This document provides summaries and analyses of certain rules of the relevant central counterparty (CCP) in a standardized format to facilitate comparison across a range of CCPs and CCP Services. It is not a complete or comprehensive statement of the rights and obligations of a CM or its Clients under such rules and applicable law and does not constitute legal advice. A complete and comprehensive understanding of such matters requires a review of the rules and other relevant CCP documentation and specific legal advice from counsel. The answers that follow are based on a review and analysis of the documents specified below and are current as of the date specified above. We have also included, where strictly necessary, high-level discussions of background law. However, the below does not purport, and should not be considered, to be an analysis of all relevant legal requirements applicable to the CCP or its CMs. We expect that the rules of the CCP may change in response to regulatory and other requirements, and these responses will be periodically updated to the extent they are impacted by any subsequent rule changes.
Contents(hide)
| 0. Overview | |
| 0.0 Date Finalised and Effective Date | Date Finalised: February 18, 2015Date of Most Recent Update: January 23, 2026 |
| 0.1 Products Cleared | ServiceThe clearing service for Futures Contracts, Option Contracts, Bond Transactions and Repurchase Agreements (the “Service”). ProductsBased on the CCP’s website and the Rules, under the Service, the CCP provides for the clearing of:Futures Contracts;Option Contracts;Bond Transactions; andRepurchase Agreements.The CCP does not currently offer clearing of Bond Transactions and Repurchase Agreements, notwithstanding their inclusion in the Rules. The CCP has not therefore provided comments on the Service as it relates to Bond Transactions and Repurchase Agreements in its review of this survey. |
| 0.2 Other products and clearing services of the CCP | OTC Service is the other service offered by the CCP. Products cleared through this other service are:A$ Fixed vs Floating BBSW IRS (BBSW is a screen rate published by Reuters each trading day (i.e. similar to LIBOR). It is used by many market participants to determine the bank bill rate. It is calculated by reference to actual bid and offer rates quoted by 8 banks for bills of exchange.)A$ Overnight Index SwapsA$ Basis SwapsAsset Swaps;BBSW vs AONIA Basis Swaps;NZ$ BKBM IRS; andNZ$ Overnight Index Swaps.The OTC Service is the subject of a separate survey. |
| 0.3 Regulators & Key Statutes/Regulations | RegulatorsThe CCP is regulated by:Australia: the RBA; andAustralia: the ASIC.Rule amendments are subject to Ministerial disallowance.Additional responsibility for regulation of the Australian financial system lies with:Australia: the TreasuryAustralia: the APRAThe CCP is recognised in Switzerland and is applying for designation by the Reserve Bank of New Zealand in order to benefit from additional settlement finality protections under the Reserve Bank of New Zealand Act 1989.Key statutes and regulationsThe CCP is subject to Parts 7.3 and 7.4 of the Corporations Act. Part 7.5A of the Corporations Act gives the ASIC the power to make derivative transaction rules. The Minister for Revenue and Financial Services is the responsible Minister for these parts of the Corporations Act: however, the responsible Minister has delegated some of the regulatory matters under these parts of the Corporation Act to authorised officers of the ASIC.Australia has committed to implementing the OTC derivatives reforms recommended by the 2009 G20 Pittsburgh Summit. Changes to transaction reporting requirements have been implemented for certain entities, and centralised clearing requirements for certain OTC interest rate derivatives have also been implemented.Amendments to the Corporations Regulations 2001 became effective on 10 September 2015. These provide a framework for the ASIC to implement centralised clearing rules for OTC interest rate derivatives. On 28 May 2015 the ASIC released draft clearing rules for public consultation. The ASIC Derivative Transaction Rules (Clearing) 2015 were implemented on 11 December 2015 and under these rules mandatory clearing came into effect from 4 April 2016. |
| 0.4 US/EU registration Status | US registration status Different services have different US regulatory treatments.In respect of the Service:The CFTC has issued an order of exemption on 18 August 2015, as amended on 28 January 2016. from registration as a derivatives clearing organisation (DCO) to the CCP. See http://www.cftc.gov/PressRoom/PressReleases/pr7214-15. CFTC has made this exemption from DCO registration for the clearing of swaps because it determined that the CCP is subject to comparable, comprehensive supervision by appropriate government authorities in the CCP’s home country. Subject to the terms and conditions of the order, the CCP is permitted to clear proprietary swap positions for its U.S. clearing members.In respect of the OTC Service, please see the survey relating to the OTC Service. EU authorisation/recognition StatusThis item primarily addresses QCCP status in the jurisdiction of the CCP. It also addresses QCCP status in the EU.Recognised under EMIR as of 27 April 2015.Under EMIR, as the CCP is established outside the European Union, it may only provide clearing services to clearing members established in the European Union if it is recognised as a third country CCP by ESMA. |
| 0.5 QCCP status | Treated as a QCCP under the EU Capital Requirements Regulation by virtue of its recognition by ESMA as a third country CCP.(although note that the CCP will not necessarily be regarded as a QCCP by regulators in other jurisdictions).The CCP has been designated as a QCCP on 23 April 2013 by the Australian Prudential Regulation Authority (the “APRA”) based on advice given by the Reserve Bank of Australia (the “RBA”) and the Australian Securities and Investments Commission (the “ASIC”). |
| 0.6 Documents Reviewed | 1. ASX Clear (Futures) Operating Rules12. ASX Clear (Futures) Operating Rules – Schedules23. ASX Clear (Futures) Operating Rules – Procedures Determinations and Practice Notes34. ASX Clear (Futures) Operating Rules – Guidance Note 1 (Admission as a Participant)45. ASX Clear (Futures) Operating Rules – Guidance Note 8 (Notification Obligations)56. ASX Clear (Futures) Operating Rules – Guidance Note 9 (Offshoring and Outsourcing)67. ASX Clear (Futures) Operating Rules – Guidance Note 10 (Business Continuity and Disaster Recovery)78. ASX Recovery Rulebook89. ASX Recovery Rulebook – Schedules910. ASX Recovery Handbook1011. RBA 2024/2025 Assessment1112. RBA 2022/2023 Assessment1213. RBA 2021/2022 Assessment1314. RBA 2018/2019 Assessment Appendix C11415. ASX Limited Board Charter1516. Clearing and Settlement Boards Charter1617. Risk Committee Charter1718. Internal Audit Charter1819. Audit and Supervision Committee Charter1920. Technology Committee Charter2021. People and Culture Committee Charter2122. Nomination Committee Charter2222. Audit and Supervision Committee Charter2223. ASXCC Investment Policy23*Hide note1 11 November 2024;https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waiversThe ASX Clear (Futures) Operating Rules comprise rules governing the Service as well as rules governing the OTC Service (the latter is the subject of a separate survey).2 13 October 2025;https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waivers3 13 October 2025;https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waivers4 4 March 2024;https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waivers5 15 December 2023;https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waivers6 15 June 2015;https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waivers7 8 March 2022;https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waivers8 26 February 2024;http://www.asx.com.au/regulation/rules/ASX-Recovery-Rules.htm9 1 June 2016;http://www.asx.com.au/regulation/rules/ASX-Recovery-Rules.htm10 1 November 2022;http://www.asx.com.au/regulation/rules/ASX-Recovery-Rules.htm11 Reserve Bank of Australia, 2024/2025 Assessment of ASX Clearing and Settlement Facilities; September 2025;https://www.rba.gov.au/payments-and-infrastructure/financial-market-infrastructure/clearing-and-settlement-facilities/assessments/asx/12Reserve Bank of Australia, 2022/2023 Assessment of ASX Clearing and Settlement Facilities; October 2023;https://www.rba.gov.au/payments-and-infrastructure/financial-market-infrastructure/clearing-and-settlement-facilities/assessments/asx/13 Reserve Bank of Australia, 2021/2022 Assessment of ASX Clearing and Settlement Facilities; September 2022;http://www.rba.gov.au/payments-and-infrastructure/financial-market-infrastructure/clearing-and-settlement-facilities/assessments/asx/14 Reserve Bank of Australia, 2018/2019 Assessment of ASX Clearing and Settlement Facilities Appendix C1; September 2019;https://www.rba.gov.au/payments-and-infrastructure/financial-market-infrastructure/clearing-and-settlement-facilities/assessments/2018-2019/15 12 August 2025;https://www2.asx.com.au/content/dam/asx/about/asx-board-charter.pdf16 24 June 2025;https://www.asx.com.au/content/dam/asx/about/cs-boards-charter.pdf17 3 June 2025;https://www.asx.com.au/content/dam/asx/about/risk-committee-charter.pdf18 May 2025;https://www.asx.com.au/content/dam/asx/about/asx-internal-audit-charter.pd19 3 June 2025;https://www.asx.com.au/content/dam/asx/about/audit-and-supervision-committee-charter.pdf20 3 June 2025;https://www.asx.com.au/content/dam/asx/about/technology-committee-charter.pdf21 3 June 2025;https://www.asx.com.au/content/dam/asx/about/people-and-culture-committee-charter.pdf22 3 June 2025;https://www.asx.com.au/content/dam/asx/about/nomination-committee-charter.pdf23 ASX Clearing Corporation Investment Policy; July 2017;http://www.asx.com.au/documents/clearing/asxcc-investment-policy.pdf* Each of the documents listed in 1, 2 (to the extent applicable to the Service) and 7, 8 above are together referred to as the “Rules”.Each of the documents listed in 3 and 10 above are together referred to as the “Procedures”.Each of the documents listed in 8 to 10 above are together referred to as the “Recovery Rules”. |
| 0.7 Reviewing Law Firms | Primary ReviewerLinklaters LLP (A19653398) Secondary ReviewerMilbank, Tweed, Hadley & McCloy LLP Australian law advice: AllensThe CCP has not yet reviewed the updated version of this survey and its contents remain subject to the CCP’s further comment. |
| 1. Governing law | |
| 1.1 What is the governing law of the Rules? | New South Wales law. The Clear (Futures) Rules are governed by, and will be interpreted in accordance with, the laws in force in New South Wales.The Recovery Rules are explicitly governed by New South Wales law.Hide noteRule 92 (Governing law and submission to jurisdiction)ASX Clear (Futures) Rules, Rule 92.1ASX Recovery Rulebook, Rule 12.15 (Governing law) |
| 1.2 What is the governing law of the Contracts? | For Contracts traded on the Australian Securities Exchange Limited – New South Wales law.For Contracts traded on the New Zealand Futures & Options Exchange Limited – New Zealand law.It is our understanding that the governing law of the Rules would remain New South Wales law for Contracts traded on the New Zealand Futures & Options Exchange Limited. See also item 7.Hide noteRule 92.3 (Governing law and submission to jurisdiction) |
| 2. Language(s) of the Rules | |
| 2.1 In which language are the Rules written? | English only. |
| 2.2 If the Rules are in more than one language, which one governs? | N/A |
| 3. Branches or operations in other jurisdictions | |
| 3.1 In what jurisdiction(s) other than its home jurisdiction does the CCP have branches or operations? | The CCP has offices in Hong Kong, London and Chicago. |
| 3.2 If the CCP has branches or operates in multiple jurisdictions, please describe any CCP Rules pertaining to conflict of laws or choice of law. | N/A |
| 4. Legal opinions | |
| 4.1 Are any legal opinions or any other form of legal comfort in relation to any of the following publicly available? | No.Enforceability of the Rules (including settlement finality issues)No. Close-out netting in the event of a CM default (including in the context of or outside of insolvency)No. Close-out netting in the event of a CCP default (including in the context of or outside of insolvency)No. Bankruptcy remoteness of initial marginNo. IAS 32 issuesNo. Characterisation and enforceability of variation marginNo. Other (please specify)1No.The RBA 2018/19 Assessment Appendix C1 addresses the legal basis of the CCP and covers, amongst other areas, the enforceability of the Rules.Enforceability of the Rules (including settlement finality issues)2Based on the RBA 2018/19 Assessment Appendix C1:the Rules have legal effect under section 822B of the Corporations Act, having effect as a contract under seal between the CCP and each of its CMs, as well as each CM and each other CM; and each CM and each issuer;the legal certainty of settlement finality is supported by Austraclear’s approval as a real-time gross settlement system under Part 2 of the Payment Systems and Netting Act 1998 (Cth) (the “PSNA”), the approval of ASX Settlement Pty Limited’s netting arrangements under Part 3 of the PSNA and the Financial Legislation Amendment (Resilience and Collateral Protection) Act (2016) which amends the PSNA to provide additional legal certainty for real-time gross settlement systems that have been approved under the PSNA;the enforcement of security interests held by the CCP in the event of a CM default is protected by Part 5 of the PSNA;by virtue of the CCP’s status as an approved netting market, the effectiveness of: (i) market netting contracts, including contracts entered into in accordance with the rules of a netting market; and (ii) the process of novation outlined in the Rules, are protected by Part 5 of the PSNA; andthe enforceability of the CCP’s Rules in circumstances when a CM has entered external administration is protected by Part 5 of the PSNA.Hide note1 RBA 2018/19 Assessment Appendix C1, Standard 1 (Legal Basis)2 RBA 2018/19 Assessment Appendix C1, Standards 1.2, 1.5 and 8.2 |
| 4.2 If not publicly available, are legal opinions or other form of legal comfort available if CMs take certain steps (e.g., sign a confidentiality agreement)? | Available via FIAFIA has obtained a number of different types of legal opinions for regulatory capital purposes that market participants are subject to. Generally, access to the legal opinions is through FIA’s online repository, which is password protected and open to paying documentation members subscribed to those particular opinions. Further information can be found on the FIA Documentation Services website (here) [Note to Integreon: please insert hyperlink here]. The full list of opinions is available here and here. [Note to Integreon: please insert hyperlinks here]. Please note that the FIA/ISDA netting opinions for US FCMs are available free of charge here. [Note to Integreon: please insert hyperlink here] For more information, please contact Mitja Siraj at FIA.Available from the CCPThe CCP has commissioned a number of legal opinions for the benefit of CMs and their Clients. However, these opinions are not publicly available and are only available on request.Enforceability of the Rules (including settlement finality issues)Yes. The CCP has obtained an opinion on the validity of the rights to port, and to terminate, Contracts on the default of a CM in accordance with Part 10 of the Rules.Close-out netting in the event of a CM default(including in the context of or outside of insolvency)Yes.Close-out netting in the event of a CCP default(including in the context of or outside of insolvency)Yes.Bankruptcy remoteness of initial marginNo.IAS 32 issuesYes.Characterisation and enforceability of variation marginNo.Other (please specify)The CCP has commissioned a number of Australian law legal opinions relating to the Service. In summary, in these legal opinions, it is confirmed that:1. Close-out netting between CM and Client under Client Clearing AgreementThe CCP’s client clearing legal model (the Client Protection Model, or CPM) does not affect the application of the PSNA to close-out netting of obligations owed between a CM and its Client under a close-out netting contract between them.2. Enforceability of PortingThe transfer (porting) of rights and obligations of a CM, Client and the CCP, and the termination, valuation and netting of obligations of those parties, in accordance with the CPM Provisions of ASX’s Operating Rules, would be validated by the PSNA.3. APS 112 for ADI Clients with an individual sub-accountThe CPM provisions as they apply to an individual sub-account satisfy the legal requirements underlying the matters set out in paragraph 25 of APRA’s Prudential Standard APS 112 (Capital Adequacy: Standardised Approach to Credit Risk) on which APRA may require an ADI to produce an independent legal opinion in order to obtain a concessional risk weighting.4. APS 112/IAS 32 – Close-out netting against the CCPIf the CCP was subject to a payment default or insolvency event (as defined in the opinion), close-out netting of obligations under Contracts against the CCP in accordance with the relevant Rules would be validated by the PSNA.This summary is subject to the full content of the legal opinions, including the customary assumptions and qualifications.In addition, based on the RBA 2018/19 Assessment Appendix C1, the CCP may seek independent legal opinions on relevant legal matters relating to significant new services, including any implications that their introduction may have for the legal basis of existing functionality. These opinions may, in some circumstances, be shared with CMs or other stakeholders for their information, particularly to demonstrate that new Rules will have the intended legal effect.1The CCP analysis of potential conflicts of law across jurisdictions has identified no material legal risks. ASX Legal reviews existing legal opinions on a case-by-case basis where there are changes to legislation covered by the opinions, material changes to the Rules or new business initiatives that may impact the scope of the opinions. Additionally, ASX Legal management periodically meet to assess whether any changes in law or business activities mean that existing legal opinions should be updated.2Hide noteCCP responses of 6 and 16 February 20151 RBA 2018/19 Assessment Appendix C1, Standard 1.42 RBA 2018/19 Assessment Appendix C1, Standard 1.6 |
| 5. CM legal opinions | |
| 5.1 Is a CM required to deliver opinions regarding the enforceability of the Rules against the CM in the CM’s jurisdiction? | Where an applicant is incorporated or intends to carry on any part of its business as a CM outside Australia and the CCP considers it appropriate to do so, the CCP has the power to impose additional requirements for the applicant to be eligible to be admitted as a CM. This may include the requirement for the applicant to provide a legal opinion, from independent lawyers acceptable to the CCP and paid for by the applicant, which deals with matters required by the CCP and which is acceptable to the CCP. Such an opinion may cover the enforceability of the Rules against the CM in the CM’s jurisdiction.See item 6.1 for further information as regards CMs not incorporated in Australia.Hide noteRule 4.3A (Admission Requirements)Procedure 4.3A (Applicants Incorporated or Carrying on Business Outside Australia)Guidance Note 1 (Admission as a Participant) |
| 6. CMs incorporated in different jurisdictions to the CCP | |
| 6.1 Are CMs not incorporated in the jurisdiction of the CCP permitted? | Yes.CMs not incorporated in the jurisdiction of the CCP (Australia) are permitted under the Rules. However, as a matter of policy, the CCP does not currently accept applications for admission to the CCP from entities incorporated outside Australia unless they are a branch of a foreign bank from an approved jurisdiction* and they are authorised to carry on banking business in Australia. The CCP’s policy reflects the fact that banks as prudentially regulated entities are highly capitalised and well regulated. The CCP has a discretion under the Futures Rules to admit entities incorporated outside of Australia that do not satisfy the above policy.1Notwithstanding the CCP’s policy position, the Rules contain several additional requirements relating to foreign CMs. These requirements are described below. Note also that the CCP has a discretion to impose additional requirements.2*Note: The Rules do not provide guidance on the meaning of the term “approved jurisdiction”. However, the CCP has stated the following3:““Approved jurisdiction” refers to a jurisdiction approved by ASX from time to time. ASX “approves” jurisdictions that exhibit prudential and securities and market regulation that aligns with international standards.”Applicant requirements: Applicants incorporated or carrying on business outside Australia4If an applicant is incorporated or intends to carry on any part of its business as a CM outside Australia:(1) the CCP may require that the applicant (or a related body corporate of the applicant) must currently conduct clearing operations which are regulated by a foreign clearing and settlement facility, a foreign financial market or foreign regulatory authority acceptable to the CCP; and(2) the CCP may require that:the applicant is a clearing and settlement facility which holds an Australian clearing and settlement facility licence; orthe applicant operates as a clearing and settlement facility in an overseas jurisdiction in accordance with the legal requirements of that jurisdiction and the CCP considers the applicant to be adequately regulated in that jurisdiction; and(3) the CCP may require that the applicant (or persons connected with the applicant) give an additional undertaking(s) governed by Australian law in respect of any matter which the CCP considers reasonable or in the interest of the CCP including, without limitation, undertakings as to:the amount of resources and number of Employees to be located in Australia;access by the CCP to records required to be kept under the Rules or the Corporations Act;foreign taxes that may be payable;the law governing the applicant’s activities under the Rules and the applicant’s submission to jurisdiction;whether the law of the applicant’s incorporation would recognise protections which are substantially equivalent to those afforded by Australian law to clients’ money and property in a winding up of the applicant; andthe ranking of creditors on a winding up of the applicant; and(4) the applicant may be required to provide a legal opinion, from independent lawyers acceptable to the CCP, and paid for by the CM applicant, which deals with matters required by the CCP and which is acceptable to the CCP; and(5) the CCP may require a performance bond in a form and substance acceptable to the CCP; and(6) if the applicant proposes to conduct any overseas activity, the CCP may require the applicant to notify the CCP of the details of the proposed overseas activity and to demonstrate that the proposed overseas activity will comply with the Procedure described below (under the heading “CM requirements: Foreign CMs and other CMs with overseas activity”). CM requirements: Foreign CMs and other CMs with overseas activityNotifications and approvals 5A CM that proposes to locate or relocate any part of its business as a CM outside Australia must comply with the requirements set out in the Procedures. The relevant Procedure requires the relevant CM to:provide prior written notification to the CCP including details of the proposed overseas activity;obtain and maintain all necessary regulatory approvals from any relevant governmental agency or regulatory authority in Australia or elsewhere in respect of the overseas activity and provide a copy of those regulatory approvals to the CCP upon request;comply with the directions of the CCP and any relevant governmental agency or regulatory authority in Australia or elsewhere concerning the conduct and supervision of the overseas activity; andnot engage in overseas activity of a type which would result in the CCP becoming subject to the jurisdiction of any relevant government agency or regulatory authority outside Australia without the prior written consent of the CCP.Note that the above requirements apply to all CMs who locate aspects of their activities as a CM overseas, regardless of whether they are incorporated or carry on business overseas. Tax disclosure 6If a CM is incorporated outside Australia (or conducts any part of its business as a CM outside Australia), the CM will be required to disclose certain forthcoming tax liabilities.By way of high-level summary of the relevant provisions, when any duty or tax is or may be payable (or when any withholding or deduction may need to be made) and before the transaction or agreement giving rise to such tax, withholding or deduction is entered into or accepted, CMs must disclose to various specified entities the nature of such tax, withholding or deduction together with the amount of the likely duty, tax or withholding or the appropriate rate of duty or tax. Indemnity 7Without limiting any other indemnity given by a CM under the Rules, each CM must indemnify the CCP in respect of any loss or damage (including but not limited to any tax or duty of any kind) caused to the CCP as a result of a failure by that CM to observe the requirements described above, under the headings “Notifications and approvals” and “Tax disclosure”. Personnel 8A CM must ensure, even if part of its business as a CM or some of its Employees are located outside Australia, that it has in place appropriate arrangements so that the CM and the CCP (and Related Bodies Corporate of the CCP) can communicate with each other and receive each other’s responses quickly on a day-to-day operational basis and so that the CM can promptly comply with the Rules or a request of the CCP (or a related body corporate of the CCP). Agent appointment 9A CM that is not incorporated or registered as a foreign company under the Corporations Act must:appoint an agent, approved by the CCP, which is resident in Australia for service of process in Australia generally (including, without limitation, by ASX and the ASIC);provide the CCP as soon as practicable with a copy of any agent’s acceptance of such appointment;inform the CCP of the intended effective date of any agent ceasing for any reason to act as agent for the CM; andif the agent informs the CCP of its intention to cease acting as agent as described in the third bullet point above, appoint as soon as practicable, and in any case before an outgoing agent ceases acting as agent for the CM, a new agent, approved by the CCP.Hide note1 Guidance Note 1 (Admission as a Participant)2 Rule 4.3A (Admission Requirements)3 CCP responses of 27 January 20174 Rule 4.3A (Admission Requirements); Procedure 4.3A (Applicants Incorporated or Carrying on Business Outside Australia)5 Rule 4.15A(a) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity); Procedure 4.15A (Foreign Clearing Participants and other Clearing Participants with Overseas Activity)6 Rule 4.15A(b) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity)7 Rule 4.15A(c) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity)8 Rule 4.15A(d) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity)9 Rule 4.15A(e) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity) |
| 6.2 If so, is such a CM subject to any licensing or registration requirements in the jurisdiction of the CCP as a result of its status as a CM of the CCP? | By way of extremely high level summary (and therefore subject to qualifications and exceptions):a CM established in Australia or operating a financial services business or business in Australia that includes acting as a CM will almost certainly be subject to regulatory requirements (under the Corporations Act) in Australia; anda CM that is not established in Australia and is not operating a financial services business or business or conducting business activities (including providing services to Clients in Australia) in Australia will not be subject to regulatory requirements in Australia merely by reason of being a CM.Hide noteRule 4.2(b)Corporations Act, section 21, 601CD (1) and Chapter 5B.2, Division 2 more generallyCorporations Act, section 911A(1) and Part 7.6 more generallyASIC Regulatory Guide 121 |
| 7. Forum selection and submission to jurisdiction | |
| 7.1 Describe any CCP rules pertaining to forum selection and submission to jurisdiction. | For Contracts traded on the Australian Securities Exchange Limited – courts of New South Wales.For Contracts traded on the New Zealand Futures & Options Exchange Limited – courts of New Zealand.It is our understanding that the governing law of the Rules would remain New South Wales law for Contracts traded on the New Zealand Futures & Options Exchange Limited. See also item 7.The forum selection and submission to jurisdiction rules above apply to the CCP, each CM and each Client to which the client protection model provisions (contained in Part 10 of the Futures Rules) apply.Hide noteRule 92.2, 92.3 (Governing law and submission to jurisdiction) |
| 8. Dispute resolution | |
| 8.1 Describe the dispute resolution provisions in the Rules, if any. | All disputes to be adjudicated by the courts as specified in item 7.Hide noteRule 92.2 (Governing law and submission to jurisdiction) |
| 9. CCP disclaimers | |
| 9.1 Describe any disclaimers of the CCP’s liability set out in the Rules. | The below are disclaimers of the CCP’s liability set out in the Rules. Please see item 148 for the limited recourse disclaimer set out in the Rules.General disclaimerYes.The Rules provide that if there is a breach, in relation to services, of any term, condition or warranty implied in the Competition and Consumer Act 2010 (Cth) or the Commerce Act of New Zealand, the liability of the CCP will be limited to the supplying of services again or payment of the cost of having the services supplied again.Where the Rules exclude or limit the liability of the CCP, releases the CCP from liability, or provides for an indemnity in favour of the CCP, then to the extent permitted by law, that exclusion, limitation, release or indemnity (as applicable) extends to the CCP’s officer, agent, delegate, person acting for or on behalf of the CCP and the CCP’s contractors as well as the CCP’s related body corporates and all their officers, persons acting for or on behalf of such related bodies corporate, agents, delegates or contractors of such related bodies corporate.Limit on CCP’s obligationsThe Rules provide that the CCP will not accept or bear any liability whatsoever in respect of the operation of any clearing system or otherwise, whether for any breach of a provision of any relevant legislation, any act or omission (whether negligent or not), injury, death, damage to physical property, any direct or indirect losses but not limited to lost profits, loss of files, loss of contracts, loss of data or use of data (including any error in information supplied or made available), loss of operation time or loss of equipment or process, economic loss, loss of reputation, or losses or damages incidental or consequential to the installation, use or operation of any clearing system.The Rules also provide that the CCP will not accept or bear any liability whatsoever in respect of any act done or omitted, in good faith and in the performance or purported performance of a function or power conferred on it by the Corporations Act or by any other legislative instrument or direction of any legislature or government authority having jurisdiction over it. Failure to supply dataYes. See under “General disclaimer” above and “Force majeure” below. Suspension of serviceYes. See under “General disclaimer” above and “Force majeure” below. System failureYes. See under “General disclaimer” above and “Force majeure” below. Force majeureYes.Where the business of the CCP is materially adversely affected for any reason including, without limiting the generality of the foregoing, the intervention of any government or government authority or agency, fire, power failure or restrictions, communication breakdown, accident, flood, war or the threat of war, embargoes, boycotts, labour disputes, unavailability of data processing or bank clearance systems or act of God such that the CCP is unable to properly conduct the business of the CCP in whole or in part, the CCP will be released from its obligations under the Rules to the extent that the performance of such obligations are prevented or hindered in whole or in part by circumstances referred to above.See item 82.1 under Force Majeure – the CCP has the power to vary or modify the Rules to the extent that in its opinion is reasonably necessary in the circumstances and to take other steps. Physical emergenciesYes. A physical emergency occurs when a situation arises where the physical functions of the CCP are or are threatened to be severely and adversely affected by an event external to the trading of the CCP such as (but not limited to) fire, accident, flood, bomb threat, threat of violence, substantially inclement weather, power failure, communication breakdown, computer malfunction or danger to personnel.The Rules provide that no person will be entitled to make any claim or commence any action against the CCP, the Board or the person making the relevant decisions in respect of any decision made or action taken pursuant to the Rule relating to physical emergencies. Consequential lossYes. See under “General disclaimer” above. NegligenceNo. Agents/custodians/third partiesNo. Market emergencyNo. Bespoke compressionNo. Foreign Trading VenuesNo. Statute of limitationsNo. Physical deliveriesNo. OtherYes. Monies deposited with the CCPAny failure to invest or to invest in a particular way. Bond and Repurchase TransactionsLoss or damage arising from amendments to Contracts arising from Bond Transactions or Repurchase Agreements to reflect renegotiations or unwind agreed between the relevant BRC Participants. Incorrectly registered TransactionsCorrections made to any incorrectly registered Transactions. Delivery Procedures (forged commodity or document)Any forged commodity or document delivered to a CM or a BRC Participant, whether by or at the direction of the CCP. Attestation of Delivery Readiness CMs must have an account at the Environmental Registry to be involved in delivery. Those without an account must have procedures to close out open client positions before the Final Trading Day cut-off, as specified in the Exchange’s Operating Rules. Additionally, they must provide an attestation as required by the Exchange. Exercise of its powers under the Recovery RulesYes. None of the CCP, any of its affiliates or any officers, employees, representatives, agents or contractors of the CCP or its affiliates is liable for any direct, indirect or consequential loss, liability, damage, cost or expense (including legal costs) whatsoever arising in any way (including but not limited to by negligence) from the exercise or attempted exercise of, failure to exercise, or delay in exercising, a power, right, discretion or remedy under the Recovery Rules of the CCP.Hide noteRule 67.4 (Environmental Futures Contracts) Rule 94.5 (Limit on Obligations of ASX Clear (Futures)), Rule 23 (Extension of Indemnities and Disclaimers)Rule 94.3 (Limit on Obligations of ASX Clear (Futures), ASX Clear (Futures) Operating RulesRules 81 (Emergency Situations – Physical Emergencies) and 82 (Force Majeure), ASX Clear (Futures) Operating RulesRules 3.2.3 (Monies deposited with ASX Clear (Futures), 15.1(d) (Bond and Repurchase Transactions), 31.1 (b) and (e) (Registration of a Market Contract with ASX Clear (Futures), 63.5 (Delivery Procedures) and 63A.5 (BRC Delivery Procedures)ASX Clear (Futures) Operating RulesASX Recovery Rulebook, Rule 12.7 (No liability for loss) |
| 10. CM recovery and resolution | |
| 10.1 Do the Rules contain provisions in respect of recovery and resolution procedures for CMs? | No. |
| 11 CM categories and membership requirements | |
| 11.1 Are there different categories of membership? | No. The CCP only offers 1 category of membership: admission as a “Clearing Participant”. In this survey, “Clearing Participants” are referred to as “CMs”.A CM is any person who is admitted and remains recognised as a CM entitled to clear transactions pursuant to the Rules.However, depending on the products cleared, the CM membership category is further divided into the following 3 sub-categories:BRC Participant;Futures Participant; andOTC Participant. BRC ParticipantA CM who notifies the CCP of its intention to undertake Bond and Repurchase Clearing and who complies with the Rules regarding Bond and Repurchase Clearing. Futures ParticipantA CM who has been authorised to clear Futures Contracts and/or a BRC Participant. Such a CM does not have to be a Trading Participant (see below). OTC ParticipantA CM who has been authorised to clear OTC Transactions through the CCP.*There are 3 further categories based on approvals granted to the relevant CM and the functions it performs:Facility Participant;Guarantor Clearing Participant; andTrading Participant. Facility ParticipantA CM that has been approved by the Australian Securities Exchange Limited and holds an Australian Clearing and Settlement CS Facility Licence (a licence granted to the operator of a clearing and settlement facility in accordance with the Corporations Act that authorises it to operate a facility providing clearing and settlement services in respect of all products traded on the Australian Securities Exchange Limited). Guarantor Clearing ParticipantA CM who in accordance with the Exchange Operating Rules is the guarantor of Transactions of a Participant who is not a CM and who enters into or receives an allocation of a Transaction in accordance with the Exchange Operating Rules. A reference to a Guarantor Clearing Participant will include a Facility Participant. Trading ParticipantA Trading Participant of the Australian Securities Exchange Limited and/or the New Zealand Futures & Options Exchange Limited pursuant to the Exchange Operating Rules. A Trading Participant may or may not be a CM.Note: As discussed above, the CCP offers two services: the Service and the OTC Service (the latter being the subject of a separate survey). The Rules comprise rules governing the Service as well as rules governing the OTC Service, and some provisions apply to CMs of the Service, as well as CMs of the OTC Service. In this survey which relates to the Service, CM has been used primarily (although not exclusively) to refer to an Futures Participant. Where CM is used to refer to an OTC Participant or either an OTC Participant or a Futures Participant, we will make it clear that this is the case.*Note: The rules covering OTC Participants are beyond the scope of this survey.Hide noteRule 1 (Definitions)CCP responses of 18 February 2015 |
| 11.2 What are the key requirements to become a member for each category of membership? Please include any operational, financial, or legal requirements. | Subject to its absolute discretion to grant or refuse admission, the CCP will admit an applicant as a CM if the applicant:• applies to the CCP by completing an application form in the form prescribed by the CCP (as described in item 11.3);• satisfies the applicable admission requirements; and• pays the relevant application fee, determined by the CCP and set out in the CCP’s published schedule of fees (available at: https://asxonline.com/content/dam/asxonline/public/documents/schedule-of-fees/asx-clearing-and-settlement-schedule-of-fees.pdf).1A high-level summary of the admission requirements is set out below. Detailed guidance on the requirements for admission, the admission procedure and how to prepare an application form are set out in the CCP’s Guidance Note 1 (Admission as a Participant), available at: https://www2.asx.com.au/content/dam/asx/rules-guidance-notes-waivers/asx-clear-(futures)-operating-rules/guidance-notes/asx_clear_futures_guidance_note_01.pdfhttps://www2.asx.com.au/content/dam/asx/rules-guidance-notes-waivers/asx-clear-(futures)-operating-rules/guidance-notes/asx_clear_futures_guidance_note_01.pdf .Exchange requirements2None. A CM does not have to be a Trading Participant of the Australian Securities Exchange Limited and/or the New Zealand Futures & Options Exchange Limited.Authorisation/licensing requirements3For applicants to be eligible for admission as a CM, the applicant must satisfy the CCP that it:• is a body corporate carrying on business in its own right and not in the capacity of a trustee of a trust; and• holds an Australian financial services licence which authorises the applicant to carry on its business as a CM (unless such a licence is not required by the Corporations Act).The above requirements are continuing requirements that must be satisfied by CMs at all times.The CCP may request an applicant to provide such information as the CCP considers necessary to establish whether the applicant satisfies the admission requirements.4 See items 6.1 and 6.2 for authorisation/licensing requirements in respect of CMs not incorporated in Australia.Financial requirements5For an applicant to be eligible for admission as a CM, the applicant must satisfy the CCP that it meets the Financial Requirements, which require each CM to hold:• Net Tangible Assets of not less than A$5,000,000; and• Net Liquid Assets of an amount greater than zero.The Financial Requirements of a particular CM may be determined by the CCP to be in excess of these requirements, having regard to (without limitation):• the number or value of Contracts held by the CM• the CCP’s assessment of the CM’s risk under such Contracts• the requirements of insurers; and• any other relevant factor.Note that the Financial Requirements are continuing requirements that must be satisfied by CMs at all times.Technical requirementsSee the requirements described under the heading “Operational requirements” below.Operational requirements6Before its admission as a CM, applicants must provide to the CCP certification (in the form prescribed by the CCP) that it has adequate resources and processes in place to comply with its obligations as a CM under the Rules. For these purposes, “resources” include financial, technological and human resources and “processes” include management supervision, training, compliance, risk management, business continuity and disaster recovery processes.When assessing whether the applicant meets these requirements, the CCP may have regard to the matters set out in the Procedures and any other matters it considers appropriate.The Procedures require the applicant to have regard to:• the Rules;• the following guidance notes issued by the CCP:o Guidance Note 1 (Admission as a Participant);o Guidance Note 9 (Offshoring and Outsourcing) (see “Offshoring and outsourcing requirements” below); ando Guidance Note 10 (Business Continuity and Disaster Recovery) (see “Business continuity requirements” below ;• the standards expected of financial services licensees set out in ASIC Regulatory Guide 104 (AFS licensing: Meeting the general obligations) and ASIC Regulatory Guide 105 (AFS licensing: Organisational competence) (which applies even if the applicant does not hold an Australian financial services licence); and• any other matters specified in the form prescribed by the CCP for the purposes of certifying that the applicant has adequate resources and processes.If required by the CCP, the applicant must be able to demonstrate to the satisfaction of the CCP, at any time, the basis on which the certification is or was provided.Note that the adequate resource and processes requirements described above are continuing requirements that must be satisfied by CMs at all times.See also item 11.3 under the heading “Certification of the applicant’s resources and processes”.Key management requirements7For an applicant to be eligible for admission as a CM, the applicant must satisfy the CCP that it is of high business integrity. In order to do so, an applicant must provide to the CCP one of the following:if the applicant is an ADI, the applicant must confirm to the CCP that it has in place a ‘fit and proper’ policy that meets the requirements of the APRA Prudential Standard CPS 520. The applicant must be able to provide evidence of that policy to the CCP upon request at any time;if the applicant holds an Australian financial services licence which authorises it to carry on business as a CM, then the applicant must confirm to the CCP that it has in place measures to ensure its responsible managers are fit and proper persons, as required in the ASIC Regulatory Guides 105 and 2, which are also applied to any of its directors who are not responsible managers. The applicant must be able to provide evidence of those measures to the CCP upon request at any time;if the applicant is an existing participant of any ASX market or clearing settlement facility; orin any other case, the applicant must provide a statutory declaration to the CCP in relation to itself and from each of its directorsThe applicant must indicate in its response to question A.4.1 of the application form which opinions it is taking. If the application indicates it is taking the fourth opinion, the required statutory declarations must be attached to the application form as Annexure A6.The applicant must also consent to the CCP obtaining information on the credit worthiness of the applicant.The CCP may have regard to any other information in its possession from any source in assessing whether the applicant meets the business integrity requirement in the Rules.Note that the high business integrity requirements described above are continuing requirements that must be satisfied by CMs at all times.Market knowledge requirementsNot addressed in the Rules.Risk requirementsSee the requirements described under “Business continuity requirements”.Suitability requirementsSee the requirements described under “Key management requirements”.Foreign applicant requirements8If an applicant is incorporated or intends to carry on any part of its business as a CM outside Australia, then the CCP may impose additional requirements for it to be eligible for admission as a CM, including (but not limited to) those specified in the Procedures.For a summary of the requirements specified in the Procedures, see item 6.1 under the heading “Applicant requirements: Applicants incorporated or carrying on business outside Australia”.Offshoring and outsourcing requirements9Applicants intending to enter into offshoring or outsourcing arrangements must be able to demonstrate that they have complied with the CCP’s offshoring and outsourcing requirements.As described under the heading “Operational requirements” above, this is because:tem resilience across each site to ensure that it can continue its normal levels of business as a CM in the event of a disruption to one or more sites or a loss of connectivity; (iv) CMs should consider whether their communications and network should have, at a minimum, dual communication lines into their working premises that are separated from one another in order to avoid a single point of failure; (v) CMs should regularly review, at least once annually, how their systems and infrastructure can be designed to improve cyber resilience. CMs are expected to choose and align their arrangements to one or more of the latest global or national cyber standards and guidance. The arrangements should be implemented at all primary and alternate sites to ensure maximum security across all sites and to facilitate continuity of the CCP operations in the event of disruption, including a cyber-attack;• In relation to connectivity to the CCP’s facility the following requirements apply (other than an OTC-only CM), (i) connections must be in the name of the CM or related body corporate; (ii) connections must be used exclusively for the CM’s activities as a CM in ASX mark• applicants are required to provide, on or before its admission as a CM, certification that it has adequate resources and processes in place to comply with its obligations as a CM under the Rules; and• when providing such certification, the Procedures require applicants to have regard to the CCP’s Guidance Note 9 (Offshoring and Outsourcing) and, if required by the CCP, be able to demonstrate to the satisfaction of the CCP, at any time, the basis on which the certification is or was provided.By way of high-level summary of the CCP’s Guidance Note 9 (Offshoring and Outsourcing) (see https://www2.asx.com.au/content/dam/asx/rules-guidance-notes-waivers/asx-clear-(futures)-operating-rules/guidance-notes/asx_clear_futures_guidance_note_09.pdf for further details):• CMs may enter into “offshoring” or “outsourcing” arrangements (broadly, where the CM enters into arrangements with another party to perform, on a continuing basis, a business activity that could be performed by the CM, either inside or outside Australia) to conduct their business as a CM;• CMs are responsible under the Rules for all actions and omissions of persons involved in its business as a CM (including, without limitation, its Employees), irrespective of where the business activities are conducted and by whom;• accordingly, where applicants intend to enter into offshoring or outsourcing arrangements, the applicant must be able to demonstrate that it has appropriate processes to supervise those arrangements, so that they comply with all applicable obligations under the Rules;• in order to demonstrate its supervision processes, the CCP expects applicants to:o have a policy in place that requires the entry, variation or termination of a material offshoring or outsourcing arrangement to be approved at a senior level (e.g. by the board of directors or by a senior manager with delegated authority to enter into such arrangements) and which, if the entity is likely to enter into more than one offshoring or outsourcing arrangement, covers the below issues;o establish clear guidelines for identifying what is material offshoring or outsourcing (the CCP considers an offshoring or outsourcing to be material if it involves a material business activity, i.e. a business activity which has the potential, if disrupted, to have a material impact on the ability of a CM to comply with its obligations under the Rules);o undertake appropriate due diligence enquires before entering into an offshoring arrangement with a wholly-owned group entity or an outsourcing arrangement with another party;o where outsourcing to a related body corporate or an unrelated third party, enter into legally binding service level agreements which, if material, address certain minimum requirements specified by the CCP;o in respect of material offshoring arrangements, agree documented processes and procedures with the CM and the service provider which address certain minimum requirements specified by the CCP;o comply with the notification requirements described in item 16 under the heading “Overseas activity and taxes”;o have appropriate management supervision processes to ensure that any offshored or outsourced activities comply with all applicable obligations under the Rules; ando consider the impact that the entry into or termination of any offshoring or outsourcing arrangements may have on its various policies, procedures and processes.Business continuity requirements10Applicants must be able to demonstrate that they have complied with the CCP’s business continuity and disaster recovery requirements.As described under the heading “Operational requirements” above, this is because:applicants are required to provide, before its admission as a CM, certification that it has adequate resources and processes in place to comply with its obligations as a CM under the Rules; andwhen providing such certification, the Procedures require applicants to have regard to the CCP’s Guidance Note 10 (Business Continuity and Disaster Recovery) and “key processes” set out in Schedule 1 to Guidance Note 1 (Admission as a Participant)..By way of high-level summary of the CCP’s Guidance Note 10 (Business Continuity and Disaster Recovery) (see https://www2.asx.com.au/content/dam/asx/rules-guidance-notes-waivers/asx-clear-(futures)-operating-rules/guidance-notes/asx_clear_futures_guidance_note_10.pdf for further details):• The CCP’s business continuity and disaster recovery requirements vary depending on whether the CM is classified as a “tier 1” or “tier 2”. A “tier 1” CM is a CM (other than an OTC-only CM) that: (i) clears or expects to clear more than 500,000 transactions per annum through the CCP; (ii) is a guarantor CM; or (iii) is advised by the CM that it is a tier 1 CM. Conversely, a “tier 2” CM is a CM that is not a tier 1 CM;• All CMs must allocate overall responsibility for disaster recovery and business continuity to a nominated business continuity officer who is a senior member of the CM’s management team with the appropriate delegated authority and the requisite qualifications, skills and experience to understand and validate the design and performance of the CM’s disaster recovery and business continuity arrangements, and is responsible for overseeing the preparation, review, updating and approval of the CM’s disaster recovery and business continuity arrangements and ensuring that the CM meets the CCP’s business continuity and disaster recovery requirements. The nominated business continuity officer should (i) identify the core personnel needed to manage, recover and resume their clearing operations following a disruption and provide them with the facilities they need to do so within the recovery time objective stated in their business continuity plan; (ii) ensure that those core personnel have clearly defined roles and responsibilities under the business continuity plan and participate in business continuity fire drills to prepare them to perform those roles and responsibilities in the event of a disruption; (iii) keep an up-to-date allocation matrix indicating which core personnel are to relocate to alternate site or to work from home in the event of a disruption affecting a primary site; and (iv) ensure that all relevant personnel receive awareness training on what to do in the event of a disruption;The nominated business continuity officer may act as the CCP’s primary point of contact for discussions related to the participant’s disaster recovery and business continuity arrangements and any disruptions that may occur, or may appoint another person with the requisite knowledge and skills (a “primary business continuity contact”) to perform that role, A participant should notify the CCP within 10 business days of the appointment and any subsequent departure of its nominated business continuity officer and any other primary business continuity contact;• All CMs must have an up to date high level infrastructure diagram which represents the current state of the technology and communications infrastructure used to conduct the CCP’s operations. The diagram must identify the location of all primary and alternate sites that house the CM’s key technology components and personnel involved in the CCP’s operations and the communication links between each of those sites. Where a CM’s infrastructure is housed across multiple primary and/or alternate sites, the diagrams must clearly identify which elements of the CCP’s operations are housed at or connected to each relevant site. The infrastructure diagrams (for both current and future state arrangements, as applicable) must be provided to the CCP upon request;• All CMs must have and maintain proper records of their key clearing systems and technology, including but not limited to records showing (i) hardware, software and infrastructure used to conduct the CCP’s operations; (ii) asset ownership and location; and (iii) support and maintenance arrangements, including indication of whether the arrangements are outsourced or offshored.The records and supporting documentation must be provided to the CCP upon request;• All CMs must have a clearly identified system and technology replacement policy which includes a process to identify when assets are nearing their end of life;• All CMs must conduct a business impact analysis covering a full range of potential disruption scenarios to their CCP operations and establish a business continuity plan which seeks to ensure that their CCP operations can be recovered and resumed following a disruption within the recovery time objective. The business continuity plan and any changes to it from time to time, should be signed-off by the nominated business continuity officer and approved by the appropriate senior management body. Each CM should ensure that its business continuity plan is securely stored in locations known to, and that can be readily accessed by all core personnel in the event of a disruption;• All CMs must specify a recovery time objective following the initiation of its business continuity plan in their business continuity plans. If the CM (i) is a tier 1 CM, the recovery time objective should be a target of 2 hours (and no more than 4 hours) for critical CCP operations and no more than 4 hours for resumption of business-as-usual CCP operations; and (ii) is a tier 2 CM, the recovery time objective should be a target of 4 hours (and no more than 6 hours) for critical CCP operations and no more than 6 hours for resumption of business-as-usual CCP operations.• The CCP has acknowledged that in some cyber-related incidents there may be exceptions to the recovery time objectives;• All CMs must comply with a variety of system resilience requirements in respect of the technology and facilities it employs to support its clearing operations. For example (i) CMs must configure their technology and have plans and processes in place to ensure that in the event of disruption at their primary site, clearing operations can be recovered and resumed at an alternate site with minimal downtime and within the abovementioned recovery time objective stated in their business continuity plan; (ii) CMs should have error-message logs available at primary and alternate sites to facilitate prompt identification not the cause of disruptions to key systems or processes; (iii) where a CM’s infrastructure is housed across multiple primary and/or alternate sites, the CM must maintain its sysets and facilities; and (iii) clearing gateways with direct connectivity to the facility must be located within Australia;• All CMs should configure their technology and have plans and processes in place so that in the event of a technology disruption at their primary site there is minimal loss of data relevant to their clearing operations;• All CMs should develop, maintain and practise a clearing defined and documented incident management plan, which can be applied to each disruption scenario provided for in the CM’s business continuity plan;• All CMs must maintain proper records of disruptions impacting their CCP operations;• A CM is responsible for all actions and omissions of persons involved in its business as a participant. This applies regardless of where the business activities are conducted and by whom. A CM is also required to have adequate resources and processes, including management supervision processes, to comply with its obligations as a CM under the Rules. This applies to all CM activities, including any that it may have outsourced or offshored. A CM must therefore have appropriate resources and processes to (i) develop its business continuity plan with due consideration to the dependencies on, and recovery of, any processes, systems or infrastructure managed by third parties performing outsourced or offshored activities; (ii) ensure its service level agreement with any third party performing outsourced or offshored activities includes a requirement for the third party to have and maintain business continuity arrangements that are appropriate and complementary to the CM’s business continuity arrangements and that they are sufficient to enable the CM to meet its recovery time objective stated in their business continuity plan; and (iii) supervise any outsourced or offshored activities to ensure they comply with the CM’s obligations under the CCP’s Rules and Guidance Note 10;• All CMs should have and comply with change management policies and procedures that are designed and function to ensure changes to its clearing operations are thoroughly assessed, tested and authorised and that appropriate disaster recovery and roll-back arrangements are in place, before changes are implemented;• All CMs should establish a framework which ensure that they are made aware of all material and relevant system and infrastructure changes initiated by vendors or service provides that may impact their CCP operations and that these too are subject to appropriate change management policies and procedures, are thoroughly assessed, tested and authorised, and that appropriate disaster recovery and roll-back arrangements are in place, before the changes are implemented. CMs must make their own independent assessment of the changes and the quality and extent of testing conducted by the vendor or service provider (and not rely on the vendor or service provider alone);• All CMs should notify the CCP of any disruption that causes the CM to engage its business continuity plan and of any significant outage regardless of whether it has engaged its business continuity plan. Notifications should be made to the relevant departments within the CCP either via phone call or email;• All CMs must also notify the CCP in writing (i) immediately, of any significant breach of, or non-compliance with, the disaster recovery and business continuity requirements using the ‘Self Reporting including Significant Breach form; and (ii) as soon as practicable after it has become aware of any fact or matter or intends to take any action that will or may affect its capacity to communicate reliably with the exchange system. using the ‘Capacity to Communicate with ASX’ form Notifications should be made via ASX Online;• All CMs must notify the CCP via email (review.team@asx.com.au) of the appointment and any subsequent departure of their nominated business continuity officer and any other primary business continuity contact within 10 business days; and• CMs should consider having their disaster recovery and business continuity arrangements reviewed periodically by their compliance function, internal or external auditor, or another part independent of the business unit primarily responsible for overseeing the preparation, review, updating and approval of those arrangements.Additional requirements11The CCP may impose, at the time a CM is admitted or at any later time, any conditions in addition to the above which it considers appropriate.The CCP must notify the applicant or the CM (as applicable) of any such additional condition(s) in writingHide note1 Rule 4.1 and 4.4A (Admission Requirements)1 Guidance Note 1 (Admission as a Participant)2 CCP responses of 18 February 20152 Corporations Act, section 822C3 Rule 4.2(a), 4.2(b) and 4.10 (Admission Requirements)4 Rule 4.3 (Admission Requirements)5 Rule 4.2(d) and 4.10 (Admission Requirements); Rules 8.2 and 8.3 (Financial Requirements); Schedule 9 (Miscellaneous Prescriptions by Board), ASX Clear (Futures) Operating Rules6 Rule 4.2(e) and 4.10 (Admission Requirements); Procedure 4.2(e) (Organisational Requirements)7 Rule 4.2(c) and 4.10 (Admission Requirements); Procedure 4.2(c) (Business Integrity Requirements)8 Rule 4.3A (Admission Requirements)9 Rule 4.2(e) (Admission Requirements); Procedure 4.2(e) (Organisational Requirements); Rule 4.11A (Responsibility for individuals involved in business); Guidance Note 9 (Offshoring and Outsourcing)10 Rule 4.2(e) (Admission Requirements); Procedure 4.2(e) (Organisational Requirements); Guidance Note 10 (Business Continuity and Disaster Recovery); Guidance Note 8 (Notification Requirements)11 Rule 4.5 (Admission Requirements) |
| 11.3 What documents must CMs sign or agree to in order to be a CM? | Application form and fee1In order to be admitted as a CM, applicants must complete, date and execute an application form (in the form prescribed by the CCP) and submit it to the CCP along with the relevant application fee.The application form and the documents included as annexures (described below under the heading “Annexures to the application form”) together address the majority of the CCP’s admission requirements, as described in item 11.2.The CCP’s application form and schedule of fees are available at:• https://www.asxonline.com/public/documents/participant-application-kit/application-documentation-for-asx–asx-24–asx-clear–asx-clear-.html; and• https://asxonline.com/content/dam/asxonline/public/documents/schedule-of-fees/asx-clearing-and-settlement-schedule-of-fees.pdf.Detailed guidance on the requirements for admission, the admission procedure and how to prepare an application form are set out in the CCP’s Guidance Note 1 (Admission as a Participant), available at: https://www2.asx.com.au/content/dam/asx/rules-guidance-notes-waivers/asx-clear-(futures)-operating-rules/guidancenotes/asx_clear_futures_guidance_note_01.pdfAnnexures to the application form2When preparing an application form, applicants must attach or annex the following documents:(1) Objectives statement (as Annexure A1)A statement outlining the applicant’s objectives for becoming a CM, including the types of business it wishes to conduct, the types of products in which it wishes to transact, and its target clients (including whether they are retail and/or wholesale and where they are, or are likely to be, located).(2) Group structure chart (as Annexure A2)A group structure chart showing the applicant’s corporate ownership structure from its ultimate holding company to the applicant and from the applicant to all of its subsidiaries (including any nominee company). It must also show the relationship between the applicant and any other group entity with which it has, or proposes to have, inter-group balances.(3) Management structure chart (as Annexure A3)A management structure chart showing the key personnel involved in managing the applicant’s proposed CCP activities and their titles, roles and reporting lines.(4) Technology process flow diagram (as Annexure A4)A technology process flow diagram showing the key systems that the applicant intends to use to conduct its proposed CCP activities and the process flows between those systems and the CCP’s systems (the technology process flow diagram should also contain sufficient information to allow the CCP to assess whether the applicant will have the necessary technical resources to communicate reliably with the clearing system and correctly process clearing messages).(5) Australian financial services licence(as Annexure A5) 3Depending on the circumstances of the applicant (as described in the CCP’s Guidance Note 1 (Admission as a Participant)), a full copy of the applicant’s existing Australian financial services licence and/or any associated applications, variations and reliefs or, as the case may be, a copy of a legal opinion from a recognised Australian law firm confirming that the applicant is not required to hold an Australian financial services licence.(6) Statutory declarations (as Annexure A6)If the circumstances described in item 11.2 under the heading “Key management requirements” apply, statutory declarations to the CCP in relation to itself and from each of its directors.(7) Certification of the applicant’s resources and processes (as Annexure A7)4Unless the applicant elects to submit it at a later stage, written certification to the CCP that it has the resources and processes in place to comply with its obligations under the CCP’s Rules (see item 11.2, under the heading “Operational requirements”).To be able to demonstrate the basis on which the certification is provided, the CCP expects the applicant to have documented its key processes for meeting its obligations under the Rules and to be able to produce an internal sign-off from a director, chief executive, head of compliance or other senior officer at the applicant that lists those documented processes and states that the signatory is satisfied that they are sufficient for the applicant to comply with its obligations under the Rules.The key processes for these purposes are listed in Schedule 1 of the CCP’s Guidance Note 1 (Admission as a Participant).(8) List of authorised signatories and nominated contacts (as Annexures F6 and A8, respectively)5Unless the applicant elects to submit them at a later stage, a completed and signed ASX Authorised Signatory Appointment Form (nominating individuals with the authority to sign documentation and to deal with operational issues on its behalf) and a completed and signed ASX Online Initial Access Form to nominate at least two individuals to access the ASX web-based system interface known as ASX Online. The individuals will be granted permission to access ASX Online as ‘Enterprise Administrators’ for the applicant entity and will be responsible for setting-up ‘roles’ in ASX Online.(9) Audited financial statements (as Annexure F4)In respect of applicants that are not ADIs, its last audited financial statements including every attachment required by law.If the applicant does not have audited financial statements, it must provide an income statement and balance sheet drawn up in accordance with the provisions of the Corporations Act (or equivalent foreign legislation), to the extent applicable, signed by at least 2 directors of the applicant.(10) Client Clearing Agreement pro forma(as Annexure F5)6In respect of applicants intending to clear for Clients (including any related body corporate), a pro forma of its Client Clearing Agreement, highlighting where the minimum terms required by the CCP are contained.(11) Foreign applicants’ agency appointment (as Annexure A9)7In respect of foreign applicants that have appointed an agent in Australia for the service of process, a copy of the appointment and the agent’s acceptance of the appointment (as described in item 6.1, under the heading “CM requirements: Foreign CMs and other CMs with overseas activity – Agent appointment”).(12) Exemption to hold an Australian financial services licence (as Annexure A10)In respect of foreign applicants that:• have, or are seeking, an ASIC exemption from the requirement to hold an Australian financial services licence on the basis of a licence it has in a foreign jurisdiction; or• maintain that it is not required to hold an Australian financial services licence but have a licence in a foreign jurisdiction that will cover its activities with the CCP,a document providing details of the law under which that licence is issued and a copy of that licence.(13) Statement of overseas activity (as Annexure A11)8If an applicant proposes to locate any part of its activities with the CCP or any employees engaged in those activities outside Australia, a statement setting out full details of the proposed overseas activity and evidence that it has obtained all necessary regulatory approvals from any relevant governmental agency or regulatory authority in Australia or elsewhere in respect of the overseas activity.This applies whether the applicant is incorporated in Australia or overseas and regardless of the nature, scale of materiality of the overseas activity.Business continuity arrangements9In addition to the application form, applicants seeking admission to the CCP must provide:• a copy of its business continuity plan for its CCP activities;• a copy of its business continuity plan infrastructure diagram; and• a completed business continuity plan self-assessment survey.The CCP’s business continuity plan self-assessment survey has further information about what should be included in the applicant’s business continuity plan and infrastructure diagram.An editable version of the CCP’s business continuity plan self-assessment survey is available at: https://asxonline.com/content/dam/asxonline/public/documents/application-forms-and-upportingdocumentation/bcp-self-assessment-survey.pdfSee also item 11.2, under the heading “Business continuity requirements”.Foreign applicant requirements10If an applicant is incorporated or intends to carry on any part of its business as a CM outside Australia, the CCP may impose additional requirements for it to be eligible for admission as a CM. Such additional requirements may necessitate the submission of supplementary documents, including (but not limited to) one or more of the documents described in item 6.1, under the heading “Applicant requirements: Applicants incorporated or carrying on business outside Australia”.See the CCP’s Guidance Note 1 (Admission as a Participant) for further information.Additional requirements11The CCP may request that an applicant provides additional information which the CCP considers necessary to establish whether the applicant satisfies its admission requirements. In addition, where the CCP admits an applicant as a CM, the CCP may at that time or at any later time, impose any conditions on the CM which it considers appropriate.Consequently, the CCP may require applicants to submit documents other than those listed above.Hide note1 Rule 4.1(a) (Admission Requirements)2 Guidance Note 1 (Admission as a Participant)3 Rule 4.2(b) (Admission Requirements)4Rule 4.2(e) (Admission Requirements); Procedure 4.2(e) (Organisational Requirements)5 Rule 4.14(a) (General Conduct of Clearing Participants); Guidance Note 1 (Admission as a Participant)6 Rule 4.14(j) (General Conduct of Clearing Participants)7 Rule 4.15A(e) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity)8 Procedure 4.3A (Applicants Incorporated or Carrying on Business Outside Australia)9 Guidance Note 1 (Admission as a Participant)10 Rule 4.3A (Admission Requirements); Procedure 4.3A (Applicants Incorporated or Carrying on Business Outside Australia)11 Rule 4.5 (Admission Requirements); . Rule 4.3 (Admission Requirements) |
| 11.4 Are exceptions made to these standard requirements and what is the governance process for such exceptions? | The CCP may where it believes to be just and equitable, and to the extent permitted by law, and on payment of the application fee (if any) prescribed by the Board, exempt a CM or a Client or any person or class of CM or Client from compliance with such provisions of the Rules and on such conditions as it sees fit.The CCP may at any time revoke such exemption. A breach of a condition imposed in respect of an exemption will be deemed to be a breach of the Rules.The CCP therefore has discretion potentially to exempt a CM from some or all of the CM membership requirements.Hide noteRule 9A.3.8 (Exemptions) |
| 12. CM evaluation requirements | |
| 12.1 Are CMs required to demonstrate/share how they evaluate and monitor their house and Client related exposure and positions? | Not addressed in the Rules.However, the CM is required to maintain such accounting records as correctly record and explain the transactions of the CM and the financial position of the CM and in addition will enable compliance with the Rules to be conveniently ascertained by the CCP, such records to be maintained in a form that will enable them to be conveniently and properly audited.Hide noteRule 4.14(i) (General conduct of Clearing Participants) |
| 13. Use of third-parties to meet membership requirements | |
| 13.1 Can the CM meet any of the membership requirements by using a third-party? | Yes. A CM may meet the CCP’s membership requirements by using a third party. However, the CM must ensure that any arrangements with third parties comply with the CCP’s Rules regarding offshoring and outsourcing (as described in item 11.2, under the heading “Offshoring and outsourcing requirements”).The Rules also require CMs to be responsible for all actions or omissions of persons involved in its business as a CM (including, without limitation, its Employees), irrespective of where the business activities are conducted and by whom. Accordingly, a CM is required to have adequate resources and processes, including management supervision processes, to comply with its obligations as a CM under the Rules. This applies to all of a CM’s activities, including any that have been offshored or outsourced to third parties.The CCP has advised that a CM can outsource the following:Operational processesAccount establishment obligationsMonitoring establishment obligationsAudit requirementsRecord requirementsMinimum technical requirements for accessBusiness continuity planning and disaster recoveryCompliance and risk management frameworks (but only partially, refer below)The CCP has advised that a CM cannot outsource the following:Licensing requirements authorising the entity to act as a CMIts obligation to be of high business integrityIts financial requirements (including the payment of margin and default fund contributions)Its requirement to ensure that it has adequate risk and compliance arrangements including the supervision of any agent’s performance under any outsourcing contract and compliance with the Futures RulesIts default management obligations under the OTC Rules Hide noteRule 4.2 (e) (Admission Requirements)CCP responses of 13 January 2017Procedure 4.2(e) (Organisational Requirements)Rule 4.11A (Responsibility for individuals involved in business)Guidance Note 9 (Offshoring and Outsourcing) |
| 13.2 If so, please provide the specifics of who can serve as a third-party (including any approval right of the CCP). | The specifics of who can serve as a third party is not addressed in the Rules.The CCP considers the entry or termination of a material outsourcing arrangement by a CM to be a material change in information concerning its business. A CM must therefore immediately notify the CCP if it enters into or terminates a material outsourcing arrangement. An outsourcing arrangement is considered by the CCP to be “material” if it involves the outsourcing of a material business activity. A “material business activity” is one that has the potential, if disrupted, to have a material impact on the ability of a CM to comply with its obligations under the Futures Rules.Hide noteFutures Rule 4.14(db)Guidance Note 9 (Offshoring and Outsourcing) |
| 13.3 Is the third party required to provide any guarantee or be subject to diligence by the CCP? | The Rules do not require the third party to provide any guarantee or be subject to diligence by the CCP, but CMs are themselves required to undertake appropriate due diligence before entering into an offshoring arrangement with a wholly-owned group entity or an outsourcing arrangement with another party.Furthermore, where the offshoring or outsourcing arrangement is a material one, then the CCP would expect the CM to be able to provide documentary evidence of its due diligence enquiries and their outcome (the CCP considers an offshoring or outsourcing to be material if it involves a material business activity, i.e. a business activity which has the potential, if disrupted, to have a material impact on the ability of a participant to comply with its obligations under the Rules).The due diligence enquiries should address as a minimum the areas set out in the CCP’s Guidance Note 9 (Offshoring and Outsourcing).Hide noteGuidance Note 9 (Offshoring and Outsourcing). |
| 14. CM minimum rating requirements | |
| 14.1 Are CMs subject to a minimum rating requirement? | No such requirement specified in the Rules. |
| 14.2 If so, what is it? | N/A |
| 15. CM information requirements | |
| 15.1 What information (financial and non-financial) do CMs have to provide to the CCP routinely? | The CCP requires CMs to provide the below information on a routine basis. See item 16 for details regarding the information which CCP requires CMs to provide on a less frequent, non-routine basis (for example, upon the occurrence of certain events).A summary of the notification requirements (including how notifications are submitted in practice) is set out in the CCP’s Guidance Note 8 (Notification Obligations), available at: https://www.asx.com.au/content/dam/asx/rules-guidance-notes-waivers/asx-clear-futures-operating-rules/guidance-notes/asx-clear-futures-guidance-note-08.pdfNote that where a CM is also a participant in another market or clearing and settlement facility operated by the CCP or a related body corporate of the CCP and the notice being provided relates to both participations, a notice given to the CCP or a related body corporate of the CCP in accordance with the operating rules of that other market or facility is taken to be given to the CCP in accordance with the Rules1. Financial information2Each CM is required:to provide to the CCP an annual audit certificate in the prescribed form (set out in in the appendix to the Procedures) within 3 months of its financial year end unless the CM is an ADI;to notify the CCP in writing of:any changes to a CM’s financial year end, within 10 Business Days of the change taking effect; andthe appointment, removal or resignation of an auditor, no more than 10 Business Days after the event.In addition, each CM is obliged to lodge with the CCP in the prescribed form a statement of its financial position as at the end of each month by no later than the prescribed date or such other date as the Board may require.*Furthermore, each CM is required to immediately advise the CCP if:the value of its financial position at any time is less than 150% of the Financial Requirements (see item 11.2);the value of its financial position is less than 150% of the Financial Requirements and has decreased by more than 20% since the last advice provided to the CCP;its financial position has varied such that it exceeds the position limits prescribed;its financial position has altered in such circumstances as are prescribed in the schedules to the Rules; oran event of default occurs or the CM has reasonable grounds to suspect that an event of default may occur.CMs incorporated outside Australia or which conduct any part of its business as a CM outside Australia must disclose certain tax related information (as described in item 6.1, under the heading “CM requirements: Foreign CMs and other CMs with overseas activity – Tax disclosure”).CMs are obliged to prepare accounts and returns in accordance with accounting standards issued by the Australian Accounting Standards Board, unless the CCP approves or prescribes otherwise (in particular, the Procedures require CMs that are foreign ADIs to prepare their accounts and returns in accordance with the accounting standards applicable to the foreign ADI in its home jurisdiction).*Note that in its notice reference number 0108.18.02 the CCP has provided for a waiver of this requirement for certain non-ADI CMs, subject to certain conditionsGroup structure chart3Unless the CM is an ADI, each CM must provide to the CCP a copy of the CM’s group structure chart as at 30 June each year, by the following 31 July. This notification should be lodged via ASX Online.The chart should show the CM’s corporate ownership structure from its ultimate holding company to the CM and from the CM to all of its subsidiaries (including any nominee company). It must also show the relationship between the CM and any other entity with which it has inter-group balances.If the CM’s group structure chart has not changed from the last version provided to the CCP, the CM may satisfy this obligation by referring to the date on which that last version was provided to the CCP and stating to the CCP that the CM’s group structure chart provided to the CCP on that date has not changed. Change of licence4CMs are required to provide to the CCP a copy of any licence or approval granted to it by a regulatory authority to enable it to carry on its business as a CM and advise the CCP in writing immediately of any change to the licence or approval affecting its activities as a CM. Changes to the CM’s name or address5CMs must notify the CCP in writing of the following changes before they become effective:any change to the CM’s name, or any name under which the CM carries on business as a CM; orany change to any address at which the CM carries on business as a CM. Changes to directors or authorised signatories6CMs must:advise the CCP in writing of any resignation or removal of a director within 10 Business Days; andpromptly notify the CCP in writing if any of the persons whose names are submitted pursuant to Rule 4.14(ea) (see item 11.3 under the heading “Annexures to the application form – (8) List of authorised signatories and nominated contacts”) cease to be authorised by the CM to sign the relevant documentation or to deal with clearing issues or if any new person is given that authority. Changes to CMs’ business7CMs must notify the CCP in writing immediately if there is any material change in information concerning its business as a CM from that previously provided to the CCP, as soon as the CM determines that such change will occur. Incomplete, inaccurate or misleading information8A CM must ensure that all information which the CM or its Employees give to the CCP is complete, accurate and not misleading. If the CM becomes aware that information which it, or its Employees, has given previously to the CCP was incomplete, inaccurate or misleading, the CM must promptly notify the CCP in writing. Appointment or cessation of agent for service of process9Where the CM is not incorporated or registered as a foreign company under the Corporations Act, the CM must notify the CCP of the acceptance by an agent of its appointment as the CM’s agent for service of process in Australia as soon as practicable after the acceptance and the intended effective date of any agent ceasing for any reason to act as the CM’s agent for service of process in Australia.Business continuity plan10A CM must notify the CCP of any disruption (as soon as reasonably practicable after becoming aware of such disruption) that causes it to enforce its business continuity plan in relation to its CCP operations. A CM is also obliged to notify the CCP of any significant outage impacting its CCP operations as soon as it becomes apparent that there is (or likely to be) a significant outage, regardless of whether or not it has engaged its business continuity plan. See item 11.2 under the heading “Business continuity requirements” for additional notifications that the CM is required to give in relation to business continuity.Hide noteGuidance Note 8 (Notification Obligations)1 Procedure 19.1 (Notice, Notification and Service of Documents)2 Rule 4.14(a) and 4.14(ab) (General Conduct of Clearing Participants); Procedure 4.14(a) (Annual Audit Certificate); Rule 8.4 (Financial Requirements); Rule 8.5(a) (Financial Requirements); Rule 8.7 (Financial Requirements); Procedure 8 (Financial Requirements); Rule 4.15A(b) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity)3 Rule 4.14(ac) (Admission Requirements); Procedure 4.14(ac) (Group Structure Chart), Guidance Note 8 (Notification Obligations)4 Rule 4.14(b) (General conduct of Clearing Participants)5 Rule 4.14(c) (General conduct of Clearing Participants)6 Rule 4.14(d) and 4.14(ea)(ii) (General conduct of Clearing Participants)7 Rule 4.14(db) (General conduct of Clearing Participants)8 Rule 4.11C (Notification of significant breach)9 Rule 4.15A(e)(ii) and 4.15A(e)(iii) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity)10 Guidance Note 8 (Notification Obligations) |
| 16. Additional CM information requirements | |
| 16.1 What additional information (financial and non-financial) can the CCP require CMs to provide? | The Rules require CMs to provide the following information on a non-routine basis or where requested by the CCP (in addition to that provided on a routine basis, as described in item 15).A summary of the notification requirements (including how notifications are submitted in practice) is set out in the CCP’s Guidance Note 8 (Notification Obligations), available at: https://www.asx.com.au/content/dam/asx/rules-guidance-notes-waivers/asx-clear-futures-operating-rules/guidance-notes/asx-clear-futures-guidance-note-08.pdf Financial information1In addition to the financial notifications described in item 15, CMs must:notify the CCP in writing if an auditor has identified a significant issue in an ASIC Form FS 71 or equivalent report lodged with the ASIC pursuant to section 989B(3) of the Corporations Act; andprovide such additional statement(s) of its financial position, in such form(s) as the CCP may require, at such time(s) as it may direct.CMs are obliged to prepare accounts and returns in accordance with accounting standards issued by the Australian Accounting Standards Board, unless the CCP approves or prescribes otherwise (in particular, the Procedures require CMs that are foreign ADIs to prepare their accounts and returns in accordance with the accounting standards applicable to the foreign ADI in its home jurisdiction). Change of control2CMs must notify the CCP in writing immediately if a person who is not a controller becomes a controller or a person who is a controller ceases to be a controller.For these purposes, a controller is a person who controls the CM. The meaning of “control” for this purpose is determined by reference to section 50AA of the Corporations Act: an entity controls a second entity if the first entity has the capacity to determine the outcome of decisions about the second entity’s financial and operating policies.Change in financial or business conditions3Each CM is required to immediately advise the CCP if:the value of its financial position at any time is less than 150% of the Financial Requirements (see item 11.2);the value of its financial position is less than 150% of the Financial Requirements and has decreased by more than 20% since the last advice provided to the CCP;its financial position has varied such that it exceeds the position limits prescribed by the Rules (as described in items 39.1 and 39.2); orits financial position has altered in such circumstances as are prescribed in the schedules to the Rules. Insolvency or inability to comply with the Rules/Procedures4CMs are required to notify the CCP in writing immediately if the CM becomes aware of any event or circumstance which adversely affects or may adversely affect its financial position or solvency or its ability to comply with the Rules or the Procedures. Significant breach of the Rules/Procedures5Where a CM becomes aware that it has committed a breach of the Rules and/or the Procedures under Rule 4.11(f) and that breach is significant, the CM must immediately notify the CCP.A CM will have committed a breach of the Rules and/or the Procedures under rule 4.11(f) if that CM:undertakes any action, or course of actions which is contrary to a provision of the Rules or the Procedures; orfails for any reason to act in accordance with a provision of the Rules, including, without limitation, failure to maintain any document or record, failure to give any notice or notification, or failure to comply with an undertaking or condition, required by or imposed under the Rules or the Procedures; orfails to comply with or continue to comply with any requirement or condition for application for participation entitlements*.For the purposes of determining whether a breach is significant a CM must have regard to the following:the number or frequency of similar breaches;the impact of the breach on the CM’s ability to comply with any other Rule or Procedure or to conduct its business operations;the extent to which the breach indicates that a CM’s arrangements to ensure compliance with the Rules and Procedures are inadequate;the actual or potential financial loss to clients of the CM, or the CM itself, arising from the breach; andany other matters specified by the CCP from time to time.It is irrelevant that the breach may have been caused by a third party.A CM must make an objective assessment of the significance of each and every breach (or a series of related breaches) including frequency and number of minor breaches (as these breaches could be systemic) when determining whether the CPP should to be notified. , A CM may use the guidance provided on the corresponding obligation to notify ASIC of significant breaches of various financial services laws for assistance.A one-off or infrequent breach may still be considered significant if it meets some or all of the criteria.*Note: The Rules use the term “Participation Entitlements” but this is not defined.Professional indemnity (or equivalent) insurance notifications6As described in items 23.1 and 23.2, CMs must take out and maintain professional indemnity (or equivalent) insurance where acting for any person other than itself or a related body corporate.In connection with such insurance, CMs must immediately notify the CCP of any notification to its insurer of any claim, potential claim or circumstance that might give rise to a claim, which relates in any way to its activities as a CM and must include the following details:any circumstance which is likely to give rise to a claim or potential claim against the CM;the receipt of a notice from any person of any intention to make a claim or potential claim against the CM; andthe details of any claim, potential claim or circumstance against the CM including the gross contingent liability, the net contingent liability, the full name of the CM’s insurer and the date the CM notified its insurer of the claim, potential claim or circumstance.CMs must also advise the CCP of any other matter which the CCP requires in relation to any professional indemnity (or equivalent) insurance policy. Legal proceedings notification7CMs must notify the CCP in writing upon commencing or becoming aware that:a CM commences legal proceedings against, or has legal proceedings commenced against it by, another CM, a Trading Participant (as described in item 11.1), the ASIC or other regulatory authority or a Client in connection with its role as a CM; andthose legal proceedings may affect the operations of the CCP or the interpretation of the Rules. Regulatory action against the CM or an Employee8CMs must notify the CCP in writing on or before the next Business Day if the CM is informed by the ASIC or its delegates (or any other person authorised under the Corporations Act), an exchange, a market operator, a clearing and/or settlement facility or a regulatory body that action is being or may be taken *against the CM or any of its Employees that relates in any way to its activities as a CM.*Note: This notification obligation applies even before the formal commencement or the conclusion of enforcement proceedings. Communication reliability9CMs must notify the CCP in writing as soon as practicable if it is unable to communicate reliably with the exchange system (being any system, including the clearing system, computer system or other electronic system utilised by the CCP or any of its Related Bodies Corporate from time to time in connection with any business of the CCP or any of its Related Bodies Corporate). . This notification is lodged via ASX Online. Event of default10If an event of default occurs or if the CM has reasonable grounds to suspect that an event of default may occur, then the CM must immediately notify the Managing Director of the CCP. Ceasing clearing a category of Contracts11In the event that the CM intends to withdraw its authorisation to clear a category of Contracts, the CM must notify the CCP prior to the proposed date of withdrawal. Any such withdrawal is only effective in the circumstances described in item 71.1. Overseas activity and taxes12CMs must provide prior written notification to the CCP if it proposes to locate or relocate any part of its business as a CM (including any Employees or any hardware and software that provides the communications interface between the CCP’s and the CM’s systems) outside Australia.In addition, if the CM is incorporated outside Australia or conducts any part of its business as a CM outside Australia and that may have tax ramifications for the CCP or any other person bound by the Rules in relation to any transaction or agreement involving the CM, then the CM must inform the CCP of those ramifications before the relevant transaction or agreement is entered into.For further information, see item 6.1, under the heading “CM requirements: Foreign CMs and other CMs with overseas activity”).Hide note1 Rule 4.14(aa) (General Conduct of Clearing Participants)1 Rule 8.5(b) (Financial Requirements)1 Rule 8.7 (Financial Requirements)1 Procedure 8 (Financial Requirements)2 Rule 4.14(da) (General Conduct of Clearing Participants); ASX Clear (Futures) Operating Rules – Part 1 (Definitions); Corporations Act, section 50AA3 Rule 8.5(a) (Financial Requirements), ASX Clear (Futures) Operating Rules4 Rule 4.14 (f) (General conduct of Clearing Participants), ASX Clear (Futures) Operating Rules5 Rule 4.11B (Notification of significant breach); Section 3 (Significant breaches), Guidance Note 8; Rule 4.11(f) (Undertaking to Abide by the Rules), Guidance Note 8 (Notification Obligations)6 Rule 4.14(e) (General conduct of Clearing Participants); Procedure 4.14(e)(Professional Indemnity Insurance)7 Rule 4.14(m)(General conduct of Clearing Participants)8 Rule 4.14(n)(General conduct of Clearing Participants)9 Rule 4.14(o)(General conduct of Clearing Participants)10 Rule 71.1(a) (Existence of Default)11 Rule 11.1(a) (Resignation)12 Rule 4.15A(a) and 4.15A(b)(Foreign Clearing Participants and other Clearing Participants with Overseas Activity); Procedure 4.15A(a)(Foreign Clearing Participants and other Clearing Participants with Overseas Activity) |
| 17. CCP rights to monitor CMs | |
| 17.1 What other rights does the CCP have to monitor the financial health of CMs and their compliance with the CM membership requirements (e.g., to visit a CM’s premises)? | Access to trading/financial information and recordsA CM is obliged to provide the CCP with immediate access to information and records concerning the CM’s trading and financial position, including the financial position of a related company if requested, whether for client or principal trading. The CCP may itself (or through an appointee) inspect the CM’s records.The CCP may, in addition, request the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable) or any related company to provide any information in its possession concerning a CM. The CCP may request (1) the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable) or the related company or (2) the CCP’s appointee to conduct an inspection of the CM in order to assist the CCP to obtain information.Hide noteRules 13.1 and 13.2 (Access to Records) |
| 18. CCP rights to enforce CM requirements | |
| 18.1 Is the CCP entitled to take any steps if a CM does not comply with the CM membership requirements, is downgraded or is subject to a material change regarding its status or financial health? | Oversight and enforcement action1The CCP is obliged to undertake the detection, investigation and determination of potential and alleged breaches of the Rules and the provision of fair procedures and the taking of enforcement action.The CCP is entitled to take action in accordance with the ASX Enforcement Rulebook (https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-enforcement-and-appealsrulebook) where it considers that a breach of the Rules may have occurred. Automatic suspension2A CM will be automatically suspended without a meeting of the Board being required if the CM is in breach of the Financial Requirements or the requirement to lodge a monthly statement of its financial position with the CCP and the breach is not rectified within 24 hours or such longer period as the Board may in its absolute discretion allow. CM event of default3Failure of the CM to meet any of its obligations under the Rules or any agreement or understanding entered into with the CCP or failure to comply with any reasonable directions of the CCP constitutes an event of default. See items 78.1 and 90.Hide note1 Rules 9A.1.1 (Introduction and Oversight of Regulatory Affairs) and 9A.2(f) (ASX Clear (Futures) Investigation and Enforcement Function)2 Rule 10.11 (Automatic suspension)3 Rule 71.3(a) (Events of Default) |
| 19. Cross guarantees and cross default in respect of CMs | |
| 19.1 If affiliated companies are CMs of the CCP, are cross-guarantees required? | No.Hide noteCCP response of 13 January 2017 |
| 19.2 Are there cross-default provisions relating to the default of an affiliate? | Various CM events of default apply to a related body corporate of the CM:an administrator or similar person is appointed of the CM or a related body corporate of the CM;an application or an order is made, proceedings are commenced, a resolution is passed or proposed in a notice of meeting or an application to a court or other steps are taken for the winding up, dissolution or official management or administration of the CM or a related body corporate of the CM or the CM or a related body corporate of the CM enters into any arrangement, compromise or composition with or assignment for the benefit of its creditors or any class of them; ora receiver, receiver and manager, administrator receiver, administrator or similar officer is appointed with respect of all or any of the assets and undertaking of the CM or a related body corporate of the CM.Hide noteRule 71.3(e), 71.3(f)(i)(A) and 71.3(B), (h)(i) (Existence of Default) |
| 20. Parent guarantees for CMs | |
| 20.1 Are parent guarantees mandated for CMs in specific circumstances? | No.Hide noteCCP response of 13 January 2017 |
| 20.2 If so, what are the circumstances? | N/A |
| 21. CM market data obligations | |
| 21.1 What types of market data are CMs required to provide to the CCP? | None.It is noted, however, that the CM’s obligation to provide information to the CCP (see item 17) is potentially broad enough to capture market data.Hide noteCCP response of 13 January 2017 |
| 21.2 Is the CM’s obligation to provide market data mandatory or optional? | N/A |
| 21.3 Can the obligation to submit market data (and to take on any penalty trades in connection with such submission) be outsourced to an affiliate of the CM or a third-party? | N/A |
| 21.4 What does the CCP use the market data for? | N/A |
| 21.5 What restrictions are imposed on a CM’s ability to disclose market data received from the CCP? | N/A |
| 21.6 Are there penalties for failure to provide such market data or for providing insufficient or off-market data? | N/A |
| 21.7 What rights and obligations does the CCP have regarding disclosure of market data received from CMs? | See item 22 on disclosure by the CCP of information provided by/on behalf of the CM pursuant to the Rules. |
| 22. CCP rights to disclosure | |
| 22.1 What rights and obligations does the CCP have regarding disclosure of other information in relation to a CM, an affiliate of a CM or a Client received from CMs? | The CCP may, where it considers appropriate, disclose information regarding its CMs and their activities that are relevant to the CCP to:the ASIC;the RBA;the APRA;Australian Securities Exchange Limited and/or New Zealand Futures & Options Exchange Limited;a clearing & settlement facility; andany governmental agency or regulatory authority;andany clearing house, clearing and settlement facility or payments system (in Australia or elsewhere) in which a CM is a member, for the purpose of assisting the CCP or that clearing house, clearing and settlement facility or payments system to monitor the CM’s compliance or capacity to comply with its obligations or to manage a default by that CM.The CCP is obliged to take all reasonable measures to protect from unauthorised use or disclosure information provided to the CCP in confidence by or on behalf of a CM pursuant to the Rules.The disclosure of information in the following circumstances does not, however, constitute unauthorised use or disclosure:pursuant to a reciprocal arrangement (which is any agreement or arrangement between the CCP and any governmental agency or regulatory authority (including, without limitation, any market, clearing house or clearing and settlement facility), in Australia or elsewhere, whose functions include the regulation of trading in, or clearing and settlement of, financial products (in Australia or elsewhere) which provides for the disclosure of information between the CCP and the other party in relation to dealings in, or clearing and settlement of financial products (in Australia or elsewhere));required to be disclosed by the CCP under any law or any order of any court or tribunal, authority or regulatory body;which at the time of disclosure to or by the CCP, was generally available to and known by the public;for the purposes of monitoring compliance with, or the enforcement of, the Rules or the adjudication of those matters;to a related body corporate of the CCP, for the purpose of enabling that related body corporate to assess whether the CM is complying, will comply with or has complied with the operating rules of, or any contractual arrangement with, that related body corporate;to an approved market operator or approved settlement facility, for the purpose of enabling the approved market operator or approved settlement facility to assess whether the CM (or a participant of the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited for whom the CM clears Futures Contracts) is complying with, will comply with or has complied with the approved market operator’s or approved clearing and settlement facility’s rules or procedures;to any governmental agency or regulatory authority including, without limitation, an exchange (including an approved market operator), market, clearing house or clearing and settlement facility (in Australia or elsewhere) which requests the CCP to provide the information to it, in the proper exercise of its powers relating to:the order and good government of participants; orthe efficient, honest, fair, competitive and informed trading, clearing and settlement of Futures Contracts (in Australia or elsewhere);any entity which provides financial backing or insurance to the CCP for the purpose of enabling that entity to assess the risk to the CCP or that entity from clearing activities generally or to assess any claim made in connection with a CM’s activities; andany clearing house, clearing and settlement facility or payments system (in Australia or elsewhere), whether or not pursuant to a reciprocal arrangement, for the purpose of assisting the CCP or that clearing house, clearing and settlement facility or payments system to monitor a CM’s compliance with its obligations or to manage a default by the CM.Hide noteRule 3.4.1 and Rule 3.4.2 (Disclosure of Information) |
| 23. CM indemnities | |
| 23.1 Do CMs (or their affiliates) provide an indemnity in favour of the CCP or any other party (including for any direct or indirect loss as a result of a default of another CM other than default fund contributions or assessments)? | The Rules do not provide for a general indemnity in favour of the CCP other than default fund contributions, but CMs acting for any person other than itself or a related body corporate must effect and maintain professional indemnity (or equivalent) insurance.Any indemnity in favour of the CCP, to the extent permitted by law, extends to the CCP’s officer, agent, delegate, person acting for or on behalf of the CCP and the CCP’s contractors as well as the CCP’s related body corporates and all their officers, persons acting for or on behalf of such related bodies corporate, agents, delegates or contractors of such Related Bodies Corporate.Specific indemnities are also required in certain circumstances, as set out in item 23.2.Hide noteRule 4.14(e) (General conduct of Clearing Participants) and 23 (Extension of Indemnities and Disclaimers) |
| 23.2 If so, what is the scope of such indemnity? | Professional indemnity insurance1CMs acting for any person other than itself or a Related Body Corporate must effect and maintain professional indemnity (or equivalent) insurance that meets the requirements set out in the Procedures.Pursuant to the Procedures:each CM must determine (acting reasonably) that its professional indemnity (or equivalent) insurance policy is adequate, having regard to the nature and extent of the business carried on by the CM in connection with its business as a CM and the responsibilities and risks assumed or which may be assumed by the CM in connection with that business;all CMs must retain a copy of the certificate evidencing the professional indemnity (or equivalent) insurance; andthe professional indemnity (or equivalent) insurance must include insurance against a breach of duty it owes in a professional capacity, whether owed in contract or otherwise at law, arising from any act or omission of the CM and its Employees.If the professional indemnity (or equivalent) insurance is provided by a related body corporate, the CM must receive confirmation from the related body corporate that it is the insurer or the self-insurer covering and indemnifying the CM against the liabilities referred to in the relevant Procedure and retain a copy of the confirmation. Intellectual property rights infringement2Each CM indemnifies the CCP in respect of any claim by a third party for infringement of intellectual property right arising out of the CM’s use of the exchange system of the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited in any manner prohibited by the Rules.The maximum liability of the CM to the CCP for such infringement is A$50,000,000. CM default3Each CM indemnifies the CCP and its officers etc in respect of an event of default by the CM, or any action or inaction by, any of the CCP or its officers, representatives, agents or contractors in connection with the event of default (including any damages, costs or expenses incurred by the CCP in accordance with the Recovery Rules), to the extent that it was not caused by the negligence, fraud or wilful default of the CCP. Indemnity in relation to taxes4Each CM indemnifies the CCP for all taxes etc payable with respect to Contracts or the registration of Transactions or monies deposited by a CM with the CCP Grain Contracts5In respect of Grain Contracts, CMs are required to give various indemnities in favour of the CCP.Each CM indemnifies the CCP for losses arising in connection with (a) any failure to comply with the CCP’s direction to take an interest in the underlying commodity (being a quantity of the type of grain underlying the relevant Grain Contract(s)) which the CCP holds for the benefit of such CM (by way of a transfer or physical delivery) and (b) any exercise by the CCP of its powers (as a result of such failure) to dispose such interest.Each CM also indemnifies the CCP for losses arising from any representation (as to its capacity and authority to transfer to the CCP or request a transfer from the CCP of an interest in the underlying commodity) or warranty (that such interest in the underlying commodity is free from encumbrance) given by it being incorrect.Each CM for whom the CCP holds an interest in the underlying commodity under the Rules indemnifies the CCP for losses arising in connection with the holding of such interest. Foreign CMs and other CMs with overseas activity6CMs must indemnify the CCP in relation to any loss or damage (including but not limited to any tax or duty of any kind) caused to the CCP as a result of a failure of the CM to observe Rules 4.15A(a) to 4.15(c), relating to overseas activity and tax notifications/disclosures.See item 6.1 for details of the requirements of the Rules, under the headings “CM requirements: Foreign CMs and other CMs with overseas activity– Notifications and approvals” and “CM requirements: Foreign CMs and other CMs with overseas activity – Tax disclosures”.Hide note1 Rule 4.14(e) (General conduct of Clearing Participants); Procedure 4.14(e) (Professional Indemnity Insurance)2 Rule 16.5(c) (Intellectual Property rights indemnity)3 Rule 75.1 (Indemnity from Clearing Participants in Default); ASX Recovery Rulebook, Rule 12.0 (Defaulting Participants to indemnify the ASX CCP)4 Rule 101.1 (Taxes and Charges)5 Rules 14.4.7 – 14.4.10 (Holding the Interest) and Schedule 14 (Grain Contracts)6 Rule 4.15A(c) (Foreign Clearing Participants and other Clearing Participants with Overseas Activity) |
| 24. Product coverage of the Service | |
| 24.1 Does the Service cover all products cleared through the legal entity or are other products cleared through other services in the same legal entity? | No. Other products are cleared through a different service in the same legal entity. The CCP separately conducts the OTC Service in respect of OTC products. |
| 25. Non-default losses | |
| 25.1 Does the CCP have the right to pass on to CMs non-CM-default losses? | Yes.The Rules permit the CCP to pass on certain investment losses exceeding A$75 million, except to the extent that (i) the investment loss is a direct result of the fraud of the CCP, ASX Clear Pty Ltd or ASXCC or (ii) a material non-compliance by the CCP with its investment policy (the occurrence of such material non-compliance does not preclude the occurrence of an “investment default”). See items 166.1 and 166.2 for further details.ASX Limited (the holding company for the ASX group) has also committed to maintaining adequate levels of business risk capital for its CCPs (i.e. the CCP and the CCP operated by ASX Clear Pty Ltd) and securities settlement facilities, recapitalising these funds as required.Hide noteASX Recovery Rulebook, Rule 6 (Allocation of Investment Losses) |
| 25.2 If so, please describe how such losses are allocated and when an amount so allocated to a CM must be paid to the CCP. | See item 166.2 for details of how investment losses are allocated to CMs and when an amount so allocated to a CM must be paid to the CCP. |
| 26. CM’s liability for non-default losses | |
| 26.1 Is there a cap on a CM’s liability for non-CM-default losses? | Yes, for the investment losses and OM investment loss (see item 166.2 for a definition) passed on to a CM.Hide noteASX Recovery Rulebook, Rule 6 (Allocation of Investment Losses) |
| 26.2 If so, please describe the cap. | The Rules permit the CCP to pass on certain investment losses to a CM (see items 166.1 and 166.2 for the determination of the amount allocated to each CM) by reducing an amount so allocated to a CM in its account (including any Client Account), provided that no amount can be reduced to less than zero. Accordingly, practically speaking, the cap on a CM’s liability for investment losses is the amount paid by the CM to and being held by the CCP in the accounts of the CM (including any Client Accounts) at the time of the determination of the amount of investment losses allocated to the CM .Hide noteASX Recovery Rulebook, Rule 6 (Allocation of Investment Losses) |
| 27. Governing committees without CM representation | |
| 27.1 Are there governing committees on which CMs are not represented overseeing the management of the CCP? | Yes.The Rules do not include many provisions relating to committees (with or without CM representation). The responses in item 27 are based on the established committee charters and the CCP’s input. These committees are mostly established by the ASX group, and not necessarily specific to the CCP only.Hide noteClearing and Settlement Boards Charter; ASX Limited Board Charter |
| 27.2 If so, what are they? | The principal governance committees overseeing the management of the CCP are the ASX Limited Board and the CCP’s Board. The ASX group’s clearing risk policy framework additionally mandates specific management roles for a number of internal committees that bring together decision makers and experts from departments across the ASX group.Details of the ASX Limited Board, the CCP’s board and the various clearing risk policy framework committees are addressed below:ASX Limited Board and the CCP’s boardThe role of the ASX Limited Board is to provide leadership, strategic guidance and oversight for the ASX group and is ultimately accountable for the overall management and performance of the ASX group. Its key responsibilities include:defining the ASX group’s purpose and its strategic objectives;leading the behaviour and values of the ASX group in order to achieve its strategic objectives;setting the risk strategy and risk appetite of the ASX group;overseeing and monitoring the ASX group’s financial performance and overseeing ASX group’s achievement of its strategic objectives; andapproving expenditure that exceeds the limits delegated to the Managing Director and CEO.The ASX Limited Board Charter sets out further details of the matters that the ASX Limited Board is responsible for. The ASX Limited Board may and has delegated certain matters, as set out below:day-to-day management of the ASX group has been delegated to the CEO;responsibility for the performance of compliance and enforcement functions for the ASX group’s market has been delegated to the Chief Compliance Officer; andother matters have been delegated to the established board committees, as set out in more detail below (and in the respective committee charters).The Clearing and Settlement Board (the “CCP’s Board”) is the governing body of the CCP and provides oversight of the clearing and settlement operations of the CCP, including the management of clearing and settlement risk. The CCP’s board is responsible for (among other matters) overseeing the adequacy of management, systems and processes to achieve ongoing compliance with the CCP’s statutory obligations.The CCP board’s charter:elaborates on the roles, responsibilities, composition and operation of the CCP’s board;sets out the matters that it has delegated to the ASX Board Committees, the Managing Director and the CEO; andplaces requirements on the structure of the CCP’s board including that the majority of the non-executive directors and the Chair be independent.The CCP’s board meets as often as is necessary and receives detailed reports on the CCP’s risk management and financial performance. Any member of a CS Board may convene a meeting of the relevant CS Board at any time, subject to the quorum requirements.The boards comprise the following:The ASX Limited Board comprises directors with the skills and expertise necessary to discharge the ASX Limited Board’s responsibilities. The ASX Limited Board determines its size and composition, and the appointment of directors is made in consultation with the Nomination Committee. The ASX Limited Board will comprise a majority of directors who are non-executive and have been assessed by the ASX Limited Board as independent.The CCP’s boards determines their size and composition subject to the requirement that a quorum can be constituted by non-ASX limited directors. The CCP’s board comprises at least 50% non-executive directors who are also not directors of ASX Limited and have been assessed by the CCP’s board as independent. The appointment of directors is made in consultation with the Nomination Committee. The ASX Limited Board may appoint or remove directors on the CCP’s board.The following board committees advise the ASX Limited Board on a number of matters relevant to the management of the CCP:the Risk Committee: The Risk Committee is a senior management committee constituted to review and oversee the process for identifying significant risks facing the ASX group, the systems of the risk management internal control and compliance within the ASX group. This includes review of the ASX group enterprise risk framework for identifying, monitoring and managing compliance with laws and regulations as well as significant business risks across the ASX group.The Risk Committee comprises at least three members who are independent non-executive directors of the ASX Limited Board. To assist with the flow of relevant information between Board Committees, the Chairs of the Audit and Supervision Committee and the Technology Committee will be members of the Committee, and the Committee Chair will be a member of the Audit and Supervision Committee and the Technology Committee.The Risk Committee meets at least on a quarterly basis, or more frequently as required. Any member of the Committee may convene a meeting of the Committee at any time.The Audit and Supervision Committee: The Audit and Supervision Committee is a senior management committee constituted to review and oversee the CCP’s consolidated financial reports and statements, the integrity of the CCP’s accounting and corporate reporting systems and liaise with and monitor the performance and independence of the CCP’s external and internal auditor.The Audit and Supervision Committee comprises at least three members who are independent non-executive directors of the ASX Limited Board. To assist with the flow of relevant information between Board Committees, the Chair of the Risk Committee will be a member of the Committee, and the Committee Chair will be a member of the Risk Committee. The Committee will collaborate with the Risk Committee in relation to matters that are relevant to the scope of the Committee’s role and responsibilities.The Audit and Supervision Committee meets at least on a quarterly basis, or more frequently as required. Any member of the Committee may convene a meeting of the Committee at any time. It also meets separately with both the external and internal auditors at least on an annual basis, without management present.ASX Limited’s corporate governance framework is supported by internal audit, which provides independent, objective assurance and advisory services to the ASX Limited Board through the Audit and Supervision Committee and the CCP’s board (“Internal Audit”). Internal Audit is an independent assurance function established by ASX Limited management, with its primary purpose being to support the ASX Limited Board and ASX Limited management to protect the assets, reputation, resilience and sustainability of the ASX group.the Technology Committee: The Technology Committee reviews, oversees and makes recommendations regarding the implementation of the ASX group’s technology, data and cyber security strategies and performance, as well as technology project implementation and operational incident management.The Technology Committee comprises at least five members who are independent non-executive directors of ASX Limited and the majority of members (including the committee chair) are required to be non-executive directors of ASX Limited. To assist with the flow of relevant information between Board Committees, the Chair of the Risk Committee is a member of the Technology Committee, and the Technology Committee Chair is a member of the Risk Committee. The company secretary of ASX Limited, or such other person as they may nominate, will act as the committee secretary. The committee secretary reports directly to the Committee, through the Committee Chair, on all matters to do with the proper functioning of the Committee.The Technology Committee meets at least on a quarterly basis, or more frequently if necessary. Any member of the Committee may convene a meeting of the Committee at any time.the People and Culture Committee: The People and Culture Committee oversees the remuneration, performance, incentive framework, workplace culture, health, safety and well-being for all staff, including the Managing Director and Chief Executive Officer, non-executive directors, senior executives and ASX staff more generally.The Committee will consist of at least three members. All members are to be independent non-executive directors of the Board. At least one member of the Committee will be a member of the Risk Committee.The Committee meets at least on a quarterly basis, or more frequently if necessary. Any member of the Committee may convene a meeting of the Committee at any time.the Nomination Committee: The Nomination Committee is responsible for reviewing, conducting a detailed examination of, and making recommendations to non-executive board members on matters relating to the process for nomination and selection, board composition and performance, succession planning, the independence of non-executive board members, gender diversity, and training for non-executive board members.The members of the Committee are appointed by the Board, in consultation with the Committee. The Committee will consist of at least three members, including the Chair of the Board, all of whom are independent non-executive directors of the Board.The Committee will meet at least two times each year or more frequently if necessary to fulfil its responsibilities. Any member of the Committee may convene a meeting of the Committee at any time.The respective board charters set out further details of the roles and responsibilities of the board committees.Hide noteASX Limited Board Charter; ASX Nomination Committee Charter; ASX Risk Committee Charter; Clearing and Settlement Boards Charter; ASX People and Culture Committee Charter; ASX Technology Committee Charter; Internal Audit Charter; ASX Audit and Supervision Committee Charter |
| 28. Risk committee | |
| 28.1 Are CMs represented on a risk committee? | Yes. CMs are represented on the risk committee of the CCP, but none of the CCP’s other internal risk committees (listed in item 27.2).Hide noteRule 20 (Risk Committee) |
| 28.2 What is the composition of the risk committee? | This is a single risk committee shared between the Service and the OTC Service.The risk committee consists of: CM representativesEach CM may nominate 1 representative as a risk committee member.A person may not be nominated to be a risk committee member unless that person (1) has appropriate expertise and experience in relation to the matters to be considered by the risk committee and (2) is acceptable to the CCP in its reasonable discretion.Client representativesThe CCP may invite up to 5 Clients to nominate a single representative for the risk committee, providing the Client:satisfies the following criteria:is a Wholesale Client (as defined under the Corporations Act) of one of the CMs (and their nomination to the risk committee is supported by their CM);has maintained an individual sub-account for a minimum of 6 months;at the time of selection, has a minimum margin requirement of greater than A$2,000,000; andis not a related body corporate of a CM; orsatisfies other criteria determined by the CCP in consultation with the risk committee from time to time.However, a person may not be nominated to be a risk committee member unless that person:has appropriate expertise and experience in relation to the matters to be considered by the risk committee; andis acceptable to the CCP in its reasonable discretion.The number of Client representatives at any given time cannot exceed 5.CCP appointeesThe CCP may select and appoint any number of further members to the risk committee in its sole discretion, where this is necessary in order for the CCP to meet requirements under applicable law with respect to the composition of the risk committee. Change of risk committee membersA CM or Client may, at any time, notify the CCP that it intends to change its nominated risk committee member by nominating a replacement nominee. Once accepted by the CCP, the replacement nominee replaces the previous nominee on the risk committee. Related bodies corporateIf 2 or more CMs are or become related bodies corporates, as determined by the CCP, such CMs are entitled to appoint only 1 representative to the risk committee. ChairmanThe risk committee will appoint a risk committee member by majority vote to serve as chairman. Risk committee secretaryThe CCP will serve as secretary and will perform administrative duties. Suspension of membershipA risk committee member will be suspended as risk committee member on the occurrence of an event of default in relation to the CM which has nominated such risk committee member.Hide noteCCP responses of 16 February 2015Procedures, Rule 20(2) (Risk Committee Members) |
| 28.3 What is the role of the risk committee? | To consult with the CM on1changes of the risk model of the CCP;changes to the default procedures or the total size, structure and composition of the default fund contributions;proposed amendments to the Rules;introducing new asset classes for clearing or by forming new products through combining existing products;changes to the method to determine eligible margin or the methods to determine haircuts (provided that the CCP will be entitled to make such changes without consultation of the risk committee in individual cases in the normal course of business);changes to the admission criteria (including the required minimum capital) for new CMs;policies of the CCP which relate to membership approvals, positions or liquidity limits of CMs, and any proposed changes to those policies; andall other matters which may have an impact on the risk management of the CCP and its CMs.In addition, the CCP must consult with its risk committee to the extent reasonably practical when making certain decisions or exercising certain powers under the Recover Rules as follows:2in connection with the use of its rights and policies in relation to Payment Reduction if:the aggregate amount of reductions effected during a Default Period exceeds an amount equal to the amount of default fund (see item 109.1 under the title of “Order of application in the default waterfall” for the scope of default fund) which existed as at the time immediately prior to the commencement of the Default Period; orthe Reduction Period (see item 109 for the meaning of Reduction Period) exceeds 7 Business Days;in connection with the exercise of its rights or powers in relation to voluntary payments before it invites any CM to make a voluntary payment (see item 109.1);in connection with the exercise of its rights or powers in relation to partial or complete Invoicing Back before it exercises such rights or powers;in connection with determining the Contracts which are to be subject to Partial Tear Up;in connection with the calculation of termination values for the purpose of Invoicing Back before notifying CMs of the relevant net termination amount (see item 107.2);in connection with the annual review of the Minimum Interim Default Fund Amount; andin connection with the annual review of the Maximum Total Interim Participant Replenishment Amount;in connection with the exercise of its rights and powers set out in item 117.2 under the heading “Replenishment during a Default Period – Interim Participant Replenishment Amount” except where there has been a further default during the Default Period which results in an Interim Default Fund Shortfall;in connection with determination of amount of the total replenishment amount before calling for CMs to pay their replenishment amounts;in connection with any calculation of any increasing amount to the default fund under the Recovery Rules before calling for additional default fund contributions (see item 113.1);in connection with the exercise of its rights or powers in relation to a voluntary wind-down (see item 149.1); andin connection with the annual review of the investment loss allocation threshold in accordance with Rule 6.2 of the Recovery Rules (see item 166.1).The CCP is not required to consult with its risk committee where it has been directed to exercise or not exercise any right or power, or take or not take any action, in connection with a default or the Recovery Rules, where directed by a governmental or regulatory entity.Hide note1 Rule 20 (Risk Committee)2 ASX Recovery Rulebook, Rule 7.2 (Risk Committee) |
| 28.4 By what voting threshold does the risk committee make decisions (e.g., a majority ballot of committee members)? | All decisions and recommendations made by the risk committee will be made through a majority vote of the members participating (i.e. attending in person or by telephone or video conference) at a validly convened meeting of the risk committee.Each participating risk committee member will have one vote. In the event that any vote is tied, the chairman will have the casting vote.The quorum for a valid meeting is 1/3rd of all risk committee members.Hide noteProcedures, Rule 20(4) (Quorum) and Rule 20(5) (Voting) |
| 28.5 Is the CCP required by the Rules to implement the decisions/recommendation of a risk committee? | No. The risk committee is consultative only. Proposals and recommendations of the risk committee will be disclosed to the Board. The CCP does not have any obligation to accept any proposal or recommendation made by, or take any action proposed by, the risk committee. However, it will provide reasons to the risk committee if it chooses not to follow any proposal or recommendation of the risk committee prior to taking, or not taking, any action.Hide noteRule 20 (Risk Committee)ASX Recovery Rulebook, Rule 7.2 (Risk Committee) |
| 28.6 If not, do the Rules require the CCP to report the decision/recommendation of the risk committee to regulators and to provide an explanation to the member committees with respect to why the CCP did not implement a decision/recommendation? | The Rules do not impose any obligation on the CCP to report decisions or recommendations of the risk committee to regulators and there is no other requirement on the CCP to report such decisions or recommendations to regulators.See item 28.5. The CCP will provide reasons to the risk committee if it chooses not to follow any proposal or recommendation of the risk committee prior to taking, or not taking, any action.Hide noteRule 20 (Risk Committee) |
| 28.7 How often does the risk committee convene during the year? Quarterly, bi-annually, annually? | Not addressed in the Rules. A meeting can be convened at the request of the chairman, any 2 risk committee members or at the secretary’s discretion. The RBA 2018/19 Assessment Appendix C1 states that the Risk Consultative Committee convenes three times per year. The frequency applicable to the CCP’s other internal risk committees are set out in item 27.2.Hide noteProcedures, Rule 20(3) (Convening the Risk Committee)RBA 2018/19 Assessment Appendix C1 Standard 3.1 |
| 29. Default committee | |
| 29.1 Are CMs represented on a default committee? | No.The CCP has established several default committees. In one such committee (the Default Management Group (DMG)) clearing members participating in the CCP’s OTC Service are represented, but not CMs which participate in the Service. CMs participating in the Service are therefore not represented on a default committee, unless they are represented on the DMG by virtue of their participation in the OTC Service.See the OTC survey for further information on the DMG. Note that, for the remainder of this survey, the term “default committee” refers to the CCP’s Default Management Committee (DMC), as described in item 29.2, which is more relevant to CMs participating in the Service.Hide noteRBA 2018/19 Assessment Appendix C1, Standard 2.8 |
| 29.2 What is the composition of the default committee? | The composition of the CCP’s default committee (described in item 29.1 as the “Default Management Committee (DMC)”) is not addressed in the Rules, but the RBA 2018/19 Assessment Appendix C1 suggests it comprises “senior management from relevant areas within ASX”.The CCP’s two other default-focused committees are comprised as follows:• the Default Management and Recovery Working Group (DMRWG) is chaired by the Chief Risk Officer and comprises key representatives from ASX’s legal, compliance, operations and risk divisions; and• the Participant Incident Response Group (PIRG) is comprises of senior staff from operational, risk management, compliance and legal functions.See the OTC survey for information on the CCP’s OTC-focused Default Management Group (DMG) and item 29.3 for details on the roles of the DMRWG and PIRG. (DMG) and item 29.3 for details on the roles of the DMRWG and PIRGHide note. RBA 2018/19 Assessment Appendix C1, Standards 2.8, 3.1, 12.1 and 12.2. |
| 29.3 What is the role of the default committee? | The role of the default committee is to be the primary decision-making forum for the management of a default. The default committee’s responsibilities range from recommending declarations of default and suspensions, to devising a risk neutralisation plan and overseeing its implementation.The default management standard and accompanying procedures provide guidance on each stage of a default (from the identification of a default event to the management of the defaulter’s position, real-time monitoring of financial solvency, and financial offset and reconciliation). The default management and recovery framework outlines the key roles and responsibilities in managing a CM default.Role of the CCP’s other default-oriented committeesBased on the RBA 2018/19 Assessment Appendix C1, the role of the CCP’s other default-oriented committees are as follows:The role of the Default Management Committee (DMC) is to be the primary forum for the management of a default, and convenes to coordinate the CCP’s response to a CM default. The DMC’s responsibilities range from recommending declarations of default and suspensions, to devising a risk reduction plan and overseeing its implementation;The role of the Default Management and Recovery Working Group (DMRWG) provides oversight of the CCP’s default management and recovery framework, and is responsible for the ongoing enhancement of the default management and recovery framework (outside of a default period);The CCP has established the DMG that assists and provides advice to the DMC in managing the default of a CM. Although the DMC is not obliged to follow the DMG’s recommendations, it is required to provide reasons where it does not accept the DMG’s advice.The role of the Participant Incident Response Group (PIRG) is to monitor and manage CM incidents and the escalation of potential default events to the default committee).See the OTC survey for information on the role of the CCP’s OTC-focused Default Management Group (DMG).Hide noteRBA 2018/19 Assessment Appendix C1, Standards 2.8, 3.1, 12.1 and 12.2.CCP responses of 13 January 2017 |
| 29.4 By what voting threshold does the default committee make decisions (e.g., a majority ballot of committee members)? | Not addressed in the Rules. |
| 29.5 Is the CCP required by the Rules to implement the decisions/recommendation of the default committee? | Not addressed in the Rules.See the OTC survey in relation to the CCP’s OTC-focused Default Management Group (DMG). |
| 29.6 If not, do the Rules require the CCP to report the decision/recommendation of the default committee to regulators and to provide an explanation to the member committees with respect to why the CCP did not implement a decision/recommendation? | Not addressed in the Rules.See the OTC survey in relation to the CCP’s OTC-focused Default Management Group (DMG). |
| 29.7 How often does the default committee convene during the year? Quarterly, bi-annually, annually? | Not addressed in the Rules.The RBA 2018/19 Assessment Appendix C1 states that the Default Management and Recovery Working Group (DMRWG) meets on a six weekly basis or more frequently as required.See the OTC survey in relation to the CCP’s OTC-focused Default Management Group (DMG).Hide noteRBA 2018/19 Assessment Appendix C1, Standard 3.1 |
| 29.8 Are CM employees required to serve on any default committees or in any other capacity in connection with the management of the unwind of a defaulting CM? | No (but see the OTC survey in relation to employees serving on the Default Management Group (DMG) in relation to the CCP’s OTC Service). |
| 29.9 If so, how are they chosen? | N/A |
| 29.10 What are the consequences if a CM refuses to serve on a default committee? | N/A |
| 29.11 Can a CM representative on the default committee still act for the CM or will there be a delay before such CM representative can return to act for CM? | N/A |
| 29.12 What legal documentation, if any, must a CM or CM representative enter into in connection with participating on any default committee? | N/A |
| 29.13 What obligations does a CM or CM representative incur by entering into any such documentation or by serving on such committee (including in relation to confidentiality and material non-public information)? | N/A |
| 30. Other committees | |
| 30.1 Are there any other committees on which CMs are represented? | Yes. The CCP has established a number of advisory committees focused on asset classes and clearing services on which CMs are represented, including the product committee and the ASX rates product advisory user group (described in item 30.2).See the CCP’s Principles for Financial Market Infrastructures Disclosure Framework, available at: https://www.asx.com.au/documents/asx-compliance/pfmi-disclosure-framework.pdf.Hide noteRule 21 (Product Committee)RBA 2018/19 Assessment Appendix C1, Standard 2.8CCP responses of 6 February 2015 |
| 30.2 If so, please provide equivalent responses for such committee(s) to those in items 28.2–28.7. | (1) Product committeeAre CMs represented on a product committee?Yes.What is the composition of the product committee?1The product committee consists of:CM representativeEach CM may nominate 1 representative as a product committee member.A person may not be nominated to be a product committee member unless that person (1) has appropriate expertise and experience in relation to the matters to be considered by the product committee and (2) is acceptable to the CCP in its reasonable discretion.CCP appointeesThe CCP may select and appoint any number of further members of the product committee in its sole discretion, where this is necessary in order for the CCP to meet requirements under applicable law with respect to the composition of the product committee.Change of product committee membersA CM may at any time notify the CCP that it intends to change its nominated product committee member by nominating a replacement nominee. Once accepted by the CCP, the replacement nominee replaces the previous nominee.Related bodies corporateIf 2 or more CMs are or become related bodies corporates, as determined by the CCP, such CMs are entitled to appoint only 1 representative to the product committee.ChairmanThe product committee will appoint a member by majority vote to serve as chairman.Product committee secretaryThe CCP will serve as secretary and will administrative duties.Suspension of membershipA product committee member will be suspended as product committee member on the occurrence of an event of default in relation to the CM which has nominated such product committee member.What is the role of the product committee?2The product committee, if established, is to consult with the CCP on:the type of OTC Transactions which are eligible for clearing (this is the subject of a separate survey and is beyond the scope of this survey) and the other types of Transactions which may be cleared through the CCP;material amendments to the Rules; andsuch other matters as the CCP may determine.What decision-making rights does the product committee have (e.g., a majority ballot of committee members)?3All decisions and recommendations made by the product committee will be made through a majority vote of the members participating (i.e. attending in person or by telephone or video conference) at a validly convened meeting of the product committee.Each participating product committee member will have one vote. In the event that any vote is tied, the chairman will have the casting vote.The quorum for a valid meeting is 1/3rd of all product committee members.Is the CCP required by the Rules to implement the decisions/recommendation of the product committee?4The product committee is consultative only. Proposals and recommendations of the product committee will be disclosed to the Board. The CCP does not have any obligation to accept any proposal or recommendation made by, or take any action proposed by, the product committee. However, the CCP will provide reasons to the product committee if it chooses not to follow any proposal or recommendation of the product committee prior to taking, or not taking, any action.If not, do the Rules require the CCP to report this to regulators and to provide an explanation to the member committees with respect to why the CCP did not implement a decision/recommendation?5The Rules do not impose any obligation on the CCP to report the CCP’s decision not to implement decisions or recommendations of the product committee to regulators, and there is no other requirement on the CCP to report such a decision by the CCP to regulators.See item 30.5. The CCP will provide reasons to the product committee if it chooses not to follow any proposal or recommendation of the product committee prior to taking, or not taking, any action.How often does the product committee convene during the year? Quarterly, bi-annually, annually?6Not addressed in the Rules. In any event, the product committee has not yet been formally convened.A meeting can be convened at the request of the chairman or any 2 product committee members or at the secretary’s discretion.Hide note1 Procedures, Rule 21(2) (Product Committee Members)2 Rule 21 (Product Committee)3 Procedures, Rule 21(4) (Quorum) and Rule 21(5) (Voting)4 See footnote 25 See footnote 26 Procedures, Rule 21(3) (Convening the Product Committee); CCP responses of 6 February 20157 RBA 2018/2019 Assessment Appendix C1, Standard 2.8 |
| 31. Transaction submission and Contract registration | |
| 31.1 Please describe how a Transaction is submitted and registered as a Contract (including timing, criteria for accepting Contracts for clearing, the resubmission of Transactions, and any differences for bunched orders (i.e. whether pre-allocated or unallocated)). | As the CCP does not currently offer clearing of Bond Transactions and Repurchase Agreements (notwithstanding their inclusion in the Rules), we have not included further details relating to the process for “notifying” such Transactions to the CCP (including whether or not there is a requirement to use a specified Trade Source) or the real time trade registration requirements. Submission of Transactions for clearingSubmission/presentation to the CCP and registration of Transactions for clearing is deemed in respect of:a Transaction which is “Recorded by the Exchange”;a Bond Transaction or Repurchase Agreement notified to the CCP,in each case in the manner prescribed in the schedules to the Rules.A Transaction is deemed to be “Recorded by the Exchange” when:it is traded on a trading platform specified under the Exchange Operating Rules and such trading platform produces a matching trade record of the Transaction (in this case, the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited, as applicable, submits the Transaction for clearing); orit is traded other than on a trading platform specified under the Exchange Operating Rules and the Transaction has been submitted to, and accepted for registration by, the CCP. Allocated TransactionsTrading Participants (see item 11.1) are responsible for allocating Transactions other than Bond Transactions and Repurchase Agreements for clearing under the Exchange Operating Rules. The Rules provide that where a Transaction is allocated and such allocation confirmed in accordance with the Exchange Operating Rules prior to registration, that Transaction will be “deemed to be Recorded” by the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited, as applicable, as so allocated and confirmed.Post-registration, in respect of Contracts other than Contracts arising from Bond Transactions or Repurchase Agreements, the Rules provide that a CM may within the period allowed by the Exchange Operating Rules, subject to confirmation of the allocation by the CM receiving the allocation, allocate a Contract to another CM. Unless the CCP declines to accept the allocation, the Contract between the allocating CM and the CCP will be extinguished and a new Contract will come into existence between the CCP and the allocated CM on the same terms as the extinguished Contract. Precondition in respect of marginThe Board or managing director (or a delegate of either) may in their absolute discretion at any time prior to registration decline to register a Transaction in the name of a CM or may impose conditions (including the deposit of margin) on the registration of any Transaction, without being required to give any reason and will notify any such decision to the CM. Real time trade registration requirementsA Transaction under the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited will be deemed to be registered with the CCP when “Recorded by the Exchange” as described above – on the day on which the Transaction is traded or in the case of Transactions effected after the close of trading, on the next Business Day of the relevant exchange. Consequences of registration/discharge of TransactionUpon registration with the CCP, a Transaction will be extinguished and 2 new contracts which will be binding on the CCP and the CMs will come into existence:a Contract between the CCP and the Buyer in terms identical to the Transaction except that the CCP will have the rights and obligations as seller; anda Contract between the CCP and the Seller in terms identical to the Transaction except that the CCP will have the rights and obligations of buyer.Upon registration with the CCP of only the position of the Buyer or of the Seller in a Transaction, the Transaction will be extinguished and a new contract which will be binding on the CCP and the CM will come into existence:a Contract between the CCP and the Buyer in terms identical to the Transaction except that the CCP will have the rights and obligations as seller; ora Contract between the CCP and the Seller in terms identical to the Transaction except that the CCP will have the rights and obligations of buyer.The effectiveness of these Contracts is supported by section 16 of the PSNA.Trading Participants (see item 11.1) (being executing parties on the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited) are not required to be CMs in order for Transactions to be discharged as part of the novation process. This is because the Exchange Operating Rules provide that upon registration with the CCP, a Transaction will be extinguished and replaced by new contract(s) with the CCP in accordance with the Rules and the original parties are released from their obligations to each other.Off- exchange Transactions must be reported to the exchange by Trading Participants.Hide noteCCP responses of 6 February 2015Rules 31, 31.1(c), 31.2 and 31.3 ((Registration of Market Contracts with ASX Clear (Futures)), 32 (Allocation of Open Contract), Schedule 1 (Registration and performance of contracts), ASX Clear (Futures) Operating Rules |
| 32. Method by which the CCP assumes contractual relationship | |
| 32.1 How is the credit of the CCP substituted for the credit of the trading counterparty (e.g., novation, guarantee, or other)? | By novation. See item 31, under “Consequences of registration/discharge of Transaction”. |
| 32.2 If by novation, is the concept of novation recognised under relevant law? | New South Wales law recognises novation. Based on the RBA 2018/19 Assessment Appendix C1, the effectiveness of the process of novation outlined in the Rules is provided certain legal protections by Part 5 of the PSNA, by virtue of the CCP’s status as an approved netting market. (See item 4.1).Hide noteRBA 2018/19 Assessment Appendix C1, Standard 1.5 |
| 32.3 How does novation or the guarantee occur (trade by trade, batch, etc.)? | Novation would occur trade by trade. The Rules do not address Transactions submitted in batches.Hide noteCCP responses of 6 February 2015RBA 2018/19 Assessment Appendix C1, Standard 1.5 |
| 33. CCP discretion to reject Transactions | |
| 33.1 Does the CCP have discretion to reject Transactions submitted for clearing? | Yes. |
| 33.2 If so, under what circumstances? | The Board or managing director (or a delegate of either) has absolute discretion at any time prior to registration to decline to register a Transaction in the name of a CM or may impose conditions (including the deposit of margin) on the registration of any Transaction without being required to give any reason and will notify any such decision to the CM. See item 31 under “Precondition in respect of margin”.In addition, the CCP will not register any Transactions in the name of a CM which is not entitled under the Rules or the Exchange Operating Rules to have a Transaction registered in its name.Hide noteRules 31.2, 31.6 (Registration of Market Contracts with ASX Clear (Futures)) |
| 34. CCP obligations following failure to register a Transaction | |
| 34.1 If the CCP fails to register a Transaction, is the CCP under an obligation to notify the relevant CM? | Yes. See item 33.2.Hide noteRule 31.2 (Registration of Market Contracts with ASX Clear (Futures)) |
| 35. CCP rights against CMs for incorrectly registered Contracts | |
| 35.1 What rights can the CCP exercise against CMs in respect of incorrectly registered Contracts? | The Rules contemplate that where a Transaction is Recorded by the Exchange incorrectly, upon correction of any such recording, the Contract registered with the CCP will also be deemed corrected.Hide noteRules 31.1(b) and 31.1(e) (Registration of Market Contracts with ASX Clear (Futures)) |
| 36. CCP discretion to avoid Contracts | |
| 36.1 Does the CCP have the discretion to avoid Contracts if it considers such Contracts to be void, voidable, unenforceable or otherwise incorrectly registered (as a result of fraud, illegality, market abuse or otherwise)? | The Rules provide that the CCP will not be obliged to meet its obligations under a Contract which resulted from a Transaction which:was entered into fraudulently by the CM or the party to such Transaction in relation to which the CM holds an equivalent position (i.e. of Buyer or Seller); orwas, to the knowledge of the CM or such party, entered into with an intention by one or both parties to cause an event of default; orwas otherwise not entered into in a bona fide manner by the CM or such party.provided that:the rights of the CCP as set out above will not relieve the CM from any obligations to the CCP under the Contract; andthe existence of or exercise of any of the rights by the CCP as set out above in relation to a Contract will not affect or avoid the CCP’s obligations under any other Contract, whether or not arising from the registration of the same Transaction.See items 33.1 and 33.2 for the CCP’s right (pre-registration) to reject Transactions submitted for clearing.Hide noteRule 31.7 (Registration of Market Contracts with ASX Clear (Futures)) |
| 36.2 If a Contract is avoided, are CMs required (either by CCP rules or due to local law in the jurisdiction of the CCP) to enter into replacement Contracts? | No. There is no requirement under the Rules to enter into replacement Contracts. |
| 36.3 If Contracts are avoided, can the CCP enter into replacement Contracts on its own account with all costs and losses in establishing such Contracts to be borne by the relevant CM? | Not addressed in the Rules. |
| 37. Assumption of liability for Transactions/Contracts | |
| 37.1 How are liabilities for Transactions/Contracts allocated during a trade lifecycle (i.e., prior to and post the CCP accepting Transactions, with respect to a CM and another CM and/or to the CCP)? | Upon registration of a Contract in the name of a CM, the CCP and the CM will assume liability for the performance of their obligations arising under the Contract from the time of registration.See item 31, under “Consequences of registration/discharge of Transaction”.Any Transaction submitted for registration as a Contract and which is not so registered will be governed by the terms of the Transaction and the CCP will not assume liability for its performance.Hide noteRule 31 (Registration of Market Contracts with ASX Clear (Futures)), |
| 38. Delayed allocation of Transactions | |
| 38.1 Do the Rules contemplate the possibility that certain Transactions, e.g., bunched orders, may not be immediately allocated to the relevant end Clients? | The Rules contemplate that transactions may not be immediately allocated to the relevant Clients. Under the Rules, where a trade is not designated as house business or a Client Transaction trade by a CM by the prescribed time, the resulting Contract will be designated to the relevant House Account.Hide noteCCP response of 13 January 2017Rule 31.1 (Registration of a Market Contract with ASX Clear (Futures))Schedule 1 (Registration and Performance of Contracts) |
| 38.2 If so, how are such Transactions and the related collateral handled in the event of a CM default prior to allocation (including changes in value of the collateral)? | N/A |
| 39. Trading limits | |
| 39.1 Can the CCP impose trading limits in respect of house business? | Yes.Hide noteRule 9 (Position Limits) |
| 39.2 If so, what types of limits may be imposed? | The Board may prescribe limits on the number of Contracts (whether Client positions or House positions) a CM may hold in any Futures Contract, OTC Transaction, Option Contract, Bond position (being the net result of Bond purchases and sales) or Repurchase Agreements or on any market.The Board may prescribe limits relating to the exposure of the CM under Contracts by reference to:the initial margin and/or variation margin and/or daily settlement liability of the CM;the number of Contracts held by a CM in any Futures Contract, OTC Transaction, Option Contract, Bond positions or Repurchase Agreements;the financial position of the CM; orany other criteria relating to the CM’s Contracts or exposure as the Board thinks fit.The Board may require a CM to comply with special limits having regard to any requirements of insurers to the CCP or such other matters as it sees fit.Hide noteRules 9.1 and 9.2 (Position Limits) |
| 39.3 What is the governance process for imposing and/or changing those limits? | Not addressed in the Rules. However, the CCP has confirmed that limits are imposed or changed by the CCP by way of notice to the affected CM.See item 39.2 for the CCP’s parameters for imposing and/or changing those limits.Hide noteCCP response of 13 January 2017 |
| 39.4 How are such limits communicated to the CM? | Not addressed in the Rules. |
| 39.5 Is there a notice period before new limits become effective? | Not addressed in the Rules. |
| 39.6 Is there a shorter (or zero) notice period in special or emergency circumstances, and what are the notice period and circumstances? | N/A |
| 40. Limitations on the ability of a CM to enter into a new Contract | |
| 40.1 Is there any other reason why the CCP can limit the ability of a CM to enter into a new Contract? | See item 33.2. The CCP has broad discretion to refuse to register new Transactions.In addition, the CCP may amend the Rules and take such measures as it deems necessary in emergency conditions. See item 82.2 for the meaning of emergency conditions.Hide noteRules 31.2 (Registration of Market Contracts with ASX Clear (Futures))Part 8 (Emergency situations and Force Majeure) |
| 41. Consequences of breach of trading limits | |
| 41.1 How are existing Contracts treated if any trading limits are breached? | Where a CM’s position is in excess of or appears likely to exceed the limits applicable to that CM, the Board or the managing director may in its or his absolute discretion do, without being limited to such actions, all or any of the following:determine that the CM is obliged to lodge additional initial margin with respect to all or any Contracts held by the CM of such amount as the Board or the managing director or his delegate may determine;direct that the CM reduce the number of its Contracts so as to not exceed such limits;direct that the CM transfer all or any Contracts to another CM (in the case of Bond Transactions or Repurchase Agreements, such transfer may only be to a BRC Participant);refuse to register further Transactions on behalf of the CM or accept any allocation or transfer to the CM;exercise the powers that the CCP has under the default procedures as if there were a CM event of default;declare the CM to be the subject of an event of default.A CM is obliged to do all things necessary to give effect to any such determination, direction or decision by such time as is required by the Board.For existing Contracts, the CCP’s powers under (a), (b), (c), (e) and (f) are of relevance.Hide noteRule 9.3 (Position Limits) |
| 41.2 How are new Transactions treated if any trading limits are breached? | See item 41.1. For new Transactions, the CCP’s power under paragraph (d) is of relevance.Hide noteRule 9.3 (Position Limits) |
| 42. Physical deliveries | |
| 42.1 If the CCP can match CMs for delivery and receipt of underlying assets, under what circumstances can it do so? | The CCP has absolute discretion to direct CMs holding matching positions to effect delivery and receipt of underlying assets.Hide noteRule 61.2 (Obligations of ASX Clear (Futures))Rule 63 (Delivery Procedures)Rule 63A (BRC Delivery Procedures)Rule 67 (Environmental Futures Contracts), Procedures Determinations and Practice Notes |
| 42.2 Are the legal obligations for delivery expressed in the rules, procedures or any related agreement? | Yes. The Rules provide that the CCP will make and take (or cause to be made and taken by buyers and sellers) delivery of commodities in relation to Contracts which are deliverable contracts, in accordance with the Exchange Operating Rules and the Rules.The CCP facilitates the delivery of Wallumbilla Natural Gas Futures Contracts by directing CMs with opposing obligations to conduct a Delivery Exchange for a physical transaction. This involves:Matching CMs to settle Open Contracts through equal and opposite positions in the transaction.Conducting a physical component transaction on an exchange operated by the Australian energy market operator.Reporting, registering, and maintaining the transaction in the same clearing account.Closing out offsetting Open Contracts and settling them before a specified deadline.If a buyer or seller fails to make delivery, the cash settlement amount determined by the CCP does not include compensation.The CCP handles the delivery under an Environmental Contract in the following manner:For taking delivery, the CCP requires the seller to transfer the specified quantity of the underlying commodity to it at the Environmental Registry. Upon this transfer, the CCP will update its records to reflect an increase in the seller’s interest by the specified quantity.For making delivery, the CCP will similarly update its records to reflect an increase in the buyer’s interest by the specified quantity following the transfer.The Exchange may include an amount of compensation to the buyer, in cases of seller delivery failure, if the buyer incurs financial loss in sourcing certificates or units and has taken all necessary steps for delivery, except when delivery is hindered by cancellation or revocation of environmental certificates or units by the Environmental Registry.These procedures ensure that the CCP maintains accurate records of interests in underlying commodities at the Environmental Registry in accordance with delivery obligations.Hide noteRule 61.2 (Obligations of ASX Clear (Futures))Rule 63 (Delivery Procedures)Rule 63A (BRC Delivery Procedures)Rule 66.1 (a) to (d) (Wallumbilla Natural Gas Futures Contract Delivery Procedures)Rule 67.2 (a) and (b) (Environmental Futures Contracts) |
| 43. Compression services | |
| 43.1 Does the CCP offer compression services? | Not addressed in the Rules. |
| 43.2 If so, describe the services provided and the requirements or restrictions set out in the Rules. | N/A |
| 44. Types of margin | |
| 44.1 What types of margin (e.g., initial margin, payment margin, variation margin) does the CCP require? | The CCP requires initial margin and variation margin. It may also require Intra-Day Margin and Extra Margin.Variation margin is described in the Rules as the “Daily Settlement Amount” in relation to Contracts other than Contracts arising from Bond Transactions or Repurchase Agreements.Based on the RBA 2018/19 Assessment Appendix C1Initial marginThe CCP’s margin models target a single-tailed confidence level of at least 99 per cent of the estimated distribution of future exposure and to the extent practical and prudent, limit the need for procyclical changes.Hide noteRule 43 (Initial Margin and Other Deposits)Rule 43A (BRC Initial Margins and Other Deposits)Rule 44 (Daily Settlement)Rule 44A (BRC Variation Margin)Rule 45 (Intra-Day and Extra Margins)RBA 2018/19 Assessment Appendix C1, Standard 6 |
| 44.2 For each type of margin, provide a brief description of the risks the margin covers. | Initial margin(1) Initial margin relating to Contracts other than Contracts arising from Bond Transactions or Repurchase AgreementsPurposeInitial margin is used to provide cover for the risk arising from movements in the mark-to-market value of Contracts following the latest variation margin call was met until the Contract can be unwound following a default.MethodInitial margin is determined by the CCP in its absolute discretion from time to time on demand or by such time as is prescribed in the schedules to the Rules or is required by the Board or the managing director or his delegate.The CCP may determine a higher rate of initial margin for a particular CM or for all or some CMs for a particular exchange contract or contract month or options series or in such other manner as it considers appropriate.The CCP may also prescribe reduced amounts in circumstances prescribed in the schedules (for example, in relation to spread positions or where there are offsetting positions (whether registered or not)).The CCP may not however reduce the amount of initial margin relating to products executed on the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited, without the consent of the relevant Exchange.Determination of initial margins may refer to the following categories of initial margin, including concessional rates:Full initial margin or Price Scanning Range: This is the rate that applies to the net futures equivalent to all futures positions in a CM’s account for each commodity (i.e. the net uncovered position). It is also the movement in the underlying futures prices used in determining initial margins on net options positions.Volatility Scanning Range: This is the change in volatility applied to the net options positions in a CM’s account for each commodity.Inter Month rate: This is the rate that applies to the futures equivalent of any options and futures positions offset against any options and futures positions in a different delivery month for the same commodity.Inter Commodity Concession: This is the concession to the initial margin on a CM’s account for offsetting positions in specified commodities.Short Option Minimum: This is the minimum charge on short options for each commodity in a CM’s account.Initial margin on Options: Initial margins on options or combinations of options and futures will be calculated, using the Standard Portfolio Analysis of Risk (SPAN) methodology developed and implemented by the Chicago Mercantile Exchange in 1988 and the parameters described above.Target degree of confidence99.5%Close-out period2 days for liquid products but for less liquid products (e.g. electricity derivatives), 3 days.(2) Initial margin relating to Contracts arising from Bond Transactions or Repurchase AgreementsPurposeThe CCP is entitled to apply initial margin held by it in satisfaction of performance by the relevant CM (being a BRC Participant) of such CM’s obligations pursuant to the Rules.MethodInitial margin is determined by the CCP in its absolute discretion from time to time upon demand or by such time as is prescribed in the schedules to the Rules or is required by the Board or the managing director or his delegate.The CCP may in appropriate circumstances or for particular transactions or classes of transactions, waive the requirement to pay initial margin, variation margin, Intra-Day Margin or Extra Margin or determine a higher or lower rate of initial margin for a particular BRC Participant.The CCP may also prescribe reduced amounts in circumstances prescribed in the schedules to the Rules.Determination of initial margins may refer to the following categories of initial margin.The total initial margin is the sum of:(1) Bond Volatility Margin(2) Correlation/Savings Multiplier; and(3) Repurchase Agreement Rate Volatility Marginmultiplied by:(4) Counterparty Multiplier.These 4 key elements are considered margin parameters:(1) Bond Volatility Margin: The amount of initial margin charged for the bond leg equals the change in value of the position if the clean price were to change by an amount equal to the haircut applied to the bond.The haircut applied to each bond represents the maximum expected change in price of the most volatile bond in each band and is set by considering historical price data. The characteristics of a bond – such as term, issuer and so on, also contribute to the banding of the bonds.(2) Correlation/Savings Multiplier: The bonds will be grouped by characteristics of the bond, which may be volatility, maturity or yield. Correlation will be calculated on offsetting positions for margin concessions between each bond group.(3) Repurchase Agreement rate volatility margin: In the event of counterparty default, the CCP may be exposed to movements in Repurchase Agreement rate. To cover this risk, an amount will be factored into initial margin (as an additive amount) to cover potential movement.(4) Counterparty Multiplier: This is used to apply differential margins between BRC Participants. For example, a BRC Participant with a credit rating of A1+ may have a counterparty multiplier of 1, while an A1 participant may have a multiplier of 1.5. It is expected that all initial BRC Participants will have a counterparty multiplier of 1.Target degree of confidence99.5%Close-out period2 days for liquid products but for less liquid products (e.g. electricity derivatives), 3 days.(3) Additional initial margin/credit stress testPurposeThe CCP is entitled to collect additional initial margin where a CM’s positions yield stress-test results above a predetermined stress-test exposure limits or where a CM holds large portfolios relative to its capital (see “Method” below).Accordingly, based on the RBA 2018/19 Assessment Appendix C1, the purpose of additional initial margin is to provide additional CM-specific cover against non-systematic spikes in individual CMs’ exposures. This is intended to mitigate the risk that the default of a CM with a large exposure, in more extreme market conditions than are contemplated by regular initial margin, may deplete or even exhaust the default fund.By upholding the ‘defaulter pays’ principle, the additional initial margin regime also provides an incentive for CMs to manage the risk they bring to the CCP.MethodThe CCP uses credit stress tests to establish whether a CM is required to post additional initial margin.Based on the RBA 2018/19 Assessment Appendix C1, the CCP applies underlying parameters and assumptions in performing credit stress tests, including:(i) profits in Client Accounts cannot be used to offset house losses, or losses on other client accounts (although client profits and losses may be offset within the same omnibus account);(ii) positions in client accounts will be closed out rather than transferred to another participant, with any losses crystallised as a result;(iii) the point of default is assumed to occur after initial and variation margin obligations from the previous day’s settlement cycle have been met by the participant, but before additional initial margin obligations from the previous settlement cycle have been met by the CM;(iv) excess collateral posted by CMs and their Clients is not available to cover stress test exposures; and(v) the assumed stressed period of risk is three days for liquid exchange-traded derivatives and five days for all other exchange-traded products and OTC derivatives.Based on the RBA 2018/19 Assessment Appendix C1, credit stress tests are based on a range of scenarios covering extreme price moves and volatility shifts in equity, interest rate and electricity contracts. The stress testing approach is based on the most extreme close-to-close price movements observed over the relevant holding period. The CCP’s stress test approach comprises a suite of historical, theoretical and hypothetical scenarios, as set out below.Historical scenariosHistorical scenarios are based on the largest observed price movements over the stressed period of risk, using the entire price history available for the product. Observed periods of stress are excluded by the CCP only if their reoccurrence is considered implausible based on the contemporary structure and functioning of the market, or if they have been superseded by more recent market events.Theoretical scenariosTheoretical scenarios are based on statistical inference from 20 years of historical price and volatility data, to capture extreme but plausible (1-in-20-year) events that have not been observed. This statistical analysis considers correlations between contracts and takes into account correlations between contracts and uses a Student’s t-distribution to allow for more extreme events than normal distribution. These include a range of scenarios that model a range of shifts, tilts, twists and bends of the yield curve as well as scenarios that apply model shocks to equities and state-specific electricity markets.Hypothetical scenariosHypothetical scenarios are forward-looking scenarios largely based on expert judgement that reflect that could result in extreme market stress but are not based on historical precedent. The hypothetical scenarios used by the CCP represent macroeconomic or market-wide events. On a monthly basis the RQWG reviews daily price and implied volatility changes for the month to determine whether there is any evidence of stress that would support a change to the scenarios.(4) Additional initial margin/liquidity add-onThe CCP has introduced a liquidity add-on for exchange-traded derivatives margined using CME SPAN. This add on is based on the size of a CM’s portfolio relative to a ‘base’ portfolio in a product. The base portfolio is set at a size that would allow it to be liquidated within the product’s margin period of risk with minimal market impact, based on historical trading volumes. For portfolios that are larger than the base portfolio for a product, the CCP sets a ‘scaler’ that is used to calculate the increase in price scanning range that would be required to cover the additional costs of liquidating the larger portfolios within the margin period of risk.Variation margin(1) Contracts other than Contracts arising from Bond Transactions or Repurchase Agreements: Daily Settlement AmountPurpose and MethodThe CCP effects daily settlement to market of all Contracts arising from Transactions traded prior to the prescribed time at the daily settlement price.The daily settlement price is determined under the Exchange Operating Rules or, if no such price is available, a price determined by the CCP having regard to prevailing market prices and/or such other factors as the CCP considers relevant.The Daily Settlement Amount that is payable by or to the CCP and the CM, as a result of the settlement to market procedure, is the difference between the value of the Contract at the last daily settlement price and the value of the Contract at the current daily settlement price.In the case of Options, settlement is made in respect of the premium.Settlement to market is effected by way of (1) daily settlement and (2) the opening of new Contracts on the same terms other than that they are at the daily settlement price i.e. at market.(2) Contracts arising from Bond Transactions or Repurchase Agreements: Variation marginPurpose and MethodVariation margin is calculated by the CCP by marking to market all Contracts arising from Bond Transactions and Repurchase Agreements.The CCP will specify the method of calculation for, or directly determine, the daily closing values and the variation margins applicable to Bond Transactions and Repurchase Agreements.After the relevant daily closing values have been determined, the CCP calculates the variation margin.Each BRC Participant is obliged by the prescribed time or on demand to pay to the CCP any variation margin payable by it.Variation margin paid will be retained by the CCP until the CCP returns the variation margin to the BRC Participant who paid it, either on settlement of the relevant Bond Transaction or Repurchase Agreement or prior to settlement in accordance with the CCP’s margining policy.Intra-Day MarginA CM is obliged to, by no later than the prescribed time deposit with the CCP by way of Intra-Day Margin amounts owing as a result of the revaluation in the prescribed manner of Contracts held by it.Extra MarginIn addition to or instead of the Intra-Day Margin, the CCP may at any time require at its absolute discretion a CM or all or any CMs by a time determined by the Board or managing director to deposit as Extra Margin, further cash, securities, margin or cover for Contracts or Transactions eligible to be registered having regard to movements in the price of the transactions traded in any market of the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited, as applicable.Hide noteCCP responses of 16 February 2015CCP responses of 6 February 2015Rule 43 (Initial Margin and other deposits) and Schedule 2 (Daily settlement payments and payments of margins using the SPAN margining system)ASX Clear (Futures) Operating Rules; The description of SPAN is available at https://www2.asx.com.au/investors/learn-about-our-investment-solutions/asx-options-knowledge-hub/optionsmargin-estimator; Rule 43A (BRC Initial Margins and Other Deposits)Rule 44 (Daily Settlement)Rule 44A (BRC Variation Margin)Rule 45 (Intra-Day and Extra Margins)RBA 2018/19 Assessment Appendix C1, Standards 4.4 – 4.7 and 6.3Schedule 5 (Approved Securities and Cover) |
| 44.3 For each type of margin, how often does the CCP make margin calls and what is the timing for CMs to meet margin calls? | Initial margin deficiency; Cash replacement1The CCP may from time to time require the provision of a deposit by way of further collateral to ensure that the valuation of the total collateral is at least equal to the initial margin liability of the CM or may require that non-cash collateral be replaced with cash.Margin calls2Contract other than Contracts arising from Bond Transactions or Repurchase Agreements:Initial margin and Daily Settlement AmountsInitial margin is required to be met on the Business Day after trade date/registration; CMs are not required to pre-fund/put in place collateral ahead of registration.The Rules provide the prescribed times by which the initial margins and Daily Settlement Amounts are payable. The prescribed times differ depending on the currency of denomination of the relevant Contracts and can be located on the CCP’s website, together with a list of cover approved for initial margins (including cash collateral denominated in a different currency to the Contract).Contracts arising from Bond Transactions or Repurchase Agreements:Initial margin and variation marginThe Rules provide the prescribed times by which the initial margins and variation margins are payable.Intra-Day Margin3Intra-Day Margin is payable by no later than the prescribed time.The CCP offers clearing services on a 24/6 basis and so it faces intra-day risk during both during the day, and overnight.Day session (8.30 am to 4.30 pm)The CCP currently conducts three scheduled intra-day margin runs during its day session, at 8.05am,11.10 am and 1.30 pm. Intra-day margin calls are issued around 45 minutes following each run and must be met by CMs within one hour of notification. The CCP is able to conduct ad hoc intra-day margin runs during the day session and will do so in response to large price movements in key contracts. Ad hoc runs are triggered if the change in price of an individual contract exceeds 100 per cent of its margin rate or the ASX/S&P 200 index price changes by 1 per cent or more intra-day. The CCP seeks to ensure that a greater proportion of intra-day exposures are collateralised in the lead up to the night session by imposing a risk-based erosion threshold to intra-day calls. Night session (5.10 pm to 7.00 am)The CCP runs hourly margin calculations during the night session; however, CMs are unable to make AUD margin payments overnight since the Australian payments system is closed. The CCP conducts a 2.00am call for initial margin for AUD denominated ETD products from CMs that meet certain criteria. This must be met within two hours of notification. Calls are made in USD to cover any initial margin shortfalls greater than $3 million for House Accounts and $5 million for Client Accounts.CMs subject to the 2.00am call are also required to post additional collateral in the form of an overnight buffer to reduce the likelihood that a call for variation margin would be required overnight. The size of the required buffer for each account is calculated based on the 80th percentile of daily mark-to-market movements between 5.00pm (end of the day session) and the 2.00am call. The CCP calculates the buffer based on one years’ worth of data. The CCP has set out a quarterly process for reviewing and resizing this buffer.The CCP collects data on the exposures on near real-time basis, and these exposure data are reviewed periodically during the night session to monitor peak exposure and erosion of margin resources. The CCP does not initiate additional ad hoc margin cycles on the basis of these data but may use information in reviewing its margin models or the appropriate timing of its margin cycles.For all intra-day and end-of-day margin calls, the CCP monitors the payment progress of CMs in the period prior to when the time payment is due, in order to identify any CM that has not matched and settled. In most cases, the early intervention and relevant escalation processes result in any operational problems being solved ahead of the payment deadline. If a margin payment is not made in the required time, the CCP has the right to call a default event.Extra Margin 4Extra Margin can be called at any time by the CCP in its absolute discretion.Extra Margin must be deposited within 1 hour of notification, in the absence of any other determination by the Board or the managing director either generally or in a particular case.In addition, the table of acceptable collateral on the CCP’s website (see item 58.1 for the weblink) sets out the lodgement process and the timing. The CCP has broad discretion in prescribing the timing for meeting margin calls. Hide note1 Rule 43.1 (Initial Margin and Other Deposits) and 43A.1 (BRC Initial Margins and Other Deposit, ASX Clear (Futures) Operating Rules, CCP responses of 6 February 2015, Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017)2 Rules 44 (Daily Settlement),44A (BRC Variation Margin), Schedule 3 (Prescribed Times), Schedule 3 (Procedures Determinations and Practice Notes (Prescribed Times)) and Schedule 5 (Approved Securities and Cover), ASX Clear (Futures) Operating Rules, CCP’s website: https://www2.asx.com.au, CCP responses of 6 February 2015, CCP responses of 6 February 2015, Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017)3 Rule 45 (Intra-Day and Extra Margins), ASX Clear (Futures) Operating Rules, CCP responses of 6 February 2015, Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017); RBA 2018/19 Assessment Appendix C1, Standard 6.44 See footnote 3 |
| 44.4 Can the CCP require CMs to post intra-day margin? | Yes. See items 44.1, 44.2 and 44.3 under the headings “Intra-Day Margin” and “Extra Margin”.Hide noteRule 45 (Intra-Day and Extra Margins) |
| 44.5 Is there an unmargined intra-day/overnight amount permitted in relation to new Contracts? | Initial margin is required to be met on the Business Day after trade date/registration; CMs are not required to pre-fund/put in place collateral ahead of registration.However, the CCP has absolute discretion at any time prior to registration to impose conditions (including the deposit of margin) on the registration of any Transactions.In relation to Contracts arising from Bond Transactions and Repurchase Agreements, the CCP has discretion (in appropriate circumstances or for particular transactions or class of transactions) to waive the requirement to pay initial margin, variation margin, Intra-Day Margin or Extra Margin or determine a lower rate of initial margin for a particular BRC Participant.Hide noteRule 31.2 (Registration of a Market Contract with ASX Clear (Futures))Rule 43A.2 (BRC Initial Margins and other deposits)CCP responses of 6 February 2015 |
| 44.6 Can the CCP provide margin credit so that a CM does not have to transfer funds to meet a margin call? | Not addressed in the Rules. The CCP has broad discretion to determine the margin amounts payable and this discretion could potentially include the provision by the CCP of margin credit such that a CM does not have to transfer funds to meet a margin call.In practice, the CCP does not provide margin credits to CMs.Hide noteCCP response of 13 January 2017 |
| 45. Suspension of new Contracts pending intra-day margin payments | |
| 45.1 Can the CCP suspend clearing of new Contracts pending payment of an intra-day margin call? | Yes, the CCP has absolute discretion at any time prior to registration to decline to register a Transaction in the name of a CM or to impose conditions (including the deposit of intra-day margin in respect of a Contract) on the registration of any Transaction.Hide noteRule 31.2 (Registration of a Market Contract with ASX Clear (Futures)) |
| 45.2 If so, how would this be notified to the CM? | Not addressed in the Rules, but the CCP has confirmed that it will notify the affected CMs in writing.Hide noteCCP response of 13 January 2017 |
| 45.3 What steps would the CM have to take to reinstate clearing of new Contracts? | Not addressed in the Rules. |
| 46. Collateral requirements upon Contract registration | |
| 46.1 Does the CCP require a CM to post collateral at the time it registers a Contract? | See item 44.5. |
| 47. Daily collateralisation of Contracts | |
| 47.1 Does the CCP require all Contracts to be fully collateralised on a daily basis? | Other than initial margin which is required to be met on the Business Day after trade date/registration, the CCP requires that all Contracts are to be fully collateralised on a daily basis. Variation margin (whether by way of settlement to market or marking-to-market) operates on a daily basis, but the CCP has discretion to waive or lower its margin requirements.Hide noteRule 43 (Initial Margin and other deposits)Rule 43A (BRC Initial Margins and other deposits)Rule 44 (Daily Settlement)Rule 44A (BRC Variation Margin)CCP responses of 6 February 2015 |
| 48. Credit limits on uncollateralised exposures | |
| 48.1 Can the CCP impose credit limits on specific CMs’ uncollateralised exposures? | The CCP may at the time of admission or any later time impose any conditions on a CM which it considers appropriate. This could include the imposition of credit limits.The CCP may also prescribe Position Limits (see item 39).Hide noteCCP responses of 13 January 2017Rule 4.5 (Admission Requirements)Rule 9 (Position Limits) |
| 49. Excess collateral | |
| 49.1 Does the CCP permit CMs to post excess collateral, and how is excess collateral protected at the CCP? | Yes. All deposits (which the CCP has confirmed include cash and non-cash collateral) held by the CCP in a CM’s House Account or Client Account, including any monies deposited in excess of a CM’s margin and Daily Settlement obligations at the time of deposit, are deemed to have been deposited for the purpose of satisfying margin and Daily Settlement obligations.Deposits held by the CCP in excess of a CM’s margin and Daily Settlement obligations from time to time are refundable to the CM by the CCP on demand, provided that the CCP is satisfied in its absolute discretion that such deposits will not be required to satisfy the CM’s obligations under the Rules (including a margin or Daily Settlement obligation).Excess margin payments are protected in a similar manner to regular margin payments.It is noted that securities, collateral, and other property deposited by CMs with the CCP are absolutely transferred, meaning that the CCP receives all rights, titles, and interests. For securities and collateral, CMs do not retain any proprietary rights post-transfer, except potentially modified by Part 11 of the Futures Rules. The CCP must only return equivalent assets, not the originals. Similarly, all cash deposited by CMs with the CCP for various margin requirements becomes the absolute legal and beneficial property of the CCP. While it represents a debt equivalent to the balance of the participant’s relevant clearing account, neither the CM nor any associated entities retain proprietary rights or interests in the cash. This arrangement is subject to the Client Protection Model Provisions.Note that the CCP may also “attribute” cash and non-cash assets posted by CMs in respect of an individual Client sub-account. Attributions that exceed the level of initial margin required in relation to such individual Client sub-account are permitted. See the Client Clearing Module for further information.Hide noteRule 49 (Excess Deposits)Rule 49A (Absolute Transfer of Securities, Collateral and Other Property)Rule 49B (Cash Deposits Represent Property of ASX Clear (Futures) Operating)CCP responses of 6 February 2015Rule 116.2A (Margin) |
| 49.2 If a CM is not permitted to post excess collateral to the CCP, how does the CCP treat any excess collateral at the CCP (e.g., excess margin resulting from a change in the marked-to-market value of the Contracts)? | N/A |
| 49.3 Is excess collateral automatically returned to the CM, or can a CM request its return at any time? | Excess collateral is not automatically returned to the CM, but the CM may request its return at any time. See item 49.1.Hide noteRule 49.2 (Excess Deposits) |
| 50. Settlement finality for margin | |
| 50.1 When is collateral deemed received from a CM or paid to a CM (settlement finality for margin)? | Not addressed in the Rules.However, collateral is deemed received from or paid to a CM when the collateral is deposited into the relevant account. In an insolvency situation, this is maintained by the PSNA. |
| 51. Cross-service margining | |
| 51.1 Does the CCP permit cross-service margining? | Margin (initial margin, variation margin, Intra-Day Margin or Extra Margin) is calculable separately and (unless otherwise prescribed) in respect of each of the Australian Securities Exchange Limited and the New Zealand Futures & Options Exchange Limited (as applicable) and, if applicable, the OTC Transactions for each House Account and Client Account of each CM.Margin is also calculable separately for each BRC House Account of each BRC Participant.However, the CCP does permit cross-service margining, currently on a limited basis. See item 51.2.Hide noteRule 41 (Accounts)Rule 41.3Rule 41A.2 (Bond and Repurchase Clearing Accounts) |
| 51.2 If so, please describe. | If a CM is also an OTC Participant, then, without limiting the discretions of the CCP in the calculation of initial margin, the calculation of initial margin with respect to that CM will take into account any Futures Contracts allocated to the calculation of OTC initial margin under the OTC Service.The CCP also facilitates the allocation of a set of interest rate futures in an OTC participant’s house account to be margined within the portfolio of the CM’s cleared OTC derivatives. Offsets of these futures, including against OTC derivatives, are similarly implicitly recognised within the filtered historical simulation value at risk model. The CCP offers CMs a tool which can automatically optimise the allocation of futures positions to a CM’s OTC derivatives portfolio. This tool identifies and allocates eligible futures contracts within a CM’s portfolio that will, if reallocated to the CM’s OTC derivatives portfolio, lead to a reduction in total calculated OTC exposure – and therefore also total initial OTC margin – without increasing the aggregate of OTC and ETD margin. Prior to the introduction of this tool, CMs had to manually identify and allocate specific futures contracts for portfolio margining.Based on the CCP’s publication “ASX OTC Interest Rate Derivatives Clearing – Service Description” (September 2013), the list of eligible cleared ASX 24 ETDs may be extended to incorporate other exchanged traded products in the future, and it is the CCP’s plan to offer a cross-margin optimisation tool that will allocate the eligible ASX 24 ETD positions in such a way as to minimise the overall cost of margining (i.e. not over-margin the net position).Portfolio margining recognises the economic relationship between, for example, A$ IRD and A$ interest rate futures and, to the extent that positions are indeed offsetting, would be expected to result in a reduction in the amount of initial margin required under the OTC Service, compared to if the positions were margined independently.The cross-margining service described above are available where:• A CM is both a CM under the Service and an OTC Participant under the OTC Service with respect to the CM’s House Account• a Client has an individual sub-account for both the Service and the OTC Service with the same CMCross-margining is currently not available where a Client has different CMs for the Service and the OTC Service or where an entity is a CM under the OTC Service but is only a Client under the Service (i.e. it is not also a CM under the Service).Hide noteRule 43.5 (Initial Margin and Other Deposits)OTC Rule 5.5(Portfolio Margining)RBA 2018/19 Assessment Appendix C1, Standard 6.5 CCP’s publication: “ASX OTC Interest Rate Derivatives Clearing – Service Description” (September 2013), Para 9.10 (Cross-margining)CCP responses of 6, 16 and 18 February 2015 |
| 52. Variation margin haircutting | |
| 52.1 Does the CCP have the right to haircut variation margin or to do something with a similar effect? | Yes. |
| 52.2 If so, in what circumstances (other than in an end-of-waterfall scenario) is it permitted to exercise this right? | Please see item 100.1 under the title of “Conditions and order for taking each recovery action”. |
| 53. CCP rights to amend margin methodology/call for additional collateral | |
| 53.1 Can the CCP amend the methodology for determining the margin requirement and/or call for additional margin at any time? | Yes. See items 44.2 and 79. |
| 54. Basis for margin calls | |
| 54.1 Is margin for Contracts called for on a gross/trade by trade basis or on a net portfolio basis? | Margin is called for on a net portfolio basis, but subject to the separation and cross-service margining set out in item 51.1 and 51.2.Hide noteRule 41 (Accounts)Rule 41.3Rule 41A.2 (Bond and Repurchase Clearing Accounts) |
| 55. Netting and set-off | |
| 55.1 Do the Rules provide for the netting and set-off of obligations in the ordinary course (including, for example, netting of variation margin, netting of variation margin and initial margin and netting of any margin and other payments)? | Yes. |
| 55.2 If so, please describe. | Offset – Daily Settlement Amounts1On each Business Day of the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable), the CCP will in relation to each CM calculate separately with respect to its relevant Client Accounts and House Accounts:(1) the sum of:all Daily Settlement Amounts payable by the CM in respect of the Daily Settlements of the previous Business Day of the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable); andall amounts payable by the CM to the CCP in respect of Contracts which were closed out prior to that Daily Settlement and after the previous Daily Settlement(2) the sum of:all Daily Settlement Amounts payable by the CCP to the CM in respect of Daily Settlements of the previous Business Day of the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable); andall amounts payable by the CCP to the CM in respect of Contracts which were closed out prior to that Daily Settlement and after the previous Daily Settlement.If the amount payable by the CM under (1) is greater than the amount payable by the CM under paragraph (2), then the CM will pay the difference to the CCP.If the amount payable by the CCP under paragraph (2) is greater than the amount payable by the CM under paragraph (1) then, subject to any other amounts owing by the CM or to the CM under the Rules, the CCP will pay the difference to the CM. Set-off rights – a CM’s House Accounts and Client Accounts2In addition, the CCP may at any time:combine or consolidate the balances (whether arising from settlements, margin payments or otherwise) in respect of all or any of the Contracts under the Service and contracts under the OTC Service designated to a CM’s House Accounts; and/orset-off any amount(s) standing from time to time to the credit of any of the CM’s House Accounts, in or towards payment or satisfaction of all or any of that CM’s liabilities to the CCP in respect of:(i) Contracts under the Service and contracts under the OTC Service designated to any of that CM’s House Accounts; or(ii) Contracts under the Service and contracts under the OTC Service designated to any of the CM’s Client Accounts, to the extent of any shortfall where proceeds of a Client Account are insufficient to meet its liabilities to the CCP in respect of Contracts under the Service and contracts under the OTC Service designated to that Client Account. Set-off rights – a CM’s Client Accounts3Except to the extent that the client protection model provisions (these are set out in Part 10 of the Rules) apply and provide otherwise, the CCP may combine or consolidate the balances (whether arising from settlements, margin payments or otherwise) in respect of all or any of the Contracts under the Service and contracts under the OTC Service designated to a CM’s Client Accounts and to set off any amount(s) standing from time to time to the credit of any of a CM’s Client Accounts in or towards payment or satisfaction of all or any of the CM’s liabilities to the CCP in respect of Contracts under the Service and contracts under the OTC Service designated to the CM’s Client Accounts. BRC Offset4Variation margin payable to a BRC Participant may be offset against any variation margin payable by that BRC Participant.Hide note1 Rule 47.1 (Offset-Daily Settlement Amounts)2 Rule 47.2(Offset-Daily Settlement Amounts)3 Rule 47.3(Offset-Daily Settlement Amounts)4 Rule 48 (BRC Offset) |
| 56. CM provision of cash collateral | |
| 56.1 How is cash collateral in respect of house business provided to the CCP (by way of title transfer or by way of security interest)? | All collateral (cash and non-cash) is currently transferred by way of title transfer to the CCP. Cash collateral is the legal and beneficial property of the CCP and represents a debt owing by the CCP to the CM. Non-cash collateral is transferred by a CM to or on account of the CCP and is not invested. The CCP has made no determination to apply the security interest provisions of Part 11 of the Rules (see below). Initial marginCash collateral may be transferred by way of title transfer or security interest if the CCP designates that Part 11 of the Rules applies to such collateral as “Secured Initial Margin”.The CCP may determine the time at which application of Part 11 of the Rules is to commence in its sole discretion. The CCP may make this determination at different times for different types of Transactions. However, a determination does not have the effect of including any property which has already been transferred to, or otherwise provided to, or designated for the benefit of, the CCP at that time as “Secured Initial Margin”.For the purposes of creating a security interest over collateral posted by a CM (cash or non-cash), no additional documentation is required. The Rules create a charge over the “Secured Initial Margin” and deals with the other requirements to effect security. Variation marginFor Contracts other than Contracts arising from Bond Transactions and Repurchase Agreements, there is daily settlement to market of Contracts in cash instead of the provision of collateral.For Contracts arising from Bond Transactions or Repurchase Agreements, cash collateral is transferred to the CCP by way of title transfer.Intra-Day Margin is a form of variation margin; cash collateral is transferred to the CCP by way of title transfer. Extra MarginThe Rules do not expressly state whether Extra Margin is provided by way of outright transfer or security interest, but the CCP has confirmed that Extra Margin is provided by way of outright transfer.Hide noteFutures Rules Part 4 (Accounts and Daily Settlement) Para 49A and 49 B; CCP responses of 6 February 2015Part 11 (Security Interest Provisions)Rule 122 (Introduction)Rule 123 (Application of Security Interest provisions)Rule124 (Secured Initial Margin)Rules 44A.3, 44A.5 and44A.6 (BRC Variation Margin)Rule 45 (Intra-Day and Extra Margins) |
| 57. CM provision of non-cash collateral | |
| 57.1 How is non-cash collateral in respect of house business provided to the CCP (by way of title transfer or by way of security interest)? | All collateral (cash and non-cash) is currently transferred by way of title transfer to the CCP. Non-cash collateral is transferred to the CCP’s account in Austraclear and is not invested or re-used by the CCP. Initial marginNon-cash collateral may be transferred by way of title transfer or security interest if the CCP designates that Part 11 of the Rules applies to such collateral as “Secured Initial Margin”. See item 56 for more details. The CCP has made no determination to apply the security interest provisions of Part 11 of the Rules. Extra MarginExtra Margin is provided by way of outright transfer.Hide noteFutures Rules Part 4 (Accounts and Daily Settlement) Para 49A and 49 B; CCP responses of 6 February 2015 |
| 58. Eligible collateral, haircuts and concentration limits | |
| 58.1 What constitutes eligible collateral? | The CCP has absolute discretion to determine what constitutes eligible collateral, subject to the requirements of the RBA’s Financial Stability Standards for Central Counterparties which require accepted collateral to have low credit, liquidity and market risks and central counterparties to set and enforce appropriately conservative haircuts and concentration limits.Acceptable collateral is reviewed annually and more frequently if market circumstances dictate. Initial marginInitial margin (including additional initial margin)The types of collateral acceptable to the CCP for the purposes of initial margin and additional initial margin calls are set out in the form of a table, at http://www.asx.com.au/data/asxclf-acceptable-collateral-list.pdf.The CCP updates this list from time to time.CMs may meet additional initial margin obligations using AUD cash or non-cash collateral, including Australian government and semi-government securities.Intra-day Margin and Extra MarginIntra-Day Margin requirements must be met by cash payments.Extra Margin can be provided by way of cash or non-cash assets. The Rules specify the types of non-cash assets that may be posted. Variation marginFor Contracts other than Contracts arising from Bond Transactions or Repurchase Agreements, there is daily settlement to market of Contracts in cash instead of the provision of collateral.For Contracts arising from Bond Transactions or Repurchase Agreements, variation margin requirements must be met by cash payments.Hide noteRule 43 (Initial Margin and Other Deposits)Rule 43A (BRC Initial Margins and Other Deposits)Rule 45 (Intra-Day and Extra Margins)Schedule 5 (Approved Securities and Cover)Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017)RBA 2018/19 Assessment Appendix C1, Standard 5.1RBA 2021/22 Assessment, Appendix B.3 (Prefunded financial sources), pp 64 |
| 58.2 Are haircuts applied to any form of eligible collateral? | Yes, haircuts are applied to all non-cash collateral posted and all cash collateral that is not in the same currency as the product being covered. Details can be found at the following weblink on the CCP’s website: https://www.asx.com.au/markets/clearing-and-settlement-services/asx-clear-futures/interest-payments-haircuts-fees-and-incentives?_gl=1*ymssw7*_ga*NzAzNDE3OTYuMTY1MjQ0NDQ5OQ..*_ga_J1L799T374*MTY5MDk4NjEwNC42MS4xLjE2OTA5ODk3NDkuNjAuMC4w.The CCP sets haircuts on eligible debt securities placed as collateral. Eligible securities are assigned a haircut based on three maturity buckets, with higher haircuts applied to longer-dated securities. The haircuts are calibrated to cover a fall in the collateral value of securities over a three-day period at 99.9 per cent confidence level, based on 20 years of price history, where available. This coverage is equivalent to the fifth worst price move over the 20 years of price history. The CCP also applies haircuts using the same methodology to cash collateral lodged to meet margin requirements for products denominated in a currency other than the collateral using a one-day holding period. The CCP’s current credit stress test framework does not stress collateral using extreme but plausible price moves, but instead monitors on a quarterly basis the impact of the worst price move over the last 20 years on the value of non-cash and non-AUD margin collateral. The CCP will determine an approach to stress testing collateral in its credit and liquidity stress tests. Collateral haircut rates are reviewed at least semi-annually and on a more frequent basis if there are changes in market conditions or collateral eligibility. Hide noteRBA 2018/19 Assessment Appendix C1, Standards 5.1, 5.3 and 5.4Schedule 5 (Approved Securities and Cover)Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017) |
| 58.3 What are the concentration limits or other restrictions in respect of different types of eligible collateral? | The Rules do not expressly set out any restrictions specifying how much of any particular type of eligible collateral a CM may provide.The CCP has absolute discretion to determine what constitutes eligible collateral and when certain types of collateral may cease to be acceptable. The CCP may therefore use such discretion to implement restrictions in practice. The CCP’s determination is subject to the requirements of the RBA’s Financial Stability Standards for Central Counterparties which require accepted collateral to have low credit, liquidity and market risks and central counterparties to set and enforce appropriately conservative haircuts and concentration limits.The publicly available collateral eligibility reflects the broad parameters set by the CCP’s collateral policy which is not publicly available but is subject to RBA’s review or oversight.The risk-based policy operated by ASX for managing concentration risks at its CCPs (i.e. the CCP and the CCP operated by ASX Clear Pty Limited) does not address concentration risk in the CCP’s collateral holdings. ASX also considers the non-cash collateral which it accepts (listed in item 58.1) to be sufficiently liquid that concentration is unlikely to be a significant concern. Concentration risk in foreign currencies is considered wherever a CM approaches ASX for approval to lodge foreign currency collateral. Should the materiality of non-cash collateral increase, The CCP would expect to apply a similar policy on concentration limits to that applied in the investment mandate.Hide noteRule 43.1 (Initial Margin and other deposits)Rule 43A.1 (BRC Initial Margins and Other Deposits)Schedule 5 (Approved Securities and Cover)CCP responses of 6 February 2015RBA 2018/19 Assessment Appendix C1, Standards 5.1 and 5.5 |
| 58.4 Can the CCP require a minimum portion of collateral to comprise cash? | Initial margin1Initial margin (including additional initial margin)There is no requirement for a minimum portion of collateral to comprise cash.However, as the CCP may at any time require that any non-cash collateral be replaced by cash, it can in practice set a requirement for a minimum portion of collateral to comprise cash if it wishes to do so. Intra-day Margin and Extra Margin 2Intra-day Margin may only be settled in cash in the currency in which the relevant Contract is denominated or such other currency as notified by the CCP in writing.Extra Margin can be provided by way of cash or non-cash assets. The CCP can therefore exercise its discretion to require a minimum portion of Extra Margin to comprise cash. Variation marginAs described in item 58.1, for Contracts arising from Bond Transactions or Repurchase Agreements, variation margin requirements must be wholly met by cash payments.For Contracts other than Contracts arising from Bond Transactions or Repurchase Agreements, there is daily settlement to market of Contracts in cash instead of the provision of collateral.Hide note1 Rules 43.1 (Initial Margin and other deposits) and 43A.1 (BRC Initial Margins and Other Deposits), ASX Clear (Futures) Operating Rules, Rule 44 (Daily Settlement), Rule 44A (BRC Variation Margin)2 Rule 45 (Intra-Day and Extra Margins) and Schedule 5 (Approved Securities and Cover), ASX Clear (Futures) Operating Rules, Rule 44 (Daily Settlement), Rule 44A (BRC Variation Margin) |
| 58.5 How, when and with what notice period can the CCP change the list of assets that constitute eligible collateral, the concentration limits, and any minimum cash requirement? | List of eligible collateralThe CCP may amend the types of collateral acceptable to it by amending the eligible collateral list on the CCP’s website at https://www.asx.com.au/data/asxclf-acceptable-collateral-list.pdf from time to time.In practice, generally the CCP will consult with the risk committee before it makes changes to the eligible collateral list and changes are notified to CMs by notice. Concentration limitThe Rules do not mandate any specific concentration limits, but the CCP has broad rights to value posted collateral at zero and demand an alternative form of collateral from CM if the CCP determines it is necessary to do so. See items 58.3 for further information about the CCP’s approach as regards concentration limits. Minimum cash requirementThe Rules do not mandate any specific minimum cash requirements. See items 58.4 and 59.1 for more details.Hide noteRule 43 (Initial Margin and other Deposits)Rule 43A (BRC Initial Margins and Other Deposits)Schedule 5 (Approved Securities and Cover)Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017)CCP responses of 6 and 16 February 2015 |
| 59. Substitution of collateral | |
| 59.1 Can the CCP require substitution of eligible collateral at any time and what are the timelines for such substitutions? | The Rules do not address the CCP’s right to demand substitute collateral, save for replacing non-cash collateral with cash collateral for initial margin. The CCP has broad discretion to value posted collateral at zero and demand an alternative form of collateral from CM if the CCP determines it is necessary to do so.On timing for the meeting of margin calls, see item 44.3. In addition, the table of acceptable collateral on the CCP’s website sets out the lodgement process and the timing. The CCP has broad discretion including prescribing the timing for any such substitution.Hide noteRule 43 (Initial Margin and other Deposits)Rule 43A (BRC Initial Margins and Other Deposits)Schedule 5 (Approved Securities and Cover)Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017) |
| 59.2 What requirements, if any, must be satisfied to permit the CCP to require a substitution? | Substitution is at the CCP’s discretion. The Rules do not specify any particular requirements. |
| 59.3 Do the timelines depend on whether the CCP or CM initiates a substitution? | In respect of a substitution required by the CCP, see item 59.1.The Rules do not expressly provide for any substitution initiated by a CM. |
| 60. Non-eligible collateral | |
| 60.1 Does the CCP offer a service under which a CM can post as collateral types of assets that would not otherwise constitute eligible collateral? | No. However, the CCP has absolute discretion to determine what constitutes eligible collateral, subject to the requirements of the RBA’s Financial Stability Standards for Central Counterparties which require accepted collateral to have low credit, liquidity and market risks and central counterparties to set and enforce appropriately conservative haircuts and concentration limits.Hide noteRule 43 (Initial Margin and other deposits)Rule 43A (BRC Initial Margins and Other Deposits)Schedule 5 (Approved Securities and Cover) |
| 60.2 If so, please describe. | See item 60.1. |
| 61. CCP rights to apply collateral rules to individual CMs | |
| 61.1 Must the CCP apply the rules addressed in items 59-60 universally or does it have the ability to apply such amendments to individual CMs? | The CCP has broad discretion to apply amendments to individual CMs.Hide noteRule 43 (Initial Margin and other Deposits)Rule 43A (BRC Initial Margins and Other Deposits) |
| 62. Collateral pricing sources | |
| 62.1 What sources are used for pricing collateral? | Not addressed in the Rules, but the CCP has confirmed that Reuters is used for pricing collateral.Hide noteCCP responses of 6 February 2015 |
| 63. CCP mitigation of wrong-way risk | |
| 63.1 Please describe how, if at all, the CCP mitigates wrong-way risk (i.e., are CMs prohibited from posting their own debt and equity securities, debt or equity of companies closely linked to them, or debt or equity securities linked to the jurisdiction in which they are organised?). | The Rules do not expressly address wrong-way risk. However, in the context of additional initial margin required following breach of a stress-test exposure limit (see item 44.2, under the heading “(3) Additional initial margin”), the CCP’s list of eligible collateral prohibits bank bills and negotiable certificates of deposit if issued by CMs or parent/associated undertakings. In addition, the CCP’s list of eligible collateral for (regular) initial margin includes only Government-issued non-cash collateral, rather than securities that may be issued by CMs or their parents/affiliates (which could potentially lead to wrong-way risk).In any event, the CCP has absolute discretion to determine what constitutes eligible collateral and when certain types of collateral may cease to be acceptable, subject to the requirements of the RBA’s Financial Stability Standards for Central Counterparties. The CCP may therefore use such discretion to implement restrictions in practice.The CCP does not accept collateral issued by a CM (or associated entity) for any margin calls. ASX monitors CMs posting stocks as collateral for short put options on that stock; in the event that this risk was substantial or persistent, ASX would liaise with the CM and may impose additional margin requirements or require the CM to reduce their exposure to the stock. Hide noteRule 43 (Initial Margin and other deposits)Rule 43A (BRC Initial Margins and Other Deposits)Schedule 5 (Approved Securities and Cover)Table of ASX Clear (Futures) Acceptable Collateral (Effective 26 May 2017)RBA 2018/19 Assessment Appendix C1, Standards 5.1, 5.5 and 6.3 |
| 64. Interest on cash collateral | |
| 64.1 Is interest payable to the CM in respect of cash collateral transferred to the CCP as margin? If so, can there be negative interest rates so that interest is due from the CM? | Initial margin1Interest is payable on initial margin (in the form of cash collateral) at such rate(s) as are set by the CCP and notified to the CM from time to time. The CCP has confirmed that there can be no negative interest rates for initial margin. Contracts other than Contracts arising from Bond Transactions and Repurchase Agreements – Daily Settlement AmountsNo interest arises on Daily Settlement Amounts as these are paid in settlement of Contracts. Contracts arising from Bond Transactions and Repurchase Agreements – Variation margin2The CCP will pay interest to BRC Participants, at a rate of interest to be determined by the CCP during the period that variation margin in respect of Bond Transactions and Repurchase Agreements is retained by the CCP. The Rules do not provide for the payment of negative interest by BRC Participants.For variation margin held by a CM, the CM will not be required to pay interest.Hide note1 Schedule 7 (Calculation of Interest), ASX Clear (Futures) Operating Rules, CCP responses of 6 February 20152 Rule 44A.4 (BRC Variation Margin), ASX Clear (Futures) Operating Rules |
| 65. Returns on non-cash collateral | |
| 65.1 Are returns earned on non-cash collateral posted by way of margin passed on to CMs? | We would expect that returns arising directly from the terms of such non-cash collateral (as distinct from returns arising from further investment of such non-cash collateral) will nevertheless accrue for the benefit of the CM.Non-cash collateral is not invested so there is no return earned.Hide noteCCP responses of 6 February 2015RBA 2018/19 Assessment Appendix C1, Standard 15.1 |
| 66. Variation margin (daily settlement versus mark to market and two way posting) | |
| 66.1 Is collateral posted in respect of variation margin provided as daily settlement or mark-to-market collateral? | Contracts other than Contracts arising from Bond Transactions and Repurchase AgreementsDaily settlement to market of Contracts in cash. Contracts arising from Bond Transactions and Repurchase AgreementsVariation margin is provided as mark-to-market collateral.Hide noteRule 44 (Daily Settlement)Rule 44A (BRC Variation Margin) |
| 66.2 Does the CCP pay any margin to the CM? If so, please describe. | Initial marginThe CCP does not deposit or lodge initial margin with its CMs. Variation marginVariation margin is passed through to the other side of the transaction and is not payable by the CCP out of its own funds.Contracts other than Contracts arising from Bond Transactions and Repurchase Agreements1Yes. The CCP makes daily determination of the Daily Settlement Amount. If the CCP determines that it needs to pay a Daily Settlement Amount to a CM, then the CCP must pay such Daily Settlement Amount to such CM. Contracts arising from Bond Transactions and Repurchase Agreements 2 Yes. The CCP makes daily determination of the variation margin by marking to market all Contracts arising from Bond Transactions and Repurchase Agreements. If the CCP determines that it needs to pay a variation margin to a BRC Participant, then the CCP must pay such variation margin to such CM.**Note: As the CCP does not currently offer clearing of Bond Transactions and Repurchase Agreements, notwithstanding their inclusion in the Rules, the CCP has not provided comments on the Service as it relates to Bond Transactions and Repurchase Agreements in its review of this survey. Rule 44A.3 is subject to Rule 48. Rule 44A.3 provides only for payment of variation margin by the BRC Participant and is silent on whether or not the CCP is obliged to pay variation margin to the BRC Participant.Rule 44A.6 refers to “Amounts paid to a BRC Participant…”; we assume that this refers to both variation margin paid by the CCP to the BRC Participant, as well as interest paid to a BRC Participant on the variation margin that it has paid to the CCP.*Note: Rule 48.1 provides that “BRC variation margin payable to a BRC Participant may be offset against any BRC variation margin payable by that BRC Participant. This would suggest that variation margin is 2-way, payable by the CCP as well.Hide note1 Rule 44 (Daily Settlement), ASX Clear (Futures) Operating Rules2 Rules 44A.3, 44A.6 (BRC Variation Margin) and 48 (BRC Offset)2 CCP responses of 6 February 2015 |
| 67. CM house accounts | |
| 67.1 What house accounts can a CM hold with the CCP (e.g., Contract/collateral/other)? | House Account(s) – Contracts excluding Contracts arising from Bond Transactions and Repurchase Agreements, but including OTC Contracts (OTC Contracts are beyond the scope of this survey)Contracts 1Each CM establishes a single House Account at the CCP in respect of both:Australian Securities Exchange Limited and/or the New Zealand Futures & Options Exchange Limited (as applicable) at which the Transactions from the CM’s house positions were originally traded; andif applicable, the house positions comprising the CM’s OTC Contracts.It is the account to which all monies and property owing to or from the CCP in relation to relevant house positions of a CM is to be referable.In addition, the CCP may establish a separate House Account for a CM with respect to a single exchange (either the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable)), to which all monies or property owing to or from the CCP in relation to relevant house positions of a CM for a prescribed group of Contracts is to be referable.Contracts which are listed on the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable)) and which are denominated in New Zealand dollars are a prescribed group of Contracts. Collateral 2Margin is calculable separately and (unless otherwise prescribed) in respect of each of the Australian Securities Exchange Limited and the New Zealand Futures & Options Exchange Limited (as applicable) and, if applicable, the OTC Transactions for each House Account and Client Account of each CM. See items 51.1 and 54.Any collateral deposited with the CCP by a CM with respect to a Contract will be designated to the account of that CM to which the Contract is designated. House Account(s) – Contracts arising from Bond Transactions and Repurchase AgreementsContractsEach BRC Participant establishes a BRC House Account at the CCP as the account to which all monies and property owing to or from the CCP in relation to relevant house positions of a BRC Participant is to be referable. CollateralMargin is calculable separately for each BRC House Account of each BRC Participant. See item 51.1.Any collateral deposited with the CCP by a BRC Participant with respect to a Contract will be designated to the account of that BRC Participant to which the Contract is designated.Hide note1 Schedule 11A (4) (Additional Prescriptions); Rule 41A.1, (Bond and Repurchase Clearing Accounts); Rules 41.1, 41.3 (Accounts); CCP responses of 6 February 2015 2 Rule 41A.2 (Bond and Repurchase Clearing Accounts); Rules 41.1, 41.3 (Accounts); CCP responses of 6 February 2015 |
| 68. Segregation requirements | |
| 68.1 Describe the segregation requirements applicable to Contracts and the related collateral credited to each type of account. | Segregation among different types of Contracts designated to a CM’s House Account(s)See item 67. Segregation between House Accounts and Client Accounts1In addition, Contracts (which include Contracts under the Service) credited to a House Account are segregated in the books and records of the CCP from contracts (which include Contracts under the Service) credited to all other accounts and are therefore segregated from contracts (which include Contracts under the Service) credited to the House Accounts of other CMs and contracts (which include Contracts under the Service) credited to Client Accounts. On the occurrence of a CM event of default, the CCP may in accordance with the Rules apply any surplus in any House Account or any other account of that CM with the CCP (whether or not arising from obligations under the Rules) to meet any deficiency in any Client Account of the CM but will not apply any surplus in any Client Account to meet any deficiency in any House Account of that CM.In no circumstances will any monies payable to, or securities, collateral or other property required to be allocated to, a Client Account be paid to or allocated to or used on the account of or in relation to positions designated to a House Account. Segregation among Clients2 See item 18.2 in the Client Clearing Module for details regarding types of accounts available for Client business and the segregation requirements.Client/Client segregation is dealt with by the “Client Protection Model Provisions” of the Rules which apply to both the Service and the OTC Service. The CCP must not apply the collateral value (as described in item 94.3) calculated in respect of each Client sub-account to meet the obligations of the CM in respect of House positions or to meet obligations of Clients other than those for which the Client sub-account is held or any other person.For further information please refer to the Client Clearing Module and/or the CCP’s Client Fact Sheet, available at: http://www.asx.com.au/documents/clearing/asx-client-clearing-client-fact-sheet-31aug2015.pdf.Hide note1 Rules 41.5 and 41.7 (Accounts); CCP responses of 6 February 20152 Rule 116.5 (Client Protection Model Provisions; CCP responses of 6 February 2015; Part 10, Rule 116.5 (Client Protection Model Provisions) |
| 68.2 Is the CCP obligated to segregate collateral received through margin calls in respect of CMs from its own assets or the margins of other CMs? | Collateral provided by way of title transfer is only segregated in the books and records of the CCP by its booking into the various accounts; there is no physical segregation of such collateral.Collateral is not currently provided by way of security.Hide noteCCP responses of 6 February 2015 |
| 69. CM affiliate Contracts | |
| 69.1 Are Contracts held by a CM for its affiliates treated as house or Client Contracts? | The Rules are not prescriptive on this point. The CCP believes that this is for the CM to determine. It may be appropriate for Contracts of an affiliate to be treated as house or Client Contracts in different circumstances, depending on, among other things, whether there is an unaffiliated end Client, and subject to ASIC Market Integrity Rules.Hide noteCCP responses of 6 February 2015 |
| 69.2 Are Contracts held by a CM for its affiliates segregated from the house Contracts of the CM? | Not addressed in the Rules but, based on the responses from the CCP, if affiliate Contracts are treated as house Contracts, they will not be segregated from those of the CM.Hide noteCCP responses of 6 February 2015 |
| 70. Allocation of collateral | |
| 70.1 How is collateral allocated to the relevant account? | See item 67. |
| 71. CM withdrawal process | |
| 71.1 Should a CM wish to withdraw from the CCP (i.e., terminate its CM status) or from the Service in the ordinary course, what specific steps would need to be followed and what conditions would need to be met? | (Please click here for a graphic depiction of the default liability of a withdrawing CM.) CCP withdrawal procedure1A CM may withdraw from the CCP or withdraw in respect of one or more of its authorisations to clear a category or categories of Transactions (including Transactions under the Service) either during or outside of a Default Period by giving the CCP a notice of withdrawal in writing. The steps and conditions are the same for both withdraw from the CCP and withdraw in respect of one or more of its authorisations to clear a category or categories of Transactions. If it notifies the CCP that it is withdrawing from all of its authorisations, then it is taken as also notifying of its withdrawal from its membership as a CM with the CCP.However, the conditions for withdraw in a Default Period are different from conditions for withdraw outside of a Default Period. Each set of these conditions is set out below. Withdrawal as a CM from the CCP outside of a Default PeriodA withdrawal, the notice of which was sent to the CCP outside of a Default Period, is not effective unless:the CM has given a notice of withdrawal in writing to the CCP, which notice must be given outside of a Default Period; andthe CCP confirms to the CM in writing that the CM has satisfied the following conditions:the CM has performed all of its accrued obligations under the Rules;the CM is not subject to any disciplinary proceedings or enforcement action within the jurisdiction of the CCP; andit has no Contracts applicable to the authorisation in respect of which it has given notice of withdrawal (i.e. all such Contracts have been closed out).The CCP will provide such confirmation, or reasons why such confirmation cannot be given, within 5 Business Days of the receipt of a written request from a CM which has given notice of withdrawal. Withdrawal as a CM from the CCP during a Default PeriodA withdrawal, the notice of which was sent to the CCP during a Default Period, is not effective unless:2the CM has given a notice of withdrawal in writing to the CCP; andthe CCP has provided notice of acceptance of the CM’s withdrawal. Such notice of acceptance will only be effective if the CM has satisfied each of the following conditions at least 5 Business Days before the end of the Default Period:the CM satisfies the CCP that it has taken or will have taken before the proposed date of withdrawal, proper steps for the orderly winding down of its business in respect of the CCP;the CM confirms it is not the subject of any disciplinary proceedings or enforcement action within Australia;the CM complies with any reasonable direction of the CCP, if any, in relation to the orderly winding down of its business in respect of the CCP;the CM has no outstanding Contracts;the CM has no obligations (including but not limited to the payment of all fees and any obligations to pay money or deliver an asset) arising directly or indirectly from any Contract;the CM has satisfied all its obligations to the CCP, including but not limited to, having paid all outstanding fees and amounts owing by the CM under the Rules and all outstanding assessments owing by the CM under the Recovery Rules, and satisfied all technical and operational requirements; andthe CM has confirmed, and the CCP agrees, that it is not the subject of any ongoing disciplinary proceedings or enforcement action within Australia.The CCP will provide such notice of acceptance, or reasons why such acceptance cannot be given, within one Business Day of a written request from a CM.If a CM has not satisfied each of the requirements set out above by 5 Business Days before the end of the Default Period, the CM’s withdrawal will be governed, when there is no Default Period subsisting, by the withdrawal process governing the withdrawals outside of a Default Period. The CM’s withdrawal will become effective in accordance with those provisions, including the Recovery Rules, if another Default Period commences.A withdrawal which has not become effective before the commencement of a Default Period cannot become effective until the end of the Default Period and is subject to the Recovery Rules, even if the CCP accepts a notice of withdrawal given by a CM before, or during, the Default Period.The CCP will notify the CMs when a CM’s withdrawal becomes effective. Other ASX withdrawals3Where a CM is also a participant in another market or clearing and settlement facility operated by the CCP or a related body corporate of the CCP and the notice being provided relates to both participations, a notice given to the CCP or a related body corporate of the CCP in accordance with the operating rules of that other market or facility is taken to be given to the CCP in accordance with the Rules.Hide note1 Rule 11 (Resignation)2 ASX Recovery Rulebook, Rule 4.2 (Resignation Notice); ASX Recovery Rulebook, Rule 4.3 (Acceptance of Resignation Notice); ASX Recovery Rulebook, Rule 4.4 (Effectiveness of resignation)3 Procedure 19.1 (Notice, Notification and Service of Documents) |
| 71.2 If a CM gives notice of its intention to withdraw, what date will be the Withdrawal Notice Date? | The Rules provide that notice given in accordance with the following methods is taken to be received as specified below:Post is taken to be given on the 2nd Business Day after the document is put in the post, in a stamped envelope or other covering addressed to the recipient;Courier is taken to be given at the time of delivery to the following address:General Manager – Clearing and Settlement OperationsASX Limited, Level 4, Exchange Centre20 Bridge Street, Sydney NSW 2000Telephone: 1800 814 051, Facsimile: 02 9235 1857;Facsimile is taken to be given when the sender’s facsimile machine indicates a successful transmission to the facsimile number referred to above.Email is taken to be given 2 hours after the time the email enters the recipient’s information system, unless a response to the contrary is received (e.g. an out of office notification); andthe web-based system known as ASX Online is taken to be given at the time which that system records the transmission.Hide noteRule 19.1 (Notice, Notification and Service of Documents)ASX Recovery Rulebook, Rule 4.3 (Acceptance of Resignation Notice)Guidance Note 8 (Notification Obligations) |
| 71.3 Is there a minimum notice period for CM withdrawal? | No, but see item 73 on Liability End Date. |
| 71.4 Is membership withdrawal contingent upon the approval of the CCP? | A withdrawal only becomes effective when, in the case of a withdrawal outside of a Default Period, the CCP confirms to the CM in writing that the CM has satisfied the conditions set out in item 71.1 or, in the case of a withdrawal during a Default Period, the CCP provides a notice of acceptance of the withdrawal to the CM.Hide noteRule 11 (Resignation)ASX Recovery Rulebook, Rule 4.3 (Acceptance of Resignation Notice) |
| 71.5 Is the ability/procedure for a CM to withdraw restricted or different if there has been a default by another CM? | Yes. There are different processes for withdrawal notices outside a Default Period and during a Default Period (although the processes are similar). A withdrawal notice given outside a Default Period cannot be effective until the end of a Default Period if a Default Period occurs before the withdrawal is effective. Please see item 71.1.Hide noteASX Recovery Rulebook, Rule 4.3 (Acceptance of Resignation Notice) |
| 72. Conditions imposed on withdrawing CM | |
| 72.1 Can the CCP impose any conditions on the withdrawing CM after Withdrawal Notice Date until the Withdrawal Effective Date? | No. |
| 73. Liability End Date | |
| 73.1 What date will be the CM’s Liability End Date? | Withdrawal outside of a Default Period1The Liability End Date for a withdrawing CM for a withdrawal occurring outside a Default Period is at the end of the last day of the quarter in which the CM meets the conditions set out in item 71.1, provided that those conditions are met at least 30 days prior to the last day of the quarter. If the CM meets those conditions less than 30 days prior to the last day of the quarter, the Liability End Date will be at the end of the last day of the following quarter.These quarters start on 1 March, 1 June, 1 September and 1 December and end on 30 May, 31 August, 30 November and 28/29 February respectively. Withdrawal during a Default Period2The Liability End Date for a withdrawal occurring during of a Default Period is the last day of the Default Period.Hide note1 Rule 11.1(c) (Resignation)1 Schedule 10 (Calculation of Futures Commitments of a Futures Participant)2 ASX Recovery Rulebook, Rules 4.4 (Effectiveness of resignation), 4.5 (Certain obligations to continue), 4.6 (Effect of resignation on Recovery Assessment), 4.8 (Effect of resignation on Partial Termination), 4.9 (Effect of resignation on Complete Termination) and 4.10 (Effect of resignation on Replenishment) |
| 74. Withdrawal Effective Date | |
| 74.1 What date will be the CM’s Withdrawal Effective Date (e.g., upon notice to the CCP of such CM’s withdrawal, upon termination of all Contracts, or otherwise)? | Withdrawal outside of a Default PeriodThe Withdrawal Effective Date is the Liability End Date (see item 73). Withdrawal during a Default Period2The Withdrawal Effective Date during a Default Period is the last day of the Default Period.Hide noteRule 11.1(c) (Resignation)ASX Recovery Rulebook, Rule 4.4 (Effectiveness of resignation) |
| 75. Obligations and liabilities of withdrawing CMs during withdraw process | |
| 75.1 In general terms, what are the obligations and liabilities of withdrawing CMs during the period between the Withdrawal Notice Date and the Withdrawal Effective Date? | In general, a withdrawing CM continues to have the rights and obligations of a CM until the Withdrawal Effective Date (which is the same as the Liability End Date), including the obligation to pay all fees, fines or other charges imposed on the CM by the CCP, due to Contracts cleared or other obligations entered into or incurred prior to termination of such membership, and the obligation to make further default fund contributions (including assessments and replenishment). Note, however, that a CM’s obligation to pay Interim Participant Replenishment Amounts ceases after its resignation notice has been accepted by the CCP.For the avoidance of doubt, the CM’s Contracts and obligations and rights thereunder continue to be subject to any recovery measures that the CCP may determine to take, including Payment Reduction, Partial Tear up and complete Invoicing Back, without regard to the impending withdrawal of such CM. See item 100.1.Hide noteCCP responses of 6 February 2015ASX Recovery Rulebook, Rule 4 (Resignation) |
| 75.2 What is the scope of the CM’s liability to the default fund following the Withdrawal Notice Date but on or before the Liability End Date? | As the Liability End Date is the same day as the Withdrawal Effective Date, the scope of the liability is the same. See items 75.1, 75.3 and 119. |
| 75.3 Can the CCP increase the size of the withdrawing CM’s default fund contribution requirement after its Withdrawal Notice Date? | Funded (paid up) default fund contributions including Variable CommitmentA withdrawing CM’s funded (paid up) default fund contributions including Variable Commitment will remain available for application by the CCP in respect of a default by any CM that occurs prior to (but not after) the withdrawing CM’s Withdrawal Effective Date. Further default fund contributions: assessments and replenishmentsSee item 75.1.During the period between the Withdrawal Notice Date and the Withdrawal Effective Date (which is the same as the Liability End Date), if a default fund contribution (either by way of Variable Commitment, assessment or replenishments) is called by the CCP, on the basis that the withdrawing CM is not a defaulting CM, the amount of such withdrawing CM’s default fund contribution in respect of the Service will be determined by the CCP on the basis summarised in item 118.1 (in the case of assessments), item 112.1 (in the case of a Variable Commitment) or item 117.1 (in the case of replenishments), without regard to the impending withdrawal of such CM. Note, however, that a CM’s obligation to pay Interim Participant Replenishment Amounts ceases after its resignation notice has been accepted by the CCP.Hide noteCCP responses of 6 February 2015ASX Recovery Rulebook, Rule 4 (Resignation) |
| 75.4 What is the scope of the CM’s liability to the default fund following the Liability End Date but before the Withdrawal Effective Date? | As the Liability End Date is the same day as the Withdrawal Effective Date, the scope of the liability is the same. |
| 75.5 Does the CM remain liable in any way following the Withdrawal Effective Date? | Effect on funded default fund contributionYes. The withdrawing CM remains liable in respect of the default of any CM(s) that occur(s) prior to (but not after) to the extent of its funded (paid up) default fund contributions including Variable Commitment, and not any further default fund contributions. See items 75.1 and 119. Effect on assessmentNo. The CCP may not request an assessment from an entity which has withdrawn from being a CM after the Withdrawal Effective Date. See items76.1, 100.1 and 118. Effect on Payment ReductionAs the Withdrawal Effective Date may only occur once a CM has no outstanding Contracts, and the Payment Reduction applies only to outstanding Contracts, a CM will not be subject to Payment Reduction following the Withdrawal Effective Date. See items 100.1 and 109. Effect on Partial Tear Up As the Withdrawal Effective Date may only occur once a CM has no outstanding Contracts, and the Partial Tear Up applies only to outstanding Contracts, a CM will not be subject to Partial Tear Up following the Withdrawal Effective Date. See items 100.1 and 107. Effect on Complete Invoicing BackAs the Withdrawal Effective Date may only occur once a CM has no outstanding Contracts, and the complete Invoicing Back applies only to outstanding Contracts, a CM will not be subject to complete Invoicing Back following the Withdrawal Effective Date. See items 100.1 and 109.1. Effect on replenishmentThe CCP may not request a Participant Replenishment Amount from an entity whose withdrawal was effective (i.e., the Withdrawal Effective Date) at the end of the Default Period which immediately preceded the call of the replenishment. Note also that the CCP may not request an Interim Participant Replenishment Amount from an entity’s at any time after that entiy’s resignation notice has been accepted by the CCP. See items 100.1 and 117. Certain obligations to continue following the CM’s withdrawalFollowing the CCP’s acceptance of the CM’s notice:the Rules continue to apply and the CCP will continue to have jurisdiction in respect of the CM concerning any conduct or any failure to comply with the CCP Rules which occurred before the Withdrawal Effective Date, whether that conduct or failure was by the CM or by any other person for whose conduct the CM was responsible;the CM continues to be bound by any indemnity given by the CM under the Rules; andother Rules continue to apply in respect of the CM to the extent required to give effect to the above two bullet points. Effects on the accrued rightsAfter the Withdrawal Effective Date, any rights that the withdrawal CM or the CCP has accrued prior to the Withdrawal Effective Date would continue to exist and would not be affected.Hide noteCCP responses of 6 February 2015Rule 6.2 (Withdrawal of Clearing Participant Commitment)Rule 7.1(d) (Satisfaction of obligations of ASX Clear (Futures))Rule 11.1 (Resignation)ASX Recovery Rulebook, Rule4 (Resignation) |
| 76. Return of unused default fund contributions | |
| 76.1 When would unused default fund contributions of the CM be returned? | The CM’s default fund contributions will be returned to it on the 1st Business Day of the quarter immediately following the Withdrawal Effective Date (see items 73 and 74).These quarters start on 1 March, 1 June, 1 September and 1 December and end on 30 May, 31 August, 30 November and 28/29 February respectively.If the CM’s withdrawal occurs during a Default Period and the CCP reasonably believes that one or more assessments may be made in respect of one or more defaults in a Default Period then the CCP may retain any amounts it determines to cover those assessments from any amounts which would otherwise be payable by it to a withdrawing CM. If the CCP determines that these amounts are no longer needed, then it will return them to the entity which withdrew as a CM (without being obliged to pay any additional amounts for the delay in payment of those amounts). However, there are no specific rules as to when such amount shall be returned (e.g., it is not clear whether such time has to be after the Withdrawal Effective Date or it could be prior to the Withdrawal Effective Date but after the CCP determines that these amounts are no longer needed).Hide noteRule 6.3 (Withdrawal of Clearing Participant Commitment)Schedule 10 (Calculation of Futures Commitments of a Futures Participant)ASX Recovery Rulebook, Rule 4.6 (Effect of resignation on Recovery Assessment) |
| 77. Extension of deadline for the return of unused default fund contributions | |
| 77.1 Is there an ability to extend the normal deadline by which default fund contributions of the CM must be returned? | No. See item 76.1. |
| 78. Non-default suspension/termination of CM membership | |
| 78.1 In what circumstances can the CCP suspend or terminate the membership of a CM other than if the CM defaults? | Of the 3 circumstances described below where suspension or termination of CM membership would occur, the last scenario (interim suspensions) is where the CM may not yet be in default. Failure to provide undertaking to abide by the Rules1Each CM agrees to be bound by the Rules in its dealings with the CCP and with each other CM and each CM agrees that the Rules will be binding on the CM as between the CM and the CCP and as between the CM and every other CM. Each CM is obliged to comply in full with any undertaking given or condition imposed by the Rules including any condition imposed by the CCP on the admission of a CM.Each CM is obliged to lodge with the CCP, on request from time to time, an undertaking in the form required by the CCP and to the effect described above duly signed by the CM.If the CCP has not received such an undertaking signed by the CM on the due date, the status and rights of the CM will be suspended until the signed undertaking is received by the CCP. Automatic SuspensionA CM will automatically be suspended, without a meeting of the Board being required, if:there is an event of default in relation to the CM; 2the CM is in breach of the Financial Requirements or its requirement to lodge with the CCP, in the prescribed form a statement of its financial position as at the end of each month by the prescribed date and fails to rectify that breach within 24 hours or such longer period as the Board in its absolute discretion may allow; 2 orwhere a liquidator, receiver, receiver and manager or administrator or some other form of external management is appointed in respect of the property of the CM or if the CM or a partner of the CM becomes bankrupt. The suspension of a CM will continue for the period that the Board considers necessary or desirable. The Board may extend the period of suspension if it considers an extension is necessary or desirable;2The CM fails to pay its annual fee within one month of the due date or such later date as the CCP may allow. 3Interim Suspensions4The Board may, on the basis that it reasonably believes it is necessary to do so in the interest of the public, or the CCP, suspend a CM. The period of suspension will be the period that the Board considers necessary or desirable. The board may extend the period of suspension if it considers an extension is necessary or desirable.If a CM has been automatically suspended or suspended on an interim basis, the CM must not hold itself out as a CM during the period of suspension.Hide note1 Rules 4.11(a), (c) and (d) (Undertaking to abide by the Rules)2 Rule 10.11 (Automatic Suspension)3 Rule 3.2.2(b) (Obligation to Pay Fees)4 Rules 10.14 and 10.14A (Interim Suspensions) |
| 78.2 How, if at all, would the responses to items 72-77 differ in such circumstances? | There would be no difference. |
| 79. Rule change process | |
| 79.1 What process must the CCP follow in order to change any of its rules (or bylaws, if applicable) under normal circumstances (i.e. excluding the exercise of any emergency powers)? | Rule amendments are, in practice, approved by the managing director/chief executive officer as the delegate of the CCP’s Board. Notice1The CCP is required to provide reasonable notice to CMs under both the Service and the Futures Service of proposed amendments to the Rules prior to the amendments taking effect. See, however, item 79.2 for more details. Consultation2Subject to a few exceptions, the CCP is required to consult with applicable CMs under both the Service and the Futures Service on proposed changes to the Rules. See item 79.2 for more details. Additional information: RBA 2018/19 Assessment Appendix C13The RBA 2018/19 Assessment Appendix C1 provides additional information on how Rule changes are effected. Based on the RBA 2018/19 Assessment Appendix C1:Section 822A of the Corporations Act establishes a framework to prescribe the matters that must be dealt with in the Rulebook and those that may instead be considered under the Procedures.Rule changes are subject to a ministerial disallowance process, although the Minister’s role in this process is delegated to authorised ASIC officers. The Corporations Act also establishes how any inconsistency between the licensed facility’s rules and applicable laws and regulations (in particular, derivative transaction rules and derivative trade repository rules) would be resolved.There is a clear process for changing the CCP’s Rulebook and Procedures. In practice, proposed rule changes are submitted informally to the ASIC.In consultation with the RBA, the ASIC considers the changes and advises the CCP of any regulatory concerns.Once such concerns are satisfactorily addressed, the CCP invites formal submission of the proposed Rule changes, which triggers a 28-day ‘disallowance’ period during which the Minister or delegate may choose to disallow the Rule changes.The Minister or delegate (who has primary responsibility for licensing clearing and settlement facilities operating in Australia and for granting exemptions from the requirement to hold a clearing and settlement facility licence) has the power to disallow Rule amendments.The Minister or delegate must consider a number of factors, including whether the proposed changes are consistent with the public interest.In addition, the Minister or delegate must ensure that there has been adequate consultation with the RBA when deciding whether to disallow Rule changes and consider any advice and recommendations from the RBA and ASIC staff.If changes to the Rulebook are not disallowed by the Minister or delegate, they are notified to CMs via the CCP’s website.It is our understanding that the procedure specified by the RBA is what occurs in practice to ensure that changes to the Rules receive ministerial and regulatory consent before they are published. Pursuant to section 882D of the Corporations Act, the CCP must notify the ASIC as soon as practicable after a change is made. The ASIC then notifies the Minister.Hide note1 Rule 14.2A, (Amendment to Rules), CCP response of 6 February 2015 2 Rule 14.2B (Amendment to Rules), CCP response of 6 February 2015 3 RBA 2018/19 Assessment Appendix C1, Standard 1.3 |
| 79.2 Must the CCP provide notice to (or otherwise consult with) CMs prior to the rule change becoming effective under normal circumstances? | Notice1Yes, the CCP is required to provide reasonable notice to CMs of proposed amendments to the Rules prior to the amendments taking effect. However, any omission by the CCP to give notice to 1 or more CMs does not affect the validity of any amendments to the Rules. Consultation2Yes, the CCP is required to consult with the applicable Consulting CMs (see below) on proposed changes to the Rules in accordance with the following table prior to submission of the amendments to the Australian Securities and Investments Commission in accordance with the Corporations Act, unless:the CCP is directed by any competent regulatory authority (in Australia or elsewhere) to amend the Rules;the CCP considers, in good faith but otherwise in its discretion, that such amendment is to correct a manifest error; orthe CCP considers, in good faith but otherwise in its discretion, that the amendment is required to comply with its clearing and settlement facility licence obligations or other applicable regulatory requirements (whether or not required under the laws of Australia or other jurisdiction).The CCP may determine the form of such consultation, which may be by way of consultation with the risk committee.Rules being amendedConsulting CMsRules where the amendment affects a CM including a CM under the OTC Service (“Affected CM”)All of the Affected CMsProcedures, Determinations and Practice Notes under the Rules where the CCP is of the view that the amendment is likely to have a material impact on a CM including a CM under the OTC Service (“Materially Affected CM”)All of the Materially Affected CMsHide note1 Rule 14.2A (Amendment to Rules)2 Rule 14.2B (Amendment to Rules) |
| 79.3 If so, what is the length of the notice period? | There is no specifically stated notice period for amendments to the Rules. The CCP is required to give “reasonable notice” prior to the amendments taking effect, and any omission by the CCP to give notice does not affect the validity of any amendments to the Rules.Hide noteRule 14.2A (Amendment to Rules) |
| 79.4 Can rule changes be made to take effect retrospectively? | The Rules do not provide for changes to take effect retrospectively. |
| 80. CM rights in respect of rule changes | |
| 80.1 Describe any rights of CMs (including ballot rights) to approve, object to, and/or prevent the implementation of a particular change to the Rules under normal circumstances. | The CCP is required to consult with relevant CMs (see item 79.1) on proposed changes to the Rules prior to submission of the amendments to the Australian Securities and Investments Commission in accordance with the Corporations Act However, the Rules have not provided any rights to the CM to approval, object or prevent the implementation of any particular change to the Rules.Hide noteRule 14.2B (Amendment to Rules) |
| 81. Regulatory approval of rule changes | |
| 81.1 Do Rules changes need to be approved by one or more of the regulators under normal circumstances? | Rule changes must be submitted by the CCP to the Australian Securities and Investments Commission as soon as practicable after being made. Changes cease to have effect 21 days after the change is made if not lodged with the Australian Securities and Investments Commission.As soon as practicable after it receives notice of such change, the Australian Securities and Investments Commission must submit a copy of such notice for ministerial review.The Minister for Revenue and Financial Services (the Minister) (who has primary responsibility for licensing clearing and settlement facilities operating in Australia and for granting exemptions from the requirement to hold a clearing and settlement facility licence) has the power to disallow all or part of the amendments to the Rules of the CCP within 28 days after receipt by the Australian Securities and Investments Commission of the notice of such changes. The power to disallow changes to the rules has been delegated by the Minister to authorised officers of the ASIC.Hide noteCorporations Act, sections 822D and 822ECCP response of 6 February 2015 |
| 81.2 Are different types of changes (e.g., changes under normal circumstances and changes in emergency situations) subject to different regulatory approval processes? | No, all Rule changes must be submitted by the CCP for ministerial review as soon as practicable after being made.Hide noteCCP response of 6 February 2015 |
| 82. Emergency rule change process | |
| 82.1 Does the CCP have any special rulemaking powers in the event of an emergency (including a market emergency)? | Yes.Physical Emergencies1If, in the opinion of the managing director of the CCP or his delegate, a physical emergency occurs or is likely to occur, he or she may take such action as shall be deemed necessary to deal with the emergency.For the scope or definition of physical emergency, see item 82.2. The CCP’s power to take action in these circumstances is very broad and will include special rulemaking powers. The Rules specifically provide that the CCP will be entitled to apply the Rules as varied or modified so far as necessary to give effect to a relevant decision or direction made or given in these circumstances. Market Emergencies2If the CCP determines that an undesirable situation or practice is developing or has developed which is contrary to the maintenance of a fair and orderly market, the CCP may take or refrain from taking, or direct a CM to take or refrain from taking, any action which the CCP considers is appropriate and in the interests of maintaining a fair and orderly market or underlying market. For these purposes:‘market’ means a market:(i) conducted by the Australian Securities Exchange Limited and/or the New Zealand Futures & Options Exchange Limited;(ii) conducted by an organisation to which the CCP provides services; or(iii) a market in which an organisation to which the CCP provides services is a participant.‘underlying market’ means, in relation to:(i) a Transaction or Contract which in either case is a futures contract, the market in the underlying commodity, security or index or things which comprise the underlying index; and(ii) a Transaction or Contract which in either case is an options contract, a market in the underlying futures contract or the underlying market in relation to the futures contract as defined in (i) above.Similar to where there is a physical emergency, the CCP’s power to take action in these circumstances is very broad and will include special rulemaking powers. The Rules specifically provide that the CCP will be entitled to apply the Rules as varied or modified so far as necessary to give effect to a relevant decision or direction made or given in these circumstances.In addition, the CCP is entitled to give effect to any direction of the Australian Securities and Investments Commission made pursuant to the Corporations Act or requirement of the Securities Commission pursuant to the Securities Act of New Zealand in relation to Transactions or the operation of the CCP or any other lawful direction. The CCP is obliged to notify one Commission of any direction or requirement of the other Commission.Under the Corporations Act, the ASIC may, if it considers that it is necessary or in the public interest to protect people dealing in a financial product or class of financial products or if it considers that the CCP has not done all things reasonably practicable to ensure the CCP’s services are provided in a fair and effective way, give the CCP a direction not to provide its services in relation to any transactions that relate to a specified financial product or class of financial products or any other direction concerning dealings with transactions that relate to a specified financial product or financial products.Under the Corporations Act the ASIC may also, if it considers that the CCP has not done all things reasonably practicable to reduce systemic risk in the provision of the CCP’s services, give the CCP a direction in writing to take specified measures to comply with the whole or a part of a Financial Stability Standard determined under section 827D of the Corporations Act or to take any other action that the ASIC considers will reduce systemic risk in the provision of the CCP’s services.Force Majeure3Yes. In the event of force majeure (see item 83.1 for the scope or definition of force majeure), the CCP is to be released from its obligations under the Rules to the extent that the performance of such obligations are prevented or hindered in whole or in part by the circumstances and the CCP may vary or modify the Rules to the extent that in the opinion of the CCP is reasonably necessary in the circumstances and, without limiting the generality of the above, the steps that the CCP may take will include:the mandatory cash settlement of any Contract (including deliverable contracts) at a price determined by the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable) or failing that by the CCP;the close out (Invoicing Back) of any Contract; andthe exercise of any power which would be exercisable by the CCP in a CM event of default. Recognition of CCP powers under emergencies by the Recovery Rules4The Recovery Rules specifically provide that nothing in the Recovery Rules limits any of the rights or remedies available to the CCP in the event of an emergency (as set out above).Hide note1 Rules 81.1(a), (b) and 81.4 (Emergency Situations; Physical Emergencies), ASX Clear (Futures) Operating Rules2 Rules 81.2 (Emergency Situations; Market Emergencies) and 81.3 (Emergency Situations), ASX Clear (Futures) Operating Rules; Corporations Act, sections 823D and 823E3 Rule 82 (Force Majeure), ASX Clear (Futures) Operating Rules4 ASX Recovery Rulebook, Rule 9 (Emergencies and Force Majeure) |
| 82.2 Can the CCP invoke emergency rulemaking powers solely by reason of a CM default? | No. |
| 82.3 Are there any internal procedural checks to such emergency rulemaking powers? | Not addressed in the Rules. |
| 83. Definition of “emergency” | |
| 83.1 What constitutes an “emergency”? | The below will constitute an “emergency” under the Rules. Physical emergencies1Yes. A physical emergency occurs when a situation arises where the physical functions of the CCP are or are threatened to be severely and adversely affected by an event external to the trading of the CCP, such as (but not limited to) fire, accident, flood, bomb threat, threat of violence, substantially inclement weather, power failure, communication breakdown, computer malfunction or danger to personnel. Market disruption2Yes. A market emergency occurs if the CCP determines that an undesirable situation or practice is developing or has developed which is contrary to the maintenance of a fair and orderly market. State of war3Yes. See under “Physical Emergency” above; in particular, the reference to “bomb threat, threat of violence”. See under “Force Majeure” below; in particular, the reference to “war or the threat of war”. Government action4Yes. See under “Force Majeure” below; in particular, the reference to “the intervention of any government or government authority or agency” International action5Yes. See under “Force Majeure” below; in particular, the reference to “the intervention of any government or government authority or agency”. Force Majeure6Yes. Where the business of the CCP is materially adversely affected for any reason including, without limiting the generality of the foregoing, the intervention of any government or government authority or agency, fire, power failure or restrictions, communication breakdown, accident, flood, war or the threat of war, embargoes, boycotts, labour disputes, unavailability of data processing or bank clearance systems or act of God such that the CCP is unable to properly conduct the business of the CCP in whole or in part. OtherN/AHide note1 Rule 81.1(a) (Emergency Situations; Physical Emergencies), ASX Clear (Futures) Operating Rules2 Rule 81.2 (Emergency Situations; Market Emergencies), ASX Clear (Futures) Operating Rules3 Rules 81.1(a) (Emergency Situations; Physical Emergencies) and 82 (Force Majeure), ASX Clear (Futures) Operating Rules4 Rule 82 (Force Majeure), ASX Clear (Futures) Operating Rules5 See footnote 46 See footnote 4 |
| 84. Procedural checks on emergency rule changes | |
| 84.1 Describe any notification or consultation obligation on the CCP and/or any notice period before any action can become effective in an emergency situation rule change. | The CCP has notice and consultation obligations for proposed amendment to the Rules which clearly apply in normal circumstances. See item 79.1 and 79.2.The CCP’s power to take action in an emergency situation is very broad and includes special rulemaking powers. The Rules specifically provide that the CCP will be entitled to apply the Rules as varied or modified so far as necessary to give effect to a relevant decision or direction made or given in these circumstances.(We also note that, in the event of a physical emergency, the Rules provide that no person will be entitled to make any claim or commence any action against the CCP, the Board or the person making decisions in respect of any decision made or action taken in respect of such physical emergency.)Given the breadth of the CCP’s power in these circumstances, it is likely that the CCP could vary or modify the Rules without notice or consultation.However, any such Rule change would remain subject to sections 822D and 822E of the Corporations Act, which provide that changes cease to have effect 21 days after the change if not lodged with the Australian Securities and Investments Commission and that the Minister is able to disallow changes to the Rules within 28 days of the changes being lodged with the Australian Securities and Investments Commission. See item 81.1.Hide noteRule 14 (Amendment to Rules)Rule 81.4 (Emergency Situations)Rule 81.1(d) (Emergency Situations; Physical Emergencies) |
| 84.2 Describe any rights of CMs (including ballot rights) to approve, object to and/or prevent the implementation of a particular action in an emergency situation. | For the same reasons set out in item 84.1, given the breadth of the CCP’s power in an emergency situation, it is likely that the CCP could act without CMs having the right to approve, object and/or prevent the implementation of any such action. |
| 84.3 Can the CCP override any of these consultation rights, notice periods, ballot or other rights of CMs in an emergency? | Yes – this is likely to be the case. See items 84.1 and 84.2.See also items 81.1 and 84.1. Any Rule change effected in an emergency would remain subject to sections 822D and 822E of the Corporations Act, which provide that changes cease to have effect 21 days after the change if not lodged with the Australian Securities and Investments Commission and that the Minister is able to disallow changes to the Rules within 28 days of the changes being lodged with the Australian Securities and Investments Commission. |
| 85. Additional procedural checks on emergency rule changes | |
| 85.1 Are there any other procedural checks to such emergency rulemaking powers? | No. |
| 86. Additional CCP rights to waive/suspend Rules | |
| 86.1 Does the CCP have any other rights outside of any emergency powers to waive or suspend the Rules? | Yes. The CCP may where it believes it to be just and equitable, and to the extent permitted by law, and on payment of the application fee (if any) prescribed by the Board, exempt a specified, or a class of, CM or Client from compliance with such provisions of the Rules and on such conditions as it sees fit. A breach of a condition imposed in respect of an exemption will be deemed to be a breach of the Rules.The CCP may, at any time, revoke such exemption.Any exemption granted to a class of CM or Client (but not an exemption granted to a specified CM or Client) will, for the purposes of the Corporations Act, be deemed to be an amendment to the Rules.Hide noteCCP responses of 6 February 2015Rule 9A.3.8 (Exemptions) |
| 87. Invoicing Back | |
| 87.1 Does the CCP have the ability to (i) close out a CM’s Contract or (ii) liquidate Contracts on opposite sides of the market in emergency (but not default) conditions through Invoicing Back Contracts with CMs or third party-CMs for the purposes of liquidation of Contracts? | Yes. See item 82.1. The powers of the CCP are very broad in an emergency situation. Physical Emergency1The CCP may take such action as shall be deemed necessary to deal with the physical emergency. Market Emergency2The CCP may take or refrain from taking, or direct a CM to take or refrain from taking, any action which the CCP considers is appropriate and in the interests of maintaining a fair and orderly market or underlying market. See item 82.1. Force Majeure3The CCP has broad discretion including, without limitation, taking the steps set out in item 82.1.Hide note1 Rule 81(Emergency Situations)2 See footnote 13 Rule 82 (Force Majeure) |
| 87.2 If so, by what mechanism is the pricing determined? | Physical Emergency1Not addressed in the Rules. Market Emergency2Not addressed in the Rules. Force Majeure3The Rules provide that the price for mandatory cash settlement is to be determined by the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited (as applicable) or, failing that by the CCP.Hide note1Rule 81 (Emergency Situations)2 See footnote 23 Rule 82 (Force Majeure) |
| 87.3 What is the timing for Invoicing Back? | Not addressed in the Rules. |
| 87.4 For Invoicing Back, is Client business treated separately from house business? | Not addressed in the Rules. |
| 88. Forced Allocation | |
| 88.1 Does the CCP have the right to force-allocate Client and house Contracts to third-party CMs in emergency (but not default) conditions? | Not specifically, but the powers of the CCP are very broad in an emergency situation. Physical Emergency1The CCP may take such action as shall be deemed necessary to deal with the physical emergency. Market Emergency2The CCP may take or refrain from taking, or direct a CM to take or refrain from taking, any action which the CCP considers is appropriate and in the interests of maintaining a fair and orderly market or underlying market. See item 82.1. Force Majeure3The CCP has broad discretion including, without limitation, taking the steps set out in item 82.1.However, emergency conditions and force majeure are designed to capture market-wide circumstances rather than those specific to particular CMs. An attempt to transfer a CM’s Contracts to a third party CM in such circumstances would be questionable.Hide note1 Rule 81 (Emergency Situations), ASX Clear (Futures) Operating Rules2 See footnote 13 Rule 82 (Force Majeure), ASX Clear (Futures) Operating Rules |
| 88.2 If so, by what mechanism are the pricing, size of allocations, and CM recipients determined? | Not addressed in the Rules. |
| 88.3 What is the timing for Forced Allocation? | Not addressed in the Rules. |
| 88.4 For Forced Allocation, is Client business treated separately from house business? | Not addressed in the Rules. |
| 89. Amendments to Contract specifications | |
| 89.1 Can the CCP make amendments to Contract specifications? | Yes. The CCP’s power to amend the Rules is summarised in item 79.1. The CCP will need to notify and consult CMs on proposed changes to Contract specifications; CM approval would not however be required.Hide noteRule 14 (Amendment to Rules) |
| 89.2 Can amendments to Contract specifications be made on a retroactive basis? | The Rules do not provide for changes to take effect retrospectively. |
| 89.3 Describe any rights of CMs (including ballot rights) to approve, object to and/or prevent the implementation of a particular change to the Contract specifications. | The Rules do not provide for any rights of CMs to approve, object to and/or prevent the implementation of a particular change to the Contract specifications. |
| 90. Events of default | |
| 90.1 What constitutes an “event of default” by a CM? Please list all possible options that may constitute an event of default (including any grace periods) and note where the CCP has discretion to determine these | Where there is, in the opinion of the Board or managing director, an event of default with respect to a CM, the Board or managing director may declare the CM to be in default. The CCP therefore has discretion to determine an event of default. The Rules do not provide for any grace periods. Breach of Rulebook/agreement; suspension of transfer, termination and other rights under co-operating clearing house rules1Yes.The CM fails to meet any of its obligations under the Contracts, the Rules, the Exchange Operating Rules or any agreement or understanding entered into with the CCP or fails to comply with any reasonable directions of the CCP.The CM fails to comply, or indicates that it will or may fail to comply, with any of the Rules or the Procedures or the terms of any agreement with the CCP.2 Breach of exchange/clearing house membership terms and/or rules3Yes.The CM has failed to comply with a determination made by a tribunal pursuant to the Old Australian Securities Exchange Disciplinary Processes and Appeals Rulebook.The CM fails to comply with (1) any action taken by the CCP in accordance with the provisions of the ASX Enforcement and Appeals Rulebook where the CCP considers that a breach of the Rules may have occurred or (2) the provisions of the ASX Enforcement and Appeals Rulebook. Suspension of membership/authorisation and/or other action by a regulatory body4Yes. The CM or a related body corporate of the CM is suspended, expelled or terminated as a member or participant of or subject to any sanction imposed by, or declared in default or non-compliance under the rules of any Australian or overseas, futures, securities, commodity or stock exchange or market or any other Australian or overseas clearing and settlement facility or is subject to any sanction imposed by any Australian or overseas regulatory authority. Failure to pay the CCP5Yes.The CM fails to pay initial margins or variation margins or Daily Settlement Amounts or Intra Intra-Day or Extra Margins within the period provided by the Rules.The CM fails to pay an amount(s) (other than the amount(s) referred to in the preceding paragraph) in total exceeding A$1,000 which is due and payable to the CCP.The CM fails to pay an amount due to be paid by it in the time and manner required under the Recovery Rules. 6 Failure to pay/perform under any agreementYes. See last bullet point under “Others” below. Insolvency-related events7Yes.an administrator of the CM or a related body corporate of the CM or similar person is appointed;an application or an order is made, proceedings are commenced, a resolution is passed or proposed in a notice of meeting or an application to a court or other steps are taken for:the winding up, dissolution or official management or administration of the CM or a related body corporate of the CM; or the CM or a related body corporate of the CM enters into any arrangement, compromise or composition with or assignment for the benefit of its creditors or any class of them;the CM ceases or suspends or threatens to cease or suspend substantially all of its business or threatens to dispose of substantially all of its assets;the CM is or is deemed under any applicable legislation to be unable to pay its debts as and when they fall due (other than as a result of failure to pay a debt or claim the subject of a good faith dispute) or stops or suspends or threatens to stop or suspend payment of all or a class of its debts; andwith respect to all or any of the assets and undertaking of the CM or a related body corporate of the CM:a receiver, receiver and manager, administrative receiver, administrator or similar officer is appointed;a security interest is enforced ora distress, attachment, or other execution is levied or enforced Automatic Early Termination EventsNo.Others8an investigator, inspector or other officer is appointed or an investigation is directed or commenced under the Corporations Act or any other legislation to investigate all or any part of the affairs of the CM or a related company of the CM, in circumstances which are material to its capacity to meet its obligations to the CCP;anything analogous to any of the events referred to in Rule 71.3(a)-(i) (inclusive), or having substantially similar effect, occurs with respect to a CM or a related body corporate of the CM including, without limitation, anything occurring outside Australia or under the law of a jurisdiction other than Australia;the CM is the subject of a notice under any insurance referred to in the CCP’s default waterfall , or any other insurance taken out by the CCP to enable it to meet its obligations to CMs which affects the amount or conditions or operation of such insurance;there is an event deemed or described as a default by the Exchange Operating Rules or as otherwise provided in the Rules including a failure to comply with the requirements relating to position limits under the Rules or the Exchange Operating Rules;the CM acts fraudulently or in a misleading or deceptive manner with respect to any Contract or Transaction whose registration gives rise to a Contract;upon request by the CCP, which may be made at any time, the CM fails to confirm on or before the cutoff time reasonably specified by the CCP in its request that it is able to pay its debts as they become due and payable; andany other event or series of events, whether related or not, occurs (or appears likely to occur) which in the opinion of the Board or managing director has (or appears likely to have) a material effect on the CM’s capacity to meet its obligations to the CCP.Hide note1 Rule 71.3(a) (Existence of Default)2 Rule 71.3(n) (Existence of Default)3 Rules 71.3(ga) and (gb) (Existence of Default)4 Rule 71.3(g) (Existence of Default)5 Rules 71.3(c) and (d) (Existence of Default),6 ASX Recovery Rulebook, Rule 2.2 (Default and Defaulted Participant) and ASX Recovery Rulebook, Rule 12.2(b) (Consequences of Participant not complying)7 Rules 71.3(e), (f) and (h) (Existence of Default)8 Rules 71.3(i), (j), (k), (l), (m), (o) and (p) (Existence of Default) |
| 91. Process for declaration of CM default | |
| 91.1 What is the process for declaring a default (including whether the CCP has to consult with its board, its risk committee and/or its local regulators)? | A CM is obliged to immediately notify the managing director of the CCP:if an event of default occurs under the Rules; orif the CM has reasonable grounds to suspect that an event of default may occur.Where there is in the opinion of the CCP an event of default with respect to a CM, the CCP may declare the CM to be in default.The Rules do not require the CCP to consult with its risk committee and/or its local regulators in order to declare an event of default.Hide noteRule 71.1 (Existence of Default)CCP responses of 6 February 2015 |
| 91.2 Is the CCP required to inform, and/or get consent from, a local regulator prior to determining that there has been an event of default by a CM? | No. There is no such requirement under the Rules or under any law requiring the CCP to get consent from any regulator prior to declaring an event of default. In practice, the CCP will work closely with the Australian regulators.Hide noteCCP responses of 6 February 2015 |
| 92. CCP communication procedures in respect of CM default | |
| 92.1 Upon the occurrence of default, what are the CCP’s procedures for communication relating to the default (specifically, does the CCP communicate the occurrence of a default and/or the suspension of membership to CMs, Clients and/or other CCPs, in addition to regulators)? | The CCP’s declaration of an event of default is made by the giving of a notice of termination in writing to the CM. See item 91.1.The Rules do not specify any communication requirements in relation to CMs, Clients, other CCPs or regulators.In practice, the CCP will publish a market notice, notifying other CMs, Clients and other CCPs that it has declared the CM in default.The CCP will also communicate directly with the defaulting CM’s Clients holding individual sub-accounts (see the Client Clearing Module) and CMs identified as Replacement CMs for the purpose of determining whether Client positions can be ported.Hide noteRule 72.1 A(a) (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss)CCP responses of 6 February 2015 |
| 93. CCP determination of CM or Client default | |
| 93.1 How does the CCP determine whether a default is associated with a Client account or house account? | The Rules do not require the CCP to determine whether a default is associated with a Client Account or House Account, as a default by a CM affects all its accounts. |
| 94. CCP rights in respect of collateral upon a CM default | |
| 94.1 Upon a CM default, what rights does the CCP have with respect to collateral? | The Rules provide that the CCP will in its absolute discretion have the power:to sell, realise, apply and set off any monies, securities, collateral or other property deposited with the CCP by the defaulting CM by way of initial margin, default fund contributions or otherwise (whether or not arising from obligations under the Rules);to re-hypothecate deposited securities, collateral, or property—whether for Initial Margin, Extra Margin, or otherwise—to manage the default; andto apply the proceeds towards satisfaction of any amount payable by the defaulting CM to the CCP under or in connection with the Rules or the rules applicable to the OTC Service,without being required to give notice to or obtain the consent of the defaulting CM or any court order, with full power to execute any documents in its own name or as attorney for the defaulting CM for that purpose provided always that any monies, securities, collateral or other property deposited with the CCP with respect to Contracts designated to a Client Account may only be used to meet obligations in a Client Account and will not be used to meet any obligations in a House Account.The CCP also has absolute discretion to apply any surplus in any House Account of the defaulting CM to any deficiency on any Client Account of the defaulting CM.See item 100.1.Hide noteRule 72.1 (b), (ba) and (c) (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss) |
| 94.2 Does the CCP have to take any steps to enforce its rights in relation to collateral? | There are no formalities required in order for the CCP to enforce collateral.The Rules provide that collateral may be realised and applied towards satisfaction of the defaulting CM’s obligations owed to the CCP without the CCP being required to give notice to or obtain the consent of the defaulting CM or any court order. See item 94.1.Hide noteRule 72.1(b) (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss) |
| 94.3 Does the CCP ordinarily liquidate all non-cash collateral to cash? | House AccountsThe CCP has confirmed that the CCP will liquidate all non-cash collateral in relation to (1) House Accounts (2) Client Accounts which are omnibus sub-accounts and (3) individual Client sub-Accounts (i.e. non-omnibus accounts) where assets have not been attributed to a CM.Client AccountsClient Account enhancements were introduced as of 31 August 2015 to comply with the regulatory guidance of the RBA (see Client Clearing Module item 14.2).Individual sub-accountsIn particular, in relation to Client Accounts which are individual sub-accounts, a CM has the ability (but not the obligation) to instruct the CCP to attribute specific cash and non-cash collateral (“attributed assets”) to an individual sub-account so that in the event of a CM default, the CCP can port to a Replacement CM or return (less close-out costs) directly to the Client, attributed assets (or equivalent assets) (together with cash, if the haircut value of attributed assets is less than the value of Initial Margin). However, the CCP may realise some or all of those attributed assets (as required) in circumstances where: (a) the Client has individual sub-accounts in respect of both Contracts relating to the Service as well as the OTC Service and those individual sub-accounts are to be transferred to different Replacement CMs; or (b) the Contracts in the individual sub-account have been terminated by the CCP and: (i) the realisation of some or all of the equivalent non-cash assets is required to meet losses, costs and expenses allocated to the individual sub-account; or (ii) the CCP is unable to transfer equivalent non-cash assets to the Client including due to lack of timely, complete or valid transfer instructions, impossibility, impracticability or any other event or circumstance. In any of those circumstances the CCP may realise such equivalent non-cash assets and transfer or pay cash instead.This will in effect mean that, broadly, in relation to Client Accounts which are individual sub-accounts where non-cash collateral has been attributed, the CCP would not ordinarily liquidate all non-cash collateral to cash.Omnibus sub-accountsIn contrast, in relation to Client Accounts which are omnibus sub-accounts, a CM does not have the ability to instruct the CCP to attribute specific cash and non-cash collateral to such omnibus sub-accounts. If a CM defaults, the CCP is unlikely to be able to post-default port the Contracts in an omnibus sub-account to a Replacement CM. The CCP will terminate the Contracts in an omnibus sub-account and return any remaining “collateral value” (see Client Clearing Module item 14.2) to the CM or its external administrator (such as a liquidator) in cash, less applicable costs and losses. The CCP will sell any non-cash collateral lodged by the defaulting CM that is not attributed to an individual sub-account in order to return the cash amount as described above. Please refer to the Client Clearing Module item 14.2 for further information and/or the CCP’s Client Protection Model Client Fact Sheet, available at: http://www.asx.com.au/documents/clearing/asx-client-clearing-client-fact-sheet-31aug2015.pdf.Hide noteCCP responses of 13 January 2017Rule 116.2A and 116.3 (Margin)Rule 119 (Clearing Participant Default (Application to Individual Sub-Accounts)Rule 121 (Clearing Participant Default (Termination of Option Positions and Collateral Value), in particular, Rule 121.4Procedures, Rule 121.4 (Clearing Participant Default (Termination of Option Positions and Collateral Value)http://www.asx.com.au/documents/clearing/asx-client-clearing-client-fact-sheet-31aug2015.pdf |
| 95. Settlement of payment obligations following a CM default | |
| 95.1 How do CCP Rules enable it to settle payment obligations on time following any individual or combined default among its CMs? | See CM Default – Default Process (items 100-108) |
| 96. Netting and set-off following a CM default | |
| 96.1 Do the Rules provide for the netting and set-off of obligations, including obligations to return collateral, upon the default of a CM? | Yes. In addition, the Rules expressly provide that the CCP may do anything necessary to effect such set-off, including varying the timing for payment of any amount owing by the CCP to the defaulting CM and making currency exchanges.Hide noteRule 72.3 (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss)ASX Recovery Rulebook, Rule 12.8 (Set-off) |
| 96.2 Is a net amount calculated per account? | Yes. A net amount(s) (due and payable by the defaulting CM to the CCP or by the CCP to the defaulting CM) is calculated by the CCP separately in respect of the House Account and the Client Account and demand immediate payment of any net amount payable by the defaulting CM to the CCP.Without limitation, the amounts netted by the CCP may include amounts determined to be payable under, or in connection with, the rules applicable to the OTC Service or due under the indemnity granted to each related body corporate of the CCP (eg, ASX Clear Pty Limited) under the Rules. House AccountsThe net amount is calculated with respect to all House Accounts of a CM. Client AccountEach CM has only a single Client Account with the CCP. Client sub-accounts of a CM’s Client Account do not form separate Client Accounts for the purposes of the Rules.If a CM has Clients to which the client protection model provisions apply, then netting is to be conducted separately in respect of each Client sub-account within the Client Account of that CM and in respect of any remaining part of that Client Account. A net cash amount is to be payable in respect of each separate netting which takes place.Even if the same Client has sub-accounts with multiple CMs, normally the CCP will treat each of such sub-accounts of the same Client as being separate. However, the CCP has discretion to choose to make calculations for its own purpose with respect to such Client, across the different sub-accounts held for that Client with multiple CMs.The client protection model provisions now apply to all Clients of the Service as well as all Clients of the OTC Service.Hide noteRule 23 (Extension of Indemnities and Disclaimers), Rule 72.3 and Rule 72.4 (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss)Rule 115 (Client Sub-Accounts)CCP responses of 6 February 2015 |
| 97. Calculation of termination amount | |
| 97.1 How is the termination amount calculated (describe the methodology for determining the termination amount, including timing; specify each termination amount that could be calculated and each service that would be included in the calculation of each termination amount, and note any distinctions between Client and house accounts)? | See item 96.2.A net amount is calculated separately in respect of the House Account and the Client Account (but if there are Client sub-accounts, then a net amount is to be calculated for each Client sub-account).Where the CCP has exercised its right to declare a Contract terminated (see item 100.1), to calculate their termination value the CCP may take into account (i) its determination of the value of obligations which fell due before the termination date but which have not been performed, (ii) the value of obligations which would have been due for performance under the terminated Contract(s) after the termination time if the terminated Contract(s) had not been terminated (including payment of initial margin or variation margin as applicable) and (iii) its losses, costs, charges and expenses in connection with the management of the default of the relevant defaulting CM with respect to the terminated Contract(s) including, without limitation, costs and expenses associated with hedging any exposure of the CCP arising out of the default, and amounts payable by it in respect of any auction held in accordance with the CCP’s procedures on default;Where the CCP has exercised its right to combine the terminated Contracts of different defaulting CMs or to combine terminated Contracts in the House Account and the Client Account of a defaulting CM into a single auction, the losses, costs, charges and expenses are to be calculated as of the time of combination of such terminated Contracts and will be conducted by allocating any losses, costs, charges and expenses to each relevant account proportionately to its relative risk as determined by the CCP using the value of initial margin calculated with respect to each relevant account at the time of combination of the terminated Contracts. With respect to client sub-accounts, the CCP will deduct any losses, costs, charges and expenses so attributed to that client sub-account from the guaranteed initial margin value of that client sub-account.On the interaction between House Account(s) and Client Account, on a CM default, the CCP has absolute discretion to apply any surplus in any House Account of the defaulting CM to any deficiency on any Client Account of the defaulting CM. Monies or other property deposited with the CCP with respect to a Client Account may however only be used to meet obligations in a Client Account and will not be used to meet any obligations in a House Account.On timing of payment, the CCP may demand immediate payment of any net amount payable by the defaulting CM to the CCP.Both the Service and the OTC Service would be included in the calculation of the termination amount.The Rules specifically provide that the amounts netted by the CCP may include amounts determined to be payable under, or in connection with, the rules applicable to the OTC Service or the Recovery RuleHide noteRule 72.1(b), 72.1(c), 72.1B(d) and 72.1B(f)Rule 72.3 (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss) |
| 98. Net termination amounts for multiple services | |
| 98.1 If the CCP offers more than one service, does the net termination amount include amounts due to/from the CCP in respect of other services? | Yes. The CCP offers 2 services – the Service and the OTC Service. The net amount payable to or from the CCP under the Rules can include amounts determined to be payable under, or in connection with, the Rules applicable to the Service as well as the rules applicable to the OTC Service. See item 97 and 96.2.Hide noteRule 72.3 (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss), Rule 23 (Extension of Indemnities and Disclaimers), |
| 99. Payment of termination amounts and return excess collateral/remaining default contributions to defaulting CMs | |
| 99.1 When is the CCP required to pay any termination amount, return surplus collateral and any remaining default contribution to the defaulting CM? | Not addressed in the Rules but the CCP has broad discretion as to when amounts are repaid to a defaulting CM. We would expect this to be after (i) the CCP’s determination of all amounts due/payable to the defaulting CM across all lines and (ii) application by the CCP of all assets to which it has recourse for the purposes of reducing the CCP’s losses.It is assumed that, once all the amounts due in respect of the CM default has been determined, the CCP would return all excess collateral (cash and non-cash), in respect of house business to the defaulting CM.Hide notePart 7 (Procedures on a Default) |
| 100. Default process | |
| 100.1 What are the CCP’s specific default procedures? | The CCP is given very broad powers which it can exercise in its absolute discretion in a default scenario. In particular, the CCP may exercise its powers under the Recovery Rules.Broadly speaking, there are two sets of default processes: non-recovery process and recovery process. These two processes can be taken by the CCP at the same time or one after the other. Each of these two processes is described below. Non-recovery processOn a CM default, the CCP will in its absolute discretion have the power to do all or any of the following in any order:to close-out all or any Contracts under the Service and contracts under the OTC Service of the defaulting CM including in its absolute discretion such Contracts or contracts in the Client Account by closing out any opposite positions in any House Account or Client Account and/or buying or selling opposite positions on the markets of the Australian Securities Exchange Limited or the New Zealand Futures & Options Exchange Limited as if a request to close out had been made by the defaulting CM under the Rules and to appropriate any excess after the application of the netting and set-off provisions of the Rules; the price attributable to the close out of any such Contracts or contracts is to be determined by the CCP in its discretion provided that the price is fair and equitable as between Contracts regardless of the account in which they were registered and whether they were closed out on-or-off market. Without limitation, if any two CMs are in default and hold Contracts that the CCP determines to be opposite positions, the CCP will in its absolute discretion have the power to close out these Contracts by matching of these opposite positions. The price attributable to the close out of such Contracts is to be determined by the CCP in its discretion;to terminate all or any Contracts (other than OTC Contracts) of the defaulting CM (including Contracts in the Client Account), and to auction, (i) Contracts newly established by the CCP which, taken as a whole, are equivalent to all or some of the Contracts of the defaulting CM; and Contracts arising from the CCP hedging the portfolio of the defaulting CM;to declare that any Contracts (other than OTC Contracts) of the defaulting CM (including Contracts in the Client Account) are to be the subject of a termination and the time at which such termination is to be effective (termination date) and then calculate a termination value in respect of one or more terminated Contracts as selected by the CCP;to combine terminated Contracts involved in a default management process where such Contracts relate to both house positions and client positions of a defaulting CM, or the Contracts of more than one defaulting CM so that they are treated as part of one or more portfolios at any time after the commencement of the default management process for the purpose of auction;to allocate any losses, costs, charges and expenses in connection with that default management process between the relevant defaulting CM(s) and between the house accounts, client accounts and client sub-accounts of the relevant defaulting CM(s) which relate to those terminated Contracts;to sell, realise, apply and set off any monies, securities, collateral or other property deposited with the CCP by the defaulting CM by way of initial margin, default fund contributions or otherwise (whether or not arising from obligations under the Rules) and to apply the proceeds towards satisfaction of any amount payable by the defaulting CM to the CCP under or in connection with the Rules and the rules applicable to the OTC Service, without being required to give notice to or obtain the consent of the defaulting CM or any court order, with full power to execute any documents in its own name or as attorney for the defaulting CM for that purpose, provided always that any monies, securities, collateral or other property deposited with the CCP with respect to Contracts under the Service and contracts under the OTC Service designated to a Client Account may only be used to meet obligations in a Client Account and will not be used to meet any obligations in a House Account;to re-hypothecate any securities, collateral or other property deposited with the CCP by the CM in default by way of initial margin, extra margin or otherwise (whether or not arising from obligations under the Rules) for the purpose of managing the default;to apply any surplus in any House Account of the defaulting CM to any deficiency on any Client Account of the defaulting CM;to transfer all or any Contracts under the Service and contracts under the OTC Service designated to a Client Account of the defaulting CM to another CM with the written authority of such transferee CM, together with any initial margins which in the opinion of the CCP are held with respect to such Contracts or contracts;to exercise or abandon any Option Contract of the defaulting CM; any such exercise or abandonment will be deemed to have been effected by the CM which is the party to the Option Contract;to itself give or take delivery of any commodity;to close out any remaining Contracts of the defaulting CM in order to offset any exposure arising from a CM default by trading Transactions; any Transactions so traded are to be registered; the CCP may close out the Contracts so traded against Contracts of the CM as if such Transactions had been entered into by the defaulting CM;to terminate Contracts of the defaulting CM at a price determined by the CCP subject to the Rules; in determining the price at which the CCP will terminate such Contracts, the CCP expects to use the same calculations as used for the termination of the Contracts of any non-defaulting CM in accordance with the Recovery Rules;to terminate the defaulting CM’s rights and status as a CM;to hedge or offset any exposure arising from a default by entering into new Contract on aa relevant exchange or directly with market participants or any other persons or as may be permitted or directed by the relevant exchange in accordance with Exchange Operating Rules. The CCP may auction such new Contracts as part of a portfolio of use them close out Contracts of the defaulting CM;to do anything permitted by the rules applicable to the OTC Service; andto do all such other necessary acts and things as are ancillary or incidental to the execution of the CCP’s powers enumerated under the Rules in connection with the CM event of default, provided that, in exercising its powers outlined above, the CCP may not:(1) affect the order in which assets are applied under the default waterfall; or(2) Invoice Back or Force Allocate Contracts to another CM. Recovery processApart from the actions that the CCP can take in a non-recovery process as described above, the CCP can also take the following recovery actions to discharge the CCP Loss. These actions are summarised below together with a reference to the items in which the actions are fully covered.Call for assessments (item 118)Effect a Payment Reduction (item 109).Effect a Partial Tear Up to restore a “matched book” (item 107.1).*Effect a complete Invoicing Back (item 107.1).Call for a replenishment (item 117).Invite or accept voluntary payments from the CMs (item 109.1).* Note that Partial Tear Up is not available as a general loss absorption tool, but only to restore a “matched book”. Conditions to call for assessmentThe CCP may exercise its rights and powers to call for assessment from non-defaulting CMs after occurrence of a CM default if the following conditions are satisfied:a CM has defaulted;the CCP reasonably expects that there is a CCP Loss or that a CCP Loss may arise in the future with respect to the Default Period which has been, or may be, allocated to the default fund at the relevant time; andthe CCP has not determined that it will affect a complete Invoicing Back. Conditions to voluntary payment:The CCP may at any time after a default, by notice invite each CM to make a voluntary payment (see item 109.1 for further details of voluntary payment). Conditions to replenishmentThe replenishment may only be called upon by the CCP if all of the following conditions are satisfied:a CM has defaulted;a DMP Completion Date has occurred with respect to a Default Period ; andthe CCP has not decided it will voluntarily wind-down all of its product classes.Once a call for a Participant Replenishment Amount has been made by the CCP, it cannot be made again until the end of next Default Period. See item 117 for further details of replenishment. Subject to the cap described in item 117.2, the CCP may call for more than one Interim Participant Replenishment Amount in respect of a Default Period. Conditions to complete Invoicing BackPlease see item 107.1 for conditions to complete Invoicing Back.Hide noteRule 72.1 and 72.2 (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss)ASX Recovery Rulebook, Rule 3 (Recovery Powers)ASX Recovery Rulebook, Paragraph 13 of Schedule 5 (Call for Participant Replenishment Amount)ASX Recovery Rulebook, Paragraph 3 of Schedule 5 (Interim commitments by Participants) |
| 100.2 Is the CCP required or permitted to hedge Contracts? | The CCP is not required, but is permitted, to hedge Contracts.The CCP is empowered to manage and mitigate exposures resulting from a CM’s default by taking strategic trading actions. The CCP may engage in hedging or offsetting activities to manage exposure from a default. This can be done through:Market Trading: Executing trades on a trading system maintained by the Relevant Exchange via a CM of the exchange.Direct Agreements: Entering into direct trading agreements with market participants or other permissible entities, as guided by the Relevant Exchange’s rules.It is relevant to note that any Market Contracts executed for these purposes must be registered by the CCP. These Market Contracts may be put up for auction or closed out against the defaulting CM’s Open Contracts. This process is treated as if the defaulting participant had entered into these Market Contracts themselves.This approach allows the CCP to effectively handle potential risks and losses by using market mechanisms to stabilise positions during a CM’s default.The CCP has very wide powers in a CM default scenario which would include the hedging of Contracts (see item 100.1). Note also that the CCP has residual power to do all such other necessary acts and things as are ancillary or incidental to the execution of the CCP’s powers enumerated under the Rules in connection with a CM event of default.Hide noteRule 72.1 and 72.2 (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss) |
| 100.3 Are non-defaulting CMs required to enter into hedging Contracts with the CCP? | No. |
| 100.4 If so, what are the consequences for refusal to enter into such hedging Contracts? | N/A |
| 100.5 Does the CCP have to consult any committees (e.g., a risk committee or a default committee) in making decisions and managing a default process? | Yes, the CCP must consult with the risk committee in the circumstances set out in item 28.3 and the default committee as set out in item 29.3. There is no default management committee that includes CM representatives for the Service.Hide noteRule 72.1 (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss)Rule 20 (Risk Committee)ASX Recovery Rulebook – Rule 7.1 (Reserve Bank of Australia)ASX Recovery Handbook – Rule 7.2 (Risk Committee)CCP responses of 6 February 2015 |
| 101. Publication of CCP default process | |
| 101.1 How, if at all, are these procedures and their outcome publicised? | The CCP is under no obligation under the Rules to publicise the non-recovery procedures or the outcome of a default process.In practice, if a CM is declared in default, the CCP will publish a market notice, notifying other CMs, Clients and other CCPs that it has declared the CM in default and again subsequently when the default management process is completed. In the absence of a declaration of default, there will be no publication.The recovery procedures are set out in the Recovery Rules which provide that the CCP will notify CMs at various stages in the default process.Hide noteCCP responses of 6 February 2015 |
| 102. Auction mechanism | |
| 102.1 Does the CCP use an auction mechanism to liquidate the portfolio of the defaulting member? | The CCP has the right to use an auction mechanism as part of the default process when terminating a Contract of the defaulting CM but is not obliged to do so.Hide noteRule 72.1 (aa) (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss) |
| 102.2 Are non-defaulting CMs required to participate? | No, non-defaulting CMs are not required to participate. If a CM is invited to participate, it may choose whether to participate or not.Hide noteRule 72.1(aa) (Powers of ASX Clear (Futures) Upon A Default and Determination of A Loss (DM Auction Procedures)), ASX Clear (Futures) Operating Rules, paragraphs 4.2, 4.4 and 8(b)(iii) |
| 102.3 If so, to what extent? | N/A |
| 102.4 If a CM refuses to participate, what are the consequences for not bidding? | N/A |
| 102.5 Are Clients allowed to participate? | Yes. The CCP may invite a Client to participate in an action, provided that the Client has satisfied following conditions:It has entered into a written agreement with the CCP that it will be bound by the CCP’s auction procedures;it has entered into a written non-disclosure agreement in the form reasonably requested by the CCP in respect of its participation in the CCP’s auctions; andIt has been accepted in writing by both the CCP and the relevant CM of which it is a Client as being ready and able to participate in an auction.Hide noteRule 72.1(aa) (Powers of ASX Clear (Futures) Upon A Default and Determination of A Loss, ASX Clear (Futures) Operating Rules, paragraph 2.3 and 4.2 |
| 102.6 If so, what are a CM’s obligations with respect to a bid submitted by a Client? | The CM will assume the obligations of its Client, if the Client is the winning bidder and will enter into the transactions comprising the auction pool with the CCP at an auction price that is determined in accordance with these auction proceduresHide noteASX Clear (Futures) Operating Rules, paragraph 4.1 |
| 102.7 Is there a minimum bid size? | N/A. See item 102.8 |
| 102.8 Does the CCP allow CMs to submit bids for part only of an auction portfolio? | No, once the CCP has determined the auction portfolio for an auction, each bid must be made in respect of the auction portfolio in its entirety and may not be made in respect of one or more individual components of the auction portfolio.Hide noteASX Clear (Futures) Operating Rules, paragraph 6.1 |
| 102.9 On what basis does the CCP decide the size and composition of the auction portfolio? | The CCP determines at its sole discretion the groups of transactions which are to be the subject of each separate auction and form an auction portfolio. Without limiting the ways in the CCP may form an auction portfolio, the CCP may:take into consideration factors such as the type, jurisdiction and value of each auction transaction; anddetermine that a single auction transaction is to be split into multiple transactions, with each transaction being included in a different auction portfolio as a separate auction transaction.The CCP may elect to seek advice or opinions from experts to inform any decision it may make when determining the auction portfolio. Where such expert advice or opinion is sought , the CCP is not required to act in accordance with any expert advice or opinion that is provided.Hide noteASX Clear (Futures) Operating Rules, paragraph 3 |
| 102.10 Are the house and Client Contracts kept in separate auction portfolios? | The CCP can declare the Contracts of the defaulting CM terminated, whether such Contracts related to a house or client account. Following termination of Contracts in client account, such positions cease to be client positions and may be combined with terminated Contracts relating to house positions. If the terminated Contracts involved in a default management process related to both house positions and client positions of a defaulting CM or to the positions of more than one defaulting CM, the CCP:may combine any such terminated Contracts so that they are treated as part of one or more portfolios at any time after the commencement of the default management process for the purpose of auction;is to allocate any losses, costs, charges and expenses in connection with that default management process between the relevant defaulting CMs and between the house accounts, Client accounts and Client sub-accounts of the relevant defaulting CM which relate to those terminated Contracts. The losses, costs, charges and expenses are to be calculated as of the time of combination of such terminated Contracts and will be conducted by allocating any losses, costs, charges and expenses to each relevant account proportionately to its relative risk as determined by the CCP using the value of initial margin calculated with respect to each relevant account at the time of combination of the terminated Contracts;in the case of a relevant account which is a Client sub-account, is to deduct any losses, costs, charges and expenses so attributed to that Client Sub-Account in accordance with the bullet point above from the guaranteed initial margin value of that Client sub-account in accordance with the client protection model provisions.Hide noteRule 72.1B(b), (c) and (f)(Powers of ASX Clear (Futures) Upon A Default and Determination of A Loss |
| 102.11 How would the auction be structured/conducted in respect of multiple auction portfolios? | There will be one auction portfolio only comprised in a single auction.Hide noteASX Clear (Futures) Operating Rules, paragraph 8(b)(ii) |
| 102.12 What is the consequence if two or more bidders submit the same price for an auction portfolio (e.g., is the auction portfolio allocated on a pro-rata basis, and/or is timeline of price submission used to determine the allocation)? | The timeline of price submission is used to determine the allocation. If (i) two or more bidders enter the same bid, and (ii) the bid entered by multiple bidders is the highest valid bid received by the CCP, the winning bid will be the bid that was received first by the CCP, unless both bids are received by the CCP at the same time, in which case the CCP will have absolute discretion in determining the winning Bid.Hide noteASX Clear (Futures) Operating Rules, paragraph 7.1(b) |
| 102.13 Does the CCP retain the power to set minimum bid price thresholds? | Yes. See item 102.13Hide noteASX Clear (Futures) Operating Rules, paragraph 5.1(g). |
| 102.14 If so, how is this determined and is the minimum bid communicated to auction participants? | Prior to each auction, the CCP will provide all CMs and clients that are invited to participate in the auction with the specific auction terms and with any further relevant information relating to the auction that the CCP deems necessary. The specific auction terms will stipulate, among other things, whether the CCP has set a reserve price.Hide noteASX Clear (Futures) Operating Rules, paragraph 5.1(g). |
| 102.15 Can the CCP reject specific bids or reject the auction entirely? | Reject specific bid 1Yes. If the highest bid received by the CCP for an auction portfolio is not acceptable to the CCP in its sole discretion, having regard to its compliance with its obligations as a CS facility licensee, the CCP may instead select the next highest bid (or, if the next highest bid is also not acceptable to the CCP, each subsequent lower bid until a bid is deemed acceptable) as the winning bid in any auction.All bids submitted to the CCP must be positive bids. A negative bid will not be accepted by the CCP as a valid bid.The CCP may reject any communication from a bidder purporting to submit, revise or revoke any bid in compliance with the auction procedures if the CCP determines, in its discretion, that such communication is not clear and unequivocal.Cancel the auction 2The CCP is entitled, at any time prior to the expiration time for an auction, to cancel the auction or the amend the terms of the action, provided that, in case of change of the terms, it will extend the expiration time to allow for bidders to exercise the revocation right.Hide note1 ASX Clear (Futures) Operating Rules, paragraphs 6.5, 6.7 and 7.1(c)2 ASX Clear (Futures) Operating Rules, paragraph 5.2 |
| 102.16 If so, under what conditions? | See item 102.15 |
| 102.17 How are “off market” or “non-competitive” bids defined and what are the consequences of submitting “off market” bids? | N/A, see item 102.15 in relation to which bids may be rejected. |
| 102.18 How does the CCP deal with a scenario where it does not receive any bids in the auction? | The CCP has the right to cancel an auction at any time – see item 102.15. If the CCP determines that an auction or any part of it has failed for any reason, the CCP may:reallocate the transactions comprising the auction portfolio and hold a further auction in accordance with the auction procedures; andtake any such other action as the CCP determines in its discretion is appropriate.Hide note2ASX Clear (Futures) Operating Rules, paragraph 7.5 |
| 102.19 How does the CCP determine to whom Contracts are allocated pursuant to the auction and for what price? | The highest bid will be the winning bid, subject to the right of the CCP to reject the highest bid (see item 102.15) and provided that if a reserve price specified for the auction portfolio is higher than the otherwise winning bid for such auction portfolio, then there is taken to be no winning bid for such auction portfolio.Hide noteASX Clear (Futures) Operating Rules, paragraphs 7.1, 7.2 and 8 |
| 102.20 Does the CCP have any obligation to accept a majority percentage of the bids? | No |
| 103. Utilisation of default process | |
| 103.1 Is the CCP required to utilise the specified default process? | No. See item 100.1. |
| 104. Outsourcing of the CCP’s CM default process | |
| 104.1 Is the CCP permitted to outsource aspects of the default process? | Not addressed in the Rules.As the Rules do not prohibit outsourcing, there is no restriction on this; however, the CCP would be responsible as principal for the actions of any outsourced staff in relation to its contractual obligations and regulatory obligations under the Corporations Act, which would place some constraints on any such outsourcing.In practice, the CCP does not outsource aspects of the default process to third parties.See also item 11.2 under the heading “Offshoring and outsourcing requirements” for factors that may impact on the ability of the CCP to outsource aspects of the default process. Certain Financial Stability Standards may also have an impact. These include:FSS 2.9: a CCP that is part of a group of companies should (among other things) consider specific procedures for preventing and managing conflicts of interest, including with respect to intra-group outsourcing arrangements.FSS 16.5: a CCP should identify, monitor and manage the risks that key participants, other financial market infrastructures and service and utility provides might pose to its operations. A CCP should inform the RBA of any critical dependencies on utilities or service providers.FSS 16.9: a CCP that relies upon, outsources to, or has other dependencies with a realted body, another financial market infrastructure or a third party service provider should ensure that those operations meet the resilience, security and operational performance requirements of the Financial Stability Standards and equivalent requirements if any other jurisdiction in which it operates.FSS 16.10: all of a CCP’s outsourcing or critical service provision arrangements should provide rights of access to the RBA to obtain sufficient information regarding the service provider’s operation of any critical functions provided. A CCP should consult with the RBA prior to entering into an outsourcing or service provision arrangement for critical functions.FSS 16.11: a CCP should organise its operations, including any outsourcing or critical service provision arrangements, in such a way so as to ensure continuity of service in a crisis and to facilitate effective crisis management actions by the RBA or other relevant authorities. These arrangements should be commensurate with the nature and scale of the CCP’s operations.FSS 21.1(h): a CCP should inform the RBA as soon as reasonably practicable if it or a service it relies on from a third party or outsourced provider experiences a significant operational disruption, including providing the conclusions of its post-incident review.”Hide noteCCP responses of 6 February 2015 |
| 104.2 If so, under what circumstances? | N/A |
| 104.3 If the CCP is permitted to outsource aspects of the default process, is the CCP’s ability to outsource limited to certain obligations? | N/A |
| 104.4 To whom may the CCP outsource aspects of the default process and what decision-making rights would be outsourced? | Not addressed in the Rules. |
| 104.5 Is any indemnification provided to the CCP if the outsourcing results in a loss? | Not addressed in the Rules. |
| 104.6 Will the CCP remain liable for the performance of its obligations regardless of whether such obligations are outsourced or delegated? | Not addressed in the Rules.The CCP will remain liable for its contractual and regulatory obligations. |
| 105. Outsourcing of CM obligations | |
| 105.1 Is the CM permitted to outsource any of its obligations to an affiliate or a third-party? | Not addressed in the Rules.A CM is not prohibited from outsourcing, so there is no restriction on this. |
| 105.2 If so, under what circumstances? | N/A |
| 105.3 Is the CM’s ability to outsource limited to certain obligations? | Not addressed in the Rules. |
| 105.4 Is any indemnification provided to the CCP by the CM if the outsourcing results in a loss? | Not addressed in the Rules. |
| 105.5 Will the CM remain liable for the performance of its obligations regardless of whether such obligations are outsourced or delegated? | Not addressed in the Rules.A CM will remain liable for its contractual and regulatory obligations. |
| 106. Forced Allocation | |
| 106.1 Does the CCP have the right to forcibly allocate Client and house Contracts to non-defaulting CMs? | The Rules specifically provide that, in exercising its powers on a CM default, the CCP may not Force Allocate Contracts to other CMs. See item 100.1.This would apply to Contracts designated to both Client Accounts and House Accounts.Hide noteRule 72.1(k) (proviso (ii)) (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss) |
| 106.2 If so, by what mechanism are pricing, size of allocations and CM recipients determined? | N/A |
| 106.3 What is the timing for Forced Allocation? | N/A |
| 106.4 Is Client business treated separately from house business? | N/A |
| 107. Invoicing Back | |
| 107.1 Does the CCP have the ability to liquidate Contracts on opposite sides of the market through Invoicing Back Contracts with non-defaulting members for purposes of liquidating Contracts or hedging market risks of the defaulting member? | Yes.Rule 72.1(k) specifically provides that, in exercising its powers on a CM default, the CCP may not Invoice Back Contracts to another CM (see item 100.1). However, the Recovery Rules provide that the CCP can in its discretion Invoice Back Contracts to non-defaulting CMs on a CM default. However, it is provided that the Recovery Rules always prevail over any other Rules if there is any inconsistency; and, despite Rule 72.1(k), the CCP has the ability to liquidate Contracts on opposite sides of the market through Invoicing Back Contracts with non-defaulting CMs.Partial Tear Up :Conditions to Partial Tear Up The CCP may exercise its rights and powers to effect Partial Tear Up if the CCP determines that:a CM has defaulted;it has an “unmatched book” (as defined below);it reasonably expects that:exercise the power of Partial Tear Up may restore a “matched book”;it is unlikely to be able to otherwise restore a “matched book” in a reasonable time as determined by the CCP;the termination amounts (see item 107.2 under the title of “Netting of the termination values” for the determination of termination amount) which are to be payable by the CCP in accordance with the Partial Tear Up rules will be paid in full; andit has not determined that it will effect a complete Invoicing Back.For the purpose of partial and complete Invoicing Back, “matched book” and “unmatched book” are determined as below:“Unmatched book” means that, after a default of a CM, the CCP is exposed to the risk that its payment and delivery obligations to CMs under Contracts will not be matched by the payments and deliveries made by CMs to it under Contracts as determined by the CCP.“Matched book” means that, following such an “unmatched book” determination, such risk has been appropriately managed, as determined by the CCP, by measures such as (but not limited to) the following:entering into new Contracts or terminating existing Contracts; andtransferring obligations; andentering into other transactions,The CCP will notify CMs of this determination. However, any failure to provide this notice does not affect whether or not the CCP has restored a “matched book”.Any determination or notification in respect of the CCP restoring a “matched book” does not affect the CCP’s ability to subsequently determine that it has an “unmatched book”. Selection of Contracts for Partial Tear Up When the CCP determines which Contracts (of the non-defaulting CMs) are to be subject to Partial Tear Up , the CCP must use best endeavours to:select the minimum number of Contracts which it believes are necessary in order for it to restore a “matched book; andselect the Contracts to be Invoiced Back so that:the Contracts to be Invoiced Back are shared between the CMs who held those types of Contracts on a pro rata basis (to the extent practicable). The pro rata determination is to be made by reference to the net position in the relevant Contracts held by a CM across its accounts (including its Client Account); andeach CM is given an opportunity to agree with the CCP which of its Contracts are to be Invoiced Back (and if the CCP and the CM so agree, the Contracts which the CM and the CCP so agree are to be terminated) but if:the CM does not submit to the CCP a valid allocation of its Contracts which are to be Invoiced Back within the timeframe set by the CCP; orthe Invoicing Back of Contracts set out in the allocation submitted by the CM would increase the CCP’s uncollateralised exposure to the CM to an extent that is unacceptable to the CCP in its absolute discretion,then the CCP is to select that CM’s Contracts on a pro rata basis across the CM’s accounts (including its Client Account). Notification to the CMsThe CCP must notify the CMs holding the Contracts which have been selected for Invoicing Back and the time at which the Invoicing Back is to take effect. The obligations of the CCP and the CM under the Contract terminate at the time notified. Complete Invoicing BackConditions to complete Invoicing BackThe CCP may exercise its rights and powers to effect a complete Invoicing Back if:a CM has defaultedthe CCP reasonably expects that:if it has an “unmatched book”, it is unlikely to otherwise be able to restore a “matched book” within a reasonable time (including exercise its right of Partial Tear Up) as determined by the CCP; orthe amount of payments (excluding any payments in respect of initial margin and additional margin) which are, or will become, payable by it under the Rules (including the Recovery Rules) is likely to exceed the Default Resources that the CCP reasonably determines will be available at that time; orthe use of its other rights and powers to allocate CCP Losses or to restore a “matched book” would not be consistent with its obligations, including that the CCP must, to the extent that it is reasonably practicable to do so, comply with the Financial Stability Standards which apply to it and do all other things necessary to reduce systemic risk; andif the CCP has chosen to do so, it has invited CMs to make voluntary payments to the CCP as described in item 109.1. Notification to CMsIf the CCP has determined that all Contracts which all CMs have with the CCP are to be Invoiced Back then it must notify the CMs of the time at which the Invoicing Back is to take effect.The obligations of each of the CCP and the CM under each of the Contracts are Invoiced Back from the time specified in the notice and the registration of the Contracts is to be cancelled.Hide noteRule 72.1(k) (provision (ii)) (Powers of ASX Clear (Futures) upon a Default and Determination of a Loss)ASX Recovery Rulebook, Rule 1.4 (Inconsistency)ASX Recovery Rulebook, Rule 2.4 (Unmatched Book and Matched Book)ASX Recovery Rulebook, Schedule 3 (Partial Termination) |
| 107.2 If so, how are the prices for such Contracts determined? | A. Determination of the termination value for each Contracts subject to Invoicing BackThe termination value for Contracts subject to Invoicing Back would be determined by the CCP in good faith, in a commercially reasonable manner, in compliance with all applicable laws and in a manner which is consistent with the CCP’s applicable pricing protocols.However, if the CCP cannot determine the termination value in accordance with its applicable pricing protocols, or believes that a price determined in accordance with the applicable pricing protocols would not produce a commercially reasonable result then the CCP is to calculate the termination value by taking into account:the amount of trading losses or costs incurred and trading gains realised by the CCP in connection with any transactions which it enters into in order to terminate, close-out, offset, hedge, reduce the risk of, transfer or liquidate part of its exposures in connection with the terminated Contracts; andthe CCP’s valuations of the Contracts subject to Invoicing Back and any transactions referred to in the bullet point above taking into account their terms, including any payments or deliveries which would have been required under them after that date, and any option rights in relation to them. For this purpose, the CCP may consider any relevant information, including:relevant quotations (firm or indicative) and relevant market data supplied by one or more third parties (including relevant price and other market data provided by another exchange, market or clearing house); orsuch quotations and market data from internal sources (including pricing or other valuation models) which are, at that time, used by the CCP or CMs in the regular course of their business for the valuation of similar transactions; andwith respect to each Contract subject to Invoicing Back, all amounts which became due and which remain unpaid by the CM to the CCP on or before the date on which the Contracts were subject to Invoicing Back.The termination value so determined may be positive (if it is owing by the CM to the CCP), negative (if it is owing to the CM by the CCP) or zero. The termination value of obligations which cannot be valued by the CCP is to be zero.The determination by the CCP of such termination value is final and binding on the CCP, CMs and each other person affected by the determination.The termination value so determined is a genuine pre-estimate by the CCP of the loss or damages which the CM or the CCP will suffer from such Invoicing Back of a Contract. B. Netting of the termination valuesFollowing the calculation of the termination values with respect to the Contracts of a CM which have been subject to Invoicing Back in accordance with the Rules, the termination values with respect to Contracts held in the same account will be netted, producing a single net amount payable between the CCP and the CM with respect to that account. This amount is referred to as the termination value. C. Calculation of complete Invoicing Back payment and termination amount shortfallIn respect of a complete Invoicing Back, the CCP will calculate:in respect of each CM, the termination amount across all the CM’s accounts; andthe net termination value shortfall. The net termination value shortfall (if any) is an amount equal to the greater of zero and:the absolute value of the aggregate amount of termination amounts payable by the CCP under the Rules related to complete Invoicing Backminusthe sum of:the aggregate amount of amounts paid to the CCP with respect to the termination of Contracts conducted in accordance with rules related to Complete Termination; andthe amount of then available Default Resources (if any). D. Reductions to net termination valuesIf there is a net termination value shortfall:the CCP will allocate the net termination value shortfall to reduce net termination values payable by it;the net termination value shortfall will be allocated to those CMs in respect of which a termination amount has been calculated as due to the CM pursuant to a complete Invoicing Back, pro rata to the termination amounts with respect to each such CM; andthe amount of the termination amount shortfall which is allocated a CM will be allocated to reduce each termination amount to be made to that CM on a pro rata basis.Payment of the reduced amount of a termination amount by the CCP discharges in full its obligations in respect of that termination amount. E. Effects of the payment by the CCP under Invoicing BackPayment by the CCP (including by entry into a CM’s account) of a termination amount as determined above with respect to Contracts that have been Invoiced Back:satisfies in full the CCP’s obligation to make any further payments or deliveries under such Contracts; anddischarges any obligation of the CCP to pay, and any right of a CM to receive, any amounts, including interest, in connection with such Contracts; anddoes not give rise to any obligation for the CCP to make good the amount of any reduction made to such Contracts,except to the extent of any reimbursement (see item 109.1).Hide noteASX Recovery Rulebook, Schedule 3 (Partial Termination)ASX Recovery Rulebook, Schedule 4 (Complete Termination)ASX Recovery Rulebook, Rule 8.3 (Effect of payment by the ASX CCP) |
| 107.3 What is the timing for Invoicing Back? | Timing for termination of ContractsAfter the CCP decides to effect an Invoicing Back, the CCP shall notify the CMs of such decision. The obligations of the CCP and the CM under the Contract only terminate (i.e., Invoicing Back only takes effect) upon the notification by the CCP to the CM holding the Contracts which have been selected for Invoicing Back. Timing for payment of termination amountIf the termination amount (see item 107.2 for calculation of termination amount) is positive then that amount is payable by the CM to the CCP on the day on which it is notified to the CM by the CCP. If the termination amount is negative then the absolute value of that amount is payable by the CCP to the CM on the day on which it is notified to the CM by the CCP.The CCP will account for this amount payable by debiting or crediting the termination amount to the CM’s relevant account.Hide noteASX Recovery Rulebook, Rule 3.4 (Conditions to Partial Termination)ASX Recovery Rulebook, Paragraph 4 of Schedule 3 (Payment of Net Termination Value) |
| 107.4 Is Client business treated separately from house business? | No. |
| 108. Fire drills | |
| 108.1 Does the CCP conduct mock default “fire drills” to test the resiliency, response time and efficiency of its default management protocols? | Yes.Although the Rules do not provide for any procedures for fire drills, based on the RBA 2018/19 Assessment Appendix C1, the CCP’s in-house default management group regularly tests its default management and recovery framework by way of fire drills. These fire drills assist in ensuring that relevant ASX personnel are familiar with the default management process and identify areas where the default management and recovery framework should be updated. Findings including any recommended enhancements to the default management and recovery framework are reported to the Default Management and Recovery Working Group (DMRWG, described in item 29.2) after each fire drill.Separate fire drills are held for both the Service and the OTC Service on an annual basis. The fire drill for the Service is wholly internal and does not involve CMs or other third parties. Regulators are invited to attend.Hide noteCCP responses of 6 February 2015RBA 2018/19 Assessment Appendix C1, Standard 12.4 |
| 108.2 If so, what is the frequency of these fire drills? | Annual.1Based on the RBA 2018/19 Assessment Appendix C1, the last fire drills for the Service were conducted in 2018/19.2Hide note1 CCP responses of 13 January 20172 RBA 2018/19 Assessment Appendix C1, Standard 12.4 |
| 108.3 Are the results of the fire drills shared with CMs? | The high level results of fire drills of both the Service and the OTC Service are shared with CM representatives on the risk committee.The RBA 2018/19 Assessment Appendix C1 separately states that ASX provides detailed responses to any targeted requests for information by CMs. CMs have the ability to provide feedback and seek further information on default processes through this mechanism.Hide noteCCP responses of 6 February 2015RBA 2018/19 Assessment Appendix C1, Standard 12.3 |
| 109. CCP loss allocation structure/waterfall | |
| 109.1 Please describe the loss allocation structure that the CCP has in place. For each item in the waterfall, please indicate whether utilised resources are repayable if the CCP subsequently recovers losses. | The margin and other collateral (including the defaulted CM’s contributions to the default fund) posted by the defaulted CM would be drawn on first in the event of that CM’s default. Should this prove insufficient to meet the CCP’s obligations, the CCP may draw on a fixed quantity of the default fund1Accordingly, in the event that prefunded financial resources were exhausted, it is provided in the Recovery Rules that CCP could use any of the following recovery tools: (a) assessment, (b) Payment Reduction and (c) complete Invoicing Back to allocate the uncovered losses.The order of application of assets in the Default Resources is referred to as the “default waterfall”. The recovery tools of Payment Reduction and complete Invoicing Back are not part of the default waterfall. Default waterfallOrder of application in the default waterfallThe CCP has the following default waterfall structure:3(1) first, any moneys, securities, collateral or property held by the CCP in any account of, or in respect of, the defaulting CM (including without limitation any amounts of variation margin or other amounts which would otherwise be payable to the defaulting CM and, subject to segregation requirements under the Rules, restricting access to a Client Account, the Client Account of the defaulting CM);(2) second, default fund contributions (including all Futures Commitment and all OTC Commitment (being default fund contributions in respect of OTC Participants calculated in accordance with the rules applicable to the OTC Service)) of the defaulting CM (see item 112.1);(3) third, the CCP’s designated assets up to the amount specified in the Rules (such amount to be A$120,000,000 or such greater amount as the Board in its discretion may from time to time determine);(4) fourth:(i) if the defaulting CM is a Futures Participant and not an OTC Participantthe proceeds of the default fund contributions in respect of the Futures Service of all Futures Participants (other than the defaulting CM), up to the total aggregate amount committed by all Futures Participants under the default fund contributions in respect of the Futures Service calculated in accordance with the formula set out in the Futures Rules (including the default fund contributions in respect of the Futures Service of the defaulting CM) (“Relevant Futures Commitments”);(ii) if the defaulting CM is an OTC Participant and not a Futures Participantthe proceeds of the default fund contributions in respect of the Service of all OTC Participants (other than the defaulting CM), up to the total aggregate amount of default fund contributions in respect of the Service committed by all OTC Participants calculated in accordance with the Rules (including the default fund contributions in respect of the Service of the defaulting CM) (“Relevant OTC Commitments”);(iii) if the defaulting CM is both a Futures Participant and an OTC Participantan amount equal to the aggregate of:(A) the Futures Commitment Proportion of the Relevant Futures Commitments; and(B) the OTC Commitment Proportion of the proceeds of the Relevant OTC Commitments.For this purpose:“Futures Commitment Proportion” is the proportion calculated by dividing:(a) the daily average initial margin obligation of the defaulting CM that was attributable to Contracts other than OTC Contracts and OTC Allocated Futures Contract (being Futures Contracts allocated to the calculation of OTC initial margin in accordance with the Rules including the rules applicable to the OTC Service) by(b) the daily average initial margin obligation of the defaulting CM that was attributable to all of its Contracts (including OTC Contracts and OTC Allocated Futures Contracts).“OTC Commitment Proportion” is the proportion calculated by dividing:(a) the daily average initial margin obligation of the defaulting CM that was attributable to OTC Contracts and OTC Allocated Futures Contractsby(b) the daily average initial margin obligation of the defaulting CM that was attributable to all of its Contracts (including OTC Contracts and OTC Allocated Futures Contracts).For the purpose of each of the above calculations, the “daily average initial margin obligation” is calculated by dividing the sum of the CM’s initial margin obligation for the relevant Contracts on each Business Day in the 90 days immediately preceding the day on which the event of default first occurred by the number of Business Days in that period. (5) fifth, proceeds of any insurance or other assets available to the CCP and designated for this purpose (such amount to be A$150,000,000 or such greater amount as the Board in its discretion may from time to time determine) provided that in the case of any relevant policy of insurance the relevant excess has been exceeded; (6) sixth, proceeds of(i) the Relevant Futures Commitments; and(ii) the Relevant OTC Commitments,in each case to the extent that they have not already been applied above. If there are both Relevant Futures Commitments and Relevant OTC Commitments available to be applied, then the allocation between them is to be conducted proportionally on the basis of the total amount of each of them which was available to be applied under this paragraph (6);(7) seventh, the proceeds of any additional financial backing of CMs (the CCP may obtain from a CM additional financial backing to support the CCP’s obligations on such terms as is agreed with the CM); and(8) eighth, any other monies or other assets available to the CCP designated for this purpose up to A$180,000,000 4 ; and(9) ninth, assessments received from non-defaulting CMs. Exceptions to the order of application in the default waterfallThe Board may in its absolute discretion (without being under any express or implied obligation to do so) elect to meet any CM default from assets available pursuant to paragraph (8) and determine that such assets will replace the obligation to apply assets referred to in any or all of paragraphs (4), (5), (6) or (7) above. 5A CM’s default fund contribution cannot be applied by the CCP to discharge, or to compensate the CCP for discharging, any obligation incurred before the CCP makes its determination to require such default fund contribution.6The CCP may choose to treat the CCP Losses which arise in respect of the defaults of multiple CMs during a Default Period as one combined CCP Loss and apply assets in the default waterfall to that CCP Loss, if the CCP consider it would be appropriate. If the CCP does not choose to do so, the CCP will apply the assets in the default waterfall separately and consecutively in respect of each CM.7The CCP may apply the assets referred above to satisfy its obligations prior to its final determination of the total obligations of the relevant default.8The Rules provide that pending recovery of an asset in a paragraph in the default waterfall, the CCP may access assets referred to in a subsequent paragraph of the waterfall. However, such access is subject to prompt adjustment when an asset in a preceding paragraph has been recovered provided that no access shall be had to the assets referred to in: 9paragraphs (4) or (6) of the default waterfall until the assets referred to in paragraph (3) have been exhausted; andparagraph (6) of the default waterfall until the assets referred to in paragraph (5) have been exhausted,and provided further that the CCP will not be required to have access to assets referred to in a paragraph of the default waterfall pending the realisation of available assets referred to in a preceding paragraph. Variation to the order of application in the default waterfall 10The order of application in the default waterfall will be varied after the end of a Default Period. After the end of a Default Period, the CCP will calculate the amount of default fund that is still available to meet any future CCP Loss not including any CCP Interim Replenishment Amounts and Interim Participant Replenishment Amounts determined in respect of the immediately preceding Default Period which have not been applied to meet the CCP Loss (the “Remaining Waterfall Amount”), thenif such the Remaining Waterfall Amount is zero, then the items (3) to (6) in subsection A (Order of application in the default waterfall) above will be varied and items (8) and (9) in subsection A (Order of application in the default waterfall) above will be replaced by the following:firstly, the CCP’s designated assets, up to A$120 million minus the Applied CCP Interim Replenishment Amount (subject to a minimum of zero);secondly, to the default fund contributions of non-defaulting CMs, up to A$100 million minus one half of the Applied Interim Participant Replenishment Amount (subject to a minimum of zero);thirdly, the CCP’s designated assets, up to A$80 million; andfourthly, to the default fund contributions of non-defaulting CMs, up to A$100 million, minus one half of the Applied Interim Participant Replenishment Amount (subject to a minimum of zero),provided that where the Replacement Default Fund Size (as defined in item 117.2 below) is less than A$400 million, the new amounts specified above (each prior to the deduction of any Applied CCP Interim Replenishment Amount and Applied Interim Participant Replenishment Amounts) are to be reduced on a pro rata basis (by multiplying each such amount by the fraction equal to the Replacement Default Fund divided by A$400 million.if the Remaining Waterfall Amount is more than zero, then the items (3) to (6) in subsection A (Order of application in the default waterfall) above will be varied and item (8) in subsection A (Order of application in the default waterfall) above will be replaced by the following:firstly, the CCP’s designated assets, up to A$120 million;secondly, to the default fund contributions of non-defaulting CMs, up to A$100 million;thirdly, the CCP’s designated assets, up to the sum of :A$80 million; andthe lesser of: (x) A$70 million and (y) the amount of CCP’s designated assets which forms part of the remaining waterfall amount minus A$180 million (if any, subject to a minimum of zero);fourthly, to the default fund contributions of non-defaulting CMs, up to A$100 million; andfifthly, to the CCP’s designated assets, up to an amount equal to the lesser of:A$180 million; andthe amount of CCP’s designated assets which forms part of the Remaining Waterfall Amount (if any); Total amount of default fund contributionThe CCP has confirmed in its responses of 13 January 2017 that currently:total Futures Commitments equal A$100,000,000; andtotal OTC Commitments equal A$100,000,000.See the Appendix which includes a graphic illustration of default waterfall structure. Assets excluded from default waterfallThe Rules provide that the Default Resources do not including any of the following:11amounts paid to the CCP with respect to Partial Tear Up of Contracts with non-defaulting CM(s) or complete Invoicing Back of Contracts with all the CMs conducted in accordance with the Recovery Rules; orfunds, assets or property of the CCP which have not been designated by the CCP to be allocated to meet a CCP Loss in accordance with the default waterfall. Recovery tools available to loss absorptions (apart from assessment)12In addition to Default Resources, the CCP can also allocate the CCP Loss by way of application of the following tools. The following recovery tools are normally used after utilising the resources in the default waterfall as described above and in the order as below; but it does not have to be the case.Reduce outgoing payments under Payment Reduction (item below).Effect a Partial Tear Up to restore a “matched book” (item 107.1).Invite or accept a voluntary payment from CMs (see below).Effect a complete Invoicing Back (item 107.1).Call for a replenishment (item 117) Payment Reduction 13Upon a CM default, the CCP has the power to reduce (haircut) ASX Payments (as defined below) to non-defaulting CMs in order to allocate losses suffered on the defaulting CM’s portfolio (“Payment Reduction”). Collateral of a non-defaulting CM that may be subject to Payment ReductionThe payments payable by the CCP to a non-defaulting CM that could be reduced by the CCP in accordance with its power of Payment Reduction (“ASX Payment”) include all amounts payable by the CCP under the Rules (including, but not limited to, variation margin and amounts payable under the Recovery Rules) other than:amounts of initial margin and additional margin; andamounts payable in connection with default management, including amounts payable with respect to any auction but excluding variation margin forming part of a default management payment; andtermination amounts (see item 107.2 under the title of “Netting of the termination values” for the determination of termination amount) payable by the CCP under Contracts terminated in accordance with Partial Tear Up rules (see item 100.1); andtermination amounts payable by the CCP under Contracts terminated in accordance with complete Invoicing Back rules (see item 100.1 and item 109.1 under the title of “Complete Invoicing Back”)). Conditions to Payment ReductionThe CCP may exercise its rights and powers to effect a Payment Reduction after the occurrence of a CM default if the following conditions are satisfied:the CCP reasonably expects that there is a CCP Loss or that a CCP Loss may arise in the future with respect to the Default Period which has been, or may be, allocated to the default fund at the relevant time; andeither:the CCP reasonably expects that the CCP Loss will not be, or may not be able to be, fully allocated to the Default Resources (i.e., the default fund and assessments); orthe CCP reasonably expects that, in respect of any account (excluding the accounts of defaulting CM), the amount of an equivalent type to ASX Payment which are payable to the CCP (“ASX Receipts”) with respect to that account is not sufficient to pay off the amount of ASX Payments payable by the CCP as and when they become due and payable; andthe CCP has not determined that it will effect a complete Invoicing Back. Determination of reduced amount for a non-defaulting CMThe amount of the reduced outgoing payments to a non-defaulting CM is calculated as below. Calculation of Net ASX Receipts, Net ASX Payments, Net Participant ASX Receipts and Net Participant ASX PaymentsThe CCP will calculate, in respect of each account (excluding any account of any defaulting CM) on any day during the Default Period, the net amount of:ASX Receipts payable to the CCP in respect of the account on that day (such amounts having a positive value); andASX Payments payable by the CCP in respect of the account on that day (excluding the effect of any reduction for that day) (such amounts having a negative value).If the net amount calculated in respect of an account is:positive, the net amount is payable to the CCP and is referred to as a “Net ASX Receipt”; ornegative, the net amount is payable by the CCP and is referred to as a “Net ASX Payment”.The CCP will then calculate, in respect of each CM (excluding any defaulting CM), the net amount of Net ASX Receipts and Net ASX Payments across all the CM’s accounts with the CCP.If the net amount calculated in respect of a CM is positive, that amount is referred to as a “Net Participant ASX Receipt”. If the net amount calculated in respect of a CM is negative, that amount is referred to as a “Net Participant ASX Payment”. Calculation of ASX Payment ShortfallThe ASX Payment Shortfall for a day (if any) is an amount equal to the greater of zero and:the absolute value of the aggregate amount of Net ASX Payments on that dayminusthe sum of:the aggregate amount of Net ASX Receipts which are received by the CCP on that day; andthe amount of then available Default Resources, if any, which the CCP determines will be used to make Net ASX Payments on that day. This amount is determined by the CCP in its absolute discretion and may be zero, whether or not any Default Resources are available at that time. Allocation of ASX Payment Shortfall to reduce Net ASX PaymentsOn any day, the CCP may choose to allocate the ASX Payment Shortfall for that day to reduce Net ASX Payments payable by it on that day.The ASX Payment Shortfall will be allocated to those CMs (other than defaulting CMs) in respect of which a Net Participant ASX Payment has been calculated, pro rata to the Net Participant ASX Payments with respect to each such CM.The amount of the ASX Payment Shortfall which is allocated to a CM will be allocated to reduce each Net ASX Payment to be made to that CM on a pro rata basis. Payment of the reduced amount of a Net ASX Payment by the CCP discharges in full its obligations in respect of that Net ASX Payment.For the purpose of making these calculations, the CCP may make any currency conversions which it considers necessary, provided that they are made in a commercially reasonable manner.The Rules do not govern the manner in which a CM may choose to deal with its Clients in relation any reductions which are attributable to, or made in respect of, Net ASX Payments otherwise to be made to the CM’s Client Account. TimingThe CCP will calculate reductions to be made and effect those reductions, at the time payments to be made by the CCP are due to settle under the Rules (or at such other times as the CCP considers appropriate, including at different times in respect of different settlement cycles), on each day on which the CCP chooses to exercise its rights and powers of Payment Reduction.If the CCP has not received all of the ASX Receipts which were payable to it on a day by the time that it is to make its anticipated Net ASX Payments (as reduced in accordance with the above) then the CCP will recalculate the ASX Payment Shortfall, its allocation and the reduced Net ASX Payments based on the ASX Receipts which it has received at that time. However, the CCP may also calculate, or effect, those reductions or make any Net ASX Payment at any other time during the day, if it considers it necessary to do so.If it considers it necessary to do so, the CCP can calculate and make reductions by reference to the ASX Payments and the ASX Receipts for a particular settlement cycle which runs during a day rather than by reference to the ASX Payments and the ASX Receipts for the entire day. Cumulative calculationThe period which:commences from (and includes) the first day in the Default Period on which the CCP reduced a Net ASX Payment; andconcludes on (and includes) the day that the CCP has determined that it will not make any further reductions to Net ASX Payments in respect of the Default Period,is referred to as the “Reduction Period”.Any determination by the CCP of the conclusion of a Reduction Period does not affect the CCP’s ability to subsequently determine further Reduction Periods in respect of the same Default Period.Within one Business Day of the last day of the Reduction Period, the CCP will calculate, in respect of each CM (other than any defaulting CM):the net amount which would have been paid (expressed as a positive amount) or received (expressed as a negative amount) by the CM during the Reduction Period if the Rules described above under the title of “Net ASX Receipts, Net ASX Payments, Net Participant ASX Receipts and Net Participant ASX Payments”, “ASX Payment Shortfall” and “Allocation of ASX Payment Shortfall to reduce Net ASX Payments” had been applied to all the CM’s ASX Payments and ASX Receipts during the Reduction Period as if the Reduction Period were a single day (such amount is the “Expected Amount”);the net sum of:amounts paid by the CM to the CCP (such amounts having a positive value); andamounts paid by the CCP to the CM (such amounts having a negative value),during the Reduction Period (such net sum is the “Actual Amount”); andthe Expected Amount less the Actual Amount. This is referred to as the “Adjustment Amount”.In respect of each CM, the Adjustment Amount so determined may be positive (if the Expected Amount exceeds the Actual Amount), negative (if the Actual Amount exceeds the Expected Amount) or zero.The CCP will notify each CM of its Expected Amount, Actual Amount and Adjustment Amount.If the Adjustment Amount is positive then that amount is payable by the CM to the CCP. If the Adjustment Amount is negative then the absolute value of that amount is payable by the CCP to the CM. Such amounts must be paid by the time specified in the notice to the CM, which will be no earlier than the next following Business Day.If a CM fails to pay any amounts due to the CCP by the time specified in the notice from the CCP then that CM is in default and the payments of Adjustment Amounts will be suspended (and any such payments made are to be reversed) and the exercise of the rights and powers relating to Payment Reduction will continue until the CCP determines once more that it will not make any further reductions to Net ASX Payments in respect of the Default Period. No adjustment to amounts payable to the CCPNothing described above affects any Net ASX Receipt or any other amount which is payable to the CCP by a non-defaulting CM on any day. All such amounts payable to the CCP must be paid in full in accordance with the Rules. NotificationOn any day the CCP will use its best endeavours to notify CMs of any Payment Reduction it anticipates that it will make. The CCP will notify CMs of any reduction made to Net ASX Payments under the Rules and any adjustment to the notification, if any, it previously gave CMs in respect of such reductions. However, any failure to provide a notice described herein does not affect the reduction or its operation. No cap on the amount of Payment ReductionThere is no cap on the use of the amount of the payment that can be reduced by the CCP, although the CCP would consult with the risk committee in determining whether to continue Payment Reduction if losses allocated via this tool exceed A$650 million. Effect of payment by the CCPPayment by the CCP (including by entry into a CM’s account) of a Net ASX Payment as reduced in accordance with Recovery Rules in connection with Payment Reduction:satisfies in full the CCP’s obligation to pay the relevant Net ASX Payment(s); anddischarges any obligation of the CCP to pay, and any right of a CM to receive, any amounts, including interest, in connection with the Net ASX Payment; anddoes not give rise to any obligation for the CCP to make good the amount of any reduction made to any Net ASX Payment,except as expressly provided by Rule 5 (Reimbursement) (see item 109.1) and the CCP’s obligation, if any, to pay an Adjustment Amount (see the sub-section above under the title of “Cumulative calculation”). Voluntary payment 14Voluntary payment noticeAt any time after a CM default has occurred, the CCP may, by notice, invite each CM to make a payment of funds (referred to as a voluntary payment) to the CCP.The CCP may not invite a CM to make a voluntary payment if that CM is defaulting CM at the time of such notice.A CM is not obliged to make a voluntary payment. The CCP may choose, in its absolute discretion, whether or not to accept any voluntary payment. Treatment of voluntary paymentA voluntary payment, once received by the CCP:may not be withdrawn or revoked for any reason whatsoever; andis the absolute and beneficial property of the CCP and is to be applied or otherwise used by the CCP for the purpose agreed with the CM who made the voluntary payment. Effect of voluntary paymentThe payment of a voluntary payment does not give rise to:any obligation for the CCP to make good; orany right, title or interest of the CM (including under equity) to,any part or all of the voluntary payment or other amount, including interest, in connection with the voluntary payment, except:as described in the sub-section under the title of “Repayment of utilised resources if CCP subsequently recovers losses” below; andto the extent the CCP specifically states otherwise in writing in which case any such obligations or right, title and interest will be strictly limited to the amounts, obligations or rights set out in the CCP’s written statement. Repayment of utilised resources if CCP subsequently recovers losses15At the end of a Default Period, the CCP must account to the Contributors for any Excess Amounts (as defined below) with respect to that Default Period up to the Reimbursable Amount (as defined below) for each Contributor.An “Excess Amount” is:any amount which the CCP subsequently recovers from a defaulted CM; andany amount of assessments paid to the CCP during a Default Period which were not required to enable the CCP to meet a CCP Loss in respect of that Default Period,less any costs and expenses incurred by the CCP in connection with the recovery and any amounts payable by the Contributors to the CCP.A “Reimbursable Amount” is the aggregate amount of a CM’s assessments, the amount by any termination amount payable to it has been reduced, the amount of its default fund contribution and its voluntary payment referred to above for that Default Period, less any amounts remaining payable by the CM to the CCP.Excess Amounts are to be applied in the following order:first, to reimburse the amount of any voluntary payments. These payments are to be made pro rata to the Contributors who made such payments, up to the amount of such payments;second, to reimburse the amount of any reductions made to any termination amount payable by the CCP. These payments are to be made pro rata to CMs who have suffered such a reduction, up to the amount of such reductions; third, to reimburse the amount of assessments paid. These payments are to be made pro rata to the Contributors who paid the assessments, up to the amount of the assessments which have been paid; andfourth, in reverse order to the order for the application of assets set out in the default waterfall (see above) (including but not limited to any assets of the CCP). These payments are to be made pro rata to the Contributors whose assets were so applied, up to the amount of such applications. No Contributor will be entitled to be reimbursed for the assets which were so applied unless all Contributors have been reimbursed for assets which were so applied that were ranked lower in the default waterfall. However, the CCP is not required to account to any Contributor which is not the CCP for any amount:which is liable to be set aside under any law relating to insolvency or bankruptcy; orwhich is necessary to meet an assessment required from the Contributor or to discharge any other overdue debt obligation of the Contributor to the CCP at that time. Despite the above, at any time during a Default Period, the CCP may decide to reimburse the amount of any reductions made to any Net ASX Payments payable by the CCP (see above) out of the Default Resources which are available to it at that time. These payments are to be made pro rata to the Contributors who suffered such a reduction, up to the amount of such reductions.Application of Interim Replenishment Amounts16Any CCP Loss which arises as a result of the default of a CM on or after a DMP Completion Date but prior to the last day of the Default Period to which such DMP Completion Date relates is to be allocated in the followingorder: first, to any Interim Participant Replenishment Amounts of any defaulting CMs and any other moneys, securities, collateral or property held by the CCP in respect of any defaulting CMs; second, to any remaining amount of default fund, excluding all Interim Participant Replenishment Amounts and CCP Interim Replenishment Amounts available to the CCP; third, to the total CCP Interim Replenishment Amounts committed by the CCP during that Default Period; and fourth, to the Interim Participant Replenishment Amounts of CMs, other than any defaulting CMs, paid during that Default Period.On the last day of that Default Period, any remaining amounts referred to in second, third or fourth bullet points above are to be included in the replacement default fund.(Please click here for a graphic depiction of the waterfall structure in respect of the Service as well as the interaction, if any, across other services.)Hide note1 RBA 2021/2022 Assessment, Appendix B.3 (Prefunded financial resources)2 ASX Recovery Rulebook, Rule 2.6 (Default Resources, Default Fund and Committed ASX Assets)3 Rule 7 (Satisfaction of obligations of ASX Clear (Futures))4 Procedure 7.1(c) (Satisfaction of obligations of ASX Clear (Futures))5 Rule 7.9 (Satisfaction of Obligations of ASX Clear (Futures))6 Rule 7.17 Rule 7.1A8 Rule 7.1B9 Rule 7.2 (Satisfaction of obligations of ASX Clear (Futures))10 ASX Recovery Rulebook, Paragraph 15 of Schedule 5 (Future application of Default Waterfall)11 ASX Recovery Rulebook, Rule 2.6 (Default Resources, Default Fund and Committed ASX Assets)12 ASX Recovery Rulebook, Rule 3 (Recovery Powers)13 ASX Recovery Rulebook, Rule 2.3 (ASX CCP Loss and Defaulted Participant Assets);ASX Recovery Rulebook, Rule 2.6 (Default Resources, Default Fund and Committed ASX Assets);ASX Recovery Rulebook, Schedule 2 (ASX Payment Reduction);ASX Recovery Handbook, Schedule 2 (ASX Payment Reduction);RBA 2018/19 Assessment Appendix C1, Standards 7.9; ASX Recovery Rulebook, Rule 2.6 (Default Resources, Default Fund and Committed ASX Assets); ASX Recovery Rulebook, Rule 8.3 (Effect of payment by the ASX CCP)14 ASX Recovery Rulebook, Rule 11 (Voluntary Payments)15 ASX Recovery Rulebook, Rule 5 (Reimbursement)16 ASX Recovery Rulebook, Paragraph 7 of Schedule 5 (Application of Interim Replenishment Amounts) |
| 110. Application of default fund and/or margin across services | |
| 110.1 Can a defaulting CM have its default fund contribution or initial margin provided for one service used to pay for losses in respect of another service? | Yes.Default fund contributions1All proceeds of the defaulting CM’s default fund contributions (whether in respect of the Service or the OTC Service) are available for application in the default waterfall to satisfy its obligations to the CCP. Initial margin2All collateral held by the CCP (which will include initial margin, whether provided in respect of the Service or the OTC Service) in any account of, or in respect of, the defaulting CM are available for application in the default waterfall to satisfy its obligations to the CCP.Hide note1 Rule 7.1(b) (Satisfaction of obligations of ASX Clear (Futures), ASX Clear (Futures) Operating Rules2 Rule 7.1(a) (Satisfaction of obligations of ASX Clear (Futures), ASX Clear (Futures) Operating Rules |
| 110.2 If so, are defaulting CM funds reserved until losses across all of the relevant services are crystallised? | Not addressed in the Rules. |
| 111. Use of non-defaulting CM initial margin to cover obligations of defaulting CMs | |
| 111.1 Can the CCP use the initial margin of a non-defaulting CM to satisfy the obligations of any other CM upon its default? | No.The Recovery Rules entitle the CCP to, after the occurrence of a default, allocate the CCP Loss by reducing certain amounts payable by the CCP to the non-defaulting CMs under the conditions and in the manners as prescribed in the Recovery Rules (see item 109). However, the initial margin of the non-defaulting CMs is expressly excluded from such payment obligations that the CCP can reduce.Hide noteASX Recovery Rulebook, Paragraph 1 of Schedule 2 (ASX Payments and ASX Receipts) |
| 111.2 If so, please describe how such losses are allocated. | N/A |
| 111.3 If so, is there a cap on a CM’s liability in respect of its initial margin? | N/A |
| 111.4 If so, please describe the cap. | N/A |
| 112. Default fund calculation methodology | |
| 112.1 How does the CCP calculate the funded default fund requirement of a CM (including whether there is any floor and/or cap on the CM’s contribution to the CCP’s default fund), and how frequently does the CCP reset the size of the default fund? | Default fund contributions 1CM default fund contributionsEach CM’s default fund contribution in respect of the Service comprises:a Fixed Commitment; anda Variable Commitment.Both the Fixed Commitment and the Variable Commitment are described in further detail below. Aggregate commitment of CMs to default fundOverall, the aggregate amount to be committed by all CMs in the form of default fund contributions (”FC”) is calculated in accordance with the following formula:FC = d + (n x A$2,000,000)where:n = number of CMs which clear Futures Contracts and Option Contracts and which are also BRC Participants (excluding those which cease clearing Futures Contracts and Option Contracts and which engage only in Bond and Repurchase Clearing); andd = A$100,000,000 or such lesser amount determined by the Board calculated by reference to all CMs’ Contracts (excluding OTC Contracts) or aggregate initial margins (excluding OTC initial margins) or on such other similar basis as the Board may determine. Fixed Commitment 1The “Fixed Commitment” comprises:(A) a minimum contribution of A$2,000,000 by each CM; or(B) where the CM is also a BRC Participant and engages in Futures Contracts and Option Contracts clearing and in Bond and Repurchase Clearing, a minimum contribution of A$4,000,000 for that CMprovided however that where a CM engages only in Bond and Repurchase Clearing, paragraph (B) will not apply and the minimum contribution will be A$2,000,000 in accordance with paragraph (A). Variable Commitment 1Each CM may be required to pay an additional default fund contribution (referred to as the “Variable Commitment”).A Variable Commitment is an amount which, if provided by each CM (in addition to its Fixed Commitment), would be sufficient to bring total aggregate default fund contribution (the “Aggregate Fixed Commitment”) up to an amount in A$ calculated in accordance with the formula set out above under the heading “Default fund contributions – Aggregate default fund”.For any period during which the Aggregate Fixed Commitment are equal to or in excess of FC, no Variable Commitment will be called.If, on the other hand, the Aggregate Fixed Commitment is less than FC, the Variable Commitment for each CM will be calculated by the CCP using the formula set out below.Variable Commitment will be calculated so as to take effect from the 1st day of each new quarter. (Quarters start on 1 March, 1 June, 1 September and 1 December and end on 30 May, 31 August, 30 November and 28/29 February respectively.)To ensure that such a calculation can be performed in time to take effect from the 1st day of each new quarter, the calculation period of CM Variable Commitment Proportion (see below) will be from the 11th day of the final month of the 2nd previous quarter up to (and including) the 10th day of the final month in the previous quarter. (1) Aggregate Variable Commitment for all CMs who are Futures Participants 2The aggregate Variable Commitment for all CMs under the Service (the “Aggregate Variable Commitment”) will be determined for the 1st day of each quarter as:Aggregate Variable Commitment = FC – Aggregate Fixed Commitment (2) A CM’s Variable Commitment Proportion 2The Variable Commitment proportion for each CM (the “CM Variable Commitment Proportion”) will be calculated by taking the percentage that the daily average of each CM’s initial margins (where the average is calculated by taking the sum of each CM’s initial margin on every Business Day in the calculation period and dividing it by the number of Business Days in the calculation period) represents of the aggregate of these daily average CM initial margins.CM Variable Commitment Proportion = Average CM initial margins ÷ aggregate of all daily average initial margins BRC ParticipantsIn the case of BRC Participants, the Variable Commitment Proportion may be determined by the Board at its discretion by reference to the value of the Bond Transactions or Repurchase Agreements cleared by each BRC Participant (rather than by reference to initial margins) or such other similar basis as the Board may determine. (3) A CM’s Variable Commitment 2The Variable Commitment requirement i.e. the actual contribution required from each CM (the “CM Variable Commitment”) is calculated as follows:CM Variable Commitment = Aggregate Variable Commitment x CM Variable Commitment ProportionThe CM Variable Commitment will be rounded to the nearest multiple of A$10,000 or as otherwise ensures that the CCP has exactly the Aggregate Variable Commitment required.There is a worked example in Schedule 10 of the Rules detailing the manner in which the default fund contribution of a CM is to be calculated. (4) Timing of CCP’s notification of each CM’s Variable Commitment 2 Each CM under the Service will be advised by the CCP of its CM Variable Commitment by close of business of the 17th day of the final month of the previous quarter. If the 17th day of the final month is not a Business Day, then the next succeeding Business Day will apply.These Variable Commitments will apply as of midnight on the last day of the previous quarter. Any adjustments to Variable Commitment for a new quarter must be completed by 10:30 am (Sydney time) on the second last Business Day of the previous quarter. Variable Commitment following withdrawal of a CM 2If a CM’s withdrawal was effective during the previous quarter (i.e. the quarter preceding the quarter for which the variable commitment is being calculated), then for the purpose of calculating each remaining CM’s Variable Commitment Proportion, that CM’s daily average initial margins will be deducted from the actual aggregate of all of the daily average initial margins and this adjusted amount will be used as the basis of calculation. New CM’s Variable Commitment 2The calculation of the CM Variable Commitment Proportion for a CM not previously included in the quarterly recalculation (a “New CM”) will be estimated by the CCP.Any estimates by the CCP will be final and not be open to dispute.The following factors may be incorporated into any such estimate of the New CM’s Variable Commitment:If the New CM or any related companies or any business operations it has acquired, have not held any initial margins with the CCP or with a CM, prior to the commencement of the Variable Commitment calculation, then its CM Variable Commitment will be estimated by the CCP on the basis of forecast levels of market activity during the new quarter (i.e. the quarter for which the Variable Commitment is being calculated).If the New CM, any related companies or any business operations it has acquired, have held any initial margins with the CCP in a clearing account, or in the accounts of a futures broker(s), prior to the commencement of the Variable Commitment calculation, then these initial margins will be incorporated into the calculation of its Variable Commitment.In addition, the CCP may, at its absolute discretion, incorporate additional initial margins based on forecast levels of market activity into the calculation of its Variable Commitment.Where the New CM has not held initial margins for the full duration of the previous quarter, an average CM Variable Commitment Proportion will be calculated for the period the CM held initial margins with the CCP.To calculate the final CM Variable Commitment Proportion for each CM, the aggregate of all of the daily average initial margins will have to be recalculated including the average CM Variable Commitment Proportion for the New CM.If the New CM’s Variable Commitment commences with the 1st day of a new quarter, then the New CM will be incorporated into the recalculation of all CMs. This will involve recalculating the CM Variable Commitment Proportion for all CM after incorporating the initial margin estimate for the New CM and readjusting each CM’s Variable Commitment on the 1st day of each New CM’s Variable Commitment. Floor and/or Cap of default fund requirement 3The Fixed Commitment effectively works as a floor in respect of a CM’s default fund contributions. If default fund contributions are utilised as a result of one or more CM defaults, the CCP may request the non-defaulting CMs to make such further commitments by way of replenishment in such amount and at such times as the CCP considers necessary. A CM’s exposure to a CCP Loss is capped by the amount of its funded (paid up) default fund contributions including its Variable Commitment and (if any) replenishment amount.The Participant Replenishment Amount to be paid by a non-defaulting CM after each Default Period shall not exceed twice the default fund contribution paid by the CM at the commencement of the immediately preceding Default Period. , minus the aggregate Interim Participant Replenishment Amounts paid by that CM in respect of the immediately preceding Default Period which have been applied to meet a CCP Loss (subject to a minimum of zero).The Interim Participant Replenishment Amount to be paid by a non-defaulting CM during each Default Period shall not exceed the default fund contribution paid by the CM at the commencement of the immediately preceding Default Period.See item 117.1 for details of replenishment. Frequency of the default fund size resetVariable Commitment – quarterly recalculationVariable Commitment will be calculated so as to take effect from the 1st day of each new quarter. Quarters start on 1 March, 1 June, 1 September and 1 December and end on 30 May, 31 August, 30 November and 28/29 February respectively. Default fund size reset 4 The Board will review the size, structure and composition of the CCP’s financial resources (which will include proceeds of the default fund contributions), taking into account any recommendations made by the risk committee, changes (including anticipated changes) in the CCP’s regulatory obligations and any other matters considered relevant by the Board.The Board will conduct its review once in every successive period of 12 months. The results of the review will be published.Calculation of remaining default fund – at the end of a Default Period5: At or after the end of a Default Period(but before another Default Period commences), the CCP calculates: the aggregate amount of CCP assets committed to the default fund which would have been applied to meet the CCP Loss during the immediately prior Default Period, without including any of the aggregate CCP Interim Replenishment Amounts applied during that Default Period (the “Applied CCP Interim Replenishment Amount”) (see item 109.1, “Application of Interim Replenishment Amounts”);the aggregate amount of default fund contribution which would have been applied to meet the CCP Loss during the immediately prior Default Period, without including any of the aggregate Interim Participant Replenishment Amounts applied during that Default Period (the “Applied Interim Participant Replenishment Amount”) (see item 109.1, “Application of Interim Replenishment Amounts”).; andthe amount of the default fund (if any) still available in accordance with the default waterfall structure (see item 109.1) to meet a CCP Loss in respect of future Default Periods, not including any CCP Interim Replenishment Amounts and Interim Participant Replenishment Amounts determined in respect of the immediately preceding Default Period which have not been applied to meet a CCP Loss (see item 109.1, “Application of Interim Replenishment Amounts”).If such remaining amount is zero, the CCP is to determine the size of the default fund available to meet a CCP Loss – the Replacement Default Fund Size (see item 117.2).Hide note1 Rule 5.6 (Commitment to support obligations of ASX Clear (Futures)), ASX Clear (Futures) Operating Rules, CCP responses of 13 January 20172 Schedule 10 (Calculation of Futures Commitments of a Futures Participant), ASX Clear (Futures) Operating Rules, CCP responses of 6 February 20153 ASX Recovery Rulebook, Paragraph 12 of Schedule 5 (Participant Replenishment Amount and Maximum Replenishment Amount) and Paragraph 4 of Schedule 5 (Allocation of interim commitments to Participants)4 Rule 7.10 (Satisfaction of obligations of ASX Clear (Futures)), ASX Clear (Futures) Operating Rules, CCP responses of 6 February 20155 ASX Recovery Rulebook, Paragraph 8 of Schedule 5 (Utilised Participant Commitment and Utilised ASX CCP Commitment) and Paragraph 9 of Schedule 5 (Remaining Waterfall Amount, ASX CCP Regulatory Requirement and Replacement Default Fund Size) |
| 112.2 Please describe the methodology used by the CCP (e.g., Cover 1 or Cover 2) to calculate the size of the default fund and any stress/back testing methodology specified in the Rules. | The methodology used by the CCP to calculate the overall size of the default fund is set out in item 112.1, under the heading “Default fund contributions”.The Rules do not describe any other stress/back testing methodologies relating solely to the default fund, nor whether the CCP ‘s default fund is Cover 1 or Cover 2. However, based on the RBA 2018/19 Assessment Appendix C1:the CCP conducts daily stress tests to determine whether the level of its “prefunded financial resources” would be sufficient to cover the default of the two CMs (and their affiliates) that would potentially cause the largest aggregate credit exposure to the CCP under a wide range of scenarios, i.e. Cover 2; andthe CCP’s default fund for the Service is one component of such “prefunded financial resources” (the others being its own equity and the default fund of the OTC Service, plus initial margin and other collateral calls based on CMs’ positions).Notwithstanding the above, if daily stress tests exceed a predetermined stress-test exposure limit, then the CCP may call additional initial margin from CMs (but would not increase default fund contributions).For further details on the daily stress tests used to establish the adequacy of the CCP’s prefunded financial resources, see item 44.2 under the heading “Initial margin – Additional initial margin”.The CCP has separately confirmed that the methodology used by the CCP is Cover 2.Hide noteRBA 2018/19 Assessment Appendix C1, Standards 4.1, 4.2 and 4.4 – 4.7CCP responses of 6 February 2015 |
| 113. Unilateral changes to default fund methodology | |
| 113.1 Can the CCP unilaterally change the methodology used to calculate the size of the default fund and/or any associated floor and cap? | Yes, the Rulebook contains powers that are arguably general enough to achieve this.If the CCP were to amend the calculation methodology by way of a change to the Rulebook (as distinct from the Procedures), then see item 79.1 for the approval process.The Recovery Rules contain a specific power to unilaterally change, but only for the purpose of complying with applicable regulatory requirements and the CCP is only entitled to unilaterally increase (but not reduce) the amount of default fund. Determination of the increased amount for regulatory complianceThe amount to be increased should be determined by the CCP in consultation with the risk committee and the size of the default fund after such increase shall not be greater than A$650 million. Procedures for calling additional default fun contributions Notification obligation and quarterly calculation by the CCPThe CCP shall notify CMs of the default fund increase at least 45 calendar days before the date on which payment is due (the “Quarterly Contribution Date”) of any adjusted contribution in respect of the quarterly calculation of default fund contributions. Any failure to provide this notice does not affect the validity of the results or the actions taken by the CCP. Proportion to be allocated to the CMsThe quarterly calculations of default fund contribution will take into account the inclusion of 50% of the increased amount in the default fund.The amount of the increase in a CM’s default fund contribution which results from this inclusion (“Additional Participant Contribution”) is to be calculated by the CCP and paid by the CM on the Quarterly Contribution Date (or such other date determined by the CCP in its discretion) in the same manner as any other commitment which would otherwise be due on that date.The increase in the default fund will take effect on the Quarterly Contribution Date (or such other date determined by the CCP in its discretion) to the extent the Additional Participant Contributions have been received by the CCP. Further actions to be taken by the CCPFollowing the payment of the Additional Participant Contribution to it, the CCP is to:commit an additional amount which is equal to the aggregate Additional Participant Contributions of all CMs which were received by it (this amount is the “Additional CCP Contribution”); andvary the default waterfall so that the aggregate Additional Participant Contribution of all CMs and the Additional CCP Contribution are available to meet any CCP Loss which may arise in respect to future Default Periods on a pari passu basis with each other and only after all other CM default fund contributions (item 109.1) and amounts committed by the CCP to the default waterfall (item 109.1) have been applied in accordance with the default waterfall (except in the case of the Additional Participant Contribution of a defaulting CM, which is to be applied at the same time as any other default fund contribution of that defaulting CM).Hide noteRule 14.1 (Amendment to Rules)ASX Recovery Rulebook, Paragraph 16 of Schedule 5 (Scaling to meet regulatory requirements) |
| 113.2 If so, what is the notice period, if any? | The minimum notice period with respect to an increase in the size of the default fund for regulatory compliance is 45 calendar days before payments for the additional amount due to such change is due. Please see item 113.1 for more details. |
| 114. Default fund eligible assets | |
| 114.1 What assets may be posted as default fund contributions and how, when and with what notice period can the CCP change the list of eligible assets and any applicable concentration limits? | Eligible assets for the prefunded default fund1Based on the CCP responses, prefunded default fund contributions are paid in cash.The Rules provide that default fund contributions may be in the form of cash or in such other form as the Board may allow.The Board may determine that default fund contributions may be provided in the form of an irrevocable letter of credit issued by an Australian bank or by the provision of securities or other collateral, or in such other form as may be determined by the Board.The Board may prescribe limits on the letters of credit or other securities or collateral which may be provided from any one bank or other entity.The Board may at any time require the CM to alter the form of its default fund contributions in any way.The Board may at any time require the provision of replacement or additional letters of credit, substitute or additional securities or collateral or such other form of default fund contributions. Eligible assets for the assessment and replenishment amounts2Any assessments or replenishment amounts required by the CCP are also paid in cash and should be in immediately available funds. Change to the list of eligible assets and concentration limitsThe Rules do not describe any specific procedures for change of the list of eligible assets or concentration limits. Please refer to item 79.1 for general procedures of amendments of the Rules.Hide note1 CCP responses of 6 February 2015Rules 5.1 (b), 5.2, 5.4, 5.5 (Commitment to support obligations of ASX Clear (Futures))2ASX Recovery Rulebook, Paragraph 5 of Schedule 1 (Nature of Recovery Assessment) ASX Recovery Rulebook, Paragraph 13 of Schedule 5 (Call for Participant Replenishment Amount) |
| 114.2 How are default fund contributions provided (e.g. title transfer, segregated fund or by way of security)? | Based on the CCP responses and the Recovery Rules, default fund contributions (including the prefunded contributions, the assessment and replenishment amounts) are paid in cash by way of title transfer.Hide noteCCP responses of 6 February 2015ASX Recovery Rulebook, Paragraph 5 of Schedule 1 (Nature of Recovery Assessment) |
| 114.3 When does the CM contribute its default fund contribution? | Each CM is obliged to provide default fund contributions by such time as is prescribed by the CCP to ensure that its obligations to the CCP are met at all times. Variable Commitment1Each CM will be advised by the CCP of its Variable Commitment by close of business of the 17th day of the final month of the previous quarter. If the 17th day of the final month is not a Business Day, then the next succeeding Business Day will apply.This Variable Commitment will apply as of midnight on the last day of the previous quarter.(Quarters start on 1 March, 1 June, 1 September and 1 December and end on 30 May, 31 August, 30 November and 28/29 February respectively.) Effects on the default fund contributions of the commencement of a Default Period2During a Default Period:any calculation or re-calculation of a CM’s default fund contribution and the CCP’s right to call additional default fund contribution; andthe CMs’ right to withdraw or otherwise request the return, or re-calculation, of default fund contribution,are suspended.Hide note1 Rule 5.7 (Commitment to support obligations of ASX Clear (Futures)) and Schedule 10, Paragraph 8 (Calculation of Futures Commitments of a Futures Participant), ASX Clear (Futures) Operating Rules2 ASX Recovery Rulebook, Rule 2.8 (Effect on Participant Commitment) |
| 115. Segregation of default fund contributions | |
| 115.1 Are the default fund contributions of CMs held on a segregated basis by the CCP? | The default fund contributions are received by the CCP and treated as its assets. The CCP will keep separate records to identify the amounts provided by each CM.Hide noteCCP responses of 6 February 2015 |
| 116. Segregation of financial resources across services | |
| 116.1 If the CCP clears different Products through more than one service within the same legal entity, are the financial resources available in respect of one service segregated from those of any other service (e.g., securities, futures, CDS, etc.)? | No, the financial resources available in respect of the Service and the OTC Service are not segregated but are commingled across the 2 services. The order of application of the default fund contributions in respect of the Service and the OTC Service is governed by the Rules and depends on the type of contracts entered into by the defaulting CM, as explained below.See also items 109 and 110.1. Defaulting CM’s assetsAssets held by the CCP in the defaulting CM’s accountsAll moneys, securities, collateral or property held by the CCP (whether provided in respect of the Service or the OTC Service) in any account of, or in respect of, the defaulting CM are available for application in the default waterfall to satisfy the defaulting CM’s obligations to the CCP. Default fund contributionsAll proceeds of the defaulting CM’s default fund contributions (whether in respect of the Service or the OTC Service) are available for application in the default waterfall to satisfy the defaulting CM’s obligations to the CCP. Non-defaulting CM’s assetsThe type of Contracts entered into by the defaulting CM and its related initial margin obligations determine the order, and the extent, of the application of the non-defaulting CMs’ default fund contributions in respect of this Service and/or the OTC Service.if the defaulting CM is a Futures Participant only (and not an OTC Participant), then initially only the non-defaulting CMs’ default fund contributions in respect of the Service are to be applied (see item 109(4)); the non-defaulting CMs’ default fund contributions in respect of the OTC Service are however still at risk albeit later in the default waterfall at item 109(6), after the CCP’s contribution of A$150,000,000 at item 109(5);if the defaulting CM is an OTC Participant only (and not a Futures Participant), then initially only the non-defaulting CMs’ default fund contributions in respect of the OTC Service are to be applied (see item 109(4)); the non-defaulting CMs’ default fund contributions in respect of the Service are however still at risk albeit later in the default waterfall at item 109(6), after the CCP’s contribution of A$150,000,000 at item 109(5); andif the defaulting CM is both a Futures Participant and an OTC Participant, then the non-defaulting CMs’ default fund contributions in respect of both services would be applied; the exact proportion of such application as between the two services will in part be determined based on the defaulting CM’s initial margin obligations in respect of each of the two services.See items 109(4) and (6) for more details. CCP’s designated assetsThe CCP’s designated assets are available for loss allocation. These appear to be a combined pool of assets commingled for both the Service and the OTC Service. See item 109(3).Hide noteCCP responses of 6 February 2015Rule 7.1 (Satisfaction of Obligations of ASX Clear (Futures))Rules 7.1(a), (b), (d) and (f) (Satisfaction of obligations of ASX Clear (Futures)) |
| 117. Replenishments | |
| 117.1 Is there a cap on the amount of replenishment the CCP may require from non-defaulting CMs in respect of a single default? | Yes.Hide noteASX Recovery Rulebook, Paragraph 12 of Schedule 5 (Participant Replenishment Amount and Maximum Replenishment Amount), Paragraph 11 of Schedule 5 (Total Participant Replenishment Amount) and Paragraph 4 of Schedule 5 (Allocation of interim commitments to Participants) |
| 117.2 If so, please describe the cap. | Replenishment is capped for each Default Period (there may be one or more than one default in a Default Period) rather than for each default.The cap on Interim Participant Replenishment Amount payments in respect of a single Default Period (the “Maximum Interim Participant Replenishment Amount”) for a CM is the default fund contribution paid by the CM at the commencement of such Default Period (if any).The cap on Participant Replenishment Amount payments in respect of a single Default Period is the sum of:twice the amount of the Futures Commitment of the CM at the commencement of the immediately preceding Default Period minus one half of the aggregate Interim Participant Replenishment Amounts (see below) paid by that CM in respect of the immediately preceding Default Period which have been applied to meet CCP Loss (subject to a minimum of zero) (the “Maximum Futures Replenishment Amount”);twice the amount of the OTC Commitment of the CM at the commencement of the immediately preceding Default Period minus one half of the aggregate Interim Participant Replenishment Amounts (see below) paid by that CM in respect of the immediately preceding Default Period which have been applied to meet CCP Loss (subject to a minimum of zero) (the “Maximum OTC Replenishment Amount”)(such sum, the “Maximum Replenishment Amount”). The formula for determining the amount of replenishment in each case is described below. Formula for replenishmentThe CCP can require CMs to pay a replenishment in two scenarios.Replenishment during a Default Period – Interim Participant Replenishment Amount: If :the CCP has committed aggregate CCP Interim Replenishment Amounts which are at least equal to the Maximum CCP Interim Replenishment Amount (see item 120.4); anda DMP Completion Date has occurred for all outstanding defaults of CMs; andthe final day of the Default Period has not occurred,then the CCP may, in its reasonable discretion, call on CMs to make a contribution of assets to the default fund. The CCP determines, in its reasonable discretion, the total amount which CMs are required to provide to the default fund (this is referred to as the “Total Interim Participant Replenishment Amount”) and the CCP may call for more than one Total Interim Participant Replenishment Amount. However, the aggregate amounts provided by CMs to the default fund during a Default Period cannot exceed an amount currently set at A$100 million (the “Maximum Total Interim Participant Replenishment Amount”).If the CCP calculates a Total Interim Participant Replenishment Amount then it must allocate that amount to each CM (excluding defaulting CMs and CMs that have withdrawn from the Service from the calculation). The amount allocated to each CM (the “Interim Participant Replenishment Amount”) is to be made so that:during a Default Period, no CM is allocated such amounts which, in total, exceed its Maximum Interim Participant Replenishment Amount; andthe allocation between CMs is made so that the relative proportions between the CM (excluding defaulting CMs and CMs that have withdrawn from the Service) of the amount so allocated is equal to the relative proportions amongst them of their Maximum Interim Participant Replenishment Amounts. Replenishment after the end of a Default Period – Participant Replenishment Amount: After the end of a Default Period, the CCP calculates the amount of replenishment that each non-defaulting CM needs to make in accordance with the formula below: Replenishment amount = MIN [(Total Futures Participant Replenishment Amount × Futures Participant Proportion + Total OTC Participant Replenishment Amount × OTC Participant Proportion), Maximum Replenishment Amount]where:Total Participant Replenishment Amount: After the end of a Default Period, the CCP calculates the amount of default fund that is still available to meet any future CCP Loss (see item 112.1 under the heading “Default fund size reset”):if such remaining amount is zero, then the CCP determines the size of the new default fund (the “Replacement Default Fund Size”) (before taking into account any Applied CCP Interim Replenishment Amount or Applied Interim Participant Replenishment Amount) which shall be no more than A$400 million. The Total Participant Replenishment Amount is equal to the sum of:in respect of the Futures Commitments of all Futures Participants, one-quarter of the Replacement Default Fund Size minus one half of the Applied Interim Participant Replenishment Amount (subject to a minimum of zero) (this amount is referred to as the “Total Futures Participant Replenishment Amount”); andin respect of the OTC Commitments of all OTC Participants, one-quarter of the Replacement Default Fund Size minus one half of the Applied Interim Participant Replenishment Amount (subject to a minimum of zero) (this amount is referred to as the “Total OTC Participant Replenishment Amount”); andif such remaining amount is more than zero, the Total Participant Replenishment Amount is equal to the sum of:in respect of the Futures Commitments of all Futures Participants, the lesser of A$100 million and the aggregate amount of the Futures Commitments that was applied to meet the CCP Loss during the previous Default Period; andin respect of the OTC Commitments of all OTC Participants, the lesser of A$100 million and the aggregate amount of the OTC Commitments that was applied to meet the CCP Loss during the previous Default Period.“Futures Participant Proportion” = Maximum Futures Replenishment Amount for the relevant CM / the sum of Maximum Futures Replenishment Amount for all the non-defaulting CM“OTC Participant Proportion” = Maximum OTC Replenishment Amount for the relevant CM / the sum of Maximum OTC Replenishment Amount for all the non-defaulting CM.Hide noteASX Recovery Rulebook, Paragraph 3 of Schedule 5 (Interim commitments by the Participants), Paragraph 4 of Schedule 5 (Allocation of interim commitments to Participants), Paragraph 9 of Schedule 5 (Remaining Waterfall Amount, ASX CCP Regulatory Requirement and Replacement Default Fund Size), Paragraph 11 of Schedule 5 (Total Participant Replenishment Amount) and Paragraph 12 of Schedule 5 (Participant Replenishment Amount and Maximum Replenishment Amount) |
| 117.3 Is there a cap on the amount of replenishment the CCP may require from non-defaulting CMs in respect of multiple defaults? | Yes, if all the defaults have the same Default Period.No if the defaults are sequential and each has their own Default Period. Hide noteASX Recovery Rulebook, Paragraph 12 of Schedule 5 (Participant Replenishment Amount and Maximum Replenishment Amount), Paragraph 4 of Schedule 5 (Allocation of interim commitments to Participants) and Paragraph 11 of Schedule 5 (Total Participant Replenishment Amount) |
| 117.4 If so, please describe the cap. | There may only be one call for a Participant Replenishment Amount after defaults relating to each Default Period, regardless of the number of CM defaults relating to that period however, the CCP may call for more than one Interim Participant Replenishment Amount in respect of a single Default Period. The caps on replenishment during and following each Default Period are the same as that in item 117.2. |
| 117.5 By when is the default fund required to be replenished by the CM, following utilisation? | Interim Participant Replenishment AmountsBy notice to a CM, the CCP may require the CM to pay an Interim Participant Replenishment Amount which has been allocated to it. The notice must specify the time within which the CM must pay the Interim Participant Replenishment Amount, provided that the time must be no sooner than 5 business days after the time at which notice is given to the CM. However, if there is an Interim Default Fund Shortfall on a DMP Completion Date such that the CCP is entitled to call an Interim Participant Replenishment Amount from CMs then the CCP may require payment by a CM by giving whatever notice the CCP decides subject to a minimum of not less than one business day. Participant Replenishment AmountsIf any default fund contribution of a CM is applied in whole or in part, the CCP may give notice requiring a Participant Replenishment Amount and specifying the time within which the CM must provide such Participant Replenishment Amount, provided that the specified time is no sooner than one business day after the time at which the notice is given to the CM.A call for a Participant Replenishment Amount may only be made at or after the end of a Default Period.Hide noteASX Recovery Rulebook, Paragraph 5 of Schedule 5 (Call for Interim Participant Replenishment Amount)ASX Recovery Rulebook, Paragraph 13 of Schedule 5 (Call for Participant Replenishment Amount) |
| 117.6 Can the CCP use replenished default fund resources to meet losses incurred on account of past default or a default that caused utilisation of the default fund? | No.Hide noteASX Recovery Rulebook, Paragraph 6 of Schedule 5 (Treatment of Interim Participant Replenishment Amounts)ASX Recovery Rulebook, Paragraph 14 of Schedule 5 (Treatment of Participant Replenishment Amounts) |
| 118. Assessments | |
| 118.1 Is there a cap on the amount of assessment the CCP may require from non-defaulting CMs in respect of a single default? | Yes.Hide noteASX Recovery Rulebook, Paragraph 4 of Schedule 1 (Payment of Recovery Assessment) |
| 118.2 If so, please describe the cap. | The cap for the assessment amount that the CCP may require from a non-defaulting CM in respect of a single default is the default fund contribution of the CM at the time which the Default Period commenced. Review of the cap by the CCPThe CCP will review such cap for the assessment amount in accordance with the annual review of financial resources conducted under the Rules (see item 112.1). Calculation of the assessment amountThe amount of assessment for a non-defaulting CM is calculated in accordance with the formula below:Assessment amount = Total Assessment × Assessment Proportionwhere:Total Assessment is the amount determined by the CCP any time during a Default Period to be the aggregate amount of assessments to be paid by all the non-defaulting CMs. There are no restrictions in the Rules as to the amount of such Total Assessment. There could be multiple determinations of Total Assessments during a Default Period; andAssessment Proportion is calculated in accordance with the formula below:Assessment Proportion = the non-defaulting CM’s most recently calculated default fund contribution ÷ aggregate amount of the most recently calculated default fund contribution of all the non-defaulting CMsHide noteASX Recovery Rulebook, Paragraph 1 of Schedule 1 (Participant’s Proportion)ASX Recovery Rulebook, Paragraph 2 of Schedule 1 (The ASX CCP’s determination of Total Recovery Assessment)ASX Recovery Rulebook, Paragraph 3 of Schedule 1 (Recovery Assessment due from each Participant)ASX Recovery Rulebook, Paragraph 4 of Schedule 1 (Payment of Recovery Assessment) |
| 118.3 Is there a cap on the amount of assessment the CCP may require from non-defaulting CMs in respect of multiple defaults? | The cap for the assessment amount that the CCP may require from a non-defaulting CM in respect of multiple defaults occurred during a single Default Period is an amount equal to three times the default fund contribution of the CM at the time which the Default Period commenced.Note that the cap applies per Default Period, so if a Default Period covers multiple defaults, a single cap applies across all those defaults, whereas if the defaults are spread across more than one Default Period, there will be a separate cap for each Default Period regardless of the number of defaults covered by that Default Period.Please see item 118.2 for the determination of calculation of a CM’s assessment amount.Hide noteASX Recovery Rulebook, Paragraph 4 of Schedule 1 (Payment of Recovery Assessment) |
| 118.4 If so, please describe the cap. | The cap for the assessment amount that the CCP may require from a non-defaulting CM in respect of multiple defaults occurred during a single Default Period is an amount equal to three times the default fund contribution of the CM at the time which the Default Period commenced.Note that the cap applies per Default Period, so if a Default Period covers multiple defaults, a single cap applies across all those defaults, whereas if the defaults are spread across more than one Default Period, there will be a separate cap for each Default Period regardless of the number of defaults covered by that Default Period.Please see item 118.2 for the determination of calculation of a CM’s assessment amount.Hide noteASX Recovery Rulebook, Paragraph 4 of Schedule 1 (Payment of Recovery Assessment) |
| 118.5 By when is the CM required to provide its assessment? | The CM must pay the assessment by 11:00 AM, Sydney time, on the Business Day after notice from the CCP that the assessment issue or such later time as the CCP determines.*Note: There is an inconsistency in the Rules. The ASX Recovery Rulebook states that the assessment is due at the time specified by the CCP, which must be no later than the time specified in the ASX Recovery Handbook on the next Business Day after notice is given. However, the ASX Recovery Handbook specifies 11:00 AM on the Business Day after notice is given or such later time as the CCP determines.Hide noteASX Recovery Rulebook, Paragraphs 3 (Recovery Assessment due from each Participant) and 4 (Payment of Recovery Assessment) of Schedule 1ASX Recovery Handbook, Paragraph 3 of Schedule 1 (Recovery Assessment due from each Participant) |
| 119. CMs’ ability to cap default fund liability | |
| 119.1 Are CMs required to terminate their CCP membership to cap their default fund liability? | Yes, in respect of replenishment or assessment across more than one Default Period.There is a cap for the amount of each assessment and replenishment that a CM would be required to contribute per Default Period (see items 117 and 118). However, there is no overall cap as to the aggregate amounts of assessments and replenishments that a CM would be required to contribute for multiple Default Periods (see items 117 and 118).ReplenishmentInterim Participant Replenishment AmountsThe CCP may not request an Interim Participant Replenishment Amount from a CM at any time after the CM’s resignation notice has been accepted by the CCP, even though the resignation of the CM will not become effective until the end of the relevant Default Period; Participant Replenishment AmountsThe CCP may not request a default fund contribution from a CM whose Withdrawal Effective Date occurs at the end of the Default Period which immediately preceded the call of the default fund contribution. If the CM’s Withdrawal Effective Date has not occurred by this time, the CM’s withdrawal cannot become effective until the end of the Default Period. The CM will still be subject to the Recovery Rules, even if the CCP accepts the CM’s notice of withdrawal before, or during, the Default Period. Accordingly, a CM can only cap its default fund liability by terminating its membership. AssessmentThe CCP may not request an assessment from a CM once its Withdrawal Effective Date has occurred. If the CM’s Withdrawal Effective Date has not occurred, the CM’s withdrawal cannot become effective until the end of the Default Period. The CM will still be subject to the Recovery Rules, even if the CCP accepts the CM’s notice of withdrawal before, or during, the Default Period.If the CCP reasonably believes that one or more assessments may be made in respect of one or more defaults in a Default Period then the CCP may retain any amounts it determines to cover those assessments from any amounts which would otherwise be payable by it to the resigning CM. If the CCP subsequently determines that these amounts are no longer needed, then it will pay them to the CM which resigned, without being obliged to pay any additional amounts for the delay in payment of those amounts).Accordingly, a CM can only cap its default fund liability by terminating its membership.See items 75-77 for the liabilities of a withdrawing CM, item 117 for a CM’s replenishment obligations and item 118 for a CM’s assessment obligations.Hide noteASX Recovery Rulebook, Rule 4.4 (Effectiveness of resignation)ASX Recovery Rules, Rule 4.6 (Effect of resignation on Recovery Assessment)ASX Recovery Rulebook, Rule 4.10 (Effect of resignation on Replenishment)CCP responses of 6 and 16 February 2015 |
| 120. CCP contributions to the default fund/waterfall | |
| 120.1 Does the CCP contribute to the default fund or otherwise to the default waterfall? | Yes. See also item 109, paragraphs (3), (5) and (8) of the default waterfall structure and 120.2.Hide noteRule 7 (Satisfaction of obligations of ASX Clear (Futures))ASX Recovery Rulebook, Rule 2.6 (Default Resources, Default Fund and Committed ASX Assets) |
| 120.2 If the CCP contributes to the default fund or otherwise to the default waterfall, how much does it contribute and is there a cap? | Initial contribution by the CCP1Initially, the CCP contributes A$450,000,000 in total to the default fund or otherwise to the default waterfall in several tranches.The CCP’s contribution by way of designated assets is capped at the amount specified in the procedures to the Rules (such amount to be A$120,000,000 or such greater amount as the Board in its discretion may from time to time determine).The designated assets (as referred to in item 109 at paragraph (3)) are:(i) proceeds of a subordinated loan to the CCP by ASX Clearing Corporation Limited under an agreement dated 27 April 2009 (as amended or replaced from time to time), up to A$90,000,000; and(ii) share capital invested in the CCP by ASX Clearing Corporation Limited up to A$30,000,000.For the purpose of item 109, paragraph (5) (insurance and other designated assets), the designated assets are share capital invested in the CCP by ASX Clearing Corporation Limited (excluding share capital that is from time to time designated for the purpose of item 109 at paragraph (3) described above), up to A$150,000,000.For the purpose of item 109, paragraph (8) (other monies or assets available to the CCP), these include share capital invested in the CCP by ASX Clearing Corporation Limited (excluding share capital that is from time to time designated for the purpose of item 109, paragraphs (3) and (5) described above), up to A$180,000,000. Increase to the CCP’s contribution if there is an upsize to the default fund2If the size of the default fund has been subsequently increased by the CCP for the purpose of complying with applicable regulatory requirements (see item 113.1), the CCP shall committee additional amount to the default fund. The additional amount to be committed by the CCP to the default fund (i.e., the Additional CCP Contribution as defined in item 113.1) shall be the same as the aggregate additional default fund contribution from all the CMs which were received by the CCP. (i.e., the Additional Participant Contribution as defined in item 113.1). Please see item 113.1 for details of such upsize to the default fund. Hide note1 CCP responses of 6 February 2015; Procedures, determinations and practice notes (Rule 7.1 – Satisfaction of Obligations of ASX Clear (Futures))2 ASX Recovery Rulebook, Paragraph 16 of Schedule 5 (Scaling to meet regulatory requirements) |
| 120.3 If there is a cap, please describe it. | The initial contribution to be made by the CCP is capped at A$450,000,000.The size of the default fund can be subsequently increased for the purpose of complying with applicable regulatory requirements. However, the size of the default fund cannot be greater than A$650,000,000. The additional amount to be allocated to the CCP is half of the increased amount (see item 113.1).Accordingly, the cap of contribution to be made by the CCP (subject to further replenishment that may be required to be made by the CCP as described in item 120.4) is equal to (i) A$450,000,000; plus (ii) (A$650,000,000 minus the size of the default fund before increase) / 2.Hide noteASX Recovery Rulebook, Paragraph 16 of Schedule 5 (Scaling to meet regulatory requirements) |
| 120.4 When does it provide and replenish such contribution? | The CCP will commit additional amounts to the default fund to meet any CCP Loss which may arise in respect to future defaults in two scenarios.Replenishment during a Default Period – CCP Interim Replenishment Amount: Within 24 hours of a DMP Completion Date the CCP calculates the amount of the default fund available to meet a CCP Loss. If the remaining amount is less than an amount currently set at A$100 million (the “Minimum Interim Default Fund Amount”) then the amount of the shortfall is called the “Interim Default Fund Shortfall”. If an Interim Default Fund Shortfall has been calculated then, as soon as reasonably practicable after the immediately previous DMP Completion Date (as determined by the CCP), the CCP is to commit additional amounts of a value equal to the Interim Default Fund Shortfall to the default fund (a “CCP Interim Replenishment Amount”); provided that the aggregate additional amounts required to be committed by the CCP during a Default Period must not exceed an amount currently set at A$ 100 million (the “Maximum CCP Interim Replenishment Amount”) Replenishment at or after the end of a Default Period: At or after the end of a Default Period, the CCP will commit additional amounts to the default fund to meet any CCP Loss which may arise in respect to future defaults calculated as follows:if the Remaining Waterfall Amount (see item 112.1 under the heading “Default fund size reset”) is zero, one-half of the new default fund minus the aggregate CCP Interim Replenishment Amounts committed by the CCP in respect of the immediately preceding Default Period (subject to a minimum of zero) (see items 113.1 and 117.2); andif the Remaining Waterfall Amount (see item 112.1 under the heading “Default fund size reset”) is more than zero, the lesser of the following:the aggregate amount of the CCP’s contribution to the default fund which was applied to meet the CCP Loss in accordance with the default waterfall during the previous Default Period; andA$200 million,each minus the aggregate CCP Interim Replenishment Amounts committed by the CCP in respect of the immediately preceding Default Period (subject to a minimum of zero).Hide noteASX Recovery Rulebook, Paragraph 1 of Schedule 5 (Interim calculation of remaining Default Fund)ASX Recovery Rulebook, Paragraph 2 of Schedule 5 (Interim Commitments by the ASX CCP)ASX Recovery Rulebook, Paragraph 10 of Schedule 5 (ASX CCP Commitment Amount) |
| 121.Treatment of CCP default fund/waterfall contributions | |
| 121.1 Are such contributions separately identified on the balance sheet and, if so, are these funds held in a segregated account away from the other assets of the CCP? | Not addressed in the Rules. Such contributions are separately identified on the balance sheet but they are not held in a segregated account, however, the permitted application of these contributions is prescribed by the Rules.Hide noteCCP responses of 13 January 2017 |
| 122. Recourse to CCP assets in a default situation and any linked recourse | |
| 122.1 What recourse is there to the CCP’s assets (i.e., other than those submitted to the default fund) in a default situation? | The Rules expressly provide that the Default Resources do not include any funds, assets or property of the CCP which have not been committed by the CCP to be allocated by the CCP to meet a CCP Loss in accordance with the default waterfall. In other words, there is no recourse to the CCP’s assets other than those submitted to the default fund or prescribed as such in the Rules. See also the section entitled “Limited Recourse” in item 148.1.Hide noteRule 7.1(h)Rule 7.9 (Satisfaction of Obligations of ASX Clear (Futures))ASX Recovery Rulebook, Rule 2.6 (Default Resources, Default Fund and Committed ASX Assets) |
| 122.2 Are these assets subject to non-recourse or other ring-fencing provisions? | N/A. See item 122.1. |
| 123. Default resources for CCP link arrangements | |
| 123.1 Are there separate default resources for any interoperability/link arrangements that the CCP has in place with other CCPs? | The CCP has no interoperability or link arrangements.Hide noteCCP responses of 13 January 2017 |
| 124. CCP disclosure of Rules | |
| 124.1 How, if at all, does the CCP disclose the Rules (including any changes to the Rules) to the public? | The CCP makes the latest version of its Rules publicly available on its website at: https://www2.asx.com.au/about/regulation/rules-guidance-notes-and-waivers/asx-clear–futures–operating-rules–guidance-notes-and-waiversandhttps://www2.asx.com.au/about/regulation/rulesguidance-notes-and-waivers/asx-recovery-rules |
| 125. CCP disclosure of fees | |
| 125.1 How, if at all, does the CCP publicly disclose its fees at the level of its individual service and policies on any available discount? | The CCP publishes its fees on its services, including the Service, on its website: https://www2.asx.com.au/participants/apply-to-become-a-participant/asx-participant-fee-schedule.A comprehensive list of fees and charges associated with utilising the CCP can be found at the following link https://www2.asx.com.au/markets/market-resources/asx-schedule-of-fees. This link is included in ASX’s Principles for Financial Market Infrastructures disclosure document at https://www.asx.com.au/documents/asx-compliance/pfmi-disclosure-framework.pdf.The Board may impose the following fees in such amount as it may determine from time to time:(a) an application fee for admission as a CM (non-refundable; to be applied against the cost of investigation into the suitability of the applicant);(b) an admission fee;(c) an annual fee;(d) a transaction fee for each Contract/transaction registered in the name of the CM;(e) a fee for the acceptance of securities or collateral for initial margins or their realisation or renewal of such securities as collateral;(f) a fee for mandatory cash settlement and delivery or exercise of options;(g) a clearing infrastructure fee;(h) a support fee if the CM requires support as described in the Rules relating to the use of the exchange system, exchange equipment, licensed software etc; and(i) such other fees as it may determine,The CCP may impose different fees on different categories of CM.CMs are obliged to pay any fees so imposed on demand unless another time is specified. Fees payable pursuant to the Rules may be deducted by the CCP from any credit balance of any account of the CM with the CCPHide noteCCP responses of 6 February 2015Rule 3.2.1 (Fees) |
| 126. CCP notification of service/fee changes | |
| 126.1 How, if at all, does the CCP notify its CMs and the public of changes to services and fees? | The CCP updates its list of fees and charges on a regular basis. The list of fees and charges is re-published when changed. The CCP has obligations to notify and consult with CMs in relation to Rule changes including changes to service and fees. See items 79.1 and 79.2.Hide noteCCP responses of 6 February 2015Rule 14.2ARule 14.2B (Amendment to Rules) |
| 127. CCP disclosure of technology/communication procedures | |
| 127.1 How, if at all, does the CCP disclose information on its technology and communication procedures in respect of the Service? | The CCP publishes a participant application kit on the participant portal as online that contains information about establishing participant operations and connectivity to ASX infrastructure. The participant portal can be accessed here: https://www.asxonline.com/Participants/Welcome.Hide noteCCP responses of 6 February 2015 |
| 128. CCP completion and disclosure of the CPSS-IOSCO Disclosure framework for financial market infrastructures | |
| 128.1 Does the CCP complete the CPSS-IOSCO Disclosure framework for financial market infrastructures? | Yes.Hide noteCCP’s website: https://www2.asx.com.au/about/regulation |
| 128.2 If so, when was it last completed and how frequently is it updated? | The ASX group’s response to the CPSS-IOSCO Disclosure framework for financial market infrastructures was last completed in December 2023. The response is available on the CCP’s website, at: https://www2.asx.com.au/content/dam/asx/about/pfmi-disclosure-framework.pdfThe ASX group plans to update its response periodically and to further enhance its disclosure as necessary from time to timeHide noteCCP’s website: https://www2.asx.com.au/about/regulationRBA 2018/19 Assessment Appendix C1, Standard 20.5 |
| 128.3 How, if at all, does the CCP disclose its responses to the CPSS-IOSCO Disclosure framework for financial market infrastructures to the public? | The ASX groups’ response to the CPSS-IOSCO Disclosure framework for financial market infrastructures is available on the CCP’s website, at: https://www.asx.com.au/documents/asx-compliance/pfmi-disclosure-framework.pdfHide noteCCP’s website: https://www2.asx.com.au/about/regulation |
| 128.4 Does the CCP complete or follow the CPMI-IOSCO Public quantitative disclosure standards for central counterparties? | As set out in the RBA 2018/19 Assessment Appendix C1, the CCP publishes a set of quantitative risk and activity data in accordance with the CPMI-IOSCO Public quantitative disclosure standards for central counterparties, which are intended to complement the descriptive disclosures under the Disclosure Framework; these data are updated on a quarterly basis.The CCP publicly reports basic risk and activity data via a monthly activity report, as well as through additional data published on both its main website and a dedicated website on clearing and settlement of cash equities.Hide noteRBA 2018/19 Assessment Appendix C1, Standard 20.5 |
| 128.5 If so, when was it last completed and how frequently is it updated? | It was last completed in June 2023. FrequencyDisclosure of quantitative data in relation to the following CPSS-IOSCO principle will be updated annually:Principle 15 (General Business Risk) Disclosure of quantitative data in relation to the following CPSS-IOSCO principles will be updated quarterly:Principle 4 (Credit Risk)item 5.3 of Principle 5 (Collateral)all the items under Principle 6 (Margin) except for item 6.3Principle 7 (Liquidity Risk)Principle 12 (Exchange of Value Settlement System)Principle 14 (Segregation and Portability)Principle 16 (Custody and Investment Risk)Principle 17 (Operational Risk)Principle 18 (Access and Participation requirements)Principle 19 (Tiered Participation arrangements)Principle 20 (FMI Links)Principle 23 (Disclosure of Rules, Key Procedures and Market Data) Disclosure of quantitative data in relation to the following CPSS-IOSCO principles will be updated when changes made:item 5.1 of Principle 5 (Collateral)item 5.2 of Principle 5 (Collateral)item 6.3 of Principle 6 (Margin) Disclosure of quantitative data in relation to the following CPSS-IOSCO principle will be updated on an ad hoc basis:Principle 13 (Default Rules and Procedures)Hide noteCCP’s website: https://www2.asx.com.au/about/regulation/quantitative-disclosures-for-asx-clear-futures |
| 128.6 How, if at all, does the CCP disclose its responses to the CPMI-IOSCO Public quantitative disclosure standards for central counterparties to the public? | The CCP’s response to the CPMI-IOSCO Public quantitative disclosure standards for central counterparties is available on the CCP’s website, at: https://www2.asx.com.au/about/regulation/quantitative-disclosures-for-asx-clear-futuresHide noteCCP’s website: https://www2.asx.com.au/about/regulation/quantitative-disclosures-for-asx-clear-futures |
| 129. CCP completion and disclosure of the Federal Reserve Bank of New York’s Payments Risk Committee Recommendations for Supporting Participant Due Diligence of Central Counterparties | |
| 129.1 Does the CCP complete or follow the Federal Reserve Bank of New York’s Payments Risk Committee Recommendations for Supporting Participant Due Diligence of Central Counterparties? | No. The CCP has stated that it complies with the international standards for disclosure of compliance with the Principles for Financial Market Infrastructures.Hide noteCCP responses of 16 February 2015 |
| 129.2 If so, when was it last completed and how frequently is it updated? | N/A |
| 129.3 How, if at all, does the CCP disclose its responses to Federal Reserve Bank of New York’s Payments Risk Committee Recommendations for Supporting Participant Due Diligence of Central Counterparties to the public? | N/A |
| 130. CCP risk disclosure document | |
| 130.1 Does the CCP provide a risk disclosure document regarding the services and account structures it provides? | Yes. Account structures1Based on the RBA 2018/19 Assessment Appendix C1, the current arrangements for segregation and portability are defined in the Rules and Procedures. ASX has also published a public overview of CM default arrangements2, which outlines the current operational constraints to portability and the implications of different account structures.ASX has published a client fact sheet and a brochure on its client protection model which outline segregation and portability arrangements at the CCP, the rights of Clients in the event of a default3 and protection available for excess Client collateral. CMs are required to make this fact sheet available to all of their Clients. The fact sheet and brochure are also available on ASX’s public website. In addition, during previous assessment periods, ASX has publicly consulted stakeholders on segregation and portability arrangements for both the Service and the OTC Service. These consultations have outlined the implications of different account structures used by the CCP and identified operational constraints to portability. Risk disclosure and services4The CCP provides a range of publicly available materials but does not provide a single ‘risk disclosure document’ as such. For example, in addition to the Rules and Procedures (which form the basis of all material aspects of the CCP’s service to CMs), the CCP publishes information concerning risk management, default management, margin, capital-based position limits and business continuity arrangements. An overview of how the CCP would manage a CM default is also available, amongst other things.The majority of materials published by the CCP are accessible through the CCP’s website.Hide note1 RBA 2018/19 Assessment Appendix C1, Standard 13.4;2 CCP’s website: https://www.asx.com.au/documents/clearing/131001_Default_Management_-_Public_Information_Document_v2.pdf3 CCP’s website: https://www.asx.com.au/documents/clearing/asx-client-clearing-client-fact-sheet-31aug2015.pdf4 RBA 2018/19 Assessment Appendix C1, Standard 20.1 |
| 131. CCP hypothetical capital | |
| 131.1 Does the CCP disclose its hypothetical capital? | The CCP publishes its hypothetical capital, as part of its CPMI-IOSCO Public quantitative disclosure, on its website on a quarterly basis at: https://www.asx.com.au/documents/regulation/Public_Quantitative_Disclosure_Standards_for_Central_Counterparties_ASX_Clear_Futures.pdf1Not addressed in the Rules, but the CCP has confirmed that it provides the statistics by email to CMs who request this information and that it currently discloses its hypothetical capital on a monthly basis to its regulator and (primary foreign bank subsidiary) CMs.2Hide note1 CCP’s website: https://www.asx.com.au/documents/regulation/Public_Quantitative_Disclosure_Standards_for_Central_Counterparties_ASX_Clear_Futures.pdf2 CCP responses of 6 February 2015 |
| 131.2 If so, how does the CCP disclose its hypothetical capital? | See item 131.1 |
| 131.3 Can CMs share the CCP’s hypothetical capital with their Clients? | The CCP disclose its hypothetical capital to the public on a quarterly basis. The Clients can access such information directly through the CCP’s website at: https://www.asx.com.au/documents/regulation/Public_Quantitative_Disclosure_Standards_for_Central_Counterparties_ASX_Clear_Futures.pdf..1As to the statistics sent by the CCP to a CM per the CM’s request, there are no specific restrictions in respect of a CM sharing the CCP’s hypothetical capital information with its Clients. However, the CCP notes that it does not accept any liability to CMs (or third parties) that may result directly or indirectly from the hypothetical capital information it provides. 2Hide note1 CCP’s website: https://www.asx.com.au/documents/regulation/Public_Quantitative_Disclosure_Standards_for_Central_Counterparties_ASX_Clear_Futures.pdf2 CCP responses of 6 February 2015 |
| 132. CM access to CCP audit reports and/or conclusions | |
| 132.1 What, if any, access do CMs have to external/internal audit reports and/or conclusions? | CMs have access to the externally published EXIGO control opinions performed by the external auditor of ASX Limited (which is the ASX group holding company) (distributed via market notices).ASX Limited’s external auditor also provides an external audit opinion on the annual financial statements for the ASX group in the annual report.Hide noteCCP responses of 6 and 16 February 2015 |
| 133. Unforeseen/uncovered liquidity shortfalls | |
| 133.1 How do the Rules address unforeseen and potentially uncovered liquidity shortfalls? | Margin1The CCP has broad powers to call for additional margin at any time and may require that securities or other property deposited be replaced with cash. Additional financial backing2The Board may, with the agreement of a CM and in addition to the obligation of a CM to provide default fund contributions, obtain from a CM additional financial backing to support the CCP’s obligations on such terms as is agreed with the CM. Borrowing pending realisation of its financial resources3To enable the CCP to meet its obligations in a timely manner to non-defaulting CMs, pending the realisation of any part of the financial resources available for application in the default waterfall, the Board may borrow or otherwise seek accommodation or make other financial arrangements as it sees fit. Pre-funded default fund4Upon occurrence of a CM default, the CCP has power to apply the pre-funded default fund, including such as, the defaulting CM’s assets held by the CCP, default fund contribution of the non-defaulting CMs and assets committed by the CCP for loss allocation, to meet the loss. Please see item 109.1 for the resources in the prefunded default fund. Assessment5After utilising the prefunded default fund, the CCP has the power to meet a CCP Loss by calling assessments from non-defaulting CMs. These would be capped at the level of CM’s default fund contribution at the time which the Default Period commenced (a maximum of A$200 million in aggregate), if assessments were called in relation to a single default; or at three times the level of CMs’ default fund contribution at the time which the Default Period commenced (a maximum of A$600 million in aggregate), if assessments were called in relation to multiple CMs’ defaulting within a Default Period. The CCP would have the flexibility to call for assessments where it anticipates a liquidity shortfall resulting from a CM default, increasing the likelihood that these funds will be available to meet liquidity needs on a timely basis. See item 118. Payment Reduction5The CCP would also have the power to reduce (haircut) outgoing payments to CMs. For example, a haircut could be applied to variation margin payments due to CMs with net in-the-money positions in the event of mark-to-market loss on the defaulting CM’s portfolio. Payment Reduction could be applied to a broad range the CCP’s payment obligations, excluding the return of initial margin. There is no cap on the use of payment haircutting to address a liquidity shortfall, although the CCP would consult with the risk committee in determining whether to continue Payment Reduction if losses allocated via this tool exceed A$650 million.See item 109. Complete Invoicing Back5Any residual liquidity shortfall that could not be addressed via assessments or Payment Reduction could be addressed via the power to completely terminate all Contracts. Complete termination would be reserved as a last resort tool if there were no other means of addressing a liquidity shortfall. Under complete Invoicing Back all Contracts at the CCP would be settled with CMs at their current market value, with any residual liquidity shortfall of the CCP addressed by haircutting settlement payments to CMs. Reliance on complete Invoicing Back is considered extremely unlikely, since payment haircutting provides an uncapped mechanism to address liquidity obligations associated with the majority of payment flows.See item 109.1 under the title of “Complete Invoicing Back”.Hide note1 Rules 43.1 (Initial Margin and Other Deposits), 43A.1 (BRC Initial Margins and Other Deposits), Rule 45 (Intra-Day and Extra Margins) and Rule 45A (BRC Intra-Day and Extra Margins), ASX Clear (Futures) Operating Rules2 Rule 5.10 (Commitment to support obligations of ASX Clear (Futures)), ASX Clear (Futures) Operating Rules3 Rule 7.2 (Satisfaction of obligations of ASX Clear (Futures)), ASX Clear (Futures) Operating Rules4 Rule 7 (Satisfaction of obligations of ASX Clear (Futures))5 RBA 2018/19 Assessment Appendix C1, Standards 4.8 and 7.9 |
| 134. Liquidity facilities available to the CCP | |
| 134.1 Does the CCP have access to any liquidity facilities? | Yes. |
| 134.2 If so, please describe them generally (including the methodology used by the CCP to determine the amount of its required liquidity resources (e.g., Cover 1 or Cover 2)). | Liquidity facilitiesThe CCP’s liquidity facilities include margin and other collateral posted by CMs (see item 133) as well as the CCP’s own holdings of liquid assets.The CCP’s holdings of liquid assets and cash collateral posted by CMs are reinvested on its behalf by ASXCC in accordance with the ASXCC investment mandate (see items 158.1 and 158.2).Additionally, ASXCC holds an exchange settlement account at the RBA, meaning it is eligible for access to A$ liquidity under the RBA’s overnight and intraday liquidity facilities (against eligible collateral specified by the RBA that is held within ASXCC’s investment portfolio), including in times of market stress. The CCP, through ASXCC, also has access to EUR, GBP, JPY and USD liquidity under intraday liquidity facilities with two commercial banks up to a total of A$400 million (A$200 million with each bank). These facilities are used primarily to facilitate the intraday repayment of participant cash collateral received in each aforementioned currency in the absence of a participant default. However, the intraday facilities could also be used in a default scenario to supplement the CCP’s qualifying liquid resources.Calculation methodologyBased on the RBA 2018/19 Assessment Appendix C1, a major objective of the ASX group’s liquidity risk policy is for the CCP to maintain, with a high degree of confidence, sufficient liquidity to manage the default of two CMs and their affiliates and meet reasonably foreseeable operational cash flows.ASX’s primary liquidity requirement is the core liquidity requirement (CLR). The CLR is calculated as the sum of the default liquidity requirement (DLR) for each CCP and the ordinary liquidity requirement (OLR) across the two ASX CCPs (i.e. the CCP and the CCP operated by ASX Clear Pty Limited). The DLR for the CCP is the amount required to cover the estimated payment obligations in the event of the joint default of the two largest CMs (as measured by the payment obligations to the CCP) and their affiliates under the stressed market conditions envisaged in the CCP’s liquidity stress tests. The CCP’s DLR for AUD is the sum of:the liquidity stress test result for the two CMs and their affiliates that result in the largest payment obligation for the CCP; andthe aggregate margin requirement of the two largest CMs and their affiliates, used to cover payment obligations associated with variation margin or the close-out of positions in normal market conditions.The CCP separately calculates a DLR for each non-AUD cleared currency (currently only NZD) which comprises Cover 2 participants’ total margin requirement for NZD-denominated positions and an estimate of their stress testing exposures (calculated as 130 per cent of their initial margin requirement in NZD).The OLR is intended to cover day-to-day liquidity requirements, such as the return of margin to CMs, and is calculated by multiplying the ASXCC investment portfolio (less the DLR) by a percentage rate (OLR rate). This portfolio comprises both CCPs’ pooled prefunded resources as well as the cash margin posted at both CCPs. ASX sets currency-specific OLRs for each currency in which it has payment obligations. The OLR rates for AUD and NZD are calibrated to the maximum daily margin outflow ASXCC’s investment portfolio (as a percentage of the value of the sub-portfolio in each currency) over the last 12 months, subject to a floor of 10 per cent. The current OLR rates for AUD and NZD are 10 and 20 per cent respectively. The OLR rates for non-cleared currencies which the CCP accepts as collateral (currently EUR, GBP, JPY and USD) are set at 100 per cent of the ASXCC portfolio denominated in these currencies. OLR rates are reviewed annually.The DLR component in the above description indicates that the methodology used by the CCP to calculate its liquidity resources is Cover 2.ASX also has an Additional Liquidity Requirement (ALR) for the CCP, which is designed to reflect the potential for unexpected non-default related liquidity needs. Similar to the OLR, the ALR is calculated by multiplying the ASXCC investment portfolio (less the DLR) by a percentage rate (ALR rate). ASX has calibrated the AUD and NZD currency-specific ALR rates to ensure that it has sufficient liquid assets to cover the maximum historical AUD or NZD one-day margin outflow in the ASXCC investment portfolio (as a percentage of the value of the sub-portfolio in each currency) since late 2008 (the earliest date from which data is available). The current ALR rates for AUD and NZD are 11 and 21per cent of AUD and NZD-denominated assets in the ASXCC portfolio respectively. ASX has created liquidity-specific stress tests to assess the adequacy of the liquidity requirements related to the CCP’s investment portfolio and the actual liquidity of the portfolio.No ALR is set for EUR, GBP, JPY and USD since 100 per cent of the portfolio in these currencies must be invested in CLR-eligible assets Hide noteRBA 2018/19 Assessment Appendix C1, Standards 7.1,7.2,7.3,7.4 and 15.4 |
| 135. CM requirements to provide liquidity facilities in respect of non-cash collateral | |
| 135.1 Must a CM provide a liquidity facility to help the CCP manage its liquidity risk for non-cash collateral? | No.The Rules do not require CMs to provide a liquidity facility to manage its liquidity risk for non-cash collateral. However, as described in item 133.1, the CCP may require or direct CMs to provide additional collateral in the form of cash or to replace assets already provided with cash, thereby (indirectly) providing a mechanism to manage its liquidity risk for non-cash collateral. |
| 135.2 If so, please describe the requirement. | N/A |
| 136. Circumstances under which liquidity facilities can be drawn | |
| 136.1 Under what circumstances can these facilities be drawn? | N/A |
| 137. Replenishment of liquidity resources | |
| 137.1 How do the CCP’s rules allow for the replenishment of any liquidity resources during a stress event? | The CCP may reset/increase the size of the default fund, call for additional margin and/or put in place additional arrangements for increased financial backing. See items 112.1 and 133. |
| 138. CCP events of default | |
| 138.1 What constitutes an “event of default” by the CCP? (including any grace periods)? Please list all possible options that may constitute an event of default. | The below will constitute an “event of default” by the CCP under the Rules provided that nothing in connection with the Recovery Rules causes the CCP to be in default, unless the CCP is otherwise in default (see item 149.1). Failure to pay or deliver1Yes.If all of the following occur:(i) the CCP fails to make, when due, any payment in respect of a payment claim of a CM against the CCP arising from a Contract;(ii) such CM has notified the CCP of such failure;(iii) such CM notifies the CCP again of such failure after the expiry of a period of not less than 5 Business Days after the notification in (ii) above; and(iv) the CCP’s failure to make such payment to such CMs continues for a period of more than 5 Business Days after the notification in (iii) above. Voluntary/ Involuntary insolvency proceedings /corporate actions2Yes. The CCP is wound up in insolvency under the Corporations Act or is subject to statutory management either instituted by it or against it by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in Australia.Hide note1 Rule 76.1(a) (ASX Clear (Futures) Payment Default), ASX Clear (Futures) Operating Rules2 Rule 76.1(b) (ASX Clear (Futures) Insolvency Event), ASX Clear (Futures) Operating Rules |
| 139. Procedural requirements/regulatory approvals required for CCP default | |
| 139.1 Are there any procedural requirements or regulatory approvals required to trigger a default of the CCP? | Procedural Requirements1At the election of either the CCP or the CM (if a CM makes this election, then only its Contracts are affected):(I) the present and future obligations of the CCP and each CM to make payments and deliveries under the Contracts are terminated;(II) the CCP is to calculate the termination value of those terminated obligations; and(III) the CCP will net the termination values so calculated separately in respect of the House Account and the Client Account of each CM so that only a net cash amount is payable in respect of each of these accounts and between the CCP and each respective CM. Each such net cash amount is to be payable by the party who is determined to owe it on the Business Day on which it is determined and notified to the CM.(Where the relevant Client(s) is/are the subject of the client protection model provisions under the Rules, netting in respect of the Client Account is to be conducted separately in respect of each Client sub-account; a net cash amount is to be payable in respect of each separate netting which takes place.)If the CCP is, for operational reasons, unable to make one or more required calculations or determinations, then those particular calculations are to be made by the relevant CM. Regulatory approvalsNo regulatory approvals are required to trigger a default of the CCP.Hide note1 Rule 76.1 (Termination), ASX Clear (Futures) Operating Rules |
| 140. Determination, notification and processes in respect of the CCP’s default | |
| 140.1 How is a declaration of CCP default communicated to the CMs, Clients and to the public? | Not addressed in the Rules, but the CCP’s expectation is that the regulators would provide notification pursuant to the FMI resolution regime to be established.Hide noteCCP responses of 16 February 2015 |
| 140.2 Who is responsible for determining the CCP’s default? | Either the CCP or the CM (as the case may be) depending on who triggers the termination of Contracts.Hide noteRule 76.1 (Termination) |
| 140.3 How are shortfalls/excesses dealt with following termination of all Contracts as a result of a CCP “event of default”? | Not addressed in the Rules. The Rules only provide for the calculation of each net termination amount payable by either the CCP or a CM (see item 139). Shortfalls and excesses are not addressed in the Rules.In the event of an external administration of the CCP, any shortfall or excess will be dealt with under the insolvency regime in the Corporations Act. If a liquidator is appointed to the CCP and the CM has a shortfall after netting of termination values then the CM will have a right to prove in the liquidation of the CCP. |
| 140.4 Provide the citation of the principal statute that would govern the CCP’s insolvency. | The CCP’s insolvency will be governed by Chapter 5 (External Administration) of the Corporations Act. A specialised resolution regime for financial markets infrastructure is expected in the near future.The netting of termination values of Contracts will be governed by Rule 76 and section 16 of the PSNA.Hide noteCCP responses of 6 February 2015 |
| 141. Use of non-defaulting CM’s initial margin to cover losses of CCP upon its default | |
| 141.1 Can the CCP use the initial margin of a non-defaulting CM to satisfy losses of the CCP upon its default? | No. Initial margin of a CM can only be used to satisfy payment obligations that such CM owes in respect of its terminated Contracts.Under general insolvency law principles, as CMs only have a contractual claim to return of collateral delivered by way of title transfer, if the CCP’s liabilities overall exceeded its assets, then CMs may be required to share in the shortfall on a pro rata basis to the extent of their exposure to the CCP’s redelivery obligation in respect of collateral delivered by way of title transfer. |
| 141.2 If yes, please describe how such losses are allocated. | N/A |
| 141.3 Is there a cap on a CM’s liability for losses of the CCP upon its default? | There is no cap as such. A CM is, however, only liable forsuch CM’s outstanding default fund contributions; andsuch CM’s other claim(s) (such as accommodation fee, interest payable on default fund contributions, any additional financial backing provided, claims for the redelivery obligation in respect of collateral delivered by way of title transfer) including each net termination amount described in item 139 payable by the CCP to such CM.And such CM is at risk for the return of assets and any termination payments due to it.Hide noteRules 5.8, 5.9 and 5.10 (Commitment to support obligations of ASX Clear (Futures)) |
| 141.4 If so, please describe the cap. | N/A |
| 142. CM declaration of CCP default | |
| 142.1 If a default is called against the CCP by a CM, does that apply solely to the CM concerned or to all CMs? | It applies solely to the CM concerned.Hide noteRule 76.1 (Termination) |
| 143. Impact of CCP default on existing CM default processes | |
| 143.1 How does a CCP default affect any ongoing CM default processes with respect to both the applicable defaulting CM and the non-defaulting CMs? | Not addressed in the Rules. |
| 144. Netting and set-off upon a CCP default | |
| 144.1 Do the Rules provide for the netting and set-off of obligations, including obligations to return collateral and default fund contributions upon the default of the CCP, including in the context of an insolvency of the CCP? | Yes (see item 55.1 under the headings: “Set-off rights – a CM’s House Accounts and Client Accounts” and “Set-off rights – a CM’s Client Accounts”) apart from the amount payable by the CMs under the Recovery Rules as described below.(Where the relevant Client(s) is/are the subject of the client protection model provisions under the Rules, netting in respect of the Client Account is to be conducted separately in respect of each Client sub-account; a net cash amount is to be payable in respect of each separate netting which takes place.)As to the amount payable by a CM to the CCP under the Recovery Rules, it is provided that such amount shall be paid by the CM in full and without any set-off. For the avoidance of doubt, the Recovery Rules do not restrict the CCP’s right to net or set-off against a CM. The Recovery Rules deal with the CCP’s ability to handle default of CMs; but it has not excluded the scenario where the CCP is also at default.See also item 96.1 in relation to the CCP’s (but not a CM’s) right to effect a set-off.Hide noteRule 47.2, 47.3 (Offset – Daily Settlement Amounts)Rule 76.2 (Termination)ASX Recovery Rulebook, Rule 12.1 (Payments by Participants)ASX Recovery Rulebook, Rule 12.8 (Set-off) |
| 145. Determination of close-out value of outstanding Contracts | |
| 145.1 How, when and by whom is the close-out value for outstanding Contracts determined? | On how the close-out value is determined, see item 139.The timing as to when the close-out value is determined is not addressed in the Rules.The close-out value is to be determined by the CCP. If the CCP is, for operational reasons, unable to make one or more required calculations or determinations, then those particular calculations are to be made by the relevant CM.Hide noteRule 76.1 (Termination) |
| 146. Netting and set-off across services | |
| 146.1 If the CCP offers more than one clearing service, do the Rules provide for the netting and set-off of amounts owed in respect of one service against amounts due in respect of another service? | Yes, the Rules provide for the netting and setoff of amounts across the Service and the OTC Service.See item 55.1 under the headings: “Set-off rights – a CM’s House Accounts and Client Accounts” and “Set-off rights – a CM’s Client Accounts”See items 67 and 68 on the account structure. |
| 147. CM rights to terminate Contracts | |
| 147.1 Does the CM have the right to terminate all its Contracts at its discretion, or does the CCP have the right to compel a CM to complete Contracts after a CCP “event of default”? | The relevant CM has the right (but not the obligation) to terminate and liquidate all its Contracts on the occurrence of a CCP “event of default” (see item 139). The CCP does not have the right to compel a CM to complete transactions after a CCP’s “event of default”.Hide noteRule 76.1 (Termination), ASX Clear (Futures) Operating Rules |
| 148. Exhaustion of financial resources of CCP | |
| 148.1 Upon the exhaustion of the CCP’s financial resources, would the CCP become insolvent, would a CM or the CCP itself have the right to terminate all Contracts for that service, would the CCP institute variation margin haircutting, or is there some other outcome? | Whether the CCP would become insolventThe CCP could technically become insolvent if it were unable to pay its debts as and when they fall due, although this is unlikely to arise in practice because of the CCP’s recovery powers and the limited recourse described below. Limited recourseThe CCP’s liability in connection with the payment of an amount to a CM (or entity which was a CM) following a default of a CM is limited to the aggregate amount then available of the Default Resources and (if applicable) the amounts paid to the CCP with respect to Partial Tear Up or complete Invoicing Back only. The application of this aggregate amount in accordance with the Rules towards amounts payable by the CCP under the Rules (including the Recovery Rules) constitutes a complete discharge of the CCP’s liability to the CMs and any other person in connection with those amounts. Would a CM or the CCP itself have the right to terminate all ContractsSee items 139 and 142 in respect of a CM’s right to terminate; however, the election to terminate by a CM would result in the termination of present and future obligations between the CCP and itself only, not the termination of all Contracts between the CCP and all CMs. Would the CCP institute variation margin haircutting, or is there some other outcomeYes. See item 109 for the CCP’s power of haircutting certain outgoing payments to CMs (including, but not limited to variation margins).Hide noteRBA 2021/22 Assessment, Appendix B.3 (Prefunded financial resources)ASX Recovery Rulebook, Rule 8.4 (Limited recourse) |
| 149. CCP recovery and resolution | |
| 149.1 Are there provisions in the Rules describing the CCP’s recovery or resolution (e.g., are there any provisions for the recapitalisation or reestablishment of its services after a default has been resolved)? | The Recovery Rules cover both the recovery and resolution of the CCP, each of which is described below. Recovery powersThe Recovery Rules enhance the ability of the CCP to recover from extreme stress scenarios by granting the CCP the following recovery powers:assessment (see item 118);Payment Reduction (see item 109);Partial Tear Up (see item 107);complete Invoicing Back (see item 109.1);replenishment (see item 117); andvoluntary payment (see item 109.1) Resolution by way of voluntary wind-downThe Recovery Rules also provide for voluntary wind-down for the CCP. Conditions of voluntary wind-downIf no Default Period is subsisting and the CCP determines that its business is unviable and decides to cease to provide the clearing services (i.e., the Service and/or the OTC Service) the CCP must provide at least 90 days’ notice to all CMs in writing of the date on which the relevant service will cease. However, any action taken by the CCP in connection with a voluntary wind-down is not invalidated by any CM not receiving this notice. ConsultationThe CCP will consult with the risk committee regarding the process for the discontinuation of the clearing service. Effects on the outstanding ContractsIf there are any outstanding Contracts on the date for cessation of a service which has been notified by the CCP then the CCP may, at its sole discretion:terminate any or all of such outstanding Contracts and require them to be cash settled at a price determined by the CCP by reference to the last determined daily closing price for such Contracts; orpostpone the date of the cessation of the service until such time as the CCP determines. Co-operation obligations of the CMsCMs must assist and co-operate with the CCP as the CCP exercises its voluntary wind-down rights and carries out the orderly winding-down of its remaining business, and use best endeavours to effect the unwinding of their remaining Contracts, by (but not limited to) liquidating, compressing, closing-out or otherwise terminating their Contracts.Hide noteASX Recovery Rulebook, Rule 10 (Voluntary Wind-down) |
| 150. Limited recourse and segregation across services | |
| 150.1 If the CCP has more than one service, are there limited recourse and segregation provisions between the services? | In relation to a CM default, the CCP will return to clients directly or the CM’s external administrator (as applicable), a net residual amount (if any) for each segregated account.In relation to a CCP default, the CCP will net the termination values so calculated separately in respect of the House Account and the Client Account of each CM so that only a net cash amount is payable in respect of each of these accounts and between the CCP and each CM.Hide noteCCP response of 13 January 2017Rule 76 (Termination) |
| 151. Renewal default fund after CCP default | |
| 151.1 Does the CCP have rules with respect to the creation of a new default fund after the occurrence of a CCP default? | Not addressed in the Rules. The Recovery Rules are designed to avoid the occurrence of a CCP default. |
| 151.2 If so, what are they? | N/A. |
| 152. Link arrangements with other CCPs | |
| 152.1 Does the CCP have any link arrangements with another CCP (either directly or through an intermediary)? | No.Hide noteCCP responses of 6 February 2015 |
| 152.2 If the CCP has any link arrangements with another CCP, do the Rules require the CCP to monitor the risks associated with these link arrangements? | N/A |
| 152.3 If so, how is such risk monitored? | N/A |
| 153. Permitted investments of CM cash collateral and default fund contributions by the CCP | |
| 153.1 Do the Rules permit the CCP to invest CM cash collateral and default fund contributions? | Yes, the Rules permit the CCP to invest monies deposited with it as it sees fit. The RBA 2018/19 Assessment Appendix C1 states that investment of CM cash collateral and default fund contributions is permissible.The Board may prescribe from time to time:the interest rate payable by the CCP with respect to monies on deposit with the CCP;the interest rate payable by CMs with respect to monies which remain owing to the CCP after the due time for payment.Subject to the above, any interest obtained by the CCP from the investment of monies on deposit with the CCP will be monies to which the CCP is absolutely entitled.The CCP disclaims liability for any failure to invest or to invest in a particular way.Hide noteRule 3.2.3 (Monies deposited with ASX Clear (Futures))RBA 2018/19 Assessment, Appendix C1, Standard 15.1 |
| 153.2 If so, what investments are permissible? | Not addressed in the Rules. However, the RBA 2018/19 Assessment Appendix C1 states that CMs’ cash collateral (together with various other assets) are invested by ASXCC in accordance with the ASXCC Investment Risk Policy and the ASXCC investment mandate, which together define investment objectives, investment specifications, and audit and maintenance of the policy. This requires investments to be restricted to instruments with low credit, market and liquidity risk.For further details, please refer to items 158.1 and 158.2.Hide noteRBA 2018/19 Assessment Appendix C1, Standard 15.1 |
| 154. Concentration limits and other requirements in respect of the CCP’s investment of CM cash collateral and default fund contributions | |
| 154.1 Are there any concentration limits, minimum criteria or diversification requirements, or other restrictions on how the CCP can invest CM cash collateral and default fund contributions? | Yes.The various limits, criteria and requirements applicable to the CCP’s investment of CM cash collateral (and other assets) are set out in the ASXCC Investment Policy and the ASXCC investment mandate.For further details, see items 158.1 and 158.2. |
| 155. CCP rights to delegate cash management services | |
| 155.1 Does the CCP have the right to delegate cash management services? | Cash management services are delegated to ASXCC. ASXCC is a wholly-owned subsidiary of ASX Limited. ASXCC is the holding company for, and manages the financial resources of, the CCP. It invests these resources according to a treasury investment policy and investment mandate. ASXCC’s investment mandate requires that it maintains liquid assets readily available to meet the Cover 2 liquidity target as well as day-to-day liquidity requirements across the CCP and the ASX groups other central counterparty. ASXCC’s investment mandate establishes that liquid assets can be used to meet the CCP’s CLR and ALR.Further delegation is not specifically addressed in the Rules. Based on the RBA 2018/19 Assessment Appendix C1:AUD-denominated assets of the CCP and its CMs are administered and held within the ASX group (the CCP does not use external custodians to hold its assets or CMs’ assets);AUD-denominated non-cash collateral is lodged directly with the CCP in Austraclear;Non-AUD-denominated securities held as investments or posted as non-cash collateral are held outside the ASX group:NZD-denominated investment securities are held in NZClear, which is owned and operated by the Reserve Bank of New Zealand;Non-cash collateral and investment securities denominated in other currencies (i.e. G4 currencies) are held in Clearstream, an international central securities depository owned by Deutsche Börse ,As a credit institution, Clearstream is subject to the supervision of the Commission de Surveillance du Secteur Financier and Banque Centrale du Luxembourg in Luxembourg; andcash collateral and cash contributed to the default funds are held directly by ASXCC (of which the CCP is a subsidiary).Hide noteCCP response 27 January 2017RBA 2018/19 Assessment Appendix C1, Standards 7.3, 15.1 and 15.2ASX Recovery Rulebook, Rule 6.1 (ASX Investments and ASX Clearing Corporation) |
| 156. Rehypothecation rights | |
| 156.1 Does the CCP have the right to re-pledge, rehypothecate, transfer or use CM non-cash collateral (including both margin and default fund contributions) under its rules? | All default fund contributions are currently transferred in cash by way of title transfer to the CCP. Default fund contributions transferred in cash to the CCP constitutes the legal and beneficial property of the CCP and represents a debt owing by the CCP to the CM.The RBA 2018/19 Assessment Appendix C1 also states that the CCP does not re-use non-cash collateral posted by CMs, and that the re-use of such collateral is not permitted under the Rules.Hide noteFutures Rules Part 4 (Accounts and Daily Settlement) Para 49A and 49 B; CCP responses of 6 February 2015RBA 2018/19 Assessment Appendix C1, Standards 5.7 and 15.1 |
| 156.2 If so, are there any restrictions on this ability? | N/A. |
| 156.3 Is such investment/rehypothecation made in the name of the CCP or CM? | N/A. |
| 157. CCP requirements in respect of investment/rehypothecation proceeds | |
| 157.1 Is the CCP required to hold the existing proceeds in a manner consistent with other collateral? | No such requirement specified in the Rules. |
| 158. CCP investment policy | |
| 158.1 Does the CCP have a formal investment policy? | Yes.The investments of both ASX CCPs (i.e. the CCP and the CCP operated by ASX Clear Pty Ltd) are made in accordance with the same investment policy: the treasury investment policy. They are also controlled and managed by the same entity, ASXCC.In respect of both cash margin collected and pre-funded pooled risk resources, ASXCC invests funds in accordance with a defined investment policy, endorsed by the ASXCC board and itself governed by the ASX enterprise risk management policy. The investment policy is set out in the high-level ASXCC Investment Risk Policy (publicly available) and in the more detailed ASXCC investment mandate (not publicly available). Together, these policy documents define the ASX group’s investment objectives and investment specifications and articulate the basis for the mitigation of investment-related credit, market and liquidity risks, including by setting out a variety of counterparty eligibility criteria and investment limits (as described in item 158.2). The ASXCC investment mandate is reviewed and approved annually by the ASXCC Board and the two ASX CCP boards and presented to the risk committee for noting. The investment risk policy is reviewed and approved by the ASX Limited board.Performance of the investment portfolio within the parameters of the investment policy is closely monitored by ASXCC, with trigger points to automatically escalate potential issues before binding limits are reached. Trigger points are defined for weighted average maturity.Hide noteRBA 2018/19 Assessment Appendix C1, Standard 15.4ASXCC Investment Policy |
| 158.2 If so, what is the nature, tenor and risk profile of instruments in which investments can be made? | ASXCC investment mandate: Counterparty eligibility criteria and investment limitsBased on the RBA 2018/19 Assessment Appendix C1, the ASXCC investment mandate sets the following investment counterparty eligibility criteria and investment limits (in order to control counterparty investment risk): (1) Counterparty eligibility criteriaCounterparties must be:Australian Commonwealth or state government entities (including the RBA);the New Zealand authorised deposit-taking institutions; oroff-shore bank counterparties.Authorised deposit-taking institutions and off-shore bank counterparties must also have a Standard & Poor’s short-term credit rating of A1 or above (A2 or above if approved only as a repo counterparty). Off-shore bank counterparties are only approved for the investment of NZD, EUR, GBP, JPY and USD cash and reverse repo, both on an overnight basis.The ASXCC investment mandate does not permit investments in securities of ASX group entities. ASXCC is also not permitted to create unsecured exposures to any investment counterparty that is a CM or affiliated with a CM, other than the 4 major Australian banks.(2) Counterparty investment limitsCounterparty investment limits are not specified in the Rules. However, the RBA 2018/19 Assessment Appendix C1 indicates that they are determined according to factors such as:the credit quality of the counterparty or obligor;the size of available financial resources; andwhether eligible investment counterparties and their affiliates are also CMs.Concentration limits are set on both the proportion of the portfolio and the absolute amount that can be invested with a single counterparty. ASXCC investment mandate: Liquid assets requirementThe ASXCC investment mandate requires that a portion of its portfolio be held in liquid asset form, to cover liquidity risks from both general business risks and risks related to the CCP’s clearing activities.The ASXCC investment mandate aims for quick liquidation of investments with little, if any, price effect. Only investments in AUD and NZD-denominated instruments that can be liquidated or repurchased for cash within 2 hours are treated as ‘liquid’ products. These are defined based on the depth of market liquidity and the terms of investment, including whether the instruments are eligible for repurchase transactions with the RBA and the Reserve Bank of New Zealand. ‘Liquid’ products in other currencies (EUR, GBP, JPY and USD) are defined as those that can be sold for settlement the following business day and which are judged to have an active repo market providing same day liquidity. ASXCC Investment PolicyIn addition to the above, the ASXCC Investment Policy states that:the approved investment products currently comprise Australian Commonwealth Government securities, Australian State Government securities, bank bills, negotiable certificates of deposits, senior debt securities, bank fixed term deposits and overnight cash accounts and reverse repurchases in Australian Commonwealth and State Government securities;all securities are required to be on the RBA’s eligible securities list for re-purchase purposes; andexposures within the investment portfolio are managed using several different limits, including limits on portfolio average maturity, maximum investment tenor, concentration limits, maximum exposure to a single investment counterparty and market risk limits including VAR (value-at-risk) and PVBP (present value of a basis point) measures.Hide noteRBA 2018/19 Assessment Appendix C1, Standards 7.4 and 15.4ASXCC Investment Policy |
| 158.3 Is the policy publicly available? | The ASXCC Investment Policy is publicly available from the CCP’s website, at: http://www.asx.com.au/documents/clearing/asxcc-investment-policy.pdf.The more detailed ASXCC investment mandate is not publicly available.The broad approach to investment and investment holdings is disclosed publicly in the ASX annual report.Hide noteRBA 2018/19 Assessment Appendix C1, Standard 15ASXCC Investment Policy |
| 158.4 Are exceptions to the investment policy permissible? | Not addressed in the Rules. |
| 158.5 If they are, describe the approval process for granting exceptions to specific investments or policy more generally. | Not addressed in the Rules. |
| 158.6 Are there any concentration limits, minimum criteria or diversification requirements applied to counterparties with whom the CCP might enter into repos? | Yes.Hide noteRBA 2018/19 Assessment Appendix C1, Standard 15ASXCC Investment Policy |
| 158.7 If so, what are they? | The various limits, criteria and requirements applicable to counterparties with whom the CCP might enter into repos are set in the ASXCC Investment Policy and the ASXCC investment mandate. For further details, see items 158.1 and 158.2.Hide noteRBA 2018/19 Assessment Appendix C1, Standard 15ASXCC Investment Policy |
| 159. Settlement banks and custodians | |
| 159.1 What entity holds cash (i.e., name of settlement bank) and securities (i.e., name of sub-custodian) collateral belonging to Client accounts and house accounts? | The AUD-denominated assets of the CCP and its CMs are administered and held within the ASX group.NZD-denominated assets are held in NZClear. Assets denominated in G4 currencies are held in Clearstream.Cash collateral and cash contributed to the default funds are held directly by ASXCC and non-cash collateral is held in the CCP’s account in Austraclear. Hide noteRBA 2018/19 Assessment Appendix C1, Standards. 15.1 and 15.2 |
| 160. Settlement bank/custodian segregation of assets | |
| 160.1 Is collateral (cash and securities) provided to the CCP segregated from the assets of the entity (settlement bank) holding the collateral? | Yes.Hide noteCCP responses of 6 February 2015 |
| 161. CCP cash collateral accounts | |
| 161.1 In what type of account is the CCP required to hold cash collateral? | The Rules do not restrict the CCP from holding the cash collateral in any particular type of account. However, the CCP remains subject to its investment policy (see item 158). |
| 162. Liability in respect of cash collateral held at a settlement bank | |
| 162.1 Who bears the risk associated with cash collateral held at a settlement bank (i.e., if the bank holding cash collateral fails, who is responsible)? | Risks associated with of cash collateral held at a settlement bank are borne in the same way as risks associated with investment of any cash or non-cash collateral. Please see items 166.1 and 166.2 for how the risks and losses are allocated between the CCP and the CMs. |
| 163. CCP disclosure of risk allocation arrangements with custodians and banks | |
| 163.1 Does the CCP disclose what risk allocation arrangements it has with third parties holding cash or non-cash collateral on behalf of the CCP? | No.Hide noteCCP responses of 6 February 2015 |
| 163.2 If so, how is that disclosed? | N/A |
| 164. Claims on CM collateral held by custodians | |
| 164.1 Are custodians holding a CM’s collateral required to acknowledge to the CCP that the collateral in custody is not subject to any right, charge, security interest, lien or claim of any kind in favour of the custodian or any person claiming through the custodian (other than in respect of custodial fees relating to the relevant securities and cash account held by the CCP on behalf of the CMs)? | Not addressed in the Rules or the RBA 2022/23 Assessment or the RBA 2021/22 Assessment or the RBA 2018/19 Assessment Appendix C1.Hide noteRBA 2016/2017 Assessment Appendix C1, Standard 15.2 |
| 165. Name under which collateral and investments are held | |
| 165.1 In whose name are the collateral and investments held (i.e., the name of the CCP or the name of the CM)? | CashThe RBA 2018/19 Assessment Appendix C1 states that:cash collateral and cash contributed to the default funds are held directly by ASXCC (a wholly-owned ASX group company, of which the CCP is a subsidiary); andcash collateral and cash contributed to the default funds are “controlled” by ASXCC.The RBA 2022/23 Assessment states that an amended RITS membership agreement (and associated deed poll executed by the CCP) recognise that ASXCC is acting as trustee when holding collateral and other assets for the CCP.However, neither the Rules or the RBA 2018/19 Assessment Appendix C1 specify whether cash collateral that has not been invested is held in the name of the CCP or ASXCC. Given cash collateral is transferred by title transfer to the CCP, we would expect cash collateral (at least initially) to be held in the name of the CCP. Non-cash collateralAUD-denominated non-cash collateral is held in the CCP’s account in Austraclear. It is not held by a sub-custodian.Non-AUD-denominated securities held as investments or posted as non-cash collateral are held outside the ASX group.See also 156.3.Hide noteRBA 2018/19 Assessment Appendix C1, Standards 15.1 and 15.2The RBA 2022/23 Assessment, table 4, page 35 |
| 165.2 If investments are through an omnibus structure in the name of the CCP, does the CCP maintain records that indicate the underlying CM and/or Client whose collateral has been invested/pledged? | See item 14.2 of the Client Clearing Module. |
| 166. Allocation of investment profits/losses in respect of collateral | |
| 166.1 Are investment profits/losses in respect of collateral borne by the CCP or are they distributed back to CMs? | Investment losses1The Rules provide that certain “investment defaults” (described below) giving rise to losses exceeding A$75 million will be apportioned between the CMs in accordance with the Rules.CMs are entitled to reimbursement in certain circumstances. The apportionment mechanism and reimbursements are described in item 166.2.For the purposes of the above, “investment defaults” means either of the following:the insolvency or default of the issuer of an investment or the counterparty relating to an investment (which, in the case of an investment that is a deposit, includes the deposit-taking institution); ora loss which has been recognised with respect to, or other recognised diminution in value of, an investment (including such loss or diminution which arises in connection with a restructuring or similar event which occurs in respect of the investment),except to the extent that is a direct result of:the fraud of the CCP, ASX Clear Pty Ltd or ASXCC; ora material non-compliance by the CCP with its investment policy (the occurrence of such material non-compliance does not preclude the occurrence of an investment default).If one of the abovementioned events has occurred, then ASXCC may declare that an investment default has occurred and determine, in its reasonable discretion that an investment loss has been caused by or arises out of that investment default.For purposes of determining the amount of an investment loss, if the CCP has materially exceeded investment limits that it has approved in accordance with its investment policy, then ASXCC must disregard losses to the extent that they exceed those approved limits.If ASXCC determines that the aggregate amount of losses following one or more related investment defaults (other than those resulting from fraud of, or material non-compliance with investment policy of the CCP) is in excess of A$75 million then the amount of that excess will be allocated in accordance with the process set out in item 166.2.The CCPs’ approach establishes arrangements that non-default losses arising from a range of general business risks would be absorbed by ASX through application of operational and business risk capital held for the CCP at the ASX group level.Investment profits2In respect of investment profits, on the basis that investments are controlled and held directly by ASXCC, any investment profit would be retained by ASXCC. The Rules are silent on investment profit.The Rules permit the CCP to invest funds deposited with it as it sees fit. The Board may prescribe from time to time:the interest rate payable by the CCP with respect to monies on deposit with the CCP;the interest rate payable by CMs with respect to monies which remain owing to the CCP after the due time for payment.Subject to the above, any interest obtained by the CCP from the investment of monies on deposit with the CCP will be monies to which the CCP is absolutely entitled. See item 153.1Apart from such interest, the Rules are silent as to how the investment profits in respect of cash collateral are allocated between the CCP and the CMs. Hide note1RBA 2018/19 Assessment Appendix C1, Standards 14.3, 14.5, 15.1 and 15.2; ASX Recovery Rulebook, 6.2 (Allocation of Investment Losses)2Rule 3.2.3 (Monies deposited with ASX Clear (Futures)) |
| 166.2 If distributed to CMs, what is the basis of distributing profits/losses? | Each CCP’s investment loss and CM investment lossAfter an investment loss exceeding the A$75 million threshold has been identified in accordance with the Rules (see item 166.1), the investment losses will be allocated as follows:Allocation between two CCPs: firstly, ASXCC will allocate an amount of the investment loss to the CCP (and the CCP operated by ASX Clear Pty Ltd). This is to be determined on the basis of ASXCC’s calculation of the interest which the CCP and ASX Clear Pty Ltd respectively hold in the total amount of investments made by ASXCC; andAllocation among CMs of each CCP: secondly, the CCP will allocate its investment loss to each CM, as at the time the investment default is declared (see item 166.1). This allocation is to be determined on the basis of the CCP’s calculation of the amount representing funds which the CM has paid to the CCP in accordance with the Rules (including CM’s default fund contributions, collateral and excess cash) and which has been invested as at the time of the investment default declaration. The amount so allocated to a CM in this manner is the CM’s investment loss. provided that any investment loss on Overnight Margin Monies (“OM investment loss”), is to be allocated to each non-defaulting CM at the time of the allocation, as follows:firstly, ASXCC will allocate the OM investment loss to the CCP (the “ASXCLF OM investment loss”);secondly, the CCP will allocate the ASXCLF OM investment loss to each non-defaulting CM at the time of allocation (the “CM OM investment loss”), as follows:40 per cent. of the ASXCLF OM investment loss will be allocated in proportion to the CM’s Adjusted Default Fund Contribution;30 per cent. of the ASXCLF OM investment loss will be allocated only to those CMs that the CCP has notified prior to the investment default are in scope to pay the Overnight Margin Monies to the CCP in proportion to the CM’s Adjusted Default Fund Contribution; and30 per cent. of the ASXCLF OM investment loss will be allocated based on the CM’s percentage share of the total Overnight Margin Monies held by all US Settlement Banks at the time the investment default occurred.Where:“Adjusted Default Fund Contribution” means for a CM in the Service, the CM’s default fund contribution as last notified to the CM by the CCP and for a CM in the OTC Service, CM’s default fund contribution as last notified to the CM by the CCP adjusted by reference to the OTC/Futures margin ratio for the calculation period (as defined in Schedule 10 the to the Futures Rules).The determination of these amounts is final and binding on the CM, absent manifest error.Allocation of investment loss allocated to a CM between accounts of the CMThe CCP will allocate each CM’s investment loss (including investment loss allocated to the Clients of a CM) amongst the amounts representing funds which that CM has paid to the CCP in accordance with the Rules (including default fund contributions, collateral and excess cash) and which has been invested as at the time of the investment loss is declared. Such allocation will be made on a pro rata basis across the CM’s relevant accounts (including any Client Accounts). The CCP will allocate the CM OM investment loss across the CM’s relevant accounts (including any Client Accounts) on a pro rata basis, provided that such loss is first allocated to the Overnight Margin Monies (if any) paid by the CM to the CCP in respect of those accounts and then to the amounts representing all other funds which the CM has paid to the CCP (including its default fund contribution, collateral other than Overnight Margin Monies and excess cash) in accordance with the Rules and which has been invested in ASX Investments as at the time of the investment default declaration. The CCP will use the exchange rate of the foreign currency transaction it has entered into, or the average rate of such transactions if there are more than one, when determining the CM OM investment loss. Each such amount is immediately reduced by the amount so allocated to it, provided that no amount can be reduced to less than zero. If the amount of a CM OM investment loss is greater than the funds (including Overnight Margin Monies) the CM has paid to the CCP and which have been invested in ASX Investments as at the time of the investment default declaration, then the residual portion of the CM’s CM OM investment loss will be reallocated among the other CMs with available funds.In relation to the investment loss or a CM OM investment loss, the CM must reinstate the amount of such a reduction (other than a reduction in Overnight Margin Monies) on or before the next Business Day via a cash payment transaction in Austraclear. Such cash payment transaction must be at the “Settled” state at the same time as applies in respect of payments of margin payable on that day or as otherwise required by the CCP. CMs must provide each new Client with, or direct the new Client to, a copy of the investment loss fact sheet, before the CM holds an open position for such Client. The CCP must provide existing Clients, or direct the existing Client to, a copy of the investment loss fact sheet, within 3 months of the commencement of an ASXCLF OM investment loss allocation. The CCP may require CMs to attest annually that it has provided the investment loss fact sheet to its Clients. The investment loss fact sheet (as amended by the CCP from time to time) can be located on the CCP’s website and is titled “ASX Investment Loss Allocation – Fact Sheet for clients”.The CCP will notify each CM of its investment loss or CM OM investment loss and the allocation of such investment loss or CM OM investment loss across each of its relevant accounts. Failure to provide such a notification does not affect the allocation of the CM’s investment loss or CM OM investment loss.Use of a defaulting CM’s remaining collateral to reimburse a CM OM investment lossNotwithstanding the CM OM investment loss allocation above, a defaulting CM will be allocated a OM investment loss, if defaulting CM’s assets remain after the CCP has applied these assets to satisfy the CCP Loss (or a related body corporate of the CCP has applied those assets to satisfy losses incurred in connection with the CM’s default) and closed-out and/or ported all of the defaulting CM’s cleared positions (“Remaining defaulting CM Assets”). The loss allocation amount for such defaulting CM will be the lower of:the Remaining defaulting CM Assets (if any); andthe loss allocation amount the defaulting CM would have been allocated had it not been in default.The loss allocation amount for such defaulting CM will be applied to reimburse non-defaulting CMs on a pro rata basis for the original loss allocated to such non-defaulting CMs.ReimbursementIf the CCP exercises the powers described above and subsequently recovers an amount in respect of any investment which was the subject of the investment default, then the amount recovered (less any costs and expenses incurred by either the CCP or ASXCC in connection with the recovery) must be reimbursed to CMs.More specifically, the CCP must reimburse the CMs which suffered a reduction in the amount representing funds which the CMs have paid to the CCP in accordance with the Rules (including default fund contributions, collateral including Overnight Margin Monies or excess cash) because of their investment loss or CM OM investment loss with respect to that investment default.Such reimbursement will be made (by whatever means which the CCP decides is appropriate) pro rata to those CMs up to the amount of the relevant reduction and by also taking into account any CM OM investment loss reimbursement made to the same CMs from Remaining defaulting CM Assets. CMs will be reimbursed up to the amount of the relevant reductions prior to the CCP being reimbursed for any losses incurred in connection with the relevant investment defaults (excluding any costs and expenses incurred by the CCP in connection with the applicable investment defaults). Hide noteASX Recovery Rulebook, Rule 6 (Allocation of Investment Losses)ASX Recovery Handbook, Rule 6 (Allocation of Investment Losses)RBA 2018/19 Assessment Appendix C1, Standards 14.3, 15.1 and 15.2 |
| Global Glossary of Terms and CCP Specific Glossary of Terms | ASX Clear (Futures)_ETD_Glossary_01.23.25 |
| Monthly updates spreadsheet | ASX Clear (Futures) Pty Ltd Rule Updates Spreadsheet (as of 02.28.26) |
| Archive – yearly blacklines | ASX Clear (Futures) Pty Ltd – ETD – Base – (01.23.26 against 01.23.25)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.23.25 against 01.26.24)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.26.24 against 01.19.23)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.19.23 against 01.16.22)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.16.22 against 01.25.21)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.25.21 against 01.27.20)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.27.20 against 01.22.19)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.22.19 against 03.21.18)ASX Clear (Futures) Pty Ltd – ETD – Base – (03.21.18 against 03.16.17) |
| Archive spreadsheet | ASX Clear (Futures) Pty Ltd – ETD – Base – (01.23.26 against 10.24.25)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.24.25 against 07.24.25)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.24.25 against 04.23.25)ASX Clear (Futures) Pty Ltd – ETD – Base – (04.23.25 against 01.23.25)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.23.25 against 07.26.24)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.26.24 against 04.26.24)ASX Clear (Futures) Pty Ltd – ETD – Base – (04.26.24 against 01.26.24)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.26.24 against 10.26.23)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.26.23 against 07.26.23)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.26.23 against 04.26.23)ASX Clear (Futures) Pty Ltd – ETD – Base – (04.26.23 against 01.19.23)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.19.23 against 10.19.22)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.19.22 against 07.19.22)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.19.22 against 04.19.22)ASX Clear (Futures) Pty Ltd – ETD – Base – (04.19.22 against 01.16.22)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.16.22 against 10.26.21)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.26.21 against 07.16.21)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.16.21 against 04.27.21)ASX Clear (Futures) Pty Ltd – ETD – Base – (04.27.21 against 01.25.21)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.25.21 against 10.23.20)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.23.20 against 07.24.20)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.24.20 against 04.27.20)ASX Clear (Futures) Pty Ltd – ETD – Base – (04.27.20 against 01.27.20)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.27.20 against 10.23.19)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.23.19 against 07.23.19)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.23.19 against 04.23.19)ASX Clear (Futures) Pty Ltd – ETD – Base – (04.23.19 against 01.22.19)ASX Clear (Futures) Pty Ltd – ETD – Base – (01.22.19 against 11.20.18)ASX Clear (Futures) Pty Ltd – ETD – Base – (11.20.18 against 07.19.18)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.15.18 against 07.19.18)ASX Clear (Futures) Pty Ltd – ETD – Base – (07.19.18 against 03.21.18)ASX Clear (Futures) Pty Ltd – ETD – Base – (03.21.18 against 06.22.17)ASX Clear (Futures) Pty Ltd – ETD – Base – (06.22.17 against 04.22.16)ASX Clear (Futures) Pty Ltd – ETD – Base – (06.22.17 against 03.16.17)ASX Clear (Futures) Pty Ltd – ETD – Base – (03.16.17 against 10.25.16)ASX Clear (Futures) Pty Ltd – ETD – Base – (10.25.16 against 07.22.16) ASX Clear (Futures) Pty Ltd – ETD – Base – (07.22.16 against 04.22.16) ASX Clear (Futures) Pty Ltd – CCP Survey QuestionnaireASX Clear (Futures) Pty Ltd Rule Updates Spreadsheet (as of 02.28.26) |
| Diagrams | Hide noteASX Clear (Futures)_(ETD) – Waterfall StructureASX Clear (Futures)_(ETD) – Liability of a Withdrawing CM |
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