In its response to the FSI interim report, the corporate regulator noted that the day-to-day functioning of the financial services industry is heavily reliant on data vendors, front and middle office vendors, back office vendors and exchange and clearing vendors.

“This reliance means that outages or system malfunctions at a technology service provider that provides a large proportion of the industry with services have the capacity to affect the fair and orderly functioning of Australia’s financial markets,” said ASIC.

However, there is currently “limited regulatory visibility and oversight” of technology providers of “sufficient scale” in Australia, said the submission.

“A regulatory model to oversee technology service providers of sufficient scale would assist in addressing or mitigating the risks posed by these entities to the fair and orderly operation of Australia’s financial markets,” said ASIC.

The imposition of AFSL requirements would require technology providers to have adequate risk management systems in place, said the submission.

ASIC has also supported the FSI policy option of requiring investment administrators and fund administrators to hold an AFSL.

“The functions provided by such administrators are systemically important for the funds management industry,” said the submission.

“The safety of managed fund and superannuation fund assets is critical given the significant volume of assets in the industry and the concentration of services with a few major entities,” it said.

Under ASIC’s oversight, all breach reports by administrator licensees would be handled centrally rather than “more unsystematically through the responsible entity or registrable superannuation entity”, said the submission.

“There would be more visibility and transparency associated with potential systemic issues that may emerge from outdated administration systems or technology,” said ASIC.

Finally, there would be a regulatory "level playing field” between entities with an in-house administrator and entities with an outsourced administrator, said the submission.