ASX Clear (Futures) is the Clearing House for all Futures and Options products traded on ASX Trade24 and all eligible OTC products submitted via an approved Affirmation Platform.
Trades executed on ASX Trade24, or OTC trades affirmed on an ASX approved Affirmation Platform are submitted to ASX Clear (Futures) for registration.
Once accepted and novated by ASX Clear (Futures), the Full Participant will receive notification of a Market Contract between the Participant and ASX Clear (Futures). The Full Participant will advise the allocation instructions and the Open Contract will be registered in the Clearing Participant’s name.
Where the Full Participant and Clearing Participant are separate entities, the trade will be given up and only registered to the Clearing Participant on their acceptance.
At the end of each clearing day, ASX Clear (Futures) will margin the Clearing Participant a daily variation margin based on the movement in the value of the positions, and an initial margin calculated on the open positions held across the House and Client account for settlement the following business day. The Clearing Participant will arrange settlement via ASX Austraclear and/or ASX Collateral.
This diagram illustrates the trade through to the daily settlement process.
Consultation. On 28 August 2013, ASX informally lodged with ASIC and released for public comment draft operating rules for ASX’s ASX 24 Exchange Traded Derivatives and OTC Interest Rate Derivatives Client Clearing service. Submissions close on 2 October 2013. The consultation paper and draft Operating Rules can be found here.
Second Consultation. On 17 October 2013, ASX informally lodged with ASIC and released for public comment further draft operating rules for ASX’s ASX 24 Exchange Traded Derivatives and OTC Interest Rate Derivatives Client Clearing service.
The second Consultation Paper focuses on certain aspects of ASX’s default management processes for OTC Interest Rate Derivatives and juniorisation of OTC Commitments. Submissions close on 15 November 2013. The consultation paper and draft Operating Rules can be found here.
Formal lodgement. On 13 January 2014, ASX formally lodged with ASIC the final form of the amendments to the ASX Clear (Futures) Operating Rules for ASX's Client Clearing Service for OTC Interest Rate Derivatives and ASX 24 Exchange Traded Derivatives, incorporating amendments required by the regulators.
- The final form of the Client Clearing rules (as lodged with ASIC on 13 January 2014) can be found here.
- The final form of the Client Clearing rules is identical to the documents lodged with ASIC on 12 December 2013, except for the changes required by regulators, as shown in this document.
Notice of the effective date of the Formal lodgement (11 February 2013) is accessible at the ASX 24 Notice here.
- Notice of the determination that the Client Protection Model rules (Part 10) commence to apply in relation to ASX 24 Exchange Traded Derivatives on 14 July 2014 is accessible at the ASX 24 Notice here.
Enhanced Client Protection Structures
First Consultation - On 14 July 2014, ASX released a consultation paper ‘Derivatives Account Segregation and Portability – Enhanced Client Protection Structures'.
ASX seeks feedback on the design of an enhanced client account structure which is intended to be implemented across the ASX Client Clearing Service for ASX 24 Exchange Traded Derivatives and OTC Interest Rate Derivatives. Potential enhancements include the protection of excess client collateral and the tracking of client non-cash collateral. The consultation paper can be found here.
Client Clearing Fact Sheets
The Client Fact Sheet introduces the two clearing account types available for ASX 24 Exchange Traded Derivatives and OTC Interest Rate Derivatives. Clearing Participants must provide their Clients with, or direct them to, the Client Fact Sheet in accordance with the amended Operating Rules. The Client Fact Sheet as at 19 March 2014 can be found here.
The ASX Clearing Corporation Investment Policy Fact Sheet can be found here.
The Client Protection Model Fact Sheet outlines the key features of the Client Protection Model that supports ASX’s Client Clearing Service for ASX 24 Exchange Traded Derivatives and OTC Interest Rate Derivatives. In addition, ASX also offers the Client Protection Model service to Nominated Persons of an entity that is itself a direct client of a Clearing Participant. For further information on the Nominated Person structure, please see the Nominated Person Fact Sheet.
Futures Client Clearing (Frequently Asked Questions)
To provide prospective users and providers of the ASX 24 ETD Client Clearing Service with additional information, ASX has produced two Frequently Asked Questions documents; one for Clients and one for Clearing Participants.
- Clearing Participants frequently asked questions (updated 7 April 2014)
- Clients frequently asked questions (updated 7 April 2014)
ASX Clear (Futures) services are provided to clearing participants, who are typically brokers or clearing and custody service providers. The two key benefits to clearing participants are netting efficiencies and counterparty credit protection.
ASX Clear is approved as a ‘netting market’ for the purposes of the Payment Systems and Netting Act. This enables the netting of settlement obligations in each individual equity, providing greater market efficiency at the time of settlement and reducing participant transaction and funding costs.
The left-hand diagram below depicts participant A’s trading activity in a single product. At a gross level, participant A has sold 100 contracts to, and bought 50 contracts from, participant B. Participant A has also sold 30 contracts to, and bought 50 contracts from, participant C. Post novation, participant A’s trades with participants B and C are replaced with trades between participant A and ASX Clear (Futures). Post netting, this becomes a net sale of 30 contracts from participant A to ASX Clear (Futures) (right-hand diagram).
Counterparty credit protection
Through novation, ASX Clear (Futures) provides protection to non-defaulting clearing participants (and, indirectly, their clients) from a defaulting clearing participant which does not meet its obligations. Different arrangements apply for different categories of financial product transactions.
Clients, typically investors, must be fully informed and satisfied with the creditworthiness and performance risk of their clearing participant. ASX Clear (Futures) does not interpose itself between a clearing participant and its clients.
Novation does not change the exposure that clients have if their own clearing participant defaults and cannot meet its obligations to them.