The International Swaps and Derivatives Association (ISDA) submitted a response to a consultation from Australia’s Council of Financial Regulators (CFR) on the central clearing of bonds and repos in Australia.
In response to changes in the size and structure of the Australian bond and repo markets, the CFR sought feedback on the costs and benefits of introducing a central counterparty (CCP) in the Australian bond and repo markets. It also sought views on the circumstances under which a bond and repo CCP could be operated safely and efficiently by an overseas operator and what additional protections may be required in Australia.
ISDA welcomes the fact that the CFR is not considering the introduction of a clearing mandate. In its response, ISDA sets out the costs and benefits of voluntary central clearing for the Australian bond and repo markets. ISDA also comments on participation and other key factors to consider for a bond and repo clearing offering to be viable.
On location, the response states it is not uncommon for an overseas operator to provide clearing services related to non-domestic markets and ISDA does not see any increased risk for an overseas operator to provide clearing services for the Australian bond and repo markets, as long as the overseas CCP is appropriately supervised and risk managed.