The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Nick Sherry

Minister for Superannuation and Corporate Law

3 December 2007 - 8 June 2009

Media Release of 07/04/2009


Minister Releases RBA/ASIC Report on Central Counterparty Requirements
and Welcomes Rapid Action By ASX/ACH on The Review Findings

Senator Nick Sherry, Minister for Superannuation and Corporate Law, today released the Reserve Bank of Australia (RBA) and Australian Securities and Investments Commission (ASIC) Review of Participation Requirement for Central Counterparties and welcomed the rapid action by the Australian Securities Exchange (ASX) and its subsidiary, the Australian Clearing House (ACH), to endorse the Review's findings.

The Review has found that there is a strong in-principle case for ACH to set minimum capital levels, and although there is no single answer as to what level the minimum should be set at the Review noted that over the medium term it does not see a case that alternative arrangements would be unambiguously superior to those proposed by ACH.

In relation to the timing of further increases in minimum capital the Review found that recent market developments, particularly in the Australian third-party clearing market, mean the original timetable for capital increases should be reassessed and a more gradual implementation is recommended, with an increase to $5 million by mid-2010 and then to $10 million at some stage thereafter.

"This independent Review made it clear that there is a strong case for an increase in the level of core liquid capital for clearing participants. This reinforces my decision late in 2008 to permit an increase from the previous level of $100,000 to $2 million, which was implemented in January this year."

In response to concerns raised by smaller market participants about a planned subsequent increase in core minimum capital to $10 million by January 2010, Minister Sherry requested that the Review provide advice on what was an appropriate core liquid capital requirement for participants in Australia's licensed clearing facilities. Minister Sherry commissioned the Review on 11 December, 2008 and received the Review report on 13 March, 2009.

"I endorse the Review's findings that a lengthier period for implementation is desirable, being from July 2010 instead of January 2010, and a step up to a lower minimum amount of $5 million instead of $10 million, is the right way forward at this time."

"The circumstances in the market have shifted since the original ASX/ACH plan was developed and I welcome the ASX's rapid action based on the Review findings and its commitment today to shortly lodge new market rules to reflect the Review outcomes," Minister Sherry said.

After reaching $5 million minimum in mid-2010, the ASX has indicated its intention to then reach a $10 million minimum at a later date, likely in January 2012, the date being subject to standard regulatory clearance processes and prevailing market circumstances.

The Review also contains several initiatives the RBA suggests might be implemented by ACH to enhance compliance with the RBA's Financial Stability Standard for Central Counterparties, including conducting an analysis of whether, in the light of the global financial crisis, there is a longer-term case for considering other additional risk controls. Minister Sherry has separately written to the RBA and ACH endorsing these initiatives and encouraging their implementation.

"I would also thank the RBA, ASIC, the ASX, the Securities and Derivatives Industry Association and individual market participants for their work and involvement in this Review", said Minister Sherry.

The full Review is available in the following attachment.

Review of Participation Requirements for Central Counterparties [PDF 531KB]

7 April, 2009