Australian Stock Exchange Reduces OTC Transaction Costs to Bolster Activity

Australia’s trading community is expected to benefit from the proposed changes taking place at the Australian Stock Exchange (ASX) in relation to transaction fees. The country’s main exchange has reported that it will reduce fees, on a volume basis, for certain OTC derivatives products. The move comes on the back of ongoing investment and developments by the exchange in its OTC derivatives product range and infrastructure.

Under the new proposals, the ASX will be reducing its fees on interest rate (IR) futures for clearing participants, the exchange offers users a number of IR instruments. The ASX’s interest rate derivatives are futures and options contracts listed on Australian and New Zealand interest rate securities and reference rates.

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Financial derivatives are a key component of the ASX’s diverse product offering. The ASX is the world’s fifth largest market for listed interest rate futures contracts. According to the exchange, derivatives amounted to $197 million, or 32% of total ASX group revenue in FY13, among its derivatives products, interest rate futures account for the majority of trading volumes.

The ASX has been developing its OTC derivatives products offering since new guidelines were put forward at the G20 Summit in 2009. In January 2013, the first OTC derivatives contracts were cleared on the exchange’s clearing solution.

Peter Hiom, pictured, Deputy CEO of ASX, spoke about the firm’s developments on the OTC clearing segment in a statement: “ASX is committed to providing the Australian market with a competitive clearing service that delivers capital and operational efficiencies, with the additional benefit of being in the local time zone. We are now focussed on building liquidity, broadening the product offering, and extending our service to end-clients which we are on track to deliver by April 2014.”

Australia’s OTC derivatives market has a notional value of AU$15 trillion per annum.