On August 11, ISDA and FIA submitted a joint response to the Reserve Bank of Australia (RBA) on its consultation on guidance for Australia’s clearing and settlement facility resolution regime. The associations welcome publication of the draft guidance, which provides greater clarity and transparency on the RBA’s approach to the resolution of clearing and settlement facilities in Australia. However, the associations encourage the RBA to provide greater detail on certain aspects of its approach to resolution, including:

• The objective elements that the RBA would consider when determining whether to trigger resolution.
• Explicit assurance that the power to direct a central counterparty to amend its rules would not be used to amend any rights that any clearing participant has to terminate contracts with or take other action against a clearing house and, more broadly, under what circumstances the RBA would use this direction power.
• How it would approach compensation of market participants if their resources are used in resolution.
• Loss allocation tools – more explicitly, ruling out initial margin haircutting and limiting the use of tools like haircutting variation margin in a resolution scenario and restricting the number of cash calls on clearing members that may be used, even when those tools are part of the recovery rules.