Counterparties in the Reserve Bank's domestic market operations should be financial service providers that contribute to the stability and efficiency of the Australian financial and payments system. To be eligible to participate, counterparties must be (without limitation): members of the Reserve Bank Information and Transfer System (RITS) and of Austraclear; subject to an appropriate level of regulation; and able to ensure efficient and timely management of transactions. Whether a counterparty has eligible counterparty status will, at all times, be determined by the Reserve Bank in its absolute discretion.
1. Membership of RITS and Austraclear
Eligible counterparties must be members of RITS. To become a member of RITS, it is necessary for applicants to provide evidence to the Reserve Bank that they have the power to carry on business as a member and comply with the terms set out in the RITS regulations. For more information, see RITS Membership and RITS Legal Framework.
Eligible counterparties must be members of Austraclear; for more information, contact Austraclear. The legal entity that holds the Austraclear membership must be the same legal entity that holds the RITS membership.
2. Appropriate Level of Regulation
Whether a counterparty is subject to an appropriate level of regulation is determined by the Reserve Bank in its discretion. In general, the Reserve Bank will expect eligible counterparties to satisfy at least one of the following criteria:
2.1. Regulated by APRA
Counterparties regulated by APRA include Authorised Deposit-taking Institutions (ADIs) and Registered Life Insurance Companies.
It is not typically sufficient for a counterparty to be a subsidiary of an APRA regulated institution.
2.2. Holder of an Australian Financial Services Licence (AFSL)
The counterparty should hold a current AFSL authorising the provision of financial services in markets for the securities eligible in the Reserve Bank's domestic market operations. Relevant financial services include: issuing, acquiring or disposing of securities; making a market for securities; and providing custodial or depository services. The counterparty should also regularly provide these financial services in markets for eligible securities.
It is not typically sufficient for a counterparty to be an Australian Financial Services Authorised Representative.
2.3. Commonwealth, state or territory government institution
The counterparty should be established under Commonwealth, state or territory legislation and subject to adequate controls and support as determined by the Reserve Bank in its discretion. Such counterparties include financing authorities, treasury corporations and investment corporations.
2.4. Financial market infrastructure
The counterparty should be a licenced clearing and settlement facility, or exempt from the requirement to hold a clearing and settlement facility licence (either by regulation or by Ministerial decision) on the basis that it is subject to other regulation. For more information, see Clearing and Settlement Facilities.
3. Efficient and Timely Management of Transactions
Eligible counterparties must be able to ensure efficient and timely settlement of transactions within the Austraclear system. Any difficulties encountered by the Reserve Bank in settling transactions with a counterparty may lead to that counterparty's eligibility status being revoked. For more information on the responsibilities of counterparties, see Settlement Procedures.
Eligible counterparties must adhere to margin maintenance and substitutions on repurchase agreements as required by the Reserve Bank. Counterparties that cannot meet timely margin calls as set out by the Reserve Bank may have their eligibility status revoked; for more information, see Margin Maintenance and Substitutions on Repurchase Agreements.
4. Additional Restrictions
For certain types of domestic market operations, eligibility may be restricted to only a subset of those RITS members that meet the above conditions. In particular, the Reserve Bank's standing facilities are only available to eligible counterparties that settle payments across their own Exchange Settlement Account; for more information, see Standing Facilities Section 3.
Eligible counterparties are not prudentially supervised by the Reserve Bank. Eligible counterparty status does not grant a counterparty any entitlement to obtain liquidity through the Reserve Bank's domestic market operations. The Reserve Bank may revoke the eligible counterparty status of a counterparty if it misrepresents the nature or significance of its status as an eligible counterparty in the Reserve Bank's domestic market operations.