Assessment of ASX Clearing and Settlement Facilities Appendix C: Detailed Assessment against the Financial Stability Standards

Introduction

This Appendix sets out the Reserve Bank's assessment of how well ASX Clear and ASX Clear (Futures) have complied with the CCP Standards, and how well ASX Settlement and Austraclear have complied with the SSF Standards during the year to 30 June 2017.[44] In setting out its assessment, the Bank has applied the rating system used in CPMI and IOSCO's Principles for Financial Market Infrastructures: Disclosure Framework and Assessment Methodology.[45] Under this framework, the Bank has assessed each of the ASX CS facilities' observance of the requirements of each of the applicable FSS as being:

  • 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. In assessing how well a CS facility complies with a CCP or SSF standard, the Bank has assessed how well the facility complies with the headline standard and each of the ‘sub-standards’ listed under the headline standard. A single overall rating is applied to each CCP or SSF Standard, reflecting this assessment.

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. This Appendix includes 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 Bank's ratings of each of the CS facilities against relevant FSS are supplemented by detailed information under each sub-standard that is relevant to the Bank's assessment. The Bank gathered this information through its regular liaison with ASX staff, the supply of regular data and reports by ASX, and a series of specific information requests and meetings with ASX during and immediately following the Assessment period to gather information relevant to assessing compliance with the FSS. Arrangements for regular liaison and the supply of data and reports by ASX are described in further detail under the detailed assessments of CCP Standard 21 and SSF Standard 19.

Supplementary interpretation of CCP Standards

In assessing how well ASX Clear and ASX Clear (Futures) have observed certain sub-standards of the CCP Standards, the Bank has applied the supplementary interpretation of these sub-standards issued by way of an exchange of letters with ASX in October 2014.[46] This supplementary interpretation supersedes the Bank's previous supplementary interpretation of the CCP Standards issued in August 2013. The supplementary interpretation of the CCP Standards applies to any domestically licensed derivatives CCP that provides services to participants that are either established in the EU or subject to EU bank capital regulations, and affects CCP Standards 2.6, 4.2, 4.4, 6.3, 7.3, 13.2, 13.3, 15.4 and 21.

Footnotes

The full text of the detailed assessments of each of these CS facilities is available at Assessment of ASX Clearing and Settlement Facilities - September 2017. [44]

Available at <http://www.bis.org/cpmi/publ/d106.htm>. [45]

This letter is available at Assessment of ASX Clearing and Settlement Facilities - September 2017. [46]