Clearing and Settlement Facilities Consultations

Review of Competition in Clearing Australian Cash Equities: Conclusions Paper

In February 2015, the government announced that the Council of Financial Regulators and the Australian Competition and Consumer Commission – together, the Agencies – would conduct a review of the policy position on competition in clearing Australian cash equities. Immediately following the announcement of the review, the Agencies released a consultation paper, seeking stakeholder views on a range of potential policy approaches. This report, submitted to the government in June 2015, presents the Agencies’ conclusions from the Review, drawing together the key messages from the consultation process and the Agencies’ supporting analysis.

Resolution Regime for Financial Market Infrastructures: Response to Consultation

In February 2015, the government, acting on the advice of the Council of Financial Regulators (CFR), released a consultation paper seeking stakeholder views on legislative proposals to establish a special resolution regime for financial market infrastructures (FMIs). The CFR has considered feedback received from consultation on the initial proposals on FMI resolution, as well as continuing developments internationally. This report summarises the key feedback from stakeholders and sets out the CFR's views on how this feedback should be addressed in developing draft legislation to establish an Australian FMI resolution regime.

Overseas Clearing and Settlement Facilities: The Australian Licensing Regime - Response to Consultation

In March 2015, the Council of Financial Regulators (CFR) released a consultation paper seeking stakeholder views on a proposed new approach to assessing whether an ‘overseas’ clearing and settlement facility must be either licensed in Australia or exempted from Part 7.3 of the Corporations Act. The CFR has considered feedback received from consultation on the initial proposal. This report summarises the key feedback from stakeholders along with the CFR's views on how this feedback should be addressed in implementing the proposed framework.

Central Clearing of Repos in Australia: Conclusions

In response to a Financial Stability Board recommendation, the Reserve Bank has evaluated of the costs and benefits of central clearing of repos in Australia. To support this evaluation, the Bank conducted an industry consultation seeking stakeholder views on whether the capacity of the Australian repo market to safely, efficiently and continuously support the funding and liquidity needs of the Australian financial system would be improved by the availability of a repo CCP. This paper sets out the Bank's conclusions from the consultation process. The Bank has concluded that it does not believe there is a financial stability case to actively promote the introduction of a repo CCP in the Australian market. However, should the industry proceed with a proposal for introduction of such a CCP, the Bank would stand ready to engage in the debate and be willing to consider participation, subject to the certain pre-conditions on continuity, location and design and terms of access.

Overseas Clearing and Settlement Facilities: The Australian Licensing Regime

The Council of Financial Regulators (CFR) has issued the Consultation Paper: ‘Overseas Clearing and Settlement Facilities: the Australian Licensing Regime’. The consultation paper sets out a proposal for legislative change to clarify when an overseas clearing and settlement (CS) facility would fall within the scope of the Australian CS facility licensing regime. Any legislative change will ultimately be a matter for the Government to consider.

Central Clearing of Repos in Australia: A Consultation Paper

In response to a Financial Stability Board recommendation, the Reserve Bank has issued a Consultation Paper to support its evaluation of the costs and benefits of central clearing of repos in Australia. This paper provides an overview of the Australian repo market and considers the implications of central clearing for the Australian repo market. The paper closes with an overview of the key issues on which stakeholder feedback is sought.

Resolution Regime for Financial Market Infrastructures: Consultation Paper

The government, acting on the advice of the Council of Financial Regulators (CFR), has issued a consultation paper seeking stakeholder views on proposals to establish a special resolution regime for financial market infrastructures (FMIs). The proposals are consistent with the Financial Stability Board's Key Attributes of Effective Resolution Regimes for Financial Institutions, and would apply to domestically incorporated and licensed clearing and settlement facilities and trade repositories. The consultation paper describes key features of the proposed regime, and sets out proposals for enhanced directions powers over FMIs for regulators and resolution authorities.

Review of Competition in Clearing Australian Cash Equities: Consultation Paper

The Council of Financial Regulators (CFR) has issued a Consultation Paper as part of its review of competition in clearing Australian cash equities. The review will be carried out with the assistance of the Australian Competition and Consumer Commission (together, the Agencies). This follows a 2012 review of competition in the clearing and settlement of Australian cash equities, in which the CFR recommended a two-year moratorium on competition in the clearing of cash equities. The Agencies committed to carrying out a review at the end of the two years. This Consultation Paper sets out the scope of the Agencies' review and the issues that will be considered, and seeks stakeholder views on these issues.

Application of the Regulatory Influence Framework for Cross-border Central Counterparties

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.

Council of Financial Regulators Advice on Competition in Clearing of the Cash Equity Market

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

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.

Consultation on New Financial Stability Standards

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.

Ensuring Appropriate Influence for Australian Regulators over Cross-border Clearing and Settlement Facilities

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.

Competition in the Clearing and Settlement of the Australian Cash Equity Market: Discussion Paper

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.

Review of Financial Market Infrastructure Regulation: Letter to the Deputy Prime Minister

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

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.

Consultation on Assessing Sufficient Equivalence

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.

Review of Participation Requirements in Central Counterparties

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

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

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.

Consultation on Disclosure of Equities Securities Lending

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.

Review of Settlement Practices for Australian Equities

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.