Reserve Bank of Australia and Australian Securities and Investments Commission downgrade ASX Clear and ASX Settlement operational risk rating and direct independent CHESS review

The Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC) have escalated regulatory action against ASX over operational risk management in CHESS following the 20 December 2024 CHESS batch settlement failure, combining an out-of-cycle compliance reassessment with a mandated technical review of the CHESS platform. The RBA reassessed ASX Clear Pty Limited and ASX Settlement Pty Ltd against the RBA’s Financial Stability Standards outside the usual annual cycle and downgraded compliance with the Operational Risk standard from partly observed to not observed, indicating serious issues requiring immediate action. ASIC, using section 823BB(4) of the Corporations Act 2001, directed ASX to engage an ASIC-approved expert to undertake a technical review of CHESS, with the review and any remediation intended to bolster confidence in the stability and operational resilience of the current platform until it is replaced. The regulators also set expectations that ASX should prioritise immediate remediation of the issues that caused and exacerbated the December incident, citing concerns about the speed and nature of ASX’s response. If issues are not urgently addressed, the regulators signalled they are prepared to take further action, including using powers introduced by reforms to modernise the financial market infrastructure regulatory framework that took effect in September 2024 and further rulemaking under the Competition in Clearing and Settlement reforms. ASIC added that these actions are separate from its ongoing investigation into ASX Settlement Pty Ltd for suspected contraventions of section 821A of the Corporations Act.