Minister for Financial Services and Superannuation Bill Shorten today announced that he has granted the Financial and Energy Exchange Global Pty Ltd (FEX) an Australian Market Licence allowing it to operate a new derivatives market in Australia.
The Minister made the announcement in Beijing at the Australia-China Pension and Funds Management Dialogue, following the Prime Minister's highly successful delegation to China.
The Government has also granted LCH.Clearnet Limited (LCH) an Australian Clearing and Settlement facility licence to clear and settle contracts traded on the FEX market. The licence will also be the first non-ASX clearing licence in Australia in relation to a significant market.
The FEX market will expand the range of options for Australian market participants to trade or manage risks associated with various energy, commodity or environmental products.
"The granting of these licences will promote greater competition in Australia's derivatives trading markets. By encouraging competition we are promoting Australia as a financial services centre and helping ensure our financial markets are efficient and innovative." Mr Shorten said.
The decision will provide a trading venue to trade specialised derivative products, and provide a greater service offering to the market. This will benefit participants, investors and the Australian market more broadly.
The Government's granting of LCH's CS facility licence will permit the first overseas-based CS facility in the Australian market. This underscores the Government's commitment both to competitive financial markets and to foreign investment and appropriate foreign participation in the provision of Australia's financial market infrastructure.
Appropriate controls have been agreed to ensure that FEX and LCH provide their trading and clearing services in a safe, fair, orderly, efficient and effective way.
It is expected that the FEX market will become operational following a six month period during which the necessary commercial and logistical arrangements will be put in place.
Both FEX and LCH will work with ASIC and the Reserve Bank of Australia to ensure all requirements are met and a smooth commencement of operation takes place.
Initially, LCH will be limited to clearing the FEX market. However, the Government notes LCH's interest in also offering services in relation to the OTC derivatives market. Any future request to expand operations beyond the clearing of the FEX market will be considered on its merits in accordance with applicable procedures and subject to further advice from the relevant regulators.