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Highlights

  • Regulatory Action on ASX: ASIC and RBA escalate concerns over ASX’s operational risk management following a system failure.

  • CHESS Breakdown Impact: December’s settlement failure led to trade settlement deferrals, prompting a downgrade of ASX’s compliance rating.

  • Immediate Remediation Required: Regulators demand urgent corrective measures, warning of further action if issues persist.

The Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) have ramped up pressure on bourse operator ASX Ltd (ASX:ASX) over its handling of operational risk, following a major system failure in December.

The incident, which involved the Clearing House Electronic Subregister System (CHESS), resulted in the deferral of all trade settlements from 20 December to 23 December, 2024. In response, the central bank downgraded ASX Clear and ASX Settlement’s compliance rating for operational risk from "partly observed" to "not observed," indicating critical deficiencies that require urgent resolution.

Regulators Demand Immediate Action

ASIC has now ordered ASX to appoint an independent expert, approved by the regulator, to conduct a comprehensive technical review of its software.

"ASX's management of operational risk has been a concern for RBA staff and the Payments System Board for some time, and the recent CHESS incident has underscored those concerns," RBA Governor Michele Bullock stated.

Both the RBA and ASIC emphasised that ASX must prioritise the remediation of these issues without delay. Failure to do so could lead to further regulatory actions against the exchange operator.