8 July 2014

Proposal to expand central clearing of over-the-counter derivatives


This media release discusses the proposal to expand central clearing of over-the-counter derivatives

The Government today releases proposals to centrally clear Australian Dollar-denominated interest rate derivatives.

We are seeking stakeholder feedback on combining this proposal with an earlier proposal to introduce a central clearing mandate for interest rate derivatives denominated in four global currencies.

The Government is committed to ensuring that our financial markets are regulated at an appropriately high standard.

Introducing central clearing of over-the-counter derivatives offers considerable financial stability benefits through better default risk management.

Limiting the proposed clearing mandate to internationally active dealers ensures that the costs imposed on industry are minimised. It captures entities that are systemically important to the Australian financial system, while avoiding unnecessary regulatory costs for smaller market participants.

Internationally active dealers already clear most new transactions in Australian Dollar interest rate derivatives. The additional costs imposed by this measure are expected to be very low.

This proposed combination of central clearing mandates will further strengthen the case that Australia's over-the-counter derivatives regime is substantially equivalent to those in overseas jurisdictions. This may lead to further relief being provided to Australian businesses operating in those markets from burdensome foreign regulations.

The additional proposals paper is available on the Treasury website or the consultation website.

Submissions are requested by 1 August 2014.