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Country Profile: Australia's securities finance market

09 March 2017


Traditionally, the Australian financing and stock loan activity was seen as largely between domestic counterparts, but this is now evolving to include global market participants

The most recent change has been to expand the reporting obligations for APRA (Australian Prudential Regulation Authority) regulated entities. SRF 720 & SRF 721 were introduced in July 2016 and request specific information related to stock loan and repo positions.

 Industry participants can access inventory via all the traditional routes to market, although there are certain elements of Australia’s infrastructure that are ripe for further development, according to Fannin. "Many participants still rely on bilateral collateralisation rather than leverage a tri-party solution – making trading flows relatively less efficient and expensive," he says. "However, we feel this situation will evolve as the market continues to grow and attract investment."

The Australian market has increasingly diverse and well-serviced range of collateral management offerings. The Australian Securities Exchange (ASX) recently launched a fixed income service with plans to expand to equities. The ASX partnered with Clearstream for its domestic tri-party offering, ASX Collateral. Other agents offer international tri-party.

Davin Cheung, global funding and financing sales, APAC, Clearstream Banking, says that activity is "picking up quite nicely". "The tri-party activity has really been going up significantly over this year – so you have the CCP, commercial banks and the central bank all in the tri-party platform that is operated currently by the ASX and supported by Clearstream. That’s a good sample for tri-party activities."

"The trend for this year will definitely be a pick-up in momentum. There will be more local players looking to sign up for the platform and existing ones will increase their balances – I have no doubt about its growth. The global margin requirements, the LCR requirement and the domestic Australian regulatory requirements are all factors pushing for tri-party activity."

Traditionally, the Australian financing and stock loan activity was seen as largely between domestic counterparts, but this is now evolving to include global market participants. True domestic onshore trades are now enhanced by EMEA, US or Pan-Asian counterparts using global collateral.

Tri-party collateral managers are able to support the Australian superannuation funds and the global borrowing community, working to safeguard equity and fixed income collateral.

BNY Mellon is one of these tri-party providers. Natalie Wallder, head of collateral management & segregation, Asia Pacific, BNY Mellon, says: "We see an opportunity to support our clients in two key market developments. The first of which recognises the continued emergence of a domestic repo market and expansion over the coming year of regulatory OTC derivatives collateral needs."
   


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