2013/14 Assessment of LCH.Clearnet Limited's SwapClear Service 2. Summary of Regulatory Priorities

LCH.C Ltd's CS facility licence was varied in July 2013 to permit it to offer its SwapClear service. Consequently, as noted in Section 1, 2013/14 has been a transition period for LCH.C Ltd, during which it admitted its first Australian participants and begun to establish processes and arrangements to meet the needs of the Australian market. The tailoring of LCH.C Ltd's services to Australian participants has been a focus of the Bank's oversight of LCH.C Ltd during the Assessment period.

In assessing LCH.C Ltd's application to vary its licence, the Bank took the view that the SwapClear service could rapidly become systemically important in Australia. On the licence variation being granted, the Bank determined a set of regulatory priorities for LCH.C Ltd to ensure that its operational and governance arrangements promoted stability in the Australian financial system. These priorities, and LCH.C Ltd's progress towards them, are summarised in Table 1 and discussed in more detail in Section 3. The Bank expects LCH.C Ltd to finalise its work on these priorities during 2014/15.

The Bank has also assessed LCH.C Ltd's observance of all relevant requirements under the CCP Standards that came into effect in March 2014. As discussed in Section 1, the Bank has not formally ‘rated’ the level of LCH.C Ltd's observance against the each of the sub-standards in the newly applicable CCP Standards. The Bank has nevertheless described how LCH.C Ltd observes each sub-standard and identified regulatory priorities, as appropriate. The Bank's regulatory priorities for LCH.C Ltd for 2014/15 are summarised in Table 2. The recommendations in the table are discussed in more detail in Section 3 and in Appendix A.