Media Release 2007/08 Assessment of Australia's Clearing and Settlement Facilities and Consultation on Variation of the Financial Stability Standards

The Reserve Bank is today publishing its 2007/08 assessment of Australia's licensed clearing and settlement facilities against the Financial Stability Standards. Under these standards, which were determined by the Reserve Bank in 2003, licensed facilities are required to take all reasonable steps to promote the stability of the Australian financial system. The Reserve Bank is required to assess licensed facilities against these standards at least once a year.

The Reserve Bank is also releasing two consultation papers on variations to the Financial Stability Standards. The proposed variations will have the effect of:

• improving the transparency of securities lending in the Australian equity market; and
• establishing a framework for the regulation of overseas central counterparties operating in Australia.

2007/08 assessment of clearing and settlement facilities in Australia

It is the Reserve Bank's assessment that all four clearing and settlement facilities operated by the Australian Securities Exchange (ASX) – the Australian Clearing House; the SFE Clearing Corporation; ASX Settlement and Transfer Corporation; and Austraclear – complied with the relevant Financial Stability Standards over 2007/08.

The assessment acknowledges the challenges in the operating environment over this period, noting the increase in market volatility and rising volumes and values traded in several markets. Given these developments, the assessment pays particular attention to the facilities' policies for monitoring participants and managing financial risks. The report highlights important enhancements to the risk-management processes of the ASX central counterparties, while also identifying a number of areas for further consideration over the period ahead.

Consultation on disclosure of equities securities lending

This consultation paper follows the Reserve Bank's earlier Review of Equities Settlement Practices in Australia, conducted in response to settlement delays in late January. Under the changes proposed, the ASX will be required to collect and publish data on the lending of equities. This initiative, together with the complementary work being undertaken by the Australian Securities and Investments Commission (ASIC) and the ASX to improve the transparency of short selling of equities, will promote the efficiency, stability and integrity of the Australian equity market.

The Reserve Bank is proposing to introduce the disclosure requirement by modifying the Financial Stability Standard for Securities Settlement Facilities. The proposed variation will make it clear that to comply fully with the Standard, a licensed facility will need to collect and publish data on securities lending. The consultation document discusses a number of practical considerations in implementing this requirement.

Consultation on oversight of overseas clearing facilities

The Reserve Bank is also proposing a modification to the Financial Stability Standard for Central Counterparties to establish a framework for regulation of overseas central counterparties. Where a facility is subject to a sufficiently equivalent overseas regulatory regime, the Reserve Bank will explicitly take into account the facility's compliance with this regime in assessing whether it is contributing to the overall stability of the Australian financial system. The proposed regulatory framework will help to ensure that any foreign central counterparty operating in Australia promotes financial stability in Australia while, at the same time, avoiding unnecessary regulatory burden.

Parties wishing to make submissions on either consultation paper are invited to do so by 21 November 2008. Submissions will be placed on the Reserve Bank's website and those making submissions will be offered the opportunity to discuss their views with Reserve Bank staff. Submissions should be sent to:

Head of Payments Policy Department
Reserve Bank of Australia
GPO Box 3947
SYDNEY NSW 2001

or

pysubmissions@rba.gov.au