ASX told to bolster policies to avoid conflicts of interest over CHESS
A conflict of interest policy that the ASX belatedly strengthened at the request of the Reserve Bank and the corporate regulator has been found to be insufficient, with a review recommending 13 additional safeguards be put in place to ensure the exchange meets its legal obligations.
The independent analysis, conducted by Herbert Smith Freehills, suggested improvements on the management of conflicts between the ASX’s commercial incentives as a listed company and its role as the operator of clearing and settlement services for the entire market.
The ASX has faced significant criticism for its bungled attempt to replace its 29-year-old clearing and settlement infrastructure, known as CHESS, after ditching a seven-year project to introduce a blockchain-based system.
ASX chairman Damian Roche has committed to introduced all the recommendations of the report. Michael Quelch
Both the RBA and the Australian Securities and Investments Commission are closely monitoring the ASX, with the company required to commission the report, released on Friday, into its conflict of interest management.
The ASX has committed to implementing each of the recommendations.
This will include better defining executive responsibilities and more regular meetings between regulators and the non-ASX directors of the separate clearing and settlement boards. The law firm’s report – requested by the RBA in December – also called for additional corporate governance changes, especially around the formal documentation of meetings and decisions.
The report acknowledges ASX has made many important changes to managing conflicts of interest in the past couple of years, including responses to an RBA review on standards in 2021. The ASX said that “the majority” of
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