Benefits to the efficiency, integrity and stability of the Australian financial system

The Report found that there would be substantial benefits to the efficiency, integrity and stability of the financial system if market participants were to use centralised trade repositories, including:

  • increased capacity for market oversight and monitoring of risk concentration and other systemic risk indicators;
  • improved risk management for market participants;
  • enhanced market transparency; and
  • greater operational standardisation.

Comprehensive trade reporting would also provide regulators with detailed information to inform recommendations around potential future product class prescriptions and rule design.

In principle, all product classes and participants might directly or indirectly benefit from these enhancements.  However, it is likely that the most immediate benefit would be in higher turnover markets and for larger participants.  Markets in interest rate derivatives and FX derivatives are the most actively used in Australia; the credit derivatives market is also widely used.  Within these, the bulk of turnover involves financial institutions, of which the vast majority of activity is facilitated by a relatively small number of dealers.