Out-of-cycle assessment of ASX Clear Pty Ltd and ASX Settlement Pty Ltd: Operational Risk Standard – March 2025 2. Assessment

Summary

The incident has revealed serious issues of concern regarding ASX’s resourcing and contingency arrangements for current CHESS. Both warrant immediate attention given the potential for delayed settlement to create liquidity stress among participants and undermine confidence in the financial system. The incident occurred against the backdrop of other operational risks the RBA has highlighted over recent assessments. This is consistent with a rating of not observed for the Operational Risk standard.

Resourcing

The FSS require ASX to ensure it can reliably access and utilise well-trained and competent personnel, as well as technical and other resources. These arrangements should be designed to ensure that all key systems are operated securely and reliably in all circumstances. The incident has raised concerns about the level and capacity of ASX’s resourcing for the maintenance and support of CHESS.

During the incident, ASX only had one core engineering team working on the issue and progressing towards a solution. There was no capacity to replace members of the core engineering team during breaks. On the morning of Saturday, 21 December, investigation of the root cause was paused for a four-hour period while the core engineering team took a break. As a result, the RBA observed limited progress on identification or resolution throughout most of 21 December. ASX’s core engineering team was unable to solve the issue after more than 24 hours. Twenty-eight hours after the incident was first detected, ASX sought additional external resources. The appropriate relevant third-party specialist engineer was unavailable until the following morning, approximately 41 hours after the incident was detected. This specialist engineer ultimately helped identify the root cause and resolve the issue. External support should have been sought more promptly.

Contingency arrangements

Under the FSS, ASX must have a business continuity plan designed to ensure that critical information technology systems can resume operations within two hours following disruptive events and that settlement is completed by the end of the day of the disruption.

The incident revealed that ASX does not have recognised and tested contingency arrangements in place for failure at each step of the CHESS batch settlement process. Contingency arrangements exist only in respect of a failure at the point of submission of the batch into the Reserve Bank Information and Transfer System (RITS); this is only one stage in a multi-stage process. These contingency arrangements were developed by the RBA and are used as contingency arrangements for some other systems that settle through RITS. While ASX was ultimately able to reschedule the batch to the next business day, this was not a procedure that had been regularly tested with, and communicated to, participants.

Endnotes

Available at: ‘CHESS Batch Settlement Operational Overview’. 4