2015/16 Assessment of ASX Clearing and Settlement Facilities A2.1 ASX Settlement Standard 19: Regulatory reporting

A securities settlement facility should inform the Reserve Bank in a timely manner of any events or changes to its operations or circumstances that may materially impact its management of risks or ability to continue operations. A securities settlement facility should also regularly provide information to the Reserve Bank regarding its financial position and risk controls on a timely basis.

The Bank meets regularly with ASX Settlement to discuss matters relevant to its compliance with the FSS, and related aspects of its risk management and operational arrangements. The Bank has been kept informed of relevant developments during the Assessment period (SSF Standard 19.1). ASX Settlement provides the Bank with financial, activity and operational data and reports on a regular and timely basis (SSF Standard 19.2).

ASX Settlement's regulatory reporting arrangements with the Bank are described in further detail under the following sub-standards.

19.1 A securities settlement facility should inform the Reserve Bank as soon as reasonably practicable if:

  1. it breaches, or has reason to believe that it will breach:
    1. an SSF Standard; or
    2. its broader legislative obligation to do, to the extent that it is reasonably practicable to do so, all things necessary to reduce systemic risk;
  2. it becomes subject to external administration, or has reasonable grounds for suspecting that it will become subject to external administration;
  3. a related body to the securities settlement facility becomes subject to external administration, or if the securities settlement facility has reasonable grounds for suspecting that a related body will become subject to external administration;
  4. a participant becomes subject to external administration, or if the securities settlement facility has reasonable grounds for suspecting that a participant will become subject to external administration;
  5. a participant fails to meet its obligations under the securities settlement facility's risk control requirements or has its participation suspended or cancelled because of a failure to meet the securities settlement facility's risk control requirements;
  6. it fails to enforce any of its own risk control requirements;
  7. it plans to make significant changes to its risk control requirements or its rules, policies and procedures;
  8. it or a service it relies on from a third party or outsourced provider experiences a significant operational disruption, including providing the conclusions of its post-incident review;
  9. any internal audits or independent external expert reviews are undertaken of its operations, risk management processes or internal control mechanisms, including providing the conclusions of such audits or reviews;
  10. its operations or risk controls are affected, or are likely to be affected, by distress in financial markets;
  11. it has critical dependencies on utilities or service providers, including providing a description of the dependency and an update if the nature of this relationship changes;
  12. it proposes to grant a security interest over its assets (other than a lien, right of retention or statutory charge that arises in the ordinary course of business);
  13. it proposes to incur or permit to subsist any loans from participants or members unless such loans are subordinated to the claims of all other creditors of the securities settlement facility; or
  14. any other matter arises which has or is likely to have a significant impact on its risk control arrangements (see also SSF Standards 1.6, 14.10 and 17.3).

Two routine meetings are held between the Bank and ASX each quarter:

  • executive-level meetings to discuss developments relevant to compliance with the FSS, involving the CRO and other relevant members of ASX's management team; representatives from ASIC attend these meetings to discuss matters of common interest
  • operations meetings, involving the GE, Operations, and other members of the management team responsible for implementation of operational strategy, management of operational risk and business continuity planning.

These meetings provide a forum for the discussion of material developments, such as issues regarding participant compliance, changes to risk management controls, and the results of internal and external reviews. Matters discussed in the formal scheduled meetings are followed up, as appropriate, in more focused targeted sessions.

The Bank expects to be notified immediately of any significant risk related developments; for example, if there was an operational outage or a participant entered external administration. Notification to the Bank of significant developments is specified in many of ASX's key internal risk management policies. The Bank and ASX hold ad hoc meetings to discuss relevant matters as required. During the Assessment period, ASX and the Bank started work to formalise existing cooperation arrangements in the form of a Cooperation Letter. This work is expected to be completed in 2016/17.

During the 2015/16 Assessment period, ASX kept the Bank up to date with several minor operational incidents and the status of important project milestones, including progress on the transition to a two-day settlement cycle. The Bank is satisfied with its level of communication with ASX over this period.

19.2 A securities settlement facility should also provide to the Reserve Bank, on a timely basis:

  1. audited annual accounts;
  2. management accounts on a regular basis, and at least quarterly;
  3. risk management reports on a regular basis, and at least quarterly;
  4. periodic activity, risk and operational data, as agreed with the Reserve Bank; and
  5. any other information as specified by the Reserve Bank from time to time.

Audited annual reports are published on the ASX public website. ASX also provides the Bank with quarterly statements of balance sheet, income, and collateral held for each CS facility. Under the Code of Practice, ASX also publishes annual management accounts for its cash equity clearing and settlement services.

ASX provides the Bank with detailed activity, risk and operational data on a quarterly basis. This includes data on settlement values and volumes, as well as system availability and capacity utilisation. The quarterly operations meetings between the Bank and ASX provide a forum for discussion of developments observed in the data.

From time to time, the Bank requests additional information from ASX Settlement on topics of interest, particularly regarding any operational incidents or the status of projects with significant risk implications.