Monday March 13 2017

News Source: Global Exchanges

Focus: Takeover and Acquisition

Type: General




The Council of Financial Regulators (CFR) and the Australian Competition and Consumer Commission (together, the Agencies) have released a consultation paper: Safe and Effective Competition in Cash Equity Settlement in Australia (Consultation Paper).

The purpose of this consultation is to explore possible implications of competition in settlement of cash equities in Australia for the functioning of markets, financial stability and access, and to invite feedback on the development of policy guidance to ensure that any such competition is safe and effective. This consultation does not review the policy case for competition in settlement, noting that the government has previously endorsed a position of openness to competition in both clearing and settlement.

The first part of this paper provides an overview of current cash equity settlement arrangements in Australia and identifies three stylised market structures that might emerge following the entrance of a competing Securities Settlement Facility (SSF). These are:

  • Competition in settlement, with all trades cleared through a single CCP
  • Competition in settlement, where not all trades are cleare
  • Competition in both clearing and settlement

The consideration of possible market models is technology neutral. These models are presented to elicit feedback on the risks and policy issues that may arise under each market structure (and do not imply that any of these structures would be preferred or necessarily acceptable from a regulatory perspective).

The final sections of this paper discuss a number of potential implications for the functioning of markets, financial stability and access. The paper concludes by presenting potential controls for safe and effective competition. In developing these controls the Agencies have had regard to the Minimum Conditions (Clearing), which would be expected to apply to a central counterparty (CCP) if there was competition in clearing. Consequently, the structure of the potential controls envisaged for competition in settlement largely mirrors that of the Minimum Conditions (Clearing).

Click on the link above for further details.