Cash Rate Procedures Manual

Last Updated: 30 August 2016

Introduction

The Reserve Bank of Australia (RBA) is the Administrator of the Australian financial benchmark known as the interbank overnight cash rate (Cash Rate).

The Cash Rate is the RBA's operational target for the implementation of monetary policy.

The Cash Rate is calculated by the Cash Rate Administrator as the weighted average interest rate on overnight unsecured loans settled as Cash Transfers in the Reserve Bank Information and Transfer System (RITS) between banks in the Australian dollar Cash Market.

The Cash Rate is also an important financial benchmark in the Australian financial markets. It is used as the reference rate for Australian dollar Overnight Indexed Swaps (OIS) and the ASX 30 Day Interbank Cash Rate Futures.

The RBA also publishes a Cash Rate Total Return Index (TRI), which members of the public can use as a benchmark with a (near) risk-free rate of return. The TRI measures the performance of an investment earning the Cash Rate, where interest is reinvested.

This Cash Rate Procedures Manual sets out:

  • The RBA's internal governance arrangements for administration of the Cash Rate
  • The standards applicable to the data inputs and the data methodology
  • Cut-off times for publication of the Cash Rate and the TRI
  • The calculation methodology employed to compute the Cash Rate and the TRI
  • The use of Expert Judgment
  • Error handling procedures
  • Complaints handling processes
  • Conflicts of interest and whistle-blowing procedures
  • The process in the event of material changes in methodology

The RBA owns and operates RITS, Australia's high-value payments system.

RITS is used by banks and other approved institutions to access their Exchange Settlement Accounts (ESAs) and to settle their payment obligations on a real-time gross settlement basis.

Glossary of Terms

To the extent of any inconsistency, the definition of a term in this Glossary will prevail over the definition of a term as set out in the remainder of this Cash Rate Procedures Manual.

Business Day – a day upon which the Cash Market is open; this is a weekday on which banks generally are open for business in Sydney or Melbourne (this aligns with the definition of Settlement Day in the RITS Regulations).

Cash Market – for the purposes of the determination of the Cash Rate, the market for borrowing and lending Australian Dollar ESA balances between Cash Market Participants on an unsecured basis, for same day settlement of the initial advance and a term of overnight.

Cash Market Transaction – a transaction in the Cash Market with a term of overnight between one bank (as an unsecured provider of credit) and another bank (as an unsecured receiver of credit) settled via a RITS Cash Transfer.

Cash Market Participant – a bank that settles any Cash Market Transactions across its own ESA and which is required by the Cash Rate Administrator to identify all relevant trading activity in RITS. Banks that hold ESAs are identified on a list published on the RBA website, which is updated from time to time (ESA Holders (Banks) in the RITS Membership List). This list includes a number of banks that may appoint a settlement agent for the management of their ESA (identified by an asterisk) and as such do not conduct Cash Market Transactions. Where such banks decide to transact in the Cash Market, their transactions must be appropriately identified in RITS as specified in this Cash Rate Procedures Manual (see Section 4. Data Sufficiency and Section 5. Input Selection).

Cash Rate – the volume-weighted average interbank overnight interest rate on a per annum basis on unsecured borrowing and lending transactions between Cash Market Participants settled within RITS. The Cash Rate is rounded to two decimal places and published on market data services (Reuters RBA30 and Bloomberg RBAO7).

Cash Rate Administrator – the role and responsibilities of the RBA as set out in this Manual in respect of the calculation, error handling procedures and publication of the Cash Rate and the TRI.

Cash Rate Oversight Committee – the Committee established by the RBA to oversee the administration of the Cash Rate by the Domestic Markets Department of the RBA (see the Annex for Terms of Reference).

Cash Rate Target – in respect of any day, the RBA's target for the Cash Rate for that day, as determined by the RBA Board in pursuit of its statutory objectives and as published by the RBA on its website (see RBA - Statistics - Cash Rate).

Cash Rate Total Return Index or TRI – an index calculated and published by the Cash Rate Administrator which measures the performance of an investment earning the Cash Rate. The formula, interest payment, rounding and base period conventions are set out in Section 15. Cash Rate Total Return Index.

Counterparty-specific Transaction Data or Transaction Data – in respect of a Cash Market Participant, data in respect of an individual Cash Market Transaction between the Cash Market Participant and another Cash Market Participant. The details required to be identified in RITS in respect of each individual Cash Market Transaction are set out in Section 4. Data Sufficiency.

Exchange Settlement Account or ESA has the meaning given in the RITS Regulations. It is a deposit account provided by the RBA to approved financial institutions or other approved payments providers, used for final settlement in RITS of Australian dollar obligations between ESA holders. For further details see Exchange Settlement Account Policy.

Evening Agreed Bank – has the meaning given in the RITS Regulations. It is an ESA holder that is eligible to settle Eligible Evening Transactions (as defined in the RITS Regulations) in the final settlement session of the RITS settlement day.

Manager – the employee within the Market Operations section of the RBA's Domestic Markets Department who has escalation, validation and approval responsibilities in the Use of Expert Judgement (see Section 7. Use of Expert Judgement) and for publication of the Cash Rate (see Section 9. Publication).

Publication Date – the date on which the Cash Rate is published by the Cash Rate Administrator. The Publication Date for the Cash Rate will always be the Business Day which immediately follows the Report Date and is the date on which the Cash Market Transactions which underpin the Cash Rate mature. The Cash Rate may, under limited circumstances, be republished on the Publication Date (see Section 10. Procedures for Errors).

Publication Time – the time at which the Cash Rate is published by the Cash Rate Administrator on the Publication Date, which will be prior to 9.30am Australian Eastern Standard Time (AEST)/ Australian Eastern Daylight-saving Time (AEDT) unless the Publication Time is deferred under the limited circumstances provided for in Section 9. Publication.

RITS – the Reserve Bank Information and Transfer System.

RITS Cash Transfer – a cash payment in RITS used to settle interbank transactions. Both parties to a Cash Transfer enter their details, which must match for the transaction to settle.

RITS Regulations – the Regulations promulgated by the RBA governing participation in RITS.

Report Date – the date on which the Cash Market Transactions which underpin the Cash Rate were agreed and settled.

1. Governance

The administration of the Cash Rate and TRI is the responsibility of the Domestic Markets Department (DM) of the RBA.

The administration functions include:

  • Collection and analysis of the source Transaction Data within RITS
  • Calculation and publication of the aggregated Transaction Data
  • Communication with Cash Market Participants regarding any discrepancies
  • Implementing error handling procedures
  • Periodically reviewing the data methodology and data inputs

The business unit within DM that administers the Cash Rate and TRI is Market Operations (MO).

Other than being responsible for administering the Cash Rate and TRI, MO is responsible for managing the activities related to the RBA's operational framework for implementing monetary policy.

These activities include conducting market operations (via reciprocal purchase transactions (repos) and reverse repos, and purchases and sales of eligible securities) to ensure that the Cash Rate is consistent with the target for the Cash Rate determined by the RBA Board (see Domestic Market Operations).

In order to perform these functions, MO Personnel receive appropriate training so as to acquire the necessary knowledge of and experience in the following:

  • The Cash Market
  • Participants in the Cash Market and relevant contacts within Cash Market Participants
  • Internal procedures guiding all MO operations and business practices
  • This Cash Rate Procedures Manual
  • The AFMA Cash Conventions as published and reviewed from time-to-time by the Australian Financial Markets Association (AFMA)
  • Internal reporting and escalation procedures

MO staff occupy positions designated as sensitive within the RBA. This means that they are required to take leave for a minimum of 10 consecutive business days within any 15-month period. While taking this leave, they cannot receive or provide any instructions or enter any transactions into the RBA's systems regarding the duties of their position.

The role and involvement of MO staff in the Cash Rate process is set out in their position descriptions and individual dealing authorities.

The procedures followed by the Cash Rate Administrator in the event of an internal system outage, or absence of, or insufficient data inputs are set out in Section 7. Use of Expert Judgement, and Section 10. Procedures for Errors.

The RBA has established a Committee to oversee the administration of the Cash Rate by DM (the Cash Rate Oversight Committee).

The Cash Rate Oversight Committee reports to the RBA's Risk Management Committee and is chaired by the Assistant Governor (Financial Markets) of the RBA. Its composition includes senior RBA Personnel from areas of the RBA other than DM.

The Cash Rate Oversight Committee acts to promote the delivery of a reliable and effective Cash Rate benchmark, may examine any aspect of the Cash Rate process for this purpose and is responsible for handling and investigating any complaints and whistle-blower reports.

The Cash Rate Oversight Committee's Terms of Reference are in the Annex.

2. Conflicts of Interest

To protect the integrity and independence of the Cash Rate, the RBA implements policies to avoid conflicts of interest.

RBA Personnel and other relevant individuals must behave according to Code of Conduct for Reserve Bank Staff (RBA Code of Conduct), which explicitly requires them to recognise and manage any conflicts between their personal interests and their duties to the RBA.

The RBA Code of Conduct also restricts the ability of RBA Personnel to transact in certain financial instruments. Of most relevance for the Cash Rate, RBA Personnel and other individuals subject to the RBA Code of Conduct (and any entity controlled by them) may not:

  • Enter into, arrange, buy, sell or otherwise deal in interest rate derivatives; or
  • Engage or be involved in active trading in any financial instrument.

Under the Public Governance, Performance and Accountability Act 2013 (Cth) (PGPA Act), RBA Personnel are required to disclose any ‘material personal interest’ that relates to the affairs of the RBA.

In addition, all MO staff are required by the RBA to lodge specific disclosure declarations annually.

3. Benchmark Design

The Cash Rate is the Cash Rate Administrator's measure of the volume weighted average interest rate at which ESA balances held at the RBA by banks are lent between banks on an unsecured basis and for an overnight term.

The venue for trading such balances is the Cash Market.

The procedure for calculating the Cash Rate is based on Transaction Data extracted from RITS. The Cash Rate Administrator collects data on all RITS Cash Transfers for each Business Day that the Cash Market is open.

To enable the Cash Rate Administrator to identify in scope Cash Market Transactions, Cash Market Participants are required to identify any such Transactions in RITS as specified in this Cash Rate Procedures Manual (see Section 3. Benchmark Design and Section 4. Data Sufficiency) and in the AFMA Cash Conventions.

These Transaction Data are used by the Cash Rate Administrator to calculate the Cash Rate.

Cash Market Participants comprise any Authorised Deposit-taking Institution (ADI, as defined in the Banking Act 1959 (Cth)) which APRA has given an unrestricted consent to use the words ‘bank’, ‘banker’ or ‘banking’ pursuant to section 66 of the Banking Act.

Any such Cash Market Participant which settles any Cash Market Transactions across its own ESA is required to identify all relevant trading activity in RITS in the manner specified in Section 4. Data Sufficiency.

Non-bank ADIs and banks that do not settle any Cash Market Transactions across their own ESA are not in scope of the Cash Rate benchmark.

Banks that appoint a settlement agent for all transactions across their ESA are not in scope of the Cash Rate benchmark.

Banks that hold ESAs are identified on a list published on the RBA website, which is updated from time to time (see ESA Holders (Banks) in the RITS Membership List).

4. Data Sufficiency

The Cash Rate is calculated as an average of the interest rates on all individual interbank Cash Market Transactions weighted by the principal amount transacted (see Section 5. Input Selection).

Cash Market Participants are required to identify all their activity in the Cash Market in RITS on each Business Day that the Cash Market is open.

Since RITS remains open until 10.00pm AEST/AEDT (close of the Evening Settlement Session), whereas the Cash Market closes as per the AFMA Cash Conventions at 6.30pm/8.30pm AEST/AEDT, banks that settle any Cash Market Transactions between the close of the Cash Market and 10.00pm must appropriately identify these transactions in RITS.

Identification of transactions in RITS is required from all in scope Cash Market Participants regardless of the frequency of their Cash Market Transactions.

For the first leg of each individual Cash Market Transaction on the Report Date, both Cash Market Participants must enter the following details in the relevant fields of the RITS Cash Transfer Entry Screen (detailed instructions on entering Cash Transfers are available in the RITS Cash Transfer User Guide):

RITS Cash Transfer Entry Fields Input Details
Side The direction of the transaction (borrowing/lending Australian dollars; receiver/payer)
Other Member The Counterparty Bank
Deal Date This must be equal to the Report Date
Settlement Date This must be equal to the Deal Date and must be the Report Date
Interest Rate To be entered on a per annum basis (to four decimal places)
Amount Principal Amount
Private Comments The code IBOC1 must be included

All fields above except the ‘Private Comments’ field are matching fields, meaning the details entered by both parties must match before the transaction can proceed to final settlement.

As a general rule, the Cash Rate Administrator does not alter, delete or otherwise modify the details identifying a Cash Market Transaction in any way (see Section 7. Use of Expert Judgement).

All bilaterally identified Cash Market Transactions (i.e. where both parties have included the IBOC1 code in the ‘Private Comments’ field of the RITS Cash Transfer) are automatically included in the calculation of the Cash Rate for the Report Date.

In the event of any unilaterally identified transactions (i.e. where only one party includes the IBOC1 code in the ‘Private Comments’ field of the RITS Cash Transfer), the Cash Rate Administrator will communicate with the relevant Cash Market Participant(s) to ascertain whether the transaction was a Cash Market Transaction before the publication of the Cash Rate for the Report Date.

Similarly, the Cash Rate Administrator may contact Cash Market Participants regarding RITS Cash Transfers where neither side has identified the transaction as a Cash Market Transaction if it has reason to believe that the transaction was in scope of the Cash Rate benchmark.

To allow the Cash Rate Administrator to verify that transactions identified as Cash Market Transactions reverse on the next Business Day following the Report Date, Cash Market Participants must enter the following details in the RITS Cash Transfer Entry Screen for the second legs (i.e. when the original principal and interest are returned by the borrower to the lender) of Cash Market Transactions:

RITS Cash Transfer Entry Fields Input Details
Side The direction of the transaction (borrowing/lending Australian dollars; receiver/payer)
Other Member The Counterparty Bank
Deal Date This should be equal to the Report Date
Settlement Date This must be the next business day following the Report Date
Interest Rate To be entered on a per annum basis and must equal the interest rate entered on the first leg of the transaction (to four decimal places)
Amount Principal Amount
Private Comments The code IBOC2 must be included

When approached by the Cash Rate Administrator to resolve any matters related to Cash Market activity, Cash Market Participants are required to promptly respond.

In its communications with a Cash Market Participant, the Cash Rate Administrator will have regard to, and may communicate, the Transaction Data which has been identified to the Cash Rate Administrator by other Cash Market Participant(s) as transactions where the Cash Market Participant is a counterparty.

5. Input Selection

The Cash Rate Administrator collects individual Cash Market Transaction details from RITS on the Report Date.

Details of the specific Transaction Data collected from RITS can be found in Section 4. Data Sufficiency.

For the avoidance of doubt, and without limitation, the following types of transactions are not counted as Cash Market Transactions:

  • Transactions between banks conducted outside of RITS
  • Transactions with non-bank ADIs
  • Transactions with banks that use a settlement agent for all transactions across ESAs
  • Transactions between ESA holders that are ‘related bodies corporate’ (as defined in the Corporations Act 2001 (Cth)). For example, transactions between two subsidiaries of an entity or between an Australian branch of an entity and its subsidiary
  • Transactions in which the commitment to lend (or accept) funds was made in advance of the Report Date or included a commitment to lend (or accept) further funds on future days; and
  • Transactions in which the terms of the interbank loan were negotiated as part of a broader agreement that included other obligations between the two parties.

6. Hierarchy of the Data Inputs

Wherever possible, the Cash Rate is determined entirely from Cash Market Transactions, collected by the Cash Rate Administrator from settled RITS Cash Transfers which have been appropriately identified by Cash Market Participants.

In the event that the Cash Rate Administrator, in its Expert Judgement, determines the Transaction Data on a Report Date to be insufficiently robust, the published Cash Rate on the Publication Date will be the Cash Rate Target which prevailed on the Report Date. For example, this may occur if insufficient or no Cash Market Transactions are identified for the Report Date, where, in its discretion, the Cash Rate Administrator determines that banks are not sufficiently complying with the transaction input requirements as specified in this Cash Rate Procedures Manual, or where the RBA's systems are unavailable to perform the Cash Rate calculation process.

In all such instances, the Manager in MO (or more senior personnel) will escalate the decision to use Expert Judgement to either the Head of DM or to the Assistant Governor (Financial Markets).

Further detail on the circumstances in which the Cash Rate Administrator would use Expert Judgement is in Section 7. Use of Expert Judgement.

7. Use of Expert Judgement

As a general rule, the Cash Rate is calculated solely from Cash Market Transactions settled in RITS.

The identification by Cash Market Participants of all in-scope transactions in RITS Cash Transfers (using the code IBOC1 for first legs and IBOC2 for second legs of such transactions in the ‘Private Comments’ field), and the requirement for the details entered by both parties to match before transactions can settle provide the Cash Rate Administrator with a strong control over the quality and consistency of the underlying data.

This data methodology enables the Cash Rate Administrator to promptly detect and resolve data inconsistencies (i.e. where only one party to a transaction has identified it as a Cash Market Transaction) and reduces the need for the use of Expert Judgement in the Cash Rate calculation process.

In the instance where one party has identified a transaction using the code IBOC1 but the other party has not, the Cash Rate Administrator will promptly follow up with both parties to resolve the discrepancy. Where both parties have agreed that the transaction was a Cash Rate Transaction, the Cash Rate Administrator will change the status of the omitted transaction to IBOC1 and include it in the Cash Rate calculation. Instances where parties have omitted the code IBOC1 will not be reported as Errors in the Error Report (see Section 10. Procedures for Errors).

When the Cash rate Administrator changes the status of an IBOC transaction, it confirms in writing the change in status with the bank that has made the erroneous entry. No confirmation in writing is required to the other bank party to the IBOC transaction. The written confirmation is performed by way of an email using the following example template:

Confirmation Template
Payer Receiver Amount $m Rate (%) Settle Date Original Private Comment RBA Re-characterisation
Bank A Bank B 100 1.50 dd/mm/yyyy IBOC2 IBOC1

Where any instances of discrepancies described above cannot be resolved before the Cash Rate Administrator is required to publish the Cash Rate for the Report Date (i.e. prior to 9.30am on the Publication Date), the Cash Rate Administrator will determine, in its judgement, whether the reported Cash Market Transactions that are subject to the discrepancy are unreliable inputs into the Cash Rate calculation and whether they should be removed from the inputs into the Cash Rate calculation.

If the Cash Rate Administrator has reason to believe that any reported Cash Market Transactions do not fall in scope of the data inputs (for example, if the transactions are for a term greater than one Business Day) such transactions may, at the discretion of the Cash Rate Administrator, be removed from the calculation of the Cash Rate.

A decision to remove a Transaction from the calculation of the Cash Rate must be approved by a Manager (or more senior Personnel) in MO.

Public information on the number of Transactions that have been removed from the calculation of the Cash Rate by the Cash Rate Administrator will be reported on a quarterly basis in the Error Report (see Section 10. Procedures for Errors).

The identity of the Cash Market Participants that were unable to resolve any such inconsistencies will not be published in the Error Report.

In the circumstance where: no Cash Market Transactions have been concluded by Cash Market Participants on the Report Date; the RBA's internal systems for calculating the Cash Rate are unavailable; or the Cash Rate Administrator determines, in its discretion, that banks are not sufficiently complying with the transaction input requirements as specified in this Cash Rate Procedures Manual, the Manager in MO will escalate the decision to publish the Cash Rate on the Publication Date as being equal to the Cash Rate Target which prevailed on the Report Date. Such escalation will be made to the Head of DM or to the Assistant Governor (Financial Markets). Instances where such a procedure has been applied will be clearly communicated (see Section 11.Transparency of Benchmark Determinations).

8. Data Collection

The Cash Rate Administrator collects from RITS details of all Cash Transfers settled on the Report Date. The RITS Cash Transfer data are then filtered for transactions where at least one party has entered the IBOC1 identifier in the ‘Private Comments’ field.

Transactions between Cash Market Participants where both parties have included the code IBOC1 in the ‘Private Comments’ field are automatically designated Cash Market Transactions, however the Cash Rate Administrator may use Expert Judgement and remove such bilaterally identified trades from the calculation of the relevant day's Cash Rate (for example, when the term of a transaction is greater than one Business Day).

A transaction where only one party includes the IBOC1 identifier is selected only if the Cash Rate Administrator has ascertained that it was a Cash Market Transaction.

The Cash Rate Administrator may also designate a RITS Cash Transfer where neither side has included the IBOC1 code in the ‘Private Comments’ field as a Cash Market Transaction, if communication with the relevant Cash Market Participant(s), has revealed that the transaction was in fact a Cash Market Transaction. Such communication would be initiated if the Cash Rate Administrator had reason to believe that the transactions conformed to in-scope Cash Market Transactions. All such communication will be on a recorded telephone line.

Once the Cash Rate Administrator is satisfied that all Cash Market activity for the Report Date has concluded, and that all relevant transactions have been designated as Cash Market Transactions, the Cash Rate Administrator will finalise the Transaction Data and calculate the Cash Rate. Only the Manager in MO (or more senior personnel) is permitted to finalise data.

Since Cash Market Transactions can settle until the close of the Evening Settlement Session in RITS (normally 10.00pm AEST/AEDT), the Cash Market Administrator will in the normal course of operations only finalise the Transaction Data on the Business Day immediately following the Report Date, i.e. the Publication Date.

In order to allow timely publication of the Cash Rate (i.e. prior to 9.30am AEST/AEDT on the Publication Date), Cash Market Participants must ensure that they are readily contactable on the morning of the Publication Date, and must promptly respond to any enquiries by the Cash Rate Administrator related to their Cash Market activity on the Report Date.

The Cash Rate Administrator may, under some limited circumstances determined on a case-by-case basis, defer the publication of the Cash Rate (see Section 9. Publication).

Once the Transaction Data for a given Report Date have been finalised, the Cash Rate Administrator will monitor RITS Cash Transfers that settle on the following Business Day to confirm the unwind of transactions identified as Cash Market Transactions. For all such Cash Market Transactions, the Cash Rate Administrator will calculate a predicted unwind amount and search for matching RITS Cash Transfers on the following Business Day. Where a matching RITS Cash Transfer is found, the Cash Market Administrator will check that:

  • the parties to the transaction match the first leg of the Cash Market Transaction, in reverse order (that is, the receiver in the first leg is the payer in the second leg and vice versa);
  • the Interest Rate is equal to the Interest Rate agreed to in the first leg; and
  • both Cash Market Participants have entered the code IBOC2 in the ‘Private Comments’ field of the RITS Cash Transfer.

Transactions where all of the above conditions are met are deemed to have successfully unwound and are thus confirmed to have been true Cash Market Transactions. The Cash Rate Administrator will follow up any discrepancies with the relevant Cash Market Participant(s), and where such communication reveals that a trade was erroneously identified on the Report Date as a Cash Market Transaction, the trade will be treated as per the Cash Rate Administrator's procedure for errors (see Section 10. Procedures for Errors).

All RITS Cash Transfer data are stored securely. Only authorised users have access to the Transactions data. Transactions designated as Cash Market Transactions and therefore included in the calculation of the Cash Rate are retained permanently by the Cash Rate Administrator as national archives.

RITS Cash Transfers that are not Cash Market Transactions are automatically deleted after seven months. A log of key changes to Transaction Data will also be maintained.

The Cash Rate Administrator will permanently maintain records of instances where Expert Judgment was used, namely when a particular sample of transaction data was determined to be insufficiently robust and required escalation to the Head of DM or to the Assistant Governor (Financial Markets) (see Section 7. Use of Expert Judgment).

Records relating to complaints and whistle-blower reports received by the RBA (see Section 14. Complaints and Whistle-blowing) will also be retained as national archives.

9. Publication

The Cash Rate calculated from the RITS Cash Transfer data is published to market data services including:

  • Reuters RBA30; and
  • Bloomberg RBAO7.

The Cash Rate is rounded to two decimal places.

The Cash Rate is published on the Business Day following the Report Date (the Publication Date).

Publication occurs prior to 9.30am AEST/AEDT on the Publication Date.

A Manager (or more senior Personnel) in MO validates and approves the publication of the Cash Rate.

Under limited circumstances determined on a case-by-case basis, the Cash Rate Administrator may in its discretion defer the Publication Time of the Cash Rate on the Publication Date. This may, for example, be due to a technical problem or because more time is required to resolve a material inconsistency within the transaction data.

In any case, a decision to postpone the Publication Time of the Cash Rate will only be taken if the Cash Rate Administrator is of the opinion that such a postponement is necessary to preserve the quality of the Cash Rate benchmark.

The Cash Rate Administrator may also, under limited circumstances, republish the Cash Rate on the Publication Date. For details, see Section 10. Procedures for Errors.

The history of the Cash Rate data series is published on the RBA's website in:

usually by 11.30am AEST/AEDT on the Publication Date.

No Cash Rate will be published by the Cash Rate Administrator for those days on which the Cash Market is closed.

The Cash Rate Administrator only publishes aggregated Cash Market Transaction data as set out in Section 11. Transparency of Benchmark Determinations.

All transaction data used by the Cash Rate Administrator are kept strictly confidential, except in the event that inconsistent or erroneous Transaction Data is identified and the Cash Rate Administrator considers it is necessary or desirable to provide the data to the Cash Market Participant(s) that is/are party to the transaction so as to address or resolve the inconsistency or any other material issue with the data.

10. Procedures for Errors

Cash Market Participants should inform the Cash Rate Administrator promptly if they become aware that they have incorrectly identified or failed to identify Cash Market Transactions in RITS.

Such reports should be made by telephone to MO staff: +61 2 9551 8321

Where such reports of errors in identifying Cash Market Transactions are made to the Cash Rate Administrator after 04.00pm AEST/AEDT on the Publication Date of the Cash Rate, the Cash Rate Administrator will not revise the published Cash Rate and TRI.

The Cash Rate Administrator will nevertheless request that the Cash Market Participant(s) provide details of the reason(s) for such error(s).

Where the Cash Rate Administrator identifies after 04.00pm AEST/AEDT on the Publication Date of the Cash Rate that it is responsible for an error in the calculated Cash Rate, the same principle will apply and the Cash Rate Administrator will not revise the published Cash Rate and TRI or the ancillary Transaction Data used as calculation inputs.

The Cash Rate Administrator will thoroughly investigate the source(s) of any such error(s) it has made and take corrective steps to maintain confidence in the calculation methodology/process.

Where the Cash Rate Administrator becomes aware of an error in the identification of Cash Market Transactions by Cash Market Participant(s) or its own calculation processes on the Publication Date of the Cash Rate, the Cash Rate Administrator may republish the Cash Rate and TRI up until 04.00pm AEST/AEDT on the Publication Date.

In such circumstances, the Cash Rate Administrator will add the term ‘Republication’ to the dedicated pages on the respective market data services (including Reuters RBA30 and Bloomberg RBAO7).

Information on the incidence of errors, intraday republications and Transactions being removed from the Cash Rate calculation by the Cash Rate Administrator will be reported on a quarterly basis by the Cash Rate Administrator via an Error Report published on the RBA website.

The Error Report will include:

  • The number of errors reported over the quarter and the Report Date(s) of such errors
  • Whether such errors led to an intraday republication of the Cash Rate
  • Whether the error was made by a Cash Market Participant or the Cash Rate Administrator
  • The absolute change in the published Cash Rate (expressed in percentage points), but not the direction of change
  • The number of Transactions removed from the calculation of the Cash Rate by the Cash Rate Administrator

The identity of the Cash Market Participant(s) that reported the error(s) will not be published.

The Cash Rate Oversight Committee will review Error Reports on a quarterly basis.

11. Transparency of Benchmark Determinations

In order to provide transparency over the broad features of the Cash Market Transactions used to determine the Cash Rate, the Cash Rate Administrator publishes:

  • The number of Cash Market Transactions
  • The highest and lowest interest rates reported for Cash Market Transactions
  • The aggregate volume of Cash Market Transactions

This data is published on a daily basis, usually by 11.30am AEST/AEDT on the Publication Date, in Statistical Table F1 on the RBA website.

Instances where the Cash Rate has been determined by reference to the Cash Rate Target – for example, due to insufficient Transaction Data or a technical problem – are identified on the market data services (including Reuters RBA30 and Bloomberg RBAO7) by addition of the following text:

Cash Rate determined by reference to Cash Rate Target – Insufficient Data (or) Technical Problem

Such instances are also recorded in the Notes to Statistical Table F1 on the RBA website.

12. Periodic Review

The Cash Rate Administrator will annually review conditions in the Cash Market to determine whether any structural or other significant changes affecting the smooth functioning of the Cash Market may require changes to the design of the Cash Rate methodology.

Such reviews will have particular regard to whether trading activity and liquidity conditions in the Cash Market (e.g. number of participants, volume of transactions, and volatility in interest rates) have changed in such a way that might make the Cash Market an unviable basis for calculating the Cash Rate benchmark.

Reviews will be performed annually and the findings will be reported to the RBA's Cash Rate Oversight Committee.

In the case where the Cash Rate Oversight Committee instructs the Cash Rate Administrator to establish and implement changes to the content of the methodology, or to the Cash Rate benchmark, the Cash Rate Administrator will publish a summary of any material revisions and intended implementation dates, and also publish the rationale for any such revisions.

The Cash Rate Administrator will also review on an ongoing basis whether any changes are required to in-scope Cash Market Participants. Such reviews will take into account new entrants in the Cash Market, as well as departures.

13. Material Changes to Methodology

The Cash Rate Administrator will notify via the RBA website any material changes to the methodology for the Cash Rate or TRI.

14. Complaints and Whistle-blowing

All RBA internal complaints or whistle-blower reports on any matters relating to the Cash Rate – including to the benchmark determination process described in this Cash Rate Procedures Manual – should be reported as public interest disclosures under the Public Interest Disclosure Act 2013 (Cth) (PID Act). Information on making a disclosure under the PID Act is available on the Public Interest Disclosure page of the RBA website.

All external complaints or whistle-blower reports on any matters relating to the Cash Rate – including matters described above, should be made in writing to the RBA at:

rbainfo@rba.gov.au

Such complaints and reports should be directed to one of the RBA Authorised Officers listed below:

  • Head of Human Resources
  • Assistant Governor (Business Services)
  • Deputy Governor
  • Governor

RBA Authorised Officers collect external and internal complaints and whistle-blower reports and promptly refer them to the Cash Rate Oversight Committee which is responsible for logging, reviewing and investigating all such internal and external complaints.

The Cash Rate Oversight Committee will process complaints and whistle-blower reports on a fair basis and inform the complainant of the outcome of its investigations in a timely manner.

RBA Personnel who observe any misconduct or irregularities in the Cash Rate process must report their concerns to their supervisor or one of the aforementioned RBA Authorised Officers.

RBA Personnel directly involved in the Cash Rate process must follow documented procedures to escalate sensitive market intelligence to DM senior management, and where necessary, to the Cash Rate Oversight Committee.

Such reporting procedures particularly apply where DM staff suspect any person:

  • is manipulating or has manipulated the Cash Rate benchmark
  • is attempting to or has attempted to manipulate the Cash Rate benchmark
  • is colluding in or has colluded in the manipulation of the Cash Rate benchmark.

RBA Personnel can also anonymously report their concerns though a specialist, independent provider, KPMG. The service is known as FairCall and any concerns raised via this service are reported directly to the Deputy Governor of the RBA who may raise these concerns with the Cash Rate Oversight Committee. Details for such anonymous reporting are set out in the RBA Code of Conduct. If RBA Personnel choose to report a concern via the FairCall telephone service the provisions of the PID Act will not apply.

Disputes or queries about published Cash Rate data which are not formal complaints will be handled according to RBA's procedure for errors (see Section 10. Procedures for Errors).

15. Cash Rate Total Return Index – Calculation and Publication

15.1 Calculation Method

The Cash Rate Total Return Index (TRI) measures the performance of an investment earning the Cash Rate, where interest is reinvested:

T R I t = T R I t - d × ( 1 + C a s h   R a t e t - d × d 3 6 5 × 1 0 0 )

TRI = Cash Rate Total Return Index

t = a Business Day (a day that the Cash Market is open)

d = the number of days since the previous Business Day

The formula indicates that interest earnings are only paid and reinvested on Business Days. On non-Business Days, interest accrues at the Cash Rate of the preceding Business Day, but is not paid and reinvested until the next Business Day.

The TRI for a particular Business Day is calculated using: the unrounded value of the TRI for the previous Business Day; and the Cash Rate for the previous Business Day as published on the market data services Reuters RBA30 and Bloomberg RBAO7.

The base period for the TRI is 4 January 2011 = 100.

15.2 Publication

The TRI is published to market data services (i.e. the same services as those used for the Cash Rate) including:

  • Reuters RBA30; and
  • Bloomberg RBAO7.

Unlike the Cash Rate, which is the rate applicable on the Report Date (the Business Day preceding the Publication Date), the published TRI is the applicable index for the Publication Date.

The TRI is published to six decimal places.

Publication occurs prior to 9.30am AEST/AEDT on the Publication Date.

A Manager (or more senior Personnel) in MO validates and approves the publication of the TRI.

Where the Cash Rate Administrator republishes the Cash Rate on the Publication Date, acting under Section 10. Procedures for Errors, the TRI will also be republished.

The data series of the TRI from 4 January 2011 = 100 is available on the RBA's website in Statistical Table F1 usually by 11.30am AEST/AEDT on the Publication Date.

No TRI will be published by the Cash Rate Administrator for those days on which the Cash Market is closed.

Annex: Cash Rate Oversight Committee Terms of Reference

Committee Objectives

  • The Committee should act to promote the delivery by Domestic Markets Department (DM) of a reliable and effective Cash Rate benchmark that complies with the IOSCO Principles for Financial Benchmarks
  • The Committee should act to protect the reputation of the Cash Rate benchmark and may examine any aspect of the Cash Rate benchmark process for this purpose

Membership and Governance

  • Assistant Governor (Financial Markets) – Chair
  • Head of Risk Management – Deputy Chair
  • Deputy Head of Payments Settlements Department
  • Deputy Head of Payments Policy
  • Other senior members of the RBA with relevant financial markets/regulatory experience (e.g. Senior Legal Counsel), selected by the Chair

Committee Governance

  • The Chair will call meetings of the Committee as required, (generally every three months)
  • A Committee member may appoint an alternate, subject to the Chair's approval
  • Each member of the Committee should declare any Conflicts of Interest to the Chair
  • Committee minutes will remain confidential
  • DM will provide the Secretariat (i.e. take minutes, compile agenda, coordinate briefing materials)
  • The Committee will report to the Risk Management Committee annually

Committee Activities and Responsibilities

  • The Committee will review the effectiveness of the Cash Rate benchmark and the related control framework on an ongoing basis
  • The Committee will ensure that the Cash Rate benchmark process remains transparent to users and that the following information is publicly disclosed:
    • Definition and methodology of the Cash Rate benchmark
    • Transition processes of the Cash Rate benchmark
    • Submitters Code of Conduct
    • Complaints Procedures
  • The Committee will log, review and investigate all complaints and whistle-blower reports relating to the Cash Rate (disputes or queries about published Cash Rate data which are not formal complaints will be handled according to the Procedures for Errors contained in the Cash Rate Procedures Manual)
  • The Committee will determine the frequency of assessments of the RBA's compliance with the IOSCO Principles for Financial Benchmarks
  • The Committee will review and endorse the results of audits of the Cash Rate Process (conducted by Audit Department as part of the annual DM audit)
  • The Committee will monitor international trends in financial benchmarks and regulatory developments of relevance to the Cash Rate. Furthermore, the Committee may consider any matters it considers relevant to the maintenance of a high quality and effective Cash Rate benchmark process – this may include making recommendations to DM about the Cash Rate administration process or future development of the Cash Rate benchmark process.