MEDIA RELEASE No: 98-15 Date: 29 October 1998 Embargo: For Immediate Release

PAYMENT SYSTEMS AND NETTING ACT 1998:
APPROVAL OF RITS AND AUSTRACLEAR

The Payments System Board has declared that the Reserve Bank Information and Transfer System (RITS) and the Austraclear System (otherwise known as FINTRACS) are approved real-time gross settlement (RTGS) systems in terms of the Payment Systems and Netting Act 1998

RITS provides the core of Australia's RTGS system for high-value payments, which was fully implemented on 22 June this year, and is also the settlement system for Commonwealth Government securities. RITS handles around $110 billion in transactions each day. The Austraclear System is a settlement system for private sector and semi-government debt securities, and has daily transaction volumes ranging between $15 billion and $60 billion.

The approvals ensure that transactions conducted in these two systems are protected from the so-called "zero-hour rule". Under this rule, a court may declare that the bankruptcy of an institution commences from the midnight before the day on which the bankruptcy order was made; transactions settled between midnight and the time of the bankruptcy order would be void. Such a rule would threaten the irrevocable nature of RTGS payments and create potentially severe liquidity problems in the payments system.

By ensuring the finality of RTGS transactions, the approvals provide a legal underpinning for the elimination of settlement risk in Australia's RTGS system.

The approvals are "disallowable instruments" under the Acts Interpretation Act 1901 and, accordingly, are being tabled before each House of the Commonwealth Parliament.