Today, ASIC and the RBA (the Regulators) issued a joint letter outlining regulatory expectations of ASX Clear Pty Limited (ASX Clear) and ASX Settlement Pty Limited (ASX Settlement) when engaging with the newly established ASX Cash Equities Clearing and Settlement Advisory Group (Advisory Group).
The Advisory Group, with Independent Chair Alan Cameron AO, was established to advise ASX Clear and ASX Settlement on strategic clearing and settlement issues following longstanding industry concerns over the CHESS replacement program. Concerns raised included the adequacy of ASX’s stakeholder engagement and governance process and ASX’s management of intragroup conflicts of interest.
The letter requires ASX Clear and ASX Settlement to resource, consult and engage with the Advisory Group in good faith and in the public interest.
ASIC Chair Joe Longo said, ‘The Advisory Group’s role in assisting ASX Clear and ASX Settlement on the CHESS replacement program is vital to this process. Genuine collaboration between ASX, the Advisory Group and industry will be necessary to achieve the best outcome for the market, for listed companies and investors.
‘As the operator of critical national infrastructure, ASX must be held to the highest standards. We are prepared to use all available regulatory measures to ensure ASX Clear and ASX Settlement comply with our expectations and obligations under the Corporations Act. This includes measures under the current regulatory framework and any new powers ASIC receives under the Government’s proposed Competition in Clearing and Settlement Reforms and Financial Market Infrastructure Regulatory Reforms.’
RBA Deputy Governor Michele Bullock said, ‘It is important that the market’s trust and confidence in the CHESS replacement program is restored. To do this, the program requires a fresh and collaborative approach that draws on the advice and perspectives of a range of experienced professionals. It is important that ASX and the Advisory Group work collaboratively to a solution that is in the public interest.’
The Regulators will actively monitor ASX Clear and ASX Settlement’s engagement with the Advisory Group.
ASX Clear and ASX Settlement are expected to formally acknowledge the Regulators’ joint letter and provide a public undertaking that it will comply with these expectations by 31 August 2023.
ASIC and the RBA are co-regulators of licensed clearing and settlement (CS) facilities.
The RBA and ASIC have supervisory responsibilities for the four CS facilities in the ASX Group: two central counterparties – ASX Clear Pty Ltd and ASX Clear (Futures) Pty Ltd – and two securities settlement facilities – ASX Settlement Pty Ltd and Austraclear Limited.
The RBA conducts annual assessments covering the CS facilities' observance of relevant Financial Stability Standards determined by the RBA. ASIC has separate, but complementary, responsibilities for the licensing and supervision of CS facilities licensed under Part 7.3 of the Act. ASIC is responsible for assessing whether a CS facility’s services are provided in a fair and effective way. ASIC also has regulatory responsibilities for operators of licensed markets, including the ASX market. In carrying out supervision and assessments of CS facilities, the RBA and ASIC work closely as appropriate.