gained from the BBY default, and to update its default management arrangements and risk management approach as appropriate.
13. Segregation and portability	Broadly observed	In order to fully observe CCP Standard 13, ASX Clear should complete the implementation of planned enhancements to client segregation arrangements that support the lodgement of excess client cash collateral in respect of derivatives positions. ASX Clear is also encouraged to consider any implications for portability arrangements arising from management of the default of BBY.
14. General business risk	Observed	ASX Clear is encouraged to: periodically review its arrangements to allocate investment-related losses, to ensure that these continue to strike an appropriate balance in terms of comprehensiveness, effectiveness, transparency and controllability, creating appropriate incentives and minimising negative impact test and review its capacity to raise additional equity to replenish general business risk capital.
15. Custody and investment risks	Broadly observed	In order to fully observe CCP Standard 15, ASX Clear should, by end 2016/17, implement plans to: limit unsecured exposures to individual non-government investment counterparties/issuers to the level of capital set aside for non-participant-default or general business risk losses ensure that other investments are with government-related obligors or secured by assets issued by government-related or other highly creditworthy obligors, subject to prudent concentration limits ensure that ASX Clear's minimum liquid resource requirement (under CCP Standard 7.3) is invested in or secured by government/semi-government securities or cash. Other investments should be able to address effectively any uncovered liquidity shortfalls (e.g. be investments in, or secured by, securities eligible for repo with the Bank).
16. Operational risk	Observed	In order to continue to observe CCP Standard 16, ASX Clear will need to review its operational arrangements in light of the proposed establishment of a special resolution regime for FMIs in Australia. In particular, ASX Clear will need to ensure that its operations are organised in such a way as to facilitate effective crisis management actions under that regime once finalised. ASX Clear is encouraged to continue its dialogue with the Bank on its cyber risk management arrangements, including on the Board-level governance of its cyber risks and ongoing review of its information security strategy and policy framework. ASX Clear is also encouraged to review its cyber risk management arrangements in light of forthcoming CPMI-IOSCO guidance on cyber resilience for FMIs.
17. Access and participation requirements	Observed
18. Tiered participation arrangements	Observed
19. FMI links	Observed
20. Disclosure of rules, key policies and procedures, and market data	Observed	In order to continue to observe CCP Standard 20, ASX Clear should carry out plans to regularly publish risk and activity data in accordance with the CPMI-IOSCO quantitative disclosure standards for CCPs.
21. Regulatory reporting	Observed

Table 3: ASX Clear (Futures) Ratings and Recommendations
Standard	Rating	Recommendations
1. Legal basis	Observed
2. Governance	Observed
3. Framework for the comprehensive management of risks	Observed	ASX Clear (Futures) is encouraged to complete planned updates to the documentation of its recovery plans to take into account its expanded suite of recovery tools. ASX Clear (Futures) is encouraged to integrate testing and review of its recovery plan into its broader framework for testing and review of risk management and default management policies and processes. The Bank will monitor the outcomes from this testing and review process.
4. Credit risk	Broadly observed	In order to fully observe CCP Standard 4, ASX Clear (Futures) should complement its comprehensive loss allocation arrangements by further refining its replenishment arrangements to ensure that it is able to return to the full level of cover required under CCP Standard 4.4 on a more timely basis, while minimising the potential for procyclicality. ASX is also encouraged to test and review its capacity to replenish its own contribution to the ASX Clear (Futures) default fund. ASX Clear (Futures) is encouraged periodically to review its loss allocation arrangements, to ensure that these continue to strike an appropriate balance in terms of comprehensiveness, effectiveness, transparency and controllability, creating appropriate incentives and minimising negative impact. ASX Clear (Futures) is encouraged to carry out plans to develop additional disclosures to assist participants in understanding their contingent exposure to the use of loss allocation tools. ASX Clear (Futures) is encouraged to continue to review its interpretation of ‘extreme but plausible’ market conditions in light of evolving international best practice, including outcomes of CPMI-IOSCO work on stress testing. ASX Clear (Futures) is encouraged to implement the planned second phase of enhancements to its stress-testing models, including to: incorporate further scenarios based on peak historic price volatilities within the Board-approved historical look-back period, and additional scenarios for information only based on peak historic price volatilities beyond this period introduce additional forward-looking scenarios for information only that address the potential impact of market disruptions, multiple defaults and any dependencies on defaulting participants that might affect the default management process perform additional sensitivity analysis on the assumed shape of the yield curve in stress-test scenarios introduce additional scenarios for information only that address situations that may be regarded as beyond ‘extreme but plausible’. ASX Clear (Futures) is encouraged to continue to monitor the impact of absolute versus relative changes in yields for applying shocks to interest rate contracts and ensure that appropriate absolute floors for yield shocks are implemented where appropriate. The Bank will continue to monitor ASX Clear (Futures)' use, review and validation of its capital stress-testing model (see Section 5, Table 13).
5. Collateral	Observed
6. Margin	Observed	ASX Clear (Futures) is encouraged to review its margining approach in light of the external validation of its margin models and evolving international best practice, including outcomes of CPMI-IOSCO work on margining. The review should examine key parameter assumptions, including the holding and look-back periods.
7. Liquidity risk	Observed	ASX Clear (Futures) is encouraged to review its approach to liquidity stress testing in light of the external validation of its stress-testing models and evolving international best practice, including outcomes of CPMI-IOSCO work on stress testing. ASX Clear (Futures) is encouraged periodically to review its arrangements to address a liquidity shortfall, to ensure that these continue to strike an appropriate balance in terms of comprehensiveness, effectiveness, transparency and controllability, creating appropriate incentives and minimising negative impact.
8. Settlement finality	Observed
9. Money settlements	Observed
10. Physical deliveries	Observed
11. Exchange-of-value settlements	Observed
12. Participant default rules and procedures	Observed
13. Segregation and portability	Observed
14. General business risk	Observed	ASX Clear (Futures) is encouraged to: periodically review its arrangements to allocate investment-related losses, to ensure that these continue to strike an appropriate balance in terms of comprehensiveness, effectiveness, transparency and controllability, creating appropriate incentives and minimising negative impact test and review its capacity to raise additional equity to replenish general business risk capital.
15. Custody and investment risks	Broadly observed	In order to fully observe CCP Standard 15, ASX Clear (Futures) should, by end 2016/17, implement plans to: limit unsecured exposures to individual non-government investment counterparties/issuers to the level of capital set aside for non-participant-default or general business risk losses ensure that other investments are with government-related obligors or secured by assets issued by government-related or other highly creditworthy obligors, subject to prudent concentration limits ensure that ASX Clear (Futures)' minimum liquid resource requirement (under CCP Standard 7.3) is invested in or secured by government/semi-government securities or cash. Other investments should be able to address effectively any uncovered liquidity shortfalls (e.g. be investments in, or secured by, securities eligible for repo with the Bank).
16. Operational risk	Observed	In order to continue to observe CCP Standard 16, ASX Clear (Futures) will need to review its operational arrangements in light of the proposed establishment of a special resolution regime for FMIs in Australia. In particular, ASX Clear (Futures) will need to ensure that its operations are organised in such a way as to facilitate effective crisis management actions under that regime once finalised. ASX Clear (Futures) is encouraged to continue its dialogue with the Bank on its cyber risk management arrangements, including on the Board-level governance of its cyber risks and ongoing review of its information security strategy and policy framework. ASX Clear (Futures) is also encouraged to review its cyber risk management arrangements in light of forthcoming CPMI-IOSCO guidance on cyber resilience for FMIs.
17. Access and participation requirements	Observed
18. Tiered participation arrangements	Observed
19. FMI links	Observed
20. Disclosure of rules, key policies and procedures, and market data	Observed	In order to continue to observe CCP Standard 20, ASX Clear (Futures) should carry out plans to regularly publish risk and activity data in accordance with the CPMI-IOSCO quantitative disclosure standards for CCPs.
21. Regulatory reporting	Observed

Table 4: ASX Settlement Ratings and Recommendations
Standard	Rating	Recommendations
1. Legal basis	Observed
2. Governance	Observed
3. Framework for the comprehensive management of risks	Observed	ASX Settlement is encouraged to complete planned updates to the documentation of its recovery plans.
4. Credit risk	Not applicable
5. Collateral	Not applicable
6. Liquidity risk	Observed	ASX Settlement is encouraged to consider supplementing planned disclosures by ASX Clear to assist clearing participants in understanding their contingent exposure to the use of tools to address a liquidity shortfall with additional information to settlement participants on the potential liquidity impact of reconstitution of the ASX Settlement batch from failed settlements. In doing so, ASX Settlement is encouraged to consider the liquidity impact of batch reconstitution in scenarios that include, but are not limited to, the management of an ASX Clear participant default.
7. Settlement finality	Observed
8. Money settlements	Observed
9. Central securities depositories	Observed
10. Exchange-of-value settlement systems	Observed
11. Participant default rules and procedures	Observed
12. General business risk	Observed	ASX Settlement is encouraged to test and review its capacity to raise additional equity to replenish general business risk capital.
13. Custody and investment risks	Not applicable
14. Operational risk	Observed	In order to continue to observe SSF Standard 14, ASX Settlement will need to review its operational arrangements in light of the proposed establishment of a special resolution regime for FMIs in Australia. In particular, ASX Settlement will need to ensure that its operations are organised in such a way as to facilitate effective crisis management actions under that regime once finalised. ASX Settlement is encouraged to continue its dialogue with the Bank on its cyber risk management arrangements, including on the Board-level governance of its cyber risks and ongoing review of its information security strategy and policy framework. ASX Settlement is also encouraged to review its cyber risk management arrangements in light of forthcoming CPMI-IOSCO guidance on cyber resilience for FMIs.
15. Access and participation requirements	Observed
16. Tiered participation arrangements	Observed
17. FMI links	Observed
18. Disclosure of rules, key policies and procedures, and market data	Observed
19. Regulatory reporting	Observed

Table 5: Austraclear Ratings and Recommendations
Standard	Rating	Recommendations
1. Legal basis	Observed
2. Governance	Observed
3. Framework for the comprehensive management of risks	Observed	Austraclear is encouraged to complete planned updates to the documentation of its recovery plans.
4. Credit risk	Not applicable
5. Collateral	Not applicable
6. Liquidity risk	Observed
7. Settlement finality	Observed
8. Money settlements	Observed
9. Central securities depositories	Observed
10. Exchange-of-value settlement systems	Observed
11. Participant default rules and procedures	Observed
12. General business risk	Observed	Austraclear is encouraged to test and review its capacity to raise additional equity to replenish general business risk capital.
13. Custody and investment risks	Observed
14. Operational risk	Observed	In order to continue to observe SSF Standard 14, Austraclear will need to review its operational arrangements in light of the proposed establishment of a special resolution regime for FMIs in Australia. In particular, Austraclear will need to ensure that its operations are organised in such a way as to facilitate effective crisis management actions under that regime once finalised. Austraclear is encouraged to continue its dialogue with the Bank on its cyber risk management arrangements, including on the Board-level governance of its cyber risks and ongoing review of its information security strategy and policy framework. Austraclear is also encouraged to review its cyber risk management arrangements in light of forthcoming CPMI-IOSCO guidance on cyber resilience for FMIs.
15. Access and participation requirements	Observed
16. Tiered participation arrangements	Observed
17. FMI links	Observed
18. Disclosure of rules, key policies and procedures, and market data	Observed
19. Regulatory reporting	Observed

Table 6: Other Regulatory Priorities
Standard	Facilities	Priority
CCP Standard 2, SSF Standard 2	All facilities	The Bank will continue to monitor the effectiveness of user governance arrangements in each of the ASX CS facilities.
CCP Standard 5	Both CCPs	The Bank will continue to discuss with ASX its approach to monitoring collateral concentration risks.
CCP Standard 9, SSF Standard 8	ASX Clear, ASX Settlement	The Bank will monitor ASX's interaction with the recently established APCA standing sub-committee for Payment Providers, as a formal means of engagement on changes to settlement processes in response to regulatory or market-driven change.
CCP Standard 12	ASX Clear (Futures)	The Bank will continue to monitor the testing and review of OTC default management procedures by ASX Clear (Futures) and the Default Management Group for OTC interest rate derivatives.
CCP Standard 12	ASX Clear (Futures)	The Bank will continue to monitor ASX Clear (Futures)' annual review of its use of commingled pooled financial resources for OTC and exchange-traded derivatives, as well as the adequacy of those resources.
CCP Standard 15	Both CCPs	The Bank will discuss with ASX its approach to disclosing investment risks to participants in light of plans to introduce a power to allocate investment losses in excess of $75 million to participants.
CCP Standard 16, SSF Standard 14	All facilities	The Bank will continue to monitor prioritisation decisions, resourcing challenges, interdependencies with day-to-day business-as-usual processes, and potential change-management issues associated with ASX's technology transformation project. This includes the prioritisation of investment in the replacement of CHESS.
CCP Standard 16, SSF Standard 14	All facilities	The Bank will discuss with ASX how it applies the CPMI-IOSCO oversight expectations in managing its relationships with external providers of critical services, including the role of the recently released CPMI-IOSCO Assessment Methodology in its oversight of these critical service providers.
CCP Standard 18	Both CCPs	The Bank will continue to monitor the operation of ASX's risk-based approach to monitoring concentration risks in tiered participation, particularly as participants and their customers transition to the individually segregated client account structure in ASX Clear (Futures) and in light of any experience gained from the default of BBY Limited.

Footnote

Available at <http://www.bis.org/cpmi/publ/d106.htm>. [7]