Clearing & settlement

ASX closer to IRS clearing

The Australian Stock Exchange's plan to clear over-the-counter (OTC) interest rate swaps came a step closer this week, as seven banks stepped forward to support the project.

The first phase of the ASX OTC Interest Rate Derivatives Clearing Service is expected to occur halfway through 2013 after the Australian bourse began work on the plan in mid-2012.

Seven banks, located both in Australia and internationally, signed non-binding commitments to help develop the new service, which will provide central counterparty clearing for the A$18 trillion-market for OTC traded Australian dollar-denominated interest rate swaps.

Elmer Funke Kupper, ASX managing director and CEO said the exchange plans to develop the service alongside client clearing and collateral management solutions.

"ASX welcomes the contribution of Australian and international banks to work with ASX on an OTC clearing solution. The solution will be designed to meet the needs of the Australian market," said Kupper.

The ASX OTC clearing service aims to provide risk and operational benefits to members and the company has engaged with key customers and domestic regulators to develop the new platform.

The domestic exchange is likely to face competition for swaps clearing following an application lodged in mid-December by Anglo-French clearer LCH.Clearnet to extend its OTC interest rate clearing service to Australia.

LCH.Clearnet has filed with national regulator the Australian Securities and Investment Commission for a clearing and settlement facility licence, which would authorise it to offer its SwapClear OTC interest rate swap clearing facility to Australian banks in a bid to expand its present client list of 70 international bank members.

Richard Henderson +1 212 217 6916 richard.henderson@information-partners.com