July 2012

Ensuring Appropriate Influence for Australian Regulators over Crossborder Clearing and Settlement Facilities

In October 2011, the Council of Financial Regulators (the Council) consulted on a broad package of reforms to the regulatory framework for financial market infrastructures (FMIs). The Council subsequently wrote to the Treasurer and Deputy Prime Minister outlining its final recommendations.

The Deputy Prime Minister released the Council's letter in March 2012 along with an invitation for further stakeholder comment on implementation of the final framework.

Among its proposed reforms, the Council recommended legislative change to underpin the imposition of graduated ‘location requirements’. These may be more broadly defined as measures to be taken by the Reserve Bank of Australia (RBA) and the Australian Securities and Investment Commission (ASIC) to ensure they retain sufficient regulatory influence over cross-border FMIs that operate in Australia. Many of these measures could be implemented using existing powers under the Corporations Act, although Treasury is considering legislative change to strengthen these powers.

The purpose of this paper is to elaborate on a framework within which such measures could be taken with respect to clearing and settlement facilities. Forthcoming consultations on revisions to the RBA's Financial Stability Standards and ASIC's Regulatory Guide 211 clearing and settlement facilities: Australian and overseas operators will provide an opportunity for stakeholder feedback on use of these agencies' existing powers to implement this framework.