ASIC, RBA Set Expectations for ASX Industry Engagement

ASIC and the RBA directed ASX to use its new advisory group to seek advice on Australia’s possible implementation of T+1 settlement.  

ASIC (Australian Securities & Investments Commission) and the RBA (Reserve Bank of Australia) have issued a joint letter to ASX outlining their regulatory expectations for its engagement with its new advisory group.

The “Cash Equities Clearing and Settlement Advisory Group” was established to advise ASX Clear and ASX Settlement on strategic clearing and settlement issues following longstanding industry concerns over the CHESS replacement programme.

The concerns raised included the adequacy of ASX’s stakeholder engagement and governance process and ASX’s management of intragroup conflicts of interest. The Advisory Group would seek to address these issues.

The joint letter sets expectations for ASX Clear and ASX Settlement to resource, consult and engage with the Advisory Group “in good faith”, and for ASX to provide the resources and support necessary for the Advisory Group to execute its functions.

ASX is directed to seek advice and input from the Advisory Group on key strategic issues involving its clearing and settlement services, to “seriously consider” the advice and recommendations put forward, and to provide transparency on ASX’s considerations and decisions.

The joint letter says ASX should seek advice from the Advisory Group of strategic issues covering the CHESS replacement programme, including solution design and vendor appointment, as well as the possible implementation of T+1 settlement in Australia.

In a statement, ASIC chair Joe Longo said the Advisory Group’s role, and “genuine collaboration”, 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,” he said.

Longo said the measures include those under the current regulatory framework as well as any new powers ASIC receives under the government’s proposed clearing and settlement and financial market infrastructure reforms.

ASIC and the RBA will actively monitor ASX Clear and ASX Settlement’s engagement with the Advisory Group.

ASX responded to the joint letter on Wednesday (30 August) with a letter of its own, pledging to support the establishment and functioning of the Advisory Group, and to provide the necessary resources to support its work.

The letter says ASX will “proactively engage” with ASIC and the RBA in relation to the consideration it gives to the Advisory Group’s input, and to provide comprehensive written responses to explain why any recommendations received are not accepted.

The Advisory Group held its first meeting on Thursday (31 August), where members were briefed on ASX’s solution decision framework for the CHESS replacement project.

Procedural matters regarding membership and the Advisory Group’s charter were also finalized.