Source link – Reserve Bank of Australia

ASIC and the Reserve Bank of Australia (RBA) (the regulators) acknowledge the recent announcement by ASX
of the further delay to the Clearing House Electronic Sub-register System (CHESS) Replacement project.
The regulators welcome the appointment of Accenture to provide an independent review of the new CHESS
application software. This review is expected to assist ASX to confidently determine a new go-live date
and will form part of ASX’s replanning process.

It is now time for a careful and independent review of ASX’s and Digital Asset’s (DA) work to date
on the CHESS Replacement and the work needed to complete the project. It is critical that ASX and the
market have a high degree of confidence and certainty in a new go-live date. Industry has mobilised
significant resources to date and will need to continue to invest to ensure a successful and safe launch
of the CHESS replacement.

Despite the delay, the regulators expect ASX to replace CHESS as soon as this can be safely achieved by
ASX and users of CHESS. CHESS is a critical clearing and settlement (CS) system for the Australian cash
equity market. A stable and reliable CHESS replacement will be important to maintain investor confidence
in Australian financial markets and the stability of the financial system.

ASIC Chair Joseph Longo said, ‘It is very disappointing that there is a further delay to the CHESS
Replacement Project. Given the delays and duration of the project, it is critical that Accenture now
undertake this review to provide assurance on the delivery of a resilient replacement for CHESS and a
high degree of confidence in a revised go-live date. To achieve this we expect ASX to publish the
findings of the Accenture review. It is important that the Australian financial system is served well by
contemporary infrastructure that is efficient, resilient, reliable and scalable to meet existing and
future needs of the market and participants.’

RBA Governor Philip Lowe said, ‘The delay in the go-live date for the CHESS replacement system is
disappointing. The review initiated by ASX is an important step in providing assurance that the new CHESS
application software will be fit for purpose. The replacement system must be safe and reliable to
maintain investor confidence and the stability of Australia’s financial system.’

The regulators continue to closely monitor ASX’s compliance with its CS facility licence obligations,
including the additional licence conditions imposed in November 2021. These additional conditions
required an independent expert to be appointed as approved by ASIC to assess whether ASX’s assurance
program for the replacement of CHESS is fit for purpose, identifying any shortfalls, and reporting
regularly to ASIC. The Independent Expert, EY, has and continues to provide assurances over various
aspects of the CHESS Replacement project.

Accenture’s review will form part of ASX’s assurance program and therefore be considered by the
independent expert. Prior to go-live, ASX must provide all independent assurances to the independent
expert and the regulators and provide senior executive and Board attestations. The independent expert
must also provide to ASIC a report on the totality of the findings of the assurance reviews including
whether remedial actions have been appropriately implemented by ASX.

At a minimum, the regulators’ expectations are that the new system must meet requirements that CHESS
meets today for system availability, resilience, recoverability, performance and security. ASIC and the
RBA will continue to closely supervise ASX’s CHESS replacement change program.


We expect ASX to continue to invest in and maintain the current CHESS system so that it
continues to service the market reliably until the CHESS replacement can go live.

Background

ASIC and the RBA are co-regulators of licensed CS facilities.

The RBA and ASIC have supervisory responsibilities for the four clearing and settlement (CS) facilities in
the ASX Group: two central counterparties – ASX Clear Pty Limited and ASX Clear (Futures) Pty
Limited – and two securities settlement facilities – ASX Settlement Pty Limited and
Austraclear Limited.

The RBA conducts annual assessments covering the CS facilities’ observance of relevant Financial
Stability Standards determined by the RBA.

For more information on the RBA’s approach to supervising and assessing CS facilities, see: The
Reserve Bank’s Approach to Supervising and Assessing Clearing and Settlement Facility
Licensees.

ASIC has separate, but complementary, responsibilities for the licensing and supervision of CS facilities
licensed under Part 7.3 of the Corporations 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.



Source link – Reserve Bank of Australia