ASX's Covid-19 business continuity plans & activities

Published by: Timothy Hogben, Chief Operating Officer, ASX Apr 2020

What business continuity plans have you enacted during the Covid-19 crisis?

The Crisis Management Team was convened to manage the Covid-19 crisis in early January 2020, and meets regularly. It includes staff working in operations, compliance, risk, HR, technology and communications.

In the lead up to the lockdown, our business continuity planning included identifying the critical roles and number of employees needed to maintain our operations, either on-site or by working remotely. ASX already operates with complete employee technology mobility and out of multiple hot sites, including a backup facility, which enables us to isolate staff in key locations to reduce the risk of contagion and maintain the capability to operate from one location in the event of infection in another.

On 15 March 2020, ASX activated the phase of its business continuity plan that required all employees to work from home until further notice, with the only exceptions being the core group identified as above. This was able to be communicated on a weekend through the use of contemporary crisis management communication tools.

ASX continues to closely monitor the status of coronavirus and the advice from health authorities and the government. We are in close and regular contact with our regulators (ASIC and the RBA), and also continue to engage with customers, other global market operators and industry associations.

What steps have been taken to protect your staff?

The health and safety of our staff remains our top priority. We have in place a range of measures to help protect onsite and remote working employees and contractors against infection. ASX moved early to have almost all staff (~95%) working from home and set up strict protocols to protect the remaining 5% that travelled to and from our offices.

Some measures taken before and after the 15 March decision for all staff to work from home include:

  • Requesting majority of staff to work from home until further notice.
  • Maintaining multiple sites with minimal staff to enforce appropriate social distancing.
  • Making hand sanitiser dispensers widely available, encouraging good hygiene practices at all times and regularly cleaning high-use areas.
  • Placing health messages and visitor declaration processes at entry points to ASX facilities.
  • Restricting domestic and international business travel.
  • Conducting meetings with external attendees electronically.
  • Declining requests to hold events on ASX premises or to attend events being held elsewhere.

To assist with the transition to work from home arrangements, ASX has provided employees with resources and guides on setting up their home working stations, and tools to help managers lead their teams in this difficult situation.

We continue to monitor the situation and are well prepared to introduce additional precautionary measures as appropriate.

How is ASX responding to the current market volatility?

ASX operates at the heart of Australia’s financial markets. It is vital that our services are available, reliable and resilient at all times, and most especially during periods of heightened volatility. During this period, ASX systems and processes have performed well and without interruption.

As the operator of critically important infrastructure, we are closely monitoring market orderliness and the responsiveness of our risk management processes to changing customer exposures during the heightened volatility. This includes making capital and liquidity return requests of our clearing members and intra-day margin calls, both of which are designed to ensure that participants can meet their obligations.

We also continue to keep a close eye on company disclosures, which help ensure the market is appropriately informed.

How is ASX supporting listed companies? 

ASX is providing a package of temporary relief and updated guidance to assist listed companies to make raising capital easier at a time when speed is of the essence, manage their disclosure obligations and to help investors remain informed during this challenging time. Some of these measures include:

  • Temporary emergency capital raising measures to help facilitate capital raisings in the short-term (until 31 July 2020).
  • Practical guidance on disclosure obligations.
  • Reporting deadline relief on a case-by-case basis for listed entities with a 30 September, 31 December or 31 March balance date (those with a 31 May or 30 June balance date will be reviewed in due course).
  • Reporting relief for ASX/NZX dual-listed entities to facilitate the operation of the class waiver announced by the New Zealand Financial Markets Authority

With the emergency capital raising provisions, ASX is offering companies the flexibility to deal with urgent financial needs, while ensuring ongoing fairness and protection for all investors. We believe these measures are necessary and pragmatic, and will help ensure Australia’s capital markets continue to be well-functioning.

Further information on the measures above are contained in the latest ASX Compliance Update.

Why are circuit breakers not used in Australian exchanges such as ASX?

ASX does not use circuit breakers like those employed by some other exchanges around the world.

The Australian regulator, ASIC, applies a common set of market integrity rules for all securities and futures markets in Australia that all local market operators and their participants are required to adhere to.

These rules include specifications about the use of Anomalous Order Thresholds rather than circuit breakers.

What are Anomalous Order Thresholds?

Anomalous Order Thresholds (AOTs) calculate reference prices and limits for all ASX securities (shares, company options, exchange traded funds, managed funds products, CHESS depositary interests (CDIs), Commonwealth Government Securities and interest rate securities).

The AOT Reference Price is updated every minute and prevents the placing of aggressive orders at an individual security level (an order +/-10% away from the reference price). Note: Different percentage limits are applied to securities below $2.35. 

ASX will also pause trading in individual stocks for two minutes if the price movement triggers the Extreme Trade Range (ETR) mechanism, which is unique for every stock.

We believe the AOT-ETR mechanism promotes orderliness by striking a balance between restricting large and sudden price movements, while allowing natural market forces to guide trading.

Why does ASX remain open during periods of volatility?

All ASX equity, fixed income and derivative markets remain fully operational and open during regular trading hours.

Exchanges play an important role in the economy in allocating capital and managing risk. In times of uncertainty and high volatility, it is particularly important to offer a platform for investors and traders to manage their risks by providing the ability to transfer risk through trading of securities and derivatives and for companies to continue to raise capital.

Remaining open and ensuring continuity of markets supports price discovery and risk transfer, which are critical in periods of heightened volatility.

ASX operates in close contact with the regulators (ASIC and the RBA) and has a range of measures to maintain the market’s orderliness and resilience.

Is ASX concerned about market disclosure during this time?

ASX operates under a continuous disclosure regime. Given the challenging conditions, ASX is closely monitoring disclosure across the whole market.

It is important at the outset to state that a listed entity’s continuous disclosure obligations do not extend to predicting the unpredictable.

ASX acknowledges the particular disclosure challenges for listed entities arising from the rapidly evolving and highly uncertain situation surrounding the coronavirus pandemic and different listed entities are being affected in different ways.

Our latest Compliance Update provides further guidance for companies on their continuous disclosure obligations.

Has the pandemic impacted any of your projects? 

ASX is mindful of the challenges created by the Covid-19 pandemic and the pressure placed on project resourcing and timelines across the market, both for ASX and our customers. Consequently, we have revisited the delivery timetable for some of our projects, including CHESS replacement using distributed ledger technology.

ASX is replanning the CHESS replacement implementation timeframe and will seek user input on the new schedule in June. By then, we expect users will have more time to consider the replan and better assess the implications of Covid-19. We will then announce the new schedule.

Is ASX’s clearing and settlement infrastructure able to cope with the spike in equity trading? 

We have seen record trading volumes over the past month and large increases in the number of trades executed as a result of the heightened volatility. Our systems have remained fully operational and robust over this period.