CFR reassess central clearing for repos in Australia
29 July 2024 Australia
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The Council of Financial Regulators (CFR) has released a consultation paper reassessing the case for the central clearing of bonds and repos in Australia.
Currently, there is no central counterparty (CCP) that clears transactions in the Australian bond and repo markets. As a result, clearing occurs bilaterally and 鈥渞eflects the complex web of transactions鈥� that occur between participants, the CFR indicates.
The paper pinpoints considerable changes in the size and structure of the Australian bond and repo markets in recent years.
Analysis by Reserve Bank of Australia (RBA) staff highlights that the potential benefits of central clearing in these markets has increased, and that the case for central clearing may be stronger than previously assessed by the RBA in 2015.
The CFR is seeking feedback from stakeholders on the magnitude of any costs and benefits that may accrue from the introduction of a CCP in these Australian markets.
Feedback is also sought from stakeholders to understand the circumstances under which a bond and repo CCP could be operated safely and efficiently by an overseas operator, and what additional protections may be required in such a scenario.
The Australian bond market plays a number of important roles in the Australian economy and financial system, the CFR says.
Repos are one of the main instruments used by the RBA to undertake its domestic market operations and to provide liquidity via its standing facilities.
Interested parties have up until the closing date of 4 September 2024 to submit their responses to the consultation paper.
Currently, there is no central counterparty (CCP) that clears transactions in the Australian bond and repo markets. As a result, clearing occurs bilaterally and 鈥渞eflects the complex web of transactions鈥� that occur between participants, the CFR indicates.
The paper pinpoints considerable changes in the size and structure of the Australian bond and repo markets in recent years.
Analysis by Reserve Bank of Australia (RBA) staff highlights that the potential benefits of central clearing in these markets has increased, and that the case for central clearing may be stronger than previously assessed by the RBA in 2015.
The CFR is seeking feedback from stakeholders on the magnitude of any costs and benefits that may accrue from the introduction of a CCP in these Australian markets.
Feedback is also sought from stakeholders to understand the circumstances under which a bond and repo CCP could be operated safely and efficiently by an overseas operator, and what additional protections may be required in such a scenario.
The Australian bond market plays a number of important roles in the Australian economy and financial system, the CFR says.
Repos are one of the main instruments used by the RBA to undertake its domestic market operations and to provide liquidity via its standing facilities.
Interested parties have up until the closing date of 4 September 2024 to submit their responses to the consultation paper.
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