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ASIC takes further action over ASX’s CHESS replacement program

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The regulator will require ASX to produce two special reports.

The Australian Securities and Investments Commission (ASIC) has announced that it has taken further action to ensure that ASX adequately responds to the findings and recommendations of the external ASX CHESS Replacement Application Delivery Review published in November last year.

In a statement on Wednesday, the regulator said that its action is also intended to ensure that all necessary steps are undertaken by ASX to uplift identified gaps and deficiencies in relation to the group’s portfolio, program, and project management frameworks.

Notices have been issued by the ASIC to ASX Limited (ASX), ASX Clear Pty Ltd (ASX Clear), and ASX Settlement Pty Ltd (ASX Settlement) — together known as the ASX Licensees — under sections 794B and 823B of the Corporations Act 2001

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These notices require that the ASX Licensees produce an “External Review Special Report” covering how they will respond to the findings and recommendations of the external review.

Additionally, a second “PPPM Special Report” must also be produced covering the ASX Licensees’ current portfolio, program, and project management frameworks and an assessment of those frameworks against internationally recognised standards.

“We consider the External Review Special Report will provide necessary assurance for ASIC and industry that ASX is taking all possible steps to respond to the findings and recommendations outlined in the external review,” said ASIC chair Joe Longo.

“More broadly, an assessment of ASX’s portfolio, program, and project management frameworks against internationally recognised frameworks will demonstrate which components are fit-for-purpose and the measures to be adopted to address identified gaps and deficiencies.”

The special reports will be audited by Ernst & Young. The External Review Special Report is due to the ASIC on 30 June 2023 and the associated audit report is due to the ASIC on 31 July 2023. 

Meanwhile, the PPPM Special Report is due to the ASIC on 29 September 2023 and the associated audit report on 31 October 2023.

“These reports will help build confidence in ASX’s ability to deliver the CHESS Replacement and any other programs ASX undertakes,” Mr Longo said.

“The audited special reports will assist ASIC in its assessment of whether any further regulatory action is required.”

The corporate regulator and the Reserve Bank (RBA) laid out their expectations of ASX last November in a joint letter of regulator expectations, in which they instructed the market operator to improve its program delivery capabilities and bring the CHESS replacement back on track.

The ASIC and the RBA then announced additional action in December with the aim of ensuring that all necessary steps are taken by ASX to support and maintain current CHESS until its replacement is successfully implemented.

Last week, ASX reported a statutory profit after tax of $73.6 million for the first half of the 2023 financial year, a 70.6 per cent fall on the same period a year earlier, impacted by a CHESS derecognition charge of $176.3 million disclosed last year.

ASX CEO Helen Lofthouse also provided an “extensive update” regarding the CHESS replacement project as part of the half-year results.

“Part of resetting our approach has been a more intensive focus on listening. We understand that when we paused the project last November to revisit solution design, it signalled that we would need industry engagement for longer than had been anticipated,” she said.

“In recognition of this, we have established the CHESS Replacement Partnership Program which acknowledges that it will take the combined efforts of many stakeholders to achieve the best outcome for the market.”

ASIC takes further action over ASX’s CHESS replacement program

The regulator will require ASX to produce two special reports.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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