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Joint media release - Report on the Australian Over-The-Counter Derivatives Market – October 2012

Tuesday 30 October 2012

 

The Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Reserve Bank of Australia are releasing a Report on the Australian OTC Derivatives Market - October 2012.

This report reviews the risk management practices of market participants in the domestic over-the-counter (OTC) derivatives market. A particular focus of the report is how market participants are using centralised infrastructure, and the prospects for increased usage.

It reiterates the regulators’ view that there are strong in-principle benefits from participants in the domestic OTC derivatives market making greater use of centralised infrastructure, such as trade repositories, central counterparties and trading platforms. The regulators recognise, however, that the suitability of using centralised infrastructure will not be the same for all products and participants. The main recommendations of the report are that:

  • the Australian Government consider a broad-based mandatory trade reporting obligation for OTC derivatives;
  • central clearing of Australian dollar-denominated OTC interest rate derivatives should be adopted by larger market participants, and that this should be a mandatory obligation if the existing industry-led migration stalls; and
  • there is scope for further improvements to operational and risk-management practices in relation to non-centrally cleared transactions.

In preparing the report, a wide-ranging survey of key participants in the Australian OTC derivatives market was undertaken during July 2012. The survey covered large domestic and international banking groups, smaller authorised deposit-taking institutions, fund managers, government borrowing authorities, corporate treasuries and electricity companies.

This work builds on the issues explored in the regulators’ May 2009 Survey of the OTC Derivatives Market in Australia. The report has also been written in consideration of the Corporations Legislation Amendment (Derivative Transactions) Bill 2012, which the Australian Government has introduced into Parliament in line with the G-20’s commitments to reform global OTC derivatives markets.

Enquiries: Reserve Bank of Australia

Media Office
Information Department
Reserve Bank of Australia
SYDNEY
Phone: +61 2 9551 9720
Fax: +61 2 9551 8033
E-mail: rbainfo@rba.gov.au

Enquiries: Australian Prudential Regulation Authority

Andrew McCutcheon
Head of Media and Communications
Phone: +61 2 9210 3143
Mobile: 0417 528 660
E-mail: andrew.mccutcheon@apra.gov.au

Enquiries: Australian Securities and Investments Commission

Media Unit
Phone: + 61 1300 208 215
E-mail: media.unit@asic.gov.au

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $6 trillion in assets for Australian depositors, policyholders and superannuation fund members.