Australian Securities & Investments Commission (ASIC) Launches Inquiry into Australian Securities Exchange (ASX) Focusing on Governance, Capability & Risk Management Frameworks & Practices, Ongoing Concerns of ASX Ability to Maintain Stable, Secure & Resilient Critical Market Infrastructure, Disruption of ASX Batch Settlement on 20th December 2024 with Error Traced to Memory Allocation Logic Introduced in 2014 for CHESS Batch Settlement, Committed AUD 1 Million ($630,000) Credit to Settlement Clients in 2025 January, ASX CEO Helen Lofthouse Sent Personal Letter to Apologise
16th June | Hong Kong
The Australian Securities & Investments Commission (ASIC) has launched an inquiry into Australian Securities Exchange (ASX) focusing on governance, capability & risk management frameworks & practices, with ongoing concerns of ASX ability to maintain stable, secure & resilient critical market infrastructure. In 2025 January, Australian Securities Exchange (ASX) committed AUD 1 million ($630,000) credit to settlement clients for disruption of ASX Batch Settlement on 20th December 2024, and ASX CEO Helen Lofthouse sending a personal letter to customers to apologise. The error was traced to a memory allocation logic introduced in 2014 for CHESS Batch Settlement. ASIC (16/6/25): “ASIC today announced an Inquiry into Australian Securities Exchange (ASX) group, focusing on governance, capability and risk management frameworks and practices across the group. ASX plays a critical role in Australia’s financial markets. ASIC and the Reserve Bank of Australia (RBA) have ongoing concerns over ASX’s ability to maintain stable, secure and resilient critical market infrastructure. ASIC’s Inquiry will be led by an expert panel that will make recommendations to address any identified shortcomings or deficiencies. ASIC will publish a report of the outcome of the Inquiry, which will inform the next steps it may take … … ASIC will discontinue its investigation of the 20 December 2024 CHESS Batch Settlement failure. Consideration of this incident will form part of the broader Inquiry. While this Inquiry is underway, it is critical ASX continues to prioritise the safe and efficient operation of its infrastructure, including progress towards Release 1 of the CHESS replacement project in mid-2026.” More info below:
“ Australian Securities & Investments Commission (ASIC) Launches Inquiry into Australian Securities Exchange (ASX) Focusing on Governance, Capability & Risk Management Frameworks & Practices, Ongoing Concerns of ASX Ability to Maintain Stable, Secure & Resilient Critical Market Infrastructure, Disruption of ASX Batch Settlement on 20th December 2024 with Error Traced to Memory Allocation Logic Introduced in 2014 for CHESS Batch Settlement, Committed AUD 1 Million ($630,000) Credit to Settlement Clients in 2025 January, ASX CEO Helen Lofthouse Sent Personal Letter to Apologise “
Background
- ASIC will conduct the Inquiry using existing powers under Section 794C and 823C of the Corporations Act 2001 to assess how well ASX is complying with its obligations as a market licensee and a Clearing and Settlement facility licensee.
- The Inquiry may also use the additional powers received through the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024.
- The Inquiry panel will be asked to examine the frameworks and practices in relation to governance, capability, and risk management within ASX group.
- The composition of the expert panel will be announced in the coming weeks.
- The panel will be supported by an ASIC Secretariat, which is expected to include secondees from RBA, Australian Prudential Regulation Authority as well as the Australian Competition and Consumer Commission.
- Full details can be found in the Inquiry’s Terms of Reference.
- The RBA and ASIC are co-regulators of licensed Clearing and Settlement (CS) facilities and have separate, but complementary, responsibilities for the licensing and supervision of CS facilities licensees.
- In March 2025, in a joint letter to the ASX, ASIC and RBA expressed increasing concern over the management of operational risk, following the CHESS batch settlement failure incident that occurred on 20 Dec. The expert technical review of CHESS, that ASIC announced on 31 March, will continue alongside the Inquiry.
Australian Securities Exchange (ASX) Commits AUD 1 Million ($630,000) Credit to Settlement Clients for Disruption of ASX Batch Settlement on 20th December 2024, ASX CEO Helen Lofthouse Sending a Personal Letter to Apologise, Error Traced to Memory Allocation Logic Introduced in 2014 for CHESS Batch Settlement
26th January 2025 – Australian Securities Exchange (ASX) has committed AUD 1 million ($630,000) credit to settlement clients for disruption of ASX Batch Settlement on 20th December 2024, and ASX CEO Helen Lofthouse sending a personal letter to customers to apologise. The error was traced to a memory allocation logic introduced in 2014 for CHESS Batch Settlement. ASX (23/1/25): “ASX has today released an incident review to assist customers and stakeholders with a more detailed understanding of the CHESS Batch Settlement incident that occurred on Friday 20 December 2024. This includes an overview of how the incident unfolded, root cause analysis, steps taken to prevent reoccurrence, and a preliminary action plan that ensures the ongoing stability of CHESS and identifying opportunities for improvement in our incident management protocols. The incident resulted in Batch Settlement for Friday 20 December 2024 having to be rescheduled to the following business day, Monday 23 December 2024. The root cause of the incident arose from a combination of events but is isolated to an area of CHESS that calculates memory allocation for the settlement processes. Trading and Clearing services were unaffected on Friday and the market opened without issue on the following Monday. 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. The nature of this issue and how it arose was highly irregular and there is no record of previous incidents caused by this part of the system, or of CHESS not completing Batch Settlement on a designated settlement day. ASX Managing Director and CEO Helen Lofthouse sent a personal letter to customers today apologising once again for the incident and committed a $1 million credit to settlement participants in acknowledgement of the disruption. Details of this customer rebate can be found in the final section of the Incident Review. The Incident Review and the CEO letter to customers can be accessed on ASX’s website. Echoing the sentiment in her letter to customers, Ms Lofthouse said: “Not being able to complete Batch Settlement is unprecedented and we fully appreciate the seriousness of this matter. While the incident was successfully resolved such that the market could open normally on the next business day, this does not meet the high operating standards expected of ASX and which we expect of ourselves. “I wanted to write to customers directly to once again apologise for the incident and to assure them that we’ve taken steps to fix the issue and prevent reoccurrence. We’ve also outlined the current action plan that considers any further technical reviews and potential incident management protocols including how we engage stakeholders.” The release of today’s Incident Review underscores ASX’s continued commitment to transparency. We continue to update our regulatory agencies on this matter and further engagement with participants is planned as part of our post incident review actions.” More info below:
Incident – On Friday 20 December 2024 Batch Settlement could not proceed because a critical step in the settlement process generated an error that prevented completion. ASX was not able to resolve the error before the relevant cut-off time on Friday and therefore rescheduled settlement obligations to the following Business Day, Monday 23 December 2024. A single Batch Settlement occurred on 23 December 2024, including trades executed on 18 December 2024 (the trades which had been rescheduled), and trades executed on 19 December 2024 which settled in the ordinary course of the T+2 settlement cycle. The process to reschedule CHESS transactions is standard CHESS functionality, albeit usually carried out on a much smaller scale, and was completed without incident. ASX had identified a possible workaround late on Friday afternoon, however investigations over the weekend allowed ASX to identify the cause of the error in the CHESS code, and a fix was developed, tested and implemented on Sunday 22 December 2024. CHESS became available at the usual time on Monday 23 December 2024 and Batch Settlement commenced at 12:30pm, one hour later than usual (following Participant requests for an extension), successfully completing at 1:08pm the same day. Since the error only affected Batch Settlement, trading and related clearing continued as normal on Friday 20 December 2024 and the market opened without issue on Monday 23 December 2024. On Friday 20 December 2024, shortly following the commencement of Batch Settlement, ASX system monitoring detected an issue with the Batch Settlement process. Initial investigations by ASX engineers confirmed an error was preventing the process from completing and communications were issued at 12:05pm notifying users that Batch Settlement would be delayed. This information was published to the ASX System Status Page (System Status Page) and directly issued to users via email.
Background – For cash equities settlement in Australia, settlement occurs on a T+2 basis—that is, two Business Days after a trade is executed. The CHESS system facilitates the transfer of legal ownership of the cash market products and coordinates the simultaneous exchange of funds between Participants and their respective banks. CHESS employs a batch settlement process which involves the netting of all buy and sell transactions per security for each Participant for a given day. Each Business Day, Batch Settlement typically begins at 11:30am. During this process, ASX calculates each Participant’s net funding and securities delivery obligations, and the aggregated net funds positions of all participating financial institutions (payment providers). ASX then uses multilateral netting to settle both novated (i.e. market trades) and non-novated trades.
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