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RESERVE BANK OF AUSTRALIA

Clearing and Settlement Facilities

Consultation Documents and Other Publications

Report on the Australian OTC Derivatives Market (April 2014)

This report was jointly prepared by the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Reserve Bank of Australia. It constitutes the latest advice from the regulators to the Minister regarding mandatory requirements for trade reporting, central clearing and platform trading of over-the-counter (OTC) derivatives. The report is the third market assessment report prepared by the regulators in consideration of section 901B of the Corporations Act 2001. A further report is planned in 2015.

Application of the Regulatory Influence Framework for Cross-border Central Counterparties (March 2014)

In July 2012, the Council of Financial Regulators published the paper ‘Ensuring Appropriate Influence for Australian Regulators over Cross-border Clearing and Settlement Facilities’, which develops a graduated framework for imposing additional requirements on cross-border clearing and settlement facilities proportional to the materiality of domestic participation, their systemic importance to Australia, and the strength of their connection to the domestic financial system or real economy. In response to interest from existing and prospective licensees, this paper provides further guidance on how the Australian Securities and Investments Commission and the Reserve Bank would apply the regulatory influence framework articulated in the July 2012 paper to central counterparties in various Australian financial markets.

Report on the Australian OTC Derivatives Market (July 2013)

This report was jointly prepared by the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Reserve Bank of Australia. It constitutes the latest advice from the regulators to the Minister regarding mandatory requirements for trade reporting, central clearing and platform trading of over-the-counter (OTC) derivatives. The report is the second market assessment report prepared by the regulators in consideration of Section 901B of the Corporations Act 2001. The first report was released on 30 October 2012. A further report is expected in early 2014.

Council of Financial Regulators Advice on Competition in Clearing of the Cash Equity Market (February 2013)

Following the release of a discussion paper in June, the Council and Australian Competition & Consumer Commission (ACCC) consulted over the second half of 2012 on the issue of competition in the clearing and settlement of the Australian cash equity market. The Council, with the support of the ACCC, provided its conclusions and recommendations to the government in December. Given the potential cost implications for industry of introducing competition at this time, the Council recommended that a decision on any licence application from a CCP seeking to enter the market be deferred for two years. The Council also recommended that, in the meantime, ASX work with stakeholders to develop a Code of Practice for Clearing and Settlement of Cash Equities in Australia. It was further proposed that, at the end of the two years, the Council and the ACCC carry out a public review of the Code's implementation and effectiveness. At the same time, the prospect of granting a licence to a competing CCP or of pursuing other regulatory outcomes would be reviewed. The government has now endorsed these recommendations, and has published the Council's report together with the letters to the Deputy Prime Minister and Treasurer from the Council and the ACCC.

New Financial Stability Standards: Final Standards and Regulation Impact Statement (December 2012)

In August 2012, the Reserve Bank consulted on a proposal to determine new Financial Stability Standards (FSSs) for central counterparties and for securities settlement facilities, and revoke the previously determined FSSs. The Payments System Board has now approved the determination of final standards that align the Australian regime for regulation of licensed CS facilities with new international standards, while upholding the standards to which licensed CS facilities are held under the current FSSs. The proposed FSSs also implement key elements of the Council of Financial Regulators' framework for ensuring that Australian regulators have appropriate influence over cross-border CS facilities.

Application for Transitional Relief from New Financial Stability Standards

Report on the Australian OTC Derivatives Market (October 2012)

This report was jointly prepared by the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Reserve Bank of Australia. It reviews the risk management practices of market participants in the domestic over-the-counter (OTC) derivatives market. A particular focus of the report is how market participants are using centralised market infrastructure, such as trade repositories, central counterparties and trading platforms. The report makes a number of recommendations to promote the greater use of such infrastructure, as well as suggesting other improvements to risk management in the domestic OTC derivatives market. The report builds on information collected through a survey of market participants undertaken in mid-2012.

Consultation on New Financial Stability Standards (August 2012)

In accordance with powers under the Corporations Act 2001, the Reserve Bank has determined Financial Stability Standards (FSSs) for central counterparties and for securities settlement facilities. These standards aim to ensure that licensed clearing and settlement (CS) facilities conduct their affairs in a way that promotes overall stability in the Australian financial system. The Bank is seeking views from interested parties on a proposal to revoke the existing FSSs and determine new FSSs for both central counterparties and securities settlement facilities. The proposed FSSs aim to align the Australian regime for regulation of licensed CS facilities with new international standards, while upholding the standards to which licensed CS facilities are held under the current FSSs. The proposed FSSs also implement key elements of the Council of Financial Regulators' framework for ensuring that Australian regulators have appropriate influence over cross-border CS facilities.

Submissions on New Financial Stability Standards

Ensuring Appropriate Influence for Australian Regulators over Cross-border Clearing and Settlement Facilities (July 2012)

In October 2011, the Council of Financial Regulators (the Council) consulted on a broad package of reforms to the regulatory framework for financial market infrastructures (FMIs). The Council subsequently wrote to the Treasurer and Deputy Prime Minister outlining its final recommendations. Among its proposed reforms, the Council recommended legislative change to underpin the imposition of graduated ‘location requirements’. These may be more broadly defined as measures to be taken by the Reserve Bank and the Australian Securities and Investment Commission to ensure they retain sufficient regulatory influence over cross-border FMIs that operate in Australia. The purpose of this paper is to elaborate on a framework within which such measures could be taken with respect to clearing and settlement facilities.

Central Counterparty Interoperability (June 2012)

Many securities and derivatives markets, including most that are traded on an exchange, are served by a central counterparty (CCP). After trades are executed, the CCP inserts itself between both trading counterparties, to protect them from the risk that one defaults before the obligations are settled. This article discusses CCP interoperability, which is an arrangement that links different CCPs, allowing participants of one CCP to seamlessly deal with participants of another CCP. This can make it cheaper for traders to participate in a wider range of financial markets, and can facilitate competition between CCPs by opening up participant networks. However, interoperability also introduces financial stability risks, primarily by creating dependencies between the linked CCPs, and so it may be unsuitable for some markets. Interoperability arrangements are currently in place between some CCPs serving European equity markets, and another type of arrangement is in place linking several US CCPs. There are currently no links involving Australian CCPs, although the evolving CCP landscape may encourage links of some form in the future.

Competition in the Clearing and Settlement of the Australian Cash Equity Market: Discussion Paper (June 2012)

In the course of the Council of Financial Regulators Review of Financial Market Infrastructure Regulation, the issue of competition in clearing and settlement arose. The Council subsequently invited the Australian Competition and Consumer Commission to work with the Australian Securities and Investments Commission, the Reserve Bank and the Commonwealth Treasury to further develop analysis on the competition aspects of clearing and settlement. The paper sets out a preliminary assessment of the issues that might need to be addressed to ensure that competition between providers of clearing and settlement services does not adversely impact the effective functioning of the market for ASX securities or the stability of the Australian financial system. The paper also discusses competition and access issues that could arise when considering the existing post trade market structure for ASX securities, and how these might, in principle, be addressed.

OTC Derivatives Market Reform Considerations: A report by the Council of Financial Regulators (March 2012)

The Council of Financial Regulators (comprising the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Treasury, and chaired by the Reserve Bank), has been considering how to promote and increased use of centralised infrastructure in the Australian OTC derivatives market. This report sets out some conclusions of the Council on this matter. It has also been published on the Treasury website.

Review of Financial Market Infrastructure Regulation: Letter to the Deputy Prime Minister (February 2012)

On 8 April 2011 the Deputy Prime Minister and Treasurer, asked the Council of Financial Regulators (comprising the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Treasury, and chaired by the Reserve Bank), for advice on measures that could be introduced to ensure Australia's regulatory system for financial market infrastructure continues to protect the interests of Australian issuers, investors and market participants, including under a scenario where ASX is part of a foreign-domiciled group. This is the Council of Financial Regulators' letter of advice in relation to the review.

Review of Financial Market Infrastructure Regulation: Consultation Paper (October 2011)

On 8 April 2011 the Deputy Prime Minister and Treasurer, asked the Council of Financial Regulators (comprising the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Treasury, and chaired by the Reserve Bank), for advice on measures that could be introduced to ensure Australia's regulatory system for financial market infrastructure continues to protect the interests of Australian issuers, investors and market participants, including under a scenario where ASX is part of a foreign-domiciled group. This is a consultation paper from the Council of Financial Regulators seeking stakeholder views on this issue.

Central Clearing of Over-the-counter (OTC) Derivatives in Australia (June 2011)

The Reserve Bank of Australia, on behalf of the Council of Financial Regulators (comprising the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Treasury, and chaired by the Reserve Bank), has issued this discussion paper as part of its consideration of Australia's response to the substantial international reform efforts underway in global OTC derivatives markets. The paper discusses the evolving global landscape for OTC derivatives and central clearing, the Australian market for OTC derivatives, and a range of considerations that need to be weighed if central clearing in the domestic market is to be established.

Submissions on Central Clearing of Over-the-counter (OTC) Derivatives in Australia

The Foreign Exchange Market and Central Counterparties (March 2010)

The financial crisis has led to considerable efforts to improve risk management practices in financial markets. One of the main proposals being suggested in international fora is to increase the use of central counterparties. This article discusses the potential for central counterparty arrangements to complement existing risk management practices in the foreign exchange market.

Survey of the OTC Derivatives Market in Australia (May 2009)

This report summarises the findings of a survey of the Australian OTC derivatives market landscape carried out by the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, and the Reserve Bank of Australia in early 2009. The report identifies several areas in which operational and risk-management practices might be enhanced.

Consultation on Assessing Sufficient Equivalence (May 2009)

The Financial Stability Standard for Central Counterparties was varied in February 2009 to establish a framework for regulation of overseas central counterparties that are subject to a sufficiently equivalent regulatory regime. This consultation document seeks views from interested parties on the Reserve Bank's proposed approach to assessing the sufficient equivalence of an overseas regime.

Submissions on Assessing Sufficient Equivalence

Review of Participation Requirements in Central Counterparties (March 2009)

Further to the announcement by the Australian Clearing House of its intention to increase the minimum ‘core liquid capital’ requirement for participants, the Minister for Superannuation and Corporate Law asked the Reserve Bank and the Australian Securities and Investments Commission to provide advice on what is an appropriate ‘core liquid capital’ requirement for Australia’s licensed clearing facilities. This review contains the advice provided to the Minister on 13 March 2009 in accordance with this request.

Disclosure of Equities Securities Lending (February 2009)

The Reserve Bank has varied the Financial Stability Standard for Securities Settlement Facilities to require that data on equities securities lending be collected and published. This document sets out the final form of the variation and some details on implementation.

Consultation on Oversight of Overseas Facilities (October 2008)

The Reserve Bank is proposing to vary the Financial Stability Standard for Central Counterparties to establish a framework for regulation of overseas central counterparties that are subject to a sufficiently equivalent regulatory regime. This consultation document seeks views from interested parties on the Reserve Bank's proposed variation.

Submissions on Oversight of Overseas Facilities

Consultation on Disclosure of Equities Securities Lending (October 2008)

The Reserve Bank is proposing to vary one of the measures underpinning the Financial Stability Standard for Securities Settlement Facilities to require that data on equities securities lending be collected and published. This consultation document seeks views from interested parties on the Reserve Bank's proposed modification.

Submissions on Disclosure of Equities Securities Lending

Review of Settlement Practices for Australian Equities (26 May 2008)

On 29 and 30 January 2008, there were significant delays in the settlement of Australian equities. As a result of these delays, the Reserve Bank has undertaken an extensive review of settlement practices in the Australian equity market. This review sets out some possible modifications to current arrangements which might improve both the robustness of the settlement process and broader market functioning.

Regulation Impact Statement for the Financial Stability Standards [PDF 132K] (May 2003)