RBA Demands Governance Overhaul at ASX After Clearing Failure

Australia’s central bank has warned the Australian Securities Exchange (ASX) that it must implement major reforms in governance, culture, and risk management following last year’s settlement system breakdown. The Reserve Bank of Australia (RBA), which oversees the nation’s clearing and settlement infrastructure, said ASX’s clearing and settlement facilities continue to fall short of key regulatory standards, raising concerns about the resilience of Australia’s financial system.

RBA Assistant Governor (Financial System) Brad Jones emphasized that ASX is not currently meeting regulators’ expectations as an operator of critical national infrastructure. He underscored the importance of reliable and secure clearing and settlement systems to safeguard market stability. The central bank pledged close monitoring of ASX’s progress and cautioned that further regulatory actions could follow if improvements are not delivered.

The regulator specifically pointed to weaknesses in ASX’s risk transformation plan and called for a comprehensive review of its business continuity and contingency measures within the clearing and settlement division. These reforms are considered vital after the exchange came under heavy criticism in December when it was forced to defer a full day’s worth of trading settlements due to a failure in its Clearing House Electronic Subregister System (CHESS).

ASX CEO Helen Lofthouse acknowledged the challenges and admitted the exchange must accelerate efforts to rebuild regulatory trust. She noted that ASX has already taken steps to strengthen contingency arrangements for CHESS, including implementing code fixes and increasing memory capacity to enhance system resilience.

The CHESS system, an aging but crucial platform, handles trade settlement—typically two business days after an agreement—while also electronically registering share ownership. Its reliability is essential for smooth market operations, making the RBA’s warning a clear signal that stronger safeguards are urgently required.