Settlement of Market Repo transactions in Austraclear

What's this about:
  • Compliance
  • Operations
  • Risk
  • Technology
  • Austraclear
  • Collateral
  • Settlement
  • Trading
  • ASX 24 Market
  • Market repo
  • settlement
  • Austraclear Regulations
Notice reference number: 1433.19.12
Date published: 11/12/19
Effective as of: 11/12/19
Last updated: 11/12/19

The Australian repo market has historically adopted a fragmented approach to Market Repurchase Transactions (Market Repo) settlement. Market Repos with the RBA and some bilateral interbank Market Repos are currently settled using the repo module in Austraclear. Austraclear has become aware that Market Repos are also being settled by Austraclear participants using the “Fixed Income Securities” (FIS) outright module in Austraclear. The FIS module is designed to facilitate the settlement of outright bond transactions only, and does not take account the possibility of settlement of two linked but separate transactions at different points in time (as is characteristic of a Market Repo).  Accordingly, the FIS module does not allow for the settlement of a Market Repo in Austraclear as a transaction having the characteristics of a Market Repo, to sufficiently satisfy the requirement under Regulation 25.4 of the Austraclear Regulations (the Regulations).

Standardising the instruction and settlement of all AUD Market Repos facilitates a consistent approach to repo settlement across counterparty types and aligns internal trading system and settlement system records. Additional benefits to the market as a result of standardising Market Repo settlement include the following:

-        consistent reporting of Market Repo transactions from execution to settlement, resolving inconsistent reporting of transactions across trading and settlement systems; and

-        the potential for improved operational efficiencies for participants through the increased use of straight-through processing (STP) to settle all types of repos (including RBA repos) as a result of achieving consistency in Market Repo settlement.

Austraclear participants are reminded that both the first and second leg of all Market Repos are to be settled using the dedicated repo module in Austraclear to ensure compliance with Regulation 25.4 of the Regulations.

Austraclear recognises that internal systems changes may be required by some Austraclear participants to enable these participants to settle Market Repos using the repo module. To support the market in complying with the requirement for Market Repo settlement using the repo module, Austraclear will be conducting client education sessions individually and via various industry forums. Resources will be made available to plan and support customer testing throughout the course of 2020. Austraclear participants will be required to attest to their preparation and readiness at various check points throughout the year. Austraclear will share further details relating to these resources in Q1 2020.

Austraclear will continue development of the proposed linked and deferred settlement functionality, and will provide an update on this in due course.

Austraclear has determined that until 23 November 2020 “no action” will be taken against any Austraclear participants for a failure to comply with Regulation 25.4 of the Regulations. Participants will be required to attest that their internal processes are compliant with Regulation 25.4 of the Regulations in advance of 23 November 2020.

This “no action” relief does not constitute a waiver of the Austraclear Regulations.

What do I need to do by when?

It is recommended that Austraclear Participants assess at the earliest opportunity the extent of any technical and process changes required. Participants should note that it is possible to instruct to the repo module either via SWIFT messaging protocols or manually via the Austraclear user interface.

Need more information?

For more information refer to the Austraclear User guide. Additional resources will be made available to support participants as the initiative progresses. 

Issued by

Emma Isakka, Product Manager, Austraclear

Contact information

Emma Isakka
1300 362 257