Assessment of ASX Clearing and Settlement Facilities – September 2024 2. Overview of Ratings, Recommendations and Areas of Supervisory Focus
The RBA’s Assessment of the ASX CCPs and SSFs has been undertaken against the RBA’s Financial Stability Standards for Central Counterparties and Financial Stability Standards for Securities Settlement Facilities, as well as the CS facilities’ more general obligation to do all other things necessary to reduce systemic risk. The RBA has conducted this Assessment in accordance with its ‘Approach to Supervising and Assessing Clearing and Settlement Facility Licensees’.[1]
2.1 Ratings
The ratings for the current assessment period are set out in Table 1 below.
| Standard | ASX Clear | ASX Clear (Futures) | ASX Settlement | Austraclear |
|---|---|---|---|---|
| Legal Basis (CCP/SSF 1) | Observed | Observed | Observed | Observed |
| Governance (CCP/SSF 2) | Partly observed | Partly observed | Partly observed | Partly observed |
| Framework for the Comprehensive Management of Risks (CCP/SSF 3) | Partly observed | Partly observed | Partly observed | Partly observed |
| Credit Risk (CCP/SSF 4) | Broadly observed | Broadly observed | N/A | N/A |
| Collateral (CCP/SSF 5) | Observed | Observed | N/A | N/A |
| Margin (CCP 6) | Broadly observed | Broadly observed | N/A | N/A |
| Liquidity Risk (CCP 7, SSF 6) | Broadly observed | Broadly observed | Observed | Observed |
| Settlement Finality (CCP 8, SSF 7) | Observed | Observed | Observed | Observed |
| Money Settlements (CCP 9, SSF 8) | Observed | Observed | Observed | Observed |
| Central Securities Depositories (SSF 9) | N/A | N/A | Observed | Observed (↑) |
| Physical Deliveries (CCP 10) | N/A | Observed | N/A | N/A |
| Exchange-of-value Settlements/Settlement Systems (CCP 11, SSF 10) | Observed | Observed | Observed | Observed |
| Participant Default Rules and Procedures (CCP 12, SSF 11) | Observed | Observed | Observed | Observed |
| Segregation and Portability (CCP 13) | Broadly observed (↓) | Broadly observed (↓) | N/A | N/A |
| General Business Risk (CCP 14, SSF 12) | Broadly observed (↓) | Broadly observed (↓) | Broadly observed (↓) | Broadly observed (↓) |
| Custody and Investment Risks (CCP 15, SSF 13) | Observed | Observed | Observed | Observed |
| Operational Risk (CCP 16, SSF 14) | Partly observed | Partly observed | Partly observed | Partly observed |
| Access and Participation Requirements (CCP 17, SSF 15) | Observed | Observed | Observed | Observed |
| Tiered Participation Arrangements (CCP 18, SSF 16) | Broadly observed (↓) | Broadly observed (↓) | Observed | Observed |
| FMI Links (CCP 19, SSF 17) | Observed | Observed | Observed | Observed |
| Disclosure of Rules, Key Policies and Procedures, and Market Data (CCP 20, SSF 18) | Observed | Observed | Observed | Observed |
| Regulatory Reporting (CCP 21, SSF 19) | Broadly observed | Broadly observed (↓) | Broadly observed | Broadly observed (↓) |
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(a) Arrows in brackets indicate the ratings change from last year: an up arrow indicates an upgrade and a down arrow indicates a downgrade. ‘N/A’ means that the RBA has determined that the standard is not applicable, or an equivalent standard does not exist for the type of facility (e.g. for CCP Standard 6: Margin, there is no equivalent SSF Standard). |
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2.2 Recommendations
The RBA has made new recommendations for the CS facilities to address. A complete list of open recommendations is provided in Appendix A. There are several recommendations that the RBA requires ASX to prioritise:
- ASX should continue to place high priority on remediating ageing technology assets. ASX should have an appropriate framework or policy for asset lifecycle management that ensures the proactive and timely upgrade or replacement of technology assets.
- ASX should reduce the complexity of its vendor management frameworks and ensure that fundamental controls and processes are mandatory for all key vendors supporting the CS facilities.
- ASX should complete an independent review (conducted by either its Internal Audit or an external expert) of its internal strategy to address its overall heightened level of risk.
2.3 Supervisory focus for the year to June 2025
The RBA has identified several areas that will be an important part of its supervisory engagement with ASX in the next assessment period (Table 2).
| Areas of supervisory focus | Standard | Facility |
|---|---|---|
| Board reporting. The RBA will monitor the outcome of changes to ASX board reporting to ensure their effectiveness in supporting the boards’ ability to discuss and provide direction on key issues. | CCP/SSF 2 | All |
| Technology projects. The RBA, working closely with ASIC, will continue to closely supervise ASX’s management and delivery of key technology projects, in particular CHESS Replacement, ClearStar and the migration of services to the cloud. | CCP 16, SSF 14 | ASX Clear, ASX Settlement, ASX Clear (Futures) |
| Cyber resilience. The RBA, working closely with ASIC, will continue to monitor ASX’s evaluation of its ability to recover from cyber-attacks in a timely manner. The RBA expects ASX to continue undertaking regular independent audits (conducted by either its Internal Audit or an external expert) of its compliance with at least two industry-accepted cyber security standards (e.g. ASD E8 and NIST). | CCP 16, SSF 14 | All |
Footnotes
See RBA (2023), ‘The Reserve Bank’s Approach to Supervising and Assessing Clearing and Settlement Facility Licensees’, 15 December. [1]