2015/16 Assessment of ASX Clearing and Settlement Facilities A2.1 ASX Settlement Standard 18: Disclosure of rules, key policies and procedures, and market data
A securities settlement facility should have clear and comprehensive rules, policies and procedures and should provide sufficient information and data to enable participants to have an accurate understanding of the risks they incur by participating in the securities settlement facility. All relevant rules and key policies and procedures should be publicly disclosed.
ASX Settlement fully discloses its Operating Rules and Procedures to participants, and publicly discloses its rules and a range of additional relevant information subject to disclosure requirements on its public website (SSF Standard 18.1). This includes information regarding the general descriptions of system design and the roles and obligations of ASX Settlement and its participants (SSF Standard 18.2). ASX Settlement provides new participants with comprehensive documentation, and verifies their understanding of their responsibilities as participants. Existing participants are also provided with education on their obligations where required (SSF Standard 18.3). ASX has updated its published response to the CPMI-IOSCO Disclosure Framework and plans to periodically review and enhance this document where appropriate (SSF Standard 18.4).
The Bank will continue to monitor steps by ASX Settlement to refine and enhance its disclosure.
ASX Settlement's disclosure of rules, key policies and procedures, and market data is described in further detail under the following sub-standards.
18.1 A securities settlement facility should adopt clear and comprehensive rules, policies and procedures that are fully disclosed to participants. Relevant rules and key policies and procedures should also be publicly disclosed (including specific requirements relating to SSF Standards 1.4, 2.2, 11.3, 13.4, 15.2 and 15.3).
ASX Settlement's Operating Rules and Procedures form the basis of all material aspects of the SSF's service to participants. The Operating Rules and Procedures, together with associated Guidance Notes, are disclosed on ASX's public website.[17] The Rules and Procedures are also posted on the Customer Portal, ASX's participant website. During the Assessment period, ASX enhanced the design and functionality of its participant website to better support the dissemination of non-public information to participants.
To assist participants in their understanding of the risks of participating in ASX Settlement, and for the information of other interested stakeholders, ASX publishes a range of additional material on its public website; this includes information required to be disclosed under the FSS. Information specific to ASX Settlement includes information about participant requirements, trade and settlement monitoring systems, known software release issues and change requests, and business continuity arrangements. More general information includes: the ASX Group's regulatory framework; requirements of the FSS; requirements of the Corporations Act for provision of services in a ‘fair and effective’ way; the ASX Group's other obligations under the Corporations Act; and ASX Group's observance of the Principles. ASX also operates a dedicated website that discloses information relevant to the clearing and settlement of cash equities, to support its disclosure commitments under the Code of Practice.
Specific disclosure requirements are dealt with under SSF Standards 1.4, 2.2, 11.3, 13.4, 15.2 and 15.3.
18.2 A securities settlement facility should disclose clear descriptions of the system's design and operations, as well as the securities settlement facility's and participants' rights and obligations, so that participants can assess the risks they would incur by participating in the securities settlement facility (see SSF Standards 2.8 and 8.5).
General descriptions of ASX Settlement's system design and operations are available on ASX's public website, including as part of ASX's response to the CPMI-IOSCO Disclosure Framework (see SSF Standard 18.4). The Disclosure Framework document describes the ASX group structure, provides a general description of the CS facilities and their roles, system design and operations, outlines the legal and regulatory framework for clearing and settlement, and provides a description of steps taken by ASX to ensure compliance with the Principles and the corresponding FSS. The ASX public website provides additional information on system design and operations, including a description of the cash market settlement process.
The rights and obligations of ASX Settlement and its participants are defined in the ASX Settlement Operating Rules and Procedures, which are published on the ASX public website and the Customer Portal. These documents are supplemented with explanatory material to support participants' understanding of the risks they face by participating in the system. There is a clear process for changing ASX Settlement's Operating Rules and Procedures, with changes notified to participants via the ASX website (see SSF Standard 1.3).
The Bank will continue to monitor steps by ASX Settlement to refine and enhance its disclosures.
18.3 A securities settlement facility should provide all necessary and appropriate documentation and training to facilitate participants' understanding of the securities settlement facility's rules, policies and procedures and the risks they face from participating in the securities settlement facility.
All applicants for participation in ASX Settlement are provided with a comprehensive application pack, which includes information regarding key requirements of the facilities. Applicants have access to the Operating Rules, Procedures and Guidance Notes via the ASX website, as well as other publicly available information about the facilities, services and participation requirements. When ASX Settlement has completed an initial assessment of an application, the applicant is also invited to attend formal ‘on boarding’ meetings with the Compliance and Operations departments to discuss key areas of importance for participants.
As part of the formal admission process, the applicant is required to certify that it has resources and processes in place to comply with its obligations under the applicable Operating Rules and Procedures (see SSF Standard 15.2). This is reviewed and discussed with the applicant prior to approving admission. During ASX's review of the application, or at any time following admission, the applicant must be able to demonstrate, to the satisfaction of ASX, the basis on which the certification is, or was, provided.
ASX publishes aggregate securities lending data on its website daily, enabling participants to better understand the risks associated with these activities. For this purpose, ASX Settlement requires that participants ‘tag’ settlement instructions submitted to CHESS that are related to securities lending, and participants must disclose outstanding positions, both borrowed and lent.
Where ASX becomes aware or suspects that a participant lacks a satisfactory understanding of the Operating Rules and Procedures, or the risks of participation, ASX will generally work collaboratively with the participant to educate them on their obligations. ASX may become aware of issues through its routine risk monitoring activities or through its regular discussions with participants (see SSF Standard 14.5). Examples of matters that might raise concerns are if a participant had increased settlement fail rates or had a high frequency of technical connectivity issues. If the matter was serious, ASX may require that the participant remediate the weakness. ASX may also impose conditions on participation, or require that the participant appoint an independent expert to assist with the remediation task.
18.4 A securities settlement facility should complete regularly and disclose publicly responses to the CPSS-IOSCO Disclosure Framework for Financial Market Infrastructures.[18] A securities settlement facility also should, at a minimum, disclose basic risk and activity data, as directed by the Reserve Bank from time to time.
ASX has published its response to the CPMI-IOSCO Disclosure Framework, including information describing how its CS facilities observe the applicable Principles.[19] This document was revised during the Assessment period, in part to reflect the introduction of ASX's enhanced recovery arrangements. ASX plans to continue updating this document periodically (at least annually) and to further enhance its disclosure as necessary from time to time.
ASX reports publicly basic risk and activity data for the CS facilities via a monthly activity report, as well as through additional data published on both its main website and a dedicated website on clearing and settlement of cash equities.