RBA and ASIC act on concerns with ASX
01 April 2025 Australia
Image: AF_DigitalArtStudio/stock.adobe.com
The Reserve Bank of Australia (RBA) and the Australian Securities and Investments Commission (ASIC) have taken steps to address their concerns over the management of operational risk at the Australian Securities Exchange (ASX).
This follows the Clearing House Electronic Subregister System (CHESS) batch settlement failure incident that occurred on 20 December.
In a joint letter to the ASX, the RBA and ASIC outlined the potential for operational incidents to affect the ability of CHESS to reliably service the Australian equities market until it is replaced.
“For some time, the regulators have been raising serious concerns about operational risk at the ASX clearing and settlement facilities. These risks were realised in this major operational incident,” the letter reads.
The RBA and ASIC were also concerned about the management of the CHESS batch settlement failure during its occurrence, including communications to stakeholders and the regulators, as well as the speed and nature of ASX’s remediation actions following the incident.
In response, the RBA has downgraded its assessment of compliance with the operational risk standard for ASX Clear and ASX Settlement from ‘partly observed’ to ‘not observed’, which means serious issues of concern that warrant immediate action.
RBA Governor Michele Bullock comments: “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.”
Additionally, ASIC has directed the ASX to engage an expert to undertake a technical review of CHESS, which will provide greater confidence in the stability and operational resilience of the current platform.
ASIC Chair Joe Longo says: “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.”
Representatives from ASIC and the RBA will meet with the full boards of ASX, ASX Clear, and ASX Settlement in the coming weeks to discuss these matters.
Helen Lofthouse, CEO of the ASX, has apologised for the ASX not being able to provide settlement to its customers due to a system failure on the day, with an AU$1 million (US$626,060) credit disbursement to participants.
In her message to customers, Lofthouse explained: “There were specific circumstances in December 2024 that triggered the incident, but the root cause can be traced back to an error that was introduced in 2014 to the memory allocation logic, which resulted in the batch settlement process not being able to complete.”
This letter was published on 23 January, along with a root cause analysis report on the incident.
“Once the issue was understood, we were able to successfully resolve and prevent it from reoccurring,” added Lofthouse.
Meanwhile, work continues on the replacement of CHESS, which will be rolled out in two phases — Release 1 (clearing services) in mid-March to end-April 2026, followed by Release 2 (settlement and subregister) in 2029.
This follows the Clearing House Electronic Subregister System (CHESS) batch settlement failure incident that occurred on 20 December.
In a joint letter to the ASX, the RBA and ASIC outlined the potential for operational incidents to affect the ability of CHESS to reliably service the Australian equities market until it is replaced.
“For some time, the regulators have been raising serious concerns about operational risk at the ASX clearing and settlement facilities. These risks were realised in this major operational incident,” the letter reads.
The RBA and ASIC were also concerned about the management of the CHESS batch settlement failure during its occurrence, including communications to stakeholders and the regulators, as well as the speed and nature of ASX’s remediation actions following the incident.
In response, the RBA has downgraded its assessment of compliance with the operational risk standard for ASX Clear and ASX Settlement from ‘partly observed’ to ‘not observed’, which means serious issues of concern that warrant immediate action.
RBA Governor Michele Bullock comments: “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.”
Additionally, ASIC has directed the ASX to engage an expert to undertake a technical review of CHESS, which will provide greater confidence in the stability and operational resilience of the current platform.
ASIC Chair Joe Longo says: “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.”
Representatives from ASIC and the RBA will meet with the full boards of ASX, ASX Clear, and ASX Settlement in the coming weeks to discuss these matters.
Helen Lofthouse, CEO of the ASX, has apologised for the ASX not being able to provide settlement to its customers due to a system failure on the day, with an AU$1 million (US$626,060) credit disbursement to participants.
In her message to customers, Lofthouse explained: “There were specific circumstances in December 2024 that triggered the incident, but the root cause can be traced back to an error that was introduced in 2014 to the memory allocation logic, which resulted in the batch settlement process not being able to complete.”
This letter was published on 23 January, along with a root cause analysis report on the incident.
“Once the issue was understood, we were able to successfully resolve and prevent it from reoccurring,” added Lofthouse.
Meanwhile, work continues on the replacement of CHESS, which will be rolled out in two phases — Release 1 (clearing services) in mid-March to end-April 2026, followed by Release 2 (settlement and subregister) in 2029.
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