ASX takes a step forward on OTC derivatives clearing

ASX Group, the owner of the Australian Securities Exchange, has moved ahead with its plans to launch OTC derivatives clearing and a collateral management service.

ASX Group, the owner of the Australian Securities Exchange, has moved ahead with its plans to launch OTC derivatives clearing and a collateral management service.

ASX has now received approval from the required majority of its 14 futures clearing participants for the rule amendments needed to implement the new OTC Derivatives Clearing Service.

It will now proceed to seek formal regulatory clearance. ASX expects to have it operationally ready by next month.

ASX’s OTC Derivatives Clearing Service will provide the basis for the delivery of an onshore client clearing service for Australian investors, which is scheduled for the end of 2013.

The ASX OTC Derivatives Clearing Service will allow for the central clearing of standardised Australian dollar denominated interest rate swaps. The notional value of transactions in this market was almost A$18 trillion during the last financial year.  

For the client clearing aspect, ASX is working with nine major Australian asset managers and state government treasuries. ASX’s client clearing service will provide risk management controls to Australian investors and asset managers, enabling them to protect their individual positions and collateral in the event of a participant default.

The new service will provide client protection mechanisms in the event of a counterparty default. Additionally, it will permit cross-margining benefits with existing ASX derivative products. It will also give Australian investors access to a domestic solution where collateral is kept onshore and subject to Australian laws and regulations.

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