The Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC) are addressing concerns over operational risk management at ASX, following a failure in the CHESS batch settlement system on December 20, 2024.

In a joint statement, the regulators voiced concerns about incidents like the CHESS failure compromising the system’s ability to service the Australian equities market effectively. Concerns were also raised about the speed and nature of ASX's remediation efforts.

In response to these concerns, the RBA reassessed, ahead of schedule, the compliance of ASX Clear Pty Limited and ASX Settlement Pty Ltd with its Financial Stability Standards. The RBA downgraded their compliance with the "Operational Risk" standard from partly observed to not observed, indicating serious issues that demand immediate action.

Additionally, ASIC directed ASX, via section 823BB(4) of the Corporations Act 2001, to engage an expert approved by ASIC for a technical review of CHESS. This step is expected to enhance confidence in the platform’s stability and operational resilience.

RBA Governor Michele Bullock remarked, "It is deeply disappointing that the regulators need to take these actions today. But they are necessary. ASX operates critical infrastructure that plays a central role in the financial system. 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. The underlying issues that we have raised need to be addressed as a matter of priority to strengthen the resilience of the CHESS system."

ASIC Chair Joe Longo added, "Our actions underscore our increasingly deep concerns with ASX’s management of the CHESS system, and we will continue to consider further action. The technical review of ASX’s core technology infrastructure is necessary given the ongoing concerns the regulators have raised about ASX’s operational resilience. It is troubling that these risks were realised in this major incident."

The regulators expect ASX to prioritize the immediate remediation of issues that led to the December 2024 incident. Should these issues remain unresolved, further regulatory action could be taken, including exercising new powers under recent reforms to the regulatory framework for Financial Market Infrastructures and additional rulemaking under the Competition in Clearing and Settlement reforms.

The RBA and ASIC serve as co-regulators of licensed clearing and settlement (CS) facilities, with separate but complementary responsibilities for their licensing and supervision. These responsibilities aim to ensure facilities operate in a fair and effective manner, contributing to the stability of Australia's financial system. The actions announced follow ASIC’s investigation into ASX Settlement Pty Ltd for suspected breaches of section 821A of the Corporations Act.