AUSTRALIA: ASIC and RBA Independent Expert Review of November’s ASX Trade Outage

Monday August 23 2021

On 23^rd August 2021, the Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) (the regulators) published the summary of an independent expert review of the ASX Trade Refresh project. The review was conducted by International Business Machines (IBM) Australia Limited.

On 16^th November 2020, an outage occurred shortly after a major upgrade to ASX’s equity trading platform, ASX Trade, called the ASX Trade Refresh project (the project).

The Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) (the regulators) view operational incidents of this nature with significant concern. To examine the issues, the regulators informed ASX of their expectation that an independent review of the project be conducted in the first half of 2021. In consultation with the regulators ASX appointed IBM Australia Limited to undertake an independent expert review.

The purpose of the independent expert review was to examine the project and assess whether it met internationally recognised standards or frameworks and relevant securities industry practices.

The independent expert, IBM Australia Limited, has reported its findings and a summary of its conclusions is attached.

Overall, the independent expert found that ASX met or exceeded leading industry practices in 58 out of 75 of the capabilities assessed, including:

• Business case development and project change management, which exceeded accepted practices
• The project was provided with and had access to sufficient financial, time, people and technological resources at all stages of delivery to meet its objectives
• Communications with key stakeholders were appropriately managed, and
• Incident management actions taken by ASX were appropriate.

Significantly, the independent expert identified several key shortcomings in the project including:

• Factors that suggested the ASX Trade system was not ready to go-live considering ASX’s near zero appetite for service disruption. This was the case even though the formal implementation readiness processes were completed and verified by multiple parties without objection to go-live
• There were gaps in the rigour applied to the project delivery risk and issue management process expected for a project of this nature, and
• Risk and issue management, project compliance to ASX practices, project requirements and the project test strategy/planning did not meet accepted industry practices. It was not reasonable to expect the test plan used would meet the ASX’s near zero appetite for service disruption.

The independent expert made recommendations in seven key categories: risk, governance, delivery, requirements, vendor management, testing, and incident management.

ASX has provided the regulators with its high-level response to the independent review. The regulators note that ASX has agreed to address the recommendations from the review and apologised for the disruption to the market.

The regulators expect ASX to apply the insights from IBM’s findings across the ASX Group to ensure existing and proposed projects, including the CHESS replacement program, are managed, and implemented appropriately.

The regulators will consider the independent review, including the recommendations and ASX’s formal response. ASIC is also undertaking a separate investigation into the ASX Trade outage to determine whether ASX met its obligations under its Australian Market Licence, which is ongoing.

ASIC is continuing to engage with market operators, participants, institutional investors, and other stakeholders on the impact of the incident and will work with the industry to identify what, if any, broader market adjustments might be necessary to reduce the impact of any future incidents.

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