The Australian Securities and Investments Commission (ASIC) today announces that it has imposed additional licence conditions on three licences held within the ASX Group.

This happens as the regulator has concluded its investigation and consideration of the November 2020 market outage at the ASX.

The licence conditions are directed at mitigating risks for future upgrades, with specific emphasis on the oversight of the CHESS Replacement Program, due to go live in April 2023.

The additional licence conditions imposed on ASX’s Australian market licence require remediation of underlying issues with ASX operations that led to the November 2020 market outage. Further, the conditions assign accountability to the ASX board and senior executives for the implementation of the remedial actions and require attestations on behalf of the ASX board that adequate controls, procedures, skills, and resources are in place.

The additional conditions imposed on the licences of ASX Clear Pty Ltd and ASX Settlement Pty Ltd require an independent expert to be appointed as approved by ASIC to assess whether ASX’s assurance program for the replacement of CHESS is fit for purpose, identifying any shortfalls, and reporting regularly to ASIC.

ASX did not oppose the imposition of the additional licence conditions. In addition to the conditions, the ASX board will provide attestations specifying individual executive accountability, with clear links to remuneration consequences. The relevant executives’ interests will be appropriately aligned with the success of any remedial actions, avoidance of any further outage and with any failure to comply with their accountability obligations.

Let’s recall that, in the week beginning 16 November 2020, following a weekend software upgrade to the ASX equities trading system (ASX Trade), several operational incidents impacted the effective operation of the ASX equity market, including:

  • the ASX market outage on 16 November;
  • the incorrect pricing and subsequent unavailability of ASX Centre Point orders;
  • the degradation and failure of mass-order cancellation functionality; and
  • the unavailability of tailor-made order combinations.

Following the outage, ASIC commenced an investigation into whether ASX had met its obligations under its Australian market licence. As a result of the imposition of the additional conditions, ASIC’s investigation has now concluded.

Additionally IBM Australia Limited (IBM) undertook an independent expert review. Its purpose was to examine the ASX Trade software update project and assess whether it met internationally recognised standards or frameworks and relevant securities industry practices.