Australia’s financial regulators are tightening oversight of the Australian Securities Exchange (ASX) after a significant system failure raised concerns about the resilience of its clearing and settlement operations.
The Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC) have taken joint action in response to a CHESS batch settlement failure that disrupted trading processes on Dec. 20, 2024. The incident has intensified scrutiny of ASX’s operational risk management and its ability to maintain stability until the CHESS system is replaced.
In a joint letter sent to ASX, the regulators expressed “deep concerns” that the system may not be able to reliably support the equities market in its current state. They also raised issues with the company’s response following the failure, citing delays and shortcomings in remediation efforts.
As a result, the RBA has downgraded its assessment of ASX Clear Pty Limited and ASX Settlement Pty Limited—the two entities that manage clearing and settlement. Their rating for managing operational risk has been lowered from partly observed to not observed, the lowest on the scale and a designation used when “serious issues of concern… warrant immediate action.”
“ASX operates critical infrastructure that plays a central role in the financial system. The underlying issues that we have raised need to be addressed as a matter of priority,” RBA governor Michele Bullock said.
As part of the broader response, ASIC has also directed ASX to hire an independent expert, approved by the regulator, to carry out a technical review of the CHESS platform. The review is expected to guide any further fixes and help restore confidence in the platform’s resilience.
“The technical review of ASX’s core technology infrastructure is necessary given the ongoing concerns the regulators have raised,” ASIC chair Joe Longo said, adding that the December failure showed how “troubling” the risks have become in practice.
Both the RBA and ASIC said fixing the issues must be a top priority. They warned that if ASX does not act quickly, stronger regulatory measures could follow. These include further rule changes under reforms to improve competition in clearing and settlement.
