Mandatory central clearing for foreign currency-denominated derivatives the next step for Australia?

The regulation of the Australian OTC derivatives market continues to evolve. The next step may be the introduction of a central clearing mandate for interest rate derivatives denominated in US dollars, pounds sterling, euros and yen.

That is the only firm recommendation in the Council of Financial Regulators' latest report on the derivatives market. Other possible changes, such as mandatory central clearing of AUD-denominated interest rate derivatives and mandatory platform trading, are slated for further investigation before the CFR decides on a policy recommendation.

The decision to recommend mandatory central clearing for foreign currency-denominated derivatives, but not AUD-denominated, is based on two factors: practicality and policy.