Regulators, RBA turn focus to OTC derivatives market
Potential improvements to market transparency, legal documentation and collateralisation in the Australian over the counter (OTC) derivatives market are those that the industry will need to discuss in the coming weeks to keep the key regulators and authorities happy.
The Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Reserve Bank of Australia (RBA) will be consulting with the financial services industry over coming weeks to discuss possibilities for improvements in the Australian OTC derivatives market.
Despite improvements in this market over recent years, there is still some way to go. Following a survey of more than 30 participants in the Australian OTC derivatives market, APRA, ASIC, and the RBA found that there remains scope for improvements to operational and risk-management practices. The key areas that could be improved include those of market transparency, legal documentation, collateralisation, and the use of infrastructure, the authorities said.
APRA, ASIC and the RBA released a report on the Australian over the counter (OTC) derivatives market late last week. The report summarised key findings of a survey conducted by the authorities in recent months that examined areas in which operational and risk-management practices could be improved.
A statement from ASIC said that the international regulatory community had paid “increasing attention to developments in this area” in response to the turbulence in financial markets. In April last year, the Financial Stability Board (then known as the Financial Stability Forum) recommended that regulators take action to ensure the OTC derivatives market had sound legal and operational infrastructure.
The respondents to the survey provided information around institutional details, risk management and infrastructure, and products and counterparties.
The report found that positive developments in recent years included an increasing focus on risk-management issues, greater awareness of the importance of industry-standard documentation, more comprehensive use of collateral, and a gradual shift towards automation of post-trade processes.
Recommended for you
WT Financial has announced its second “Hubco” with a combined valuation of $7.8 million, while its first one has successfully incorporated and is now making its own acquisitions.
Remediation and litigation costs have led AMP to announce a reduced statutory net profit after tax of $98 million for the first half of 2025.
Stakeholders in the professional year discussion underscore the challenges in the current pipeline and what is holding back licensees from taking on new candidates.
Colonial First State has partnered with JP Morgan Asset Management to make its inaugural private equity allocation, continuing the firm’s expansion into unlisted asset classes.
