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OTC clearing

ASX is building world-class financial market infrastructure that is tailored for Australian participants, investors and other stakeholders. ASX's central counterparty clearing service for OTC Interest Rate Derivatives is a key component of that infrastructure.

Key features of the service

  • Initial A$ OTC Derivatives product coverage
    • A$ Fixed vs Floating BBSW IRS
    • A$ Overnight Index Swaps
    • A$ Basis Swaps
  • Service will be extended to additional currencies (e.g. $NZ) and additional products (e.g. FRAs) over time.
  • Delivered under ASX Clear (Futures) existing Australian Clearing and Settlement Facility licence.
  • Portfolio margining between OTC Interest Rate Derivatives and ASX 24 exchange-traded interest rate futures products.
  • Industry standard risk management processes including VAR-based margining.
  • Capital efficient combined Default Waterfall for all ASX Clear (Futures) OTC and exchange-traded products.
  • Technology solution that utilises industry best practice and market standard connectivity arrangements, including trade registration via the MarkitSERV trade affirmation platform.
  • Futures style novation of new trades during a 15-hour operating cycle between 6:00am and 9:00pm AEST, providing Clearing Participants with close to real-time novation.

Service Launch

ASX launched the OTC Interest Rate Derivatives Clearing Service on 1 July 2013 for dealer activity while the Australian client clearing service went live on 7 April 2014. ASX is also rolling out enhancements to ASX 24 Exchange Traded Derivatives at the start of Q3 2014. 

ASX OTC Interest Rate Derivatives Clearing Service Operating Rules

Formal lodgement - On 3 June 2013, ASX formally lodged with ASIC draft operating rules for ASX's OTC Interest Rate Derivatives Clearing Service, incorporating amendments required by the regulators. The documents lodged with ASIC are accessible here:

Notice of the effective date (1 July 2013) of the Formal lodgement was provided on 28 June 2013 by the ASX 24 Notice that is accessible here.

Supplementary rule amendment - On 1 July 2013, ASX formally lodged with ASIC a supplementary amendment to OTC Rules, Schedule 2 relating to the transitional arrangements for OTC Commitments. Effective from 1 July 2013, the detail and purpose of this amendment are contained in the ASX 24 Notice that is accessible here.

Procedures - ASX Clear (Futures) Procedure 7.1, which relates to the assets designated for use in the default fund of ASX Clear (Futures), has also been amended with effect from 1 July 2013. The details and purpose of the amendment are contained in the ASX 24 Notice that is accessible here.

The published final versions of the OTC Rulebook, OTC Handbook and the Futures Rules incorporating the changes shown above can be located here.

Dealer to Dealer Clearing (service description, frequently asked questions and fact sheets) 

To provide prospective users of the OTC service with additional information, ASX has produced a service description outlining the core components of the service, together with a Frequently Asked Questions document and several explanatory fact sheets. These are accessible here:

ASX OTC Interest Rate Derivatives – Client Clearing Service

First 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.

Response to Consultation - On 12 December 2013, ASX informally lodged with ASIC a consolidated rule amendment package that incorporates the changes proposed in the first and second consultations mentioned above, as well as further changes adopted in response to feedback from stakeholders. 

·         ASX’s response to consultation feedback can be found here

·         The consolidated Operating Rules can be found:

o   here (changes tracked against rules in force on 12 December 2013); and

o   here (changes tracked against the consultation version of the rules).

·         Non-confidential submissions can be found:

o   here AFMA (re First Consultation)

o   here ISDA (re First Consultation)

o   here ISDA (re Second Consultation)

Cleared OTC Derivatives Supplement - ASX has prepared the ASX Cleared OTC Derivatives Supplement which Clearing Participants and Clients might find useful in documenting the relationship between them with respect to clearing OTC derivatives through ASX.  The document is a sample and is not mandated for use.  The Supplement may be used in conjunction with either a futures agreement or a 2002 ISDA Master Agreement.  The Supplement can be found here and a word document is available upon request.

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.

Further OTC Rule and Handbook amendments - On 22 January 2014, ASX informally lodged with ASIC and released for OTC Participant comment further OTC Rule and Handbook amendments. The consultation period closes on 7 February 2014. 

Consultation

  • The consultation paper can be found here.
  • ASX's response to consultation feedback can be found here.

Rules

  • The draft Operating Rules (OTC Rules and Handbook) the subject of consultation can be found here.
  • The final form of the OTC Rules and OTC Handbook (as lodged with ASIC on 28 February 2014) can be found here.  These rules will become effective on 7 April 2014.
  • The final form of OTC Rules and OTC Handbook is identical to the documents lodged with ASIC on 22 January 2014, except for the changes shown in this document.
  • Notice of the determination that the Client Protection Model rules (Part 10) commence to apply in relation to OTC on 7 April 2014 is accessible at the ASX 24 Notice here.
     

OTC Derivatives Clearing – further amendments - On 17 April 2014 ASX informally lodged with ASIC and released for OTC Participant comment further rule and procedure amendments.  The consultation period ends on 15 May 2014.

Consultation

  • The consultation paper can be found here.

Rules

  • The proposed amendments to the Operating Rules 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. It can be found here

Client Clearing (service description and frequently asked questions) 

To provide prospective users and providers of the OTC Client Clearing Service with additional information, ASX has produced a service description outlining the core components of the service together with two fact sheets; one for Clients and one for Clearing Participants. 

For further information please contact ASX Business Development:

Rohan Delilkhan - General Manager, Derivatives & OTC Markets
ph: (02) 9227 0115
e: Rohan.Delilkhan@asx.com.au

Christopher Day - Senior Manager, Derivatives & OTC Clearing
ph: (02) 9227 0204
e: Christopher.Day@asx.com.au

Allan McGregor - Manager, Derivatives & OTC Clearing
ph: (02) 9227 0814
e: Allan.McGregor@asx.com.au 

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