ASIC wants industry to simulate outages and recovery strategies to improve resilience

Following its investigation into the ASX's "software issue" last November, ASIC has laid out a set of expectations for market operators and participants on how they should respond to future outages.

The Australian Securities and Investments Commission (ASIC) has concluded its investigation into the Australian Securities Exchange (ASX) software issues that arose when the refresh of its trade equity platform went live in November last year, causing the exchange to pause trade.

Off the back of this investigation, ASIC has released a report [PDF] outlining its expectations for market operators and participants when it comes to responding to future outages to improve market resilience.

Some of the specific expectations it outlined for market operators were the need to have a comprehensive test strategy that includes a wide coverage of systems and data; regular regression testing across the entire suite of test scenarios to demonstrate that any changes will not introduce defects; conduct simulation testing ahead of major market changes; and work with other market operators whenever a new trading system or major upgrade is being implemented to ensure all relevant connections operate as expected.

Additionally, ASIC said when it comes to business continuity and IT disaster recovery, it expects market operators to facilitate testing of simulated market outage events during their business continuity plan, and exercise recovery strategies or alternative arrangements as part of or in addition to standard business continuity plan exercises and tests.

Other expectations set out by ASIC for market operators include the need to develop automated systems and processes to proactively monitor for and identify market data issues and trading anomalies on its market in real-time, as well as refine policies and processes for providing participants.

"ASIC's actions today are all about ensuring the efficient and effective future operation of Australia's financial markets infrastructure. ASX and market participants must act to ensure that the market can function at all times, so that vital sources of capital are available to the economy," ASIC chair Joe Longo said.

ASIC's investigation also concluded that the ASX outage did not breach any of its licence conditions, but it has imposed three additional licence conditions on the exchange. These conditions are directed at mitigating risks for future upgrades, with specific emphasis on the oversight of the CHESS replacement program, that are scheduled to go live in April 2023.

"The new licence conditions are practical and are aligned with the action ASX is taking to improve the way we operate our business. Work to fulfil the new conditions is well underway. We are addressing each of the recommendations made in the report into the market outage and will appoint an independent expert to review our actions to meet the recommendations," ASX chief Dominic Stevens said in response to the new licencing conditions and market expectations set out of ASIC.

"Where relevant, we are applying lessons from the outage to CHESS replacement and are strengthening the project by appointing an independent expert to assess the assurance program.

"We are pleased that ASIC's investigation into the market outage is closed and that no breach of ASX's licence conditions was found. However, we will continue to invest to strengthen the quality of our infrastructure and reduce operational risk."

ASIC's investigation was conducted in addition to IBM's review into the outage, which concluded in August that the ASX outage was due to a number of shortcomings in the ASX Trade Refresh project, which resulted in a pause of trading on the day of go-live.  

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