Enhancing the stability of Australia’s financial markets
A key requirement of the Reserve Bank of Australia’s Financial Stability Standards for Central Counterparties is that a central counterparty must have sufficient risk controls to provide a high degree of confidence that it can settle its obligations if there is a default by its two largest clearing participants and their affiliates in extreme but plausible market conditions.
As a result, ASX Clear has multiple layers of risk controls, including:
- minimum capital requirements for clearing participants, monitored through financial returns
- end of day margining of clearing participants' cash market positions and derivative market positions
- at times of high market volatility, intraday margining of clearing participants' derivatives market positions
- additional margining of clearing participants where the size of their positions, the size of their margins, or the projected shortfalls from closing their positions exceed acceptable levels
- measures to ensure the adequacy of clearing house resources, including daily stress testing against extreme but plausible market price moves, and
- conditions to restrict permissions, impose limits or direct participants to close out contracts.