The regulatory frameworks for financial market infrastructures (FMIs) in Australia are aligned with the international standards for FMIs – the Principles for Financial Market Infrastructures (PFMI) – which have been developed by the Bank for International Settlements' Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions.
In Australia, central counterparties and securities settlement systems (including those operating central securities depositories) are known as clearing and settlement (CS) facilities. The Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) have separate, but complementary, regulatory responsibilities for the supervision of CS facilities licensed under Part 7.3 of the Corporations Act 2001:
- The RBA is responsible for determining standards (the Financial Stability Standards or FSS) for the purposes of ensuring that CS facility licensees conduct their affairs in a way that causes or promotes overall stability in the Australian financial system. The RBA is also responsible for assessing how well a licensee is complying with its obligation under the Corporations Act to, to the extent that it is reasonably practicable to do so, comply with these standards and do all other things necessary to reduce systemic risk.
- ASIC is responsible for assessing CS facility licensees' compliance with all other obligations arising under the Corporations Act. This includes the obligation, to the extent that it is reasonably practicable to do so, to do all things necessary to ensure that the facility's services are provided in a fair and effective way.
ASIC and the RBA have agreed a Memorandum of Understanding, which is intended to promote transparency, help prevent unnecessary duplication of effort, and minimise the regulatory burden on CS facilities.
ASIC has sole responsibility for licensing and supervision of trade repositories, which are subject to Part 7.5A of the Corporations Act.
The RBA has regulatory responsibility for Australia's payments system, including systemically important payment systems. The RBA's regulatory role is set out in the Reserve Bank Act 1959, and requires that the Payment Systems Board (PSB) determine the RBA's payments system policy in a way that best contributes to:
- controlling risk in the financial system
- promoting the efficiency of the payments system
- promoting competition in the market for payment services, consistent with overall stability of the financial system.
The only domestic payment system that currently meets the criteria for systemic importance is the Reserve Bank Information and Transfer System (RITS). Since RITS is owned and operated by the RBA, effective oversight is assured by internal governance arrangements within the RBA, as well as by transparent assessment against the PFMI. A key element of governance is the separation of the RBA's operational and oversight functions.