Clearing house alert on up to 15 brokerages
The Age
Wednesday September 23, 2009
AS MANY as 15 brokerages were placed on an alert watchlist by the nation's equities and futures clearing house at the height of market volatility over the past year, amid concerns that a squeeze in liquidity would hurt the smooth running of the Australian sharemarket.The Reserve Bank's latest annual assessment, however, showed that by the end of June the number of brokerages on the Australian Clearing House watchlist had dropped back to eight.The clearing house provides the facility for equities, warrants and fixed interest transactions to be settled and paid for. It is backed by the National Guarantee Fund, which provides investor protection funding. Both are formally overseen by the RBA.Meanwhile, rules to increase minimum capital requirements for brokers to remain members of the clearing house from July next year are starting to have an impact. Nine have resigned over the past year €” although one new member joined.Before the change, brokers were required to have minimum capital of $100,000. The minimum has now been lifted to $5 million, and will eventually rise to $10 million.The Australian Clearing House has 57 participants, including 27 Australian brokers and 20 subsidiaries of foreign banks and brokers, and eight subsidiaries of Australian banks.While collapsed Wall Street brokerage Lehman Brothers was not a direct participant in Australia's share settlements and clearing system, "its failure and resulting spillover to securities and derivatives markets did pose some challenges", the RBA said in its assessment of the clearing house.Despite the sharemarket volatility, Australia's clearing and settlement facilities "were resilient to the turbulent market conditions during this period".In the cash equity market, after very strong growth in recent years, average daily trading volume increased by 16 per cent. In value terms, daily cash equity transactions fell by 30 per cent, reflecting the heavy falls in share prices during the year.The RBA said the Australian Clearing House acted in a "timely manner" to bolster its risk management activities in response to the heightened market volatility late last year. However, the RBA said further refinements to its risk-management framework should be considered.The assessment of the clearing and settlement facilities comes before the release tomorrow of a broader review of the banking sector.
© 2009 The Age