Clearing and settlement facilities: central counterparties, securities settlement and overseas facilities

CCP becomes the counterparty to both parties through mechanisms such as novation. The key issues are credit risk, margin, collateral, liquidity and default management; SSF deals with the transfer of securities interests, payments and settlement finality, and may include a central securities depository. The domestic licensing basis is s824B(1); the overseas s824B(2) pathway requires authorisation in the country of the facility’s principal place of business, the same facility and sufficiently equivalent supervision. The advantages are a clear legal framework for transaction performance, centralised risk management and settlement. A significant Australian connection may bring an overseas facility within the regulatory regime. For example, Euroclear’s temporary exemption and application transition do not amount to a formal grant of a licence.RBA Facility overview

ASIC must be satisfied under s824B as to ongoing obligations, appropriate operating rules, mitigation of systemic risk, fair and effective services, conflict management, enforcement of participant rules, controls and personnel qualifications. Domestic CS licensees must be registered under Chapter 2A; they cannot rely on the old RG211 to assume that a foreign corporation can directly choose the domestic pathway without meeting current registration obligations. Applications under s824A and domestic regulations 7.3.10—11 or overseas regulations 7.3.13—14 must include English-language company and facility information, opinions on legal enforceability and settlement finality, risk and resource models, rules, participant and bank or custodian links, and testing and recovery plans. CCP submissions focus on margin and default resources; SSF submissions focus on securities ledgers, delivery-versus-payment and finality design. The SSF standards of RBA took effect on 2024-06-24; the applicable exception for annual gross settlement financial obligations not exceeding A$40 billion does not constitute an exemption from CS licensing. When the threshold is exceeded for the first time, RBA must be notified immediately, and the standards must be complied with from the next financial year and each subsequent financial year.Current Corporations Act SSF Scope

The board and senior management are responsible for stable operations, and key personnel must be fit and proper and competent. Shareholders and holding companies must avoid unacceptable control situations. CCP must be able to manage margin models, credit and liquidity risks, collateral, participant defaults and recovery; SSF must have capabilities in securities records, settlement banks, finality, custody and operational risk. Both should cover independent risk and compliance, system security and regulatory liaison. Resources should reflect scale and business risk, rather than a fixed number of compliance officers. A domestic entity should make arrangements for Australian-resident directors, secretaries and director ID as appropriate for its company type. Overseas teams must demonstrate that ASIC and RBA regulatory cooperation and emergency response are practicable.

No uniform fixed minimum share capital in Australian dollars or uniform NTA threshold has been verified. The applicable FSS standards—CCP standard 14.3 and SSF standard 12.3—require equity-supported liquid net assets sufficient for at least six months of current operating expenses and adequate to implement recovery or orderly exit. Resources should be of high quality and readily accessible, and in principle separate from credit, liquidity and participant default resources. CCP must also allocate margin, default and liquidity support according to risk; SSF must allocate resources according to its credit and liquidity exposures and should not mechanically copy the CCP default fund. SSF below the applicable threshold under the standards remains subject to s821A adequate resources and licence conditions; it must not be advertised as requiring zero capital.CCP General business risks SSF General Business Risk

The domestic pathway must meet Australian company registration and genuine resourcing requirements, and specify the management office, settlement and clearing systems, primary and backup premises, and outsourcing locations. The offshore pathway must specify the principal place of business in the home country, existing authorisations, and arrangements for Australian regulatory data collection and access; foreign company registration obligations continue to apply. Before relocating the offshore principal place of business to another country, check the s821F ASIC approval. There is no uniform threshold for office floor area or a general requirement that all systems be located in Australia; local resources, supervisory intensity and cross-border conditions are determined by the actual risks and licence conditions.

• Discuss in advance with ASIC and RBA the CCP or SSF functions, Australian connections, domestic or offshore pathways, and applicable FSS.
• Prepare the legal entity and control structure, participant rules, legal finality, risk models, financial resources and recovery resources.
• Have the governing body approve the English application, submit it to ASIC via s824A and provide the materials required by RBA.
• Complete ASIC fairness, effectiveness and licensing reviews, and the RBA stability risk review; accept any necessary independent verification and overseas regulator communications.
• ASIC makes the ordinary licensing decision, with all conditions, testing and readiness for opening completed; the ministerial crisis-transfer exception is not a routine step.

Official: No current uniform target for approval of new licences has been verified; the old RG211 timeframe of 12–16 weeks described only the former process of providing advice to the Minister, and ASIC expressly states that its guidance has not yet been updated to reflect the reforms, so it should not be used as a current commitment. Commercial: an initial budget schedule of 12–24 months or longer may be allowed for legal, systems, risk model and two-agency assessments; new types of CCP or complex overseas facilities usually require reassessment. This assumption is not a regulatory commitment or statistic. The transitional target for Euroclear to submit an application by 2027-05-26 is specific to that case only.

For an acquisition of a domestic non-widely-held licensee, or an applicable holding company, check the prior ASIC approval requirements for holdings exceeding 20% and any existing limits. Maintain risk resources, key personnel and continuity of participant services during the transaction; assess stability impacts relevant to RBA, critical links and contractual consents. Changes to products, settlement banks, custody, technology or rules require attention to licence and rule changes and regulatory engagement; a change of operator or asset transfer does not automatically transfer a licence. In a domestic crisis, RBA may lawfully use management or transfer powers; the special ministerial successor-licensing mechanism is separate from an ordinary merger or acquisition.

Continually comply with current s821A, applicable FSS and licence conditions; review financial resources, margin or settlement risks, links, finality, participant admission and default rules, and maintain recovery and recapitalisation plans. Report as required by ASIC and RBA; notify RBA immediately of s821BA matters, including failure or possible failure to meet FSS or resolvability standards; handle other matters under s821B and other applicable requirements. Conduct regular disaster recovery, stress and default exercises, remediation, regulatory access and financial verification. Company registration and overseas authorisations must remain valid; an orderly exit must address all unsettled transactions and critical services, and the business cannot simply be shut down.

Frequently Asked Questions