Assessment of ASX Clearing and Settlement Facilities C2. Financial Stability Standards for Securities Settlement Facilities

Standard 4: Credit risk

A securities settlement facility should effectively measure, monitor and manage its credit exposures to participants and those arising from its settlement processes. A securities settlement facility should maintain sufficient financial resources to cover its credit exposure to each participant fully with a high degree of confidence.

ASX Settlement and Austraclear do not extend credit to participants or provide a settlement guarantee. Accordingly, ASX Settlement and Austraclear do not assume credit risk as principal. Furthermore, the settlement process at ASX Settlement does not give rise to credit exposures for participants, since settlement occurs on a DvP Model 3 basis (see SSF Standard 10) and replacement cost risk (in respect of on-market trades in ASX-listed securities) is managed via novation to ASX Clear as central counterparty.

The Bank has therefore concluded that SSF Standard 4 and SSF Sub-standards 4.1 to 4.5 do not apply to ASX Settlement or Austraclear.