Media Release Number: 2017-01 7 September 2017

Australian Cash Equity Settlement Services: Policy Statement

The Council of Financial Regulators, in collaboration with the Australian Competition and Consumer Commission (ACCC), is today releasing a policy statement setting out the Minimum Conditions for Safe and Effective Competition in Cash Equity Settlement in Australia (Minimum Conditions (Settlement)).

The release of this policy statement follows the publication of the Council's consultation paper on Safe and Effective Competition in Cash Equity Settlement in Australia in March 2017. The purpose of the consultation was to explore the possible implications of competition in the settlement of cash equities in Australia for the functioning of markets, financial stability and access. The consultation paper also invited feedback on the development of policy guidance to ensure that any such competition is safe and effective, and a proposed set of policy controls.

Stakeholder feedback on the consultation broadly supported the proposed policy controls. Feedback received from stakeholders and the agencies' responses are detailed in the report Safe and Effective Competition in Cash Equity Settlement in Australia: Response to Consultation, also released today.

The policy controls set out in the Minimum Conditions (Settlement) include: (i) adequate regulatory arrangements; (ii) access on transparent, non-discriminatory, and fair and reasonable terms; (iii) appropriate links between competing securities settlement facilities; and (iv) appropriate regulatory arrangements for oversight of Primary and Secondary Markets.

The Council's publication today follows two policy statements published in October 2016: the Regulatory Expectations for Conduct in Operating Cash Equity Clearing and Settlement Services in Australia (Regulatory Expectations) and the Minimum Conditions for Safe and Effective Competition in Cash Equity Clearing in Australia (Minimum Conditions (Clearing)). The Minimum Conditions (Settlement) should be read in conjunction with these two earlier policy statements.

In response to feedback received from the consultation and in light of the release of the Minimum Conditions (Settlement), the Council is also publishing today minor and consequential changes to update the Regulatory Expectations and Minimum Conditions (Clearing). These changes clarify, for instance, that services include the provision of data necessary for clearing and settlement, and that access to these services should have prices that are fair and reasonable.

Together, the Minimum Conditions (Clearing), the Minimum Conditions (Settlement) and the Regulatory Expectations establish a flexible policy framework underpinning the government-endorsed policy stance of openness to competition. If competition in clearing or settlement were to emerge, the relevant minimum conditions would apply to those services, while the Regulatory Expectations will continue to apply to the services for which ASX remains the monopoly provider.

Elements of the Regulatory Expectations, Minimum Conditions (Clearing) and Minimum Conditions (Settlement) are not enforceable under the existing regulatory framework. In March 2016, the government announced its commitment to legislative changes to grant the relevant regulators rule-making and arbitration powers to impose requirements on clearing and settlement facilities in Australia. The Council and the ACCC will work with the government on the development of legislation to implement legislative changes to the statutory framework for clearing and settlement facilities.

The Council of Financial Regulators and the ACCC expect to review the Regulatory Expectations, Minimum Conditions (Clearing) and the Minimum Conditions (Settlement) periodically, including in the event of material changes to the operating environment or market structure for these services.

For further details, please see the following Council publications: