1. Introduction and Executive Summary

The Principles for Financial Market Infrastructures (the PFMIs), published by the Committee on Payment and Settlement Systems (CPSS, now the Committee on Payments and Market Infrastructures (CPMI)) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) in April 2012,[1] establish a set of Responsibilities of Central Banks, Market Regulators, and other Relevant Authorities for Financial Market Infrastructures (the Responsibilities). This report presents a joint Self-assessment of how well the Australian Securities and Investments Commission (ASIC) and the Reserve Bank (the Bank) have met their requirements under the Responsibilities in their regulation and oversight of central counterparties (CCPs) and securities settlement facilities (SSFs) – collectively, clearing and settlement (CS) facilities.[2]

Consistent with the Australian authorities' international commitment to implement the PFMIs, including the Responsibilities, this report provides transparency around ASIC's and the Bank's roles in the regulation and oversight of CS facilities. The report is principally targeted at an international audience. The scope of the Self-assessment is limited to ASIC's and the Bank's roles in the regulation and oversight of CS facilities in Australia, although, where relevant, the oversight arrangements for other types of financial market infrastructures (FMIs) in Australia are discussed.

The report has been produced by ASIC's Financial Market Infrastructure Stakeholder Team and the Bank's Payments Policy Department. It is expected that the report will be an input into ongoing work of the CPMI and IOSCO to monitor implementation of the PFMIs across jurisdictions, including Australia.

The Self-assessment concludes that ASIC and the Bank jointly observe all relevant Responsibilities, although in the spirit of continuous improvement it identifies some actions for both regulators.

1.1. Background

The Corporations Act 2001 establishes conditions for the licensing and operation of CS facilities in Australia and gives ASIC and the Bank powers and responsibilities relating to these facilities. These powers are exercised under the governance of ASIC's Commission and the Payments System Board (PSB), respectively. The regulators' respective roles are defined in the Corporations Act.

  • The Bank is responsible for ensuring that CS facilities comply with Financial Stability Standards (FSS) that it determines, and that facilities take any other necessary steps to reduce systemic risk.
  • ASIC is responsible for ensuring that CS facilities comply with all other obligations under the Corporations Act, including the fair and effective provision of services.

Two types of CS facility operate in Australia: CCPs and SSFs.

  • CCPs. A CCP acts as the buyer to every seller, and the seller to every buyer in a financial market. It does so by interposing itself as the legal counterparty to all purchases and sales via a process known as novation. Three CCPs are currently licensed under the Corporations Act to operate in Australia, two of which are part of the ASX Group:

    – ASX Clear Pty Limited (ASX Clear) provides CCP services for cash equities, debt products and warrants traded on the ASX and Chi-X markets, and equity-related derivatives traded on the ASX market

    – ASX Clear (Futures) Pty Limited (ASX Clear (Futures)) provides CCP services for futures and options on interest rate, equities, energy and commodity products, as well as Australian dollar-denominated over-the-counter (OTC) interest rate derivatives

    – LCH.Clearnet Limited (LCH.C Ltd) provides CCP services for OTC interest rate derivatives and is licensed to clear trades executed on a soon-to-launch derivatives exchange, Financial and Energy Exchange (FEX).
  • SSFs. A SSF provides for the final settlement of securities transactions and the maintenance of records of transfer of title. Three SSFs are licensed to operate in Australia. Again two of these are part of the ASX Group:

    – ASX Settlement Pty Limited (ASX Settlement) provides SSF services for cash equities, debt products and warrants traded on the ASX and Chi-X markets; ASX Settlement also provides SSF services for non-ASX listed securities

    – Austraclear Limited (Austraclear) provides SSF services for trades in debt securities, including government bonds and repurchase agreements

    – IMB Limited provides SSF services for trades in its own securities.

1.2. Assessment

This Self-assessment was conducted as at the end of June 2014. On the basis of the evidence presented in this report, ASIC and the Bank have concluded that they observe all relevant Responsibilities in their regulation and oversight of CS facilities.

  • The regulatory framework of the Corporations Act ensures that CCPs and SSFs operating in Australia are subject to appropriate and effective regulation and oversight by ASIC and the Bank. The respective responsibilities of ASIC and the Bank are clearly defined and effective cooperation and coordination between the two regulators ensures that there are no regulatory gaps.
  • The regulatory regime gives the responsible Minister and ASIC appropriate enforcement powers to ensure CS facility licensees' compliance with their obligations under the Corporations Act. The Bank has sound policies in place to ensure that its regulatory and oversight function for CS facilities is appropriately resourced. Likewise, ASIC's resourcing reflects its current level of regulatory activity for CS facilities.
  • ASIC's and the Bank's objectives, roles and regulations in respect of CS facilities are established and clearly defined in legislation. Associated policies and standards are publicly disclosed. A joint public statement by ASIC and the Bank clarifies how the principles within the PFMIs (the Principles) have been implemented in the regulators' respective frameworks. Both regulators have amended relevant requirements and policies and adapted regulatory and oversight processes to ensure consistent application of the Principles across FMIs.
  • ASIC and the Bank have appropriate cooperation arrangements in place with each other and with other relevant domestic regulatory authorities. As cross-border provision of FMI services becomes more widespread, it is increasingly important for regulators in different jurisdictions to work together effectively. Bilateral and multilateral cooperative oversight arrangements are important vehicles for host authorities to exert regulatory influence over FMIs that provide systemically important services in their jurisdictions.

    – ASIC and the Bank have established bilateral cooperative arrangements with the Bank of England to support their regulation and oversight of LCH.C Ltd. The Bank also sits on a Bank of England-led multilateral oversight group.

    – ASIC and the Bank recently concluded a joint Memorandum of Understanding (MOU) with the US Commodity Futures Trading Commission (CFTC) to govern cooperation and information sharing in relation to the regulation and oversight of US and Australian CCPs.[3]

    – The Bank recently concluded an MOU with the Reserve Bank of New Zealand (RBNZ) to govern cooperation and information sharing in relation to the oversight of certain CCPs in which the two central banks have a joint interest.[4]

    – Other cooperative arrangements are being established. For instance, further to an equivalence assessment in 2013, the European Securities and Markets Authority (ESMA) advised the European Commission (EC) that it regards the Australian regime for CCPs to be equivalent to the regime in the European Union (EU). Accordingly, the EC is developing an Implementing Act to give effect to this decision and ASIC and the Bank are negotiating an MOU with ESMA.

While ASIC and the Bank have concluded that they meet the requirements of the Responsibilities, in the spirit of continuous improvement they have identified the following actions:

  • To ensure consistent regulatory outcomes across FMIs and the markets that they serve, ASIC will continue to use existing forums for coordination across its stakeholder teams. Such coordination will facilitate consideration of the broader impact of application of the Principles and other aspects of CS facility regulation on the fairness and efficiency of financial markets.
  • The Bank recently established a senior level internal FMI Oversight Committee. The Bank will monitor the effectiveness of this Committee on an ongoing basis. Appropriate steps will be taken to ensure that the Committee meets its key objective of providing a forum for review and challenge to the staff's routine oversight decisions within the policy framework established by the PSB.
  • ASIC and the Bank will continue to work with other central banks and regulators of CS facilities to promote effective cooperation and mutual assistance in the regulation and oversight of cross-border CS facilities. Existing arrangements will continue to be enhanced, particularly in relation to cooperation during periods of market stress and in addressing matters related to the recovery, wind-down or resolution of cross-border CS facilities. Formal cooperation arrangements with other authorities will be established as appropriate.

The remainder of this report is structured as follows. Section 2 provides an overview of the clearing and settlement landscape in Australia, while Section 3 summarises the conclusions arising from ASIC's and the Bank's detailed Self-assessment against each Responsibility. Finally, the detailed Self-assessments of ASIC and the Bank against the Key Considerations for each Responsibility are set out in Appendix A.


The PFMIs are available at <http://www.bis.org/publ/cpss101.htm>. [1]

In this report, ‘clearing and settlement facility’ is defined as in Part 7.1, Division 6 of the Corporations Act 2001. [2]

The MOU with the CFTC is available at <http://www.rba.gov.au/payments-system/legal-framework/pdf/memorandum-20140606.pdf>. [3]

The Bank's MOU with the RBNZ is available at <http://www.rba.gov.au/payments-system/legal-framework/pdf/memorandum-20140811.pdf>. [4]