In commenting on the consultation questions below, you are encouraged to read the proposals in conjunction with the Report on the Australian OTC Derivatives Market, by APRA, ASIC and the Reserve Bank, published in July 2013 and available at this web address http://www.cfr.gov.au/media‑releases/2013/mr‑13‑03.html.
1. Do you have comments on the benefits and costs of complying with a mandatory central clearing obligation, from the point of view of your business and/or that of your customers?
We request that, in commenting, you quantify compliance costs as far as possible, including whether costs are likely to change over time, are transitional or projected ongoing costs. For example, costs may include:
- legal costs;
- staff cost — for example number of staff hours and training costs;
- IT costs; and/or
- increased costs of managing risks or funding projects.
Please separate additional costs that would come about as a result of this proposal, as well as other regulatory costs that could be mitigated if you are able to comply with Australian regulation rather than many different countries’ regulations.
To assist this analysis it would be useful to know whether your trades, and/or those of your clients, are becoming subject to central clearing obligation from other countries and whether your counterparties prefer central clearing of trades.
Answer question 1
2. Do you have comments on the proposal to mandate central clearing in respect to G4 IRD? Please also consider the costs and benefits of a wider or narrower scope. Could you comment on the incremental costs and benefits of a broader or narrower scope of coverage? For example, including only USD IRDs or alternately including all IRDs.
Answer question 2
3. Do you agree with the proposal to restrict ASIC rulemaking to entities that are considered to be G4 Dealers, and to exempt intra group trades? Could you comment on the incremental costs and benefits of including or exempting other types of entities or transactions? For example including all AFSL holders and ADIs or alternately setting a high threshold of activity.
Answer question 3
4. Do you have comments on the calculation methodology used for determining the proposed threshold of activity and the appropriate level of the threshold? Do you have views on whether notional OTC derivatives or notional OTC IRDs is the more appropriate basis for calculating the threshold? Or would you prefer a different methodology and if so, why?
Answer question 4
5. Do you have comments on the proposed timetable for implementing the central clearing obligation? Could you comment on the incremental costs and benefits of an earlier or later start date than what is proposed?
Answer question 5
6. Do you have comments on the proposal that some CCPs may be prescribed in order to ensure Australian market participants have appropriate access to CCPs? Or is there another option you prefer? If so, why?
Answer question 6
7. From the point of view of your business and/or that of your customers, what is your preliminary view on the costs and benefits of mandatory central clearing of:
- AUD IRD?
- North American and European referenced CDS?
- Any other derivatives?
8. Do you have views on the appropriate timing of the introduction of such mandatory requirements? Are there any preconditions that should be met before such mandatory requirements are introduced?
Answer question 8
9. What do you view as the characteristics that make a trading platform suitable for mandatory trading of derivatives?
Answer question 9
10. Do you have comments on the proposals relating to:
- Making the exemption of end users from trade reporting permanent, subject to ensuring that appropriate information on systemically important OTC derivatives trading is available to regulators?
- A more tightly targeted AFSL reference in the regulations?
Or is there another option you prefer? If so, why?
Answer question 10