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Source: Reuters
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  • Australia’s corporate watchdog imposes new licence conditions on the ASX following a year-long investigation into a market outage last year that hindered almost a full day of trading
  • The new conditions from ASIC emphasise replacement program for the ASX’s CHESS system, which is due to go live in April 2023
  • The conditions include appointing new independent experts to assess the replacement program and the ASX’s remediation agenda following last year’s outage
  • While ASIC addressed the need for the ASX to strengthen its infrastructure and reduce operational risk, it stopped short of finding the ASX guilty of breaching its licence obligations
  • The ASX has agreed to address the recommendations in ASIC’s reports

Australia’s corporate watchdog has imposed a string of new licence conditions on the ASX following a year-long investigation into a market outage last year that hindered almost a full day of trading.

The new conditions from the Australian Securities and Investments Commission (ASIC) have a specific emphasis on a replacement program for the ASX’s Clearing House Electronic Subregister System (CHESS) system.

The CHESS Replacement Program is due to go live in April 2023 and will replace the ageing CHESS tech with a blockchain-based clearing and settlement system.

ASIC’s conditions include appointing an independent expert to assess the ASX’s assurance program for the implementation of the CHESS replacement program. 

Other conditions will require attestations from ASX senior executives about the readiness of the replacement program, as well as the appointment of an independent expert to assess the ASX’s remediation agenda following last year’s outage.

ASIC completed its investigation almost a year to the date after it was first launched.

ASIC Chair Joe Longo said the ASX outage was a “very serious event, exacerbated by subsequent operational issues”.

“The imposition of these licence conditions will confirm that remedial actions are implemented appropriately and efficiently to address these operational issues — including for the critical rollout of the CHESS Replacement Program,” Mr Longo said.

Alongside the new licence conditions, ASIC this week released a report outlining how it expects market operators and participants to react in response to a market outage like that one in November last year.

This report highlighted “serious deficiencies” in the ASX’s and market participants’ ability to limit the impact of an outage — despite some of the concerns in this area being flagged by ASIC to the ASX in 2016.

The ASX responds

The market operator has agreed to address the recommendations in ASIC’s reports, with ASX Managing Director and CEO Dominic Stevens saying it shares the determination of regulators to “continue to strengthen market resilience”.

“The new licence conditions are practical and are aligned with the action ASX is taking to improve the way we operate our business,” Mr Stevens said.

“We are addressing each of the recommendations made in the report into the market outage and will appoint an independent expert to review our actions to meet the recommendations.

“Where relevant, we are applying lessons from the outage to CHESS replacement and are strengthening the project by appointing an independent expert to assess the assurance program.”

While ASIC’s investigation addressed the need for the ASX to strengthen its infrastructure and reduce operational risk, the watchdog stopped short of finding the ASX guilty of breaching its licence obligations.

Shares in the ASX, which is listed on the exchange it operates, were down 1.32 per cent at 2:10 pm AEDT to $93.49.

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