AFMA Committees Round-up Member Updates

Transcription

1 MEMBER NEWS November December 2017 Member Updates AFMA s Market and Operations s and Working Groups play a vital role in the efficient operation of the OTC markets by developing and managing the conventions, practices and documentation that enable the conduct of OTC transactions on common terms and understandings. Market s are elected by their peers and are subject to oversight by the Market Governance. AFMA also has a range of Policy s that facilitate industry discussion and action on policy and regulatory issues. Upcoming committee meetings are summarised in the Policy Calendar. Member firms that do not have a representative on a particular committee may suggest items for inclusion on meeting agendas by contacting the AFMA Secretariat. The summary below gives a snapshot of the issues considered and initiatives undertaken by AFMA committees over the past month. Market & Operations s Electricity 1 November, Melbourne Environmental Products 1 November, Melbourne Debt Securities 9 November Discussed the recent National Energy Guarantee policy announcement by the Federal Government, and the associated advice from the Energy Security Board. Given the potential negative implications for the electricity derivative markets, it was agreed that AFMA should seek to work closely with the regulatory authorities if the policy gains traction. Members also discussed restarting the electricity derivatives turnover survey (previously part of the AFMR), given recent regulatory interest in this area and the lack of other data alternatives. Members reviewed and approved minor amendments to the Environmental Product conventions for MGC ratification. Members also discussed the National Energy Guarantee policy which, whilst having potential major implications for electricity derivatives, also has potential implications for trading of LGCs and STCs. Discussed market conditions, trading considered to be good in Commonwealth Government Securities and satisfactory for Semi Government securities. The welcomed the implementation of the half tick increment in the 3YR bond futures contract and noted the rising roll volumes in futures trading with the September 2017 roll hitting record levels.

2 NTI 13 November Gas Derivatives Working Group 14 November Inflation Products 16 November Repo 23 November Cash 24 November Credit Products 28 November Swaps 29 November Documentation 30 November Discussed the feasibility of codifying an interpolation methodology for rates referencing BBSW where the term to maturity is less than one month, consensus being that the Cash Rate was not the appropriate T 0 rate from which to interpolate given its risk free nature and that the parties should continue to bilaterally agree the rate rather than set a methodology by way of a convention or guideline. Agreed on minor amendments to a Cash Settled Gas Trading Addendum and associated confirmation. Trading conditions remain subdued due to a benign inflation outlook and low interest rates. The noted the strong demand for linkers issued by the AOFM where a new 5 year tender was conducted to establish a November 2022 line. At A$3.5 billion, the issue was the largest tender ever, AOFM receiving bids totally A$13 billion. Discussed the potential for RBA to automate the OMO approach methodology alongside that in place for AOFM s bond tendering process. The is now monitoring the new timing of the announcement of OMO intentions, which has been advanced by 10 minutes and occurring between 9:20-9:35am. Discussed liquidity conditions in the evening sessions and the increased difficulty in squaring up. Live proving of the RITS Fast Settlement Service (FSS) is being conducted for two weeks from 27 November, where orchestrated $1 payments between the participating banks will be made. Members will review impacts on bank s evening squaring once PEXA digital conveyancing is fully mainstreamed. Discussed the new disclosure practice for price and tenor for credit issuance, noting challenges initially encountered in socializing the guidelines. However, this now appears to have been resolved. The disclosure practice will be incorporated into the DCM Primary Market Guidelines. Discussed the Reference Price Transactions Guidelines for the Australian swaps market which are modelled on those issued by the FICC Markets Standards Board, and which have now been adopted following acceptance by AFMA s Heads of and FICC Markets s. Discussed the latest netting opinions and legal opinions applicable to ISDA master agreements, GMRAs and GMSLAs contained in the OTC Guide. It also considered the proposed rectifying amendments to the Personal Property Securities Act now in consultation by Attorney-General s Department, and the Government s draft legislation supplementing APRA s Crisis Management Powers. Page 2 of 5

3 Market Governance 1 December Interest Rate Options 7 December Operations 12 December Futures Steering 13 December The welcomed new members Fiona Trigona (NSW Treasury Corporation) Anthony Robson (Yieldbroker Pty Ltd) and Colin Gilbert (ICAP Australia Pty Ltd). Discussed endeavours underway within ISDA to ensure appropriate fallback arrangements to benchmark rates and particularly LIBOR are in place. This underscores the Financial Stability Board s (FSB) belief that market participants should understand the fall back arrangements that would apply if a permanent discontinuation of such an interest rate benchmark occurred. The FSB has engaged with ISDA to examine fall back options, which in turn has established working groups to tackle this issue. One ISDA working groups covers the Asia-Pacific (AUD, SGD/HKD). Discussed the ongoing low-volatility AUD interest rate environment, which continues to negatively impact caps and floors liquidity. The Operations held a relaunch meeting and welcomed two new members Peter Farrell HSBC Bank Australia and Sebastian Rebeiro from Deutsche Bank. The considered its focus over the next 12 months which includes work on blockchain, margin implementation matters, AML/KYC, NPP, the new ASX BBSW Reporting Guidelines implementation, MIFID II, BEAR and CHESS replacement. ASX overnight margin calls Changes to STELs AIMs process Industry funding of ASIC Policy s Markets IT 8 November DCM Legal 8 November ASX attended as a guest of the to provide updates on the ISO20022 and the CHESS replacement project. Discussion also covered other topics of relevance to the ASX including the Cinnober Financial Technology update, and the upcoming status server. An update from Yieldbroker was tabled on MIFID II changes. Members also discussed the ASIC penalty regime consultation. focused on review of the draft DCM Primary Market guidelines Noted ECM Due diligence planning management (DDPM) Discussed MiFID II implementation in primary markets affecting Euromarket syndicated cross-border bond issuance Product governance and influence of allocation justification recording, inducements, costs and charges and trade and transaction reporting Page 3 of 5

4 Equities 13 November Discussed policy submissions on ASIC Enforcement Review papers on Penalties and Directions Powers and APRA Crisis Management Powers and earlier closed consultations Discussed the functioning of the Market Disciplinary Panel Considered the interpretation of s12bc ASIC Act FICC Markets 14 November Received an update on the development of AFMA FICC markets guidelines Discussed ASIC projects in OTC markets surveillance Shared information about MiFID II developments Energy Regulatory Working Group 16 November Tax 30 November Discussed the recent National Energy Guarantee policy announcement by the Federal Government, and the associated advice from the Energy Security Board. Members also discussed restarting the electricity derivatives turnover survey (previously part of the AFMR), given recent regulatory interest in this area, and the lack of other data alternatives. Discussed the AFMA/ATO Liaison Meeting and the agenda items arising. Considered the Exposure Draft and draft Explanatory Memorandum in relation to the anti-hybrid rules. Acknowledged the release of the Tax Transparency data. Risk Management Noting global interest in establishing agreed industry fall-back arrangements to benchmark rates and particularly LIBOR, the will now be reviewing potential basis risk implications from any asymmetrical approach to the application of credit and liquidity premia. AML Developments in the review of the AML/CTF Act Report back on the Reliance Workshop held with ABA, Austrac and Attorney General s Department Current areas of focus for the Fintel Alliance Page 4 of 5

5 Heads of Capital Raising 13 December Discussed policy submissions on ASIC Enforcement Review papers on Penalties and Directions Powers and APRA Crisis Management Powers Considered the announcement of the Banking Royal Commission Considered ASIC s plan and objective for 2018, particularly in relation to focus on wholesale markets Noted that AFMA would provide the FX Global Code Register for Australia and New Zealand and discussed its functioning Discussed work on reference rate fallbacks agreed to AFMA publishing the Due Diligence Planning Memorandum and discussed means of communicating with relevant issuer advisers concerning its availability. Discussed MiFID II implications for Australian practices and interaction with ASIC guidance Considered ACCC concerted practices guidance and implications for association activities Australian Financial Markets Association Level 25, Angel Place, 123 Pitt Street Sydney Tel: Fax: secretariat@afma.com.au Web: Page 5 of 5