ASX has been actively remediating and upgrading its post-trade infrastructure following the rapid and very large increase in trading activity in March 2020, when the daily record more than doubled to 7.1 million trades on 13 March and ASX systems experienced some processing delays.
These delays were related in part to multiple consecutive high trade count days, some serialised transaction processing and an ageing technology stack. This underscores the importance of ASX’s decision to replace CHESS with more contemporary technology.
CHESS has handled all trade count volumes since this time, and ASX has supported the steps taken by ASIC to ensure stability and resilience across the industry.
CHESS now has a capacity that can cater for 7 million trades per day, over multiple consecutive days, and will continue to have progressive uplifts in system capacity and performance during 2020 and 2021.
ASX has also reviewed its scenario planning with market operators and the regulatory agencies to manage the risk of potential problematic volumes should this risk materialise during trading hours.
CHESS system remediation addressing hardware, processing efficiencies and performance tuning has successfully improved the transactional throughput of CHESS and key capacity constraints. These improvements include:
ASX has also upgraded the CHESS’s storage area network (SAN), allowing faster data read and write functions.
It is important to note that intra-day processing capacity of CHESS registering trades must be accompanied with improvements to overnight batch processes. These include generating corporate action cum entitlement balances, customer reporting, and the requirement to generate net broker obligations (NBOs). The creation of NBOs is particularly challenging as volumes increase. This is because the daily overnight NBO process must complete within a short window to allow other overnight batch processes to complete in a timely manner. Further investigation of options to address these batch processing constraints is being undertaken.
Action by ASX Clear and Settlement in the event of significant trade count volumes
ASX Clearing and Settlement facilities (ASX C&S) has assessed the business and operational controls that could be implemented to manage operational effectiveness, and also the approach that ASX C&S could take in the event of an exceptionally large trade count day, which might impact on the capacity and integrity of CHESS processing, as experienced on 13 March 2020. ASX actively monitors, in real-time, the trade count volume, market volatility and transaction throughput. Predictive analysis and scenario planning have leveraged historical trade count volumes and distributions to define thresholds and provide early awareness of potential issues where capacity limits are at risk of being reached.
As a matter of principle, ASX C&S will facilitate and ensure an orderly market by keeping decisions and processes as transparent, simple and consistent as possible.
If ASX C&S identifies any potential for a processing issue due to extreme volumes, it will engage with regulators and notify all clearing and settlement participants, market operators, and other relevant stakeholders, and continue to provide communication updates on any actions required through direct channels and via the ASX System Status Page.
The potential actions that ASX C&S can, and may, implement are:
In the event that trade registration is to be stopped, ASX C&S will give as much notice as possible, but at least 15 minutes notice, to market operators that it will no longer be registering trades. All matched trades for registration for clearing and settlement will continue to be accepted by ASX C&S until that point. Once the advised time for trade registration to cease is reached, no transactions will be accepted from market operators or participants. It is expected that all market operators and participants will have a process to prevent transactions.
In recognising the need to facilitate the best interests of investors and the market overall, industry consultation and feedback confirms that closing prices from the ASX auction are widely used by stakeholders for a variety of purposes. ASX C&S will allow for a closing price auction on the ASX market and any other closing price auction that exists.
For information only.
Executive General Manager | Operations
General Manager | Market, Clearing & Settlement Operations
Email: Ben.Jackson@asx.com.au Phone: 02 9227 0897
Executive General Manager | Operations
Email: Val.Mathews@asx.com.au Phone: 02 9227 0751