The Reserve Bank of Australia (RBA) is “disappointed” by the most recent delay to the go-live date for the Australian Securities Exchange’s (ASX’s) CHESS replacement.
The comment was included in RBA and the Australian Securities and Investments Commission’s (ASIC’s) 2022 review of the exchange’s clearing and settlement facilities, which included a detailed analysis of ASX's planned replacement of the CHESS clearing and settlement system.
In the review, RBA and ASIC stated that although the ASX have “conducted their clearing and settlement affairs in a way that promotes overall stability in the Australian financial system”, it needs to “place a high priority on addressing recommendations related to operational risk”.
It found that the target state for the replacement system broadly meets the relevant standards, but that further assurances will be needed to verify that the system will meet these standards in practice.
It highlighted that ASX has made progress in addressing governance-related recommendations from the 2021 Assessment, but there are several key outstanding items that ASX must address over the coming year.
The RBA further outlined that the ASX has made some improvements to its processes for notifying the RBA, although there were significant delays in the notification of some key information.
CHESS’ original go-live date was set for April 2022, but was then pushed back to April 2023, mostly due to the impact of COVID-19 on the industry, particularly throughout 2020 in areas including collaboration and productivity.
Though, in 2021, most users indicated that they could meet the new proposed live date of April 2022, many asked for extra industry testing as well as more time to prepare for the new system. Some users also requested additional functionality that reduces manual processes, such as electronic corporate action elections.
Commenting on the 2022 review, Brad Jones, assistant governor at RBA, says: “The ASX clearing and settlement facilities are critical to the smooth functioning of the Australian financial system.
It is important that ASX further strengthen its governance and risk management arrangements to the high standards expected of critical market infrastructure. The safe and timely replacement of CHESS must also remain a high priority for ASX.”
Philip Lowe, RBA’s governor, adds: “The review initiated by ASX is an important step in providing assurance that the new CHESS application software will be fit for purpose. The replacement system must be safe and reliable to maintain investor confidence and the stability of Australia's financial system.”
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