Australia introduces mandatory swap clearing from April 2016

17 December 2015

On 14 December 2015, the Australian Securities & Investments Commission released the final rules implementing Australia's mandatory central clearing regime for OTC derivatives. The clearing obligations will commence in April 2016 for certain interest rate swaps denominated in USD, EUR, GBP, JPY and AUD for primarily large institutional dealers. 

As noted by ASIC in its report (setting out the key issues arising from its earlier Consultation Paper), ASIC had initially proposed certain cross border elements to its rules which have now been removed following industry consultation.  FIA Asia had submitted that the extra-territorial application of certain proposals were too wide.  

ASIC had proposed applying the clearing requirements to foreign clearing entities if the transaction was 'entered into' in Australia.  There was strong industry opposition to this proposal (including by FIA Asia) who submitted that the clearing requirements should be limited only to transactions 'booked in' Australia.  The strong view of FIA Asia and its members is that limiting the extra-territorial scope of the rules will minimise unncessary complexity, duplicative and potentially conflicting rules and costs and burdens on market participants.  

ASIC acknowledged that compliance with these rules would have required significant additional costs and the build of new technology and infrastructure systems.  Consequently ASIC (after consultation with RBA and APRA) considered these cross border transactions to be less significant to the management of systemic risk in Australia and concluded that the regulatory burdens outweighed the regulatory benefits and removed these cross border transactions from the clearing requirements.   

For further information, please contact Phuong Trinh.

  • FIA
  • Clearing
  • Cross Border