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
- daily stress testing of clearing participant positions under extreme but plausible market conditions to ensure the ongoing adequacy of clearing house financial resources
- additional margining of clearing participants where the size of their margins, or the projected shortfalls from closing their positions if they were to default in extreme but plausible market conditions, exceed acceptable levels, and
- conditions to restrict permissions, impose limits or direct participants to close out contracts.