The Australian stock exchange (ASX Group) has announced plans to extend its existing OTC derivatives clearing service to include client clearing functions.

ASX said the move would provide extra risk management controls to Australian investors and asset managers, allowing them to protect positions and collateral in the event of default.

Elmer Funke Kupper, ASX managing director and chief executive, said: “ASX believes it is important that investors have access to a world-class and highly liquid clearing service in Australia.

“It is part of our agenda to ensure that Australia has the infrastructure that position it well globally and in the Asian Century.”

The new functions are due to be brought online by the end of 2013, subject to regulatory approval. ASX said the clearing service would provide greater operating efficiencies for Australian investors and asset managers and be based on-shore, bringing it under the control of Australian financial regulators.

In designing the service, ASX has worked closely with major Australian financial institutions including AMP Capital, Colonial First State Global Asset Management, Future Fund, NSW Treasury Corporation, QIC (Queensland Investment Corporation), Queensland Treasury Corporation, Suncorp Bank, Treasury Corporation of Victoria and Victoria Funds Management Corporation.

Together, the financial institutions manage total aggregate assets in excess of A$768bn – or nearly 40% of total Australian investor funds under management.

David Clarke, chief risk officer of QIC, said: “We recognise that financial markets are increasingly global in nature. However, it is important for QIC as manager of $70 billion in assets that we have flexibility and choice in controlling the risk of our transactions.

“Having a domestic clearing solution available for Australian dollar interest rate swaps is therefore a valuable option to us. We are pleased that a number of banks are working with the ASX to deliver a local solution.”