The Reserve Bank of Australia (RBA) wants to see the “safe and timely” replacement of CHESS remain a “high priority” for ASX.
In its latest assessment of ASX clearing and settlement facilities, the RBA conducted a detailed review of ASX’s planned replacement of the CHESS clearing and settlement system for cash equities.
It found that the target state for the replacement system “broadly meets” the relevant standard, but ruled that “further assurances” will be needed to verify that the system will meet these standards in practice.
“The bank was disappointed by the delay to the go-live date for CHESS replacement,” the RBA stressed.
“ASX will need to demonstrate that appropriate arrangements are in place to manage risks related to its dependence on key vendors,” it noted, adding that it will “work closely” with ASIC in supervising ASX’s response to these matters.
Commenting on the bank’s latest findings, assistant governor Brad Jones said: “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.”
After announcing another delay to the CHESS replacement project schedule in August, CEO Helen Lofthouse said that more development was needed in parts of the application software to meet the market’s scalability and resilience requirements.
“We have commissioned an independent review of the application by Accenture to investigate specific areas in the application that are presenting challenges, to consider possible solutions and to provide input on the timeline for implementation,” she said.
“I am disappointed that we have extended the timeline for go-live for a third time, and I know that our customers are disappointed too. But we all agree that new CHESS must be implemented safely and with the functionality to serve the market’s needs.”
The latest delay followed two earlier announcements made in March and May.
At the time, both ASIC chair Joe Longo and RBA governor Philip Lowe reacted unfavourably to the delay announcement, with Mr Longo calling the news “very disappointing”.
The project was initially expected to be complete as early as Q4 2020, before being hit by multiple setbacks including the impacts of the COVID-19 pandemic.
