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ASIC, RBA make further requests of ASX over CHESS

By Reporter
3 minute read

ASIC has requested a special report be produced by ASX, one that details a list of matters in relation to the current CHESS.

ASIC and the Reserve Bank of Australia (RBA) have taken further action regarding the ASX CHESS replacement program.

In a statement on Thursday, the corporate regulator said it has issued a notice to ASX Clear and ASX Settlement, requiring ASX to produce a special report on specific matters in relation to the current CHESS.

The detailed list of matters to be addressed in the special report includes questions regarding the ongoing operation of CHESS, its security, its continuity, and ASX’s governance arrangements.

The report, expected to be handed in by 28 April, will then be audited by Ernst & Young.

Commenting on the first time ASIC has used its delegated power against an operator of licenced market infrastructure, the regulator’s chair, Joe Longo, said: “CHESS is critical financial market infrastructure for our country”.

“ASIC’s immediate priority is to ensure current CHESS continues to provide the level of service, reliability and resilience that is required. This is important not just for [the] industry but also for the Australian economy and investors.”

Also on Thursday, the RBA, following a determination made by the payments system board, issued a letter of expectations to the board of ASX Limited, ASX Clear and ASX Settlement in respect of the current CHESS and its replacement.

This, the regulator confirmed, supplements the ASIC-RBA joint letter issued to the boards of ASX Limited, ASX Clear and ASX Settlement on 17 November.

“The RBA expects the highest priority be given to ensuring the stability and resilience of the critical infrastructure supporting Australia’s cash equity markets,” said governor Philip Lowe.

“This needs to be the focus for current CHESS as well as in rethinking the design and implementation of its replacement. The RBA also expects to see further uplift by ASX with respect to its governance arrangements.”

Jointly, ASIC and the RBA confirmed they would continue to consider the need for further regulatory responses to ASX’s recent decision and announcement to pause the CHESS replacement program on 17 November 2022.

“The regulators are prepared to bring to bear a range of regulatory options to ensure that ASX Clear and ASX Settlement adhere to the regulators’ expectations and comply with their CS facility licence obligations,” the statement read.

“The regulators’ coordinated action today demonstrates the shared immediate concern that current CHESS is supported and maintained to ensure its stability, resilience and longevity so that it can continue to service the market reliably,” the regulators concluded.