Cash clearing competition moratorium under review

The Council of Financial Regulators (CFR) is set to conduct its second review of competition in the clearing of Australian cash equities in three years.

Assistant Treasurer, Josh Frydenberg, announced that the moratorium on competition in the sector, imposed by the previous Government after the initial review, would remain in place in the interim.

He said the Federal Government was "committed to promoting safe and efficient financial markets that drive economic growth", and it wanted to ensure the "appropriate regulatory settings" were in place to achieve its goal.

"Clearing involves a third party stepping in to protect each party to a transaction from the risk that the other will not meet their obligations," he said. "It is a key facility to manage overall risk in the financial system and also contributes to efficiency and certainty for investors.

"In February 2013, the previous Government placed a two-year moratorium on competition in the clearing of Australian cash equities. As a result, all Australian cash equities are currently cleared through ASX Clear Pty Limited, a subsidiary of ASX Limited.

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"A code of practice has since been implemented to deal with clearing and settlement services.

"The moratorium on competition will continue to apply until the Government responds to the Council's review."

As part of the review, the CFR, assisted by the Australian Competition and Consumer Commission, will conduct a number of stakeholder consultation meetings next month, alongside a request for submissions, which should be directed to the Australian Treasury.