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ANNUAL REPORT 2019Australian Financial Markets Association Ltd
Annual Report 2019
Over the last year, AFMA has maintained its focus on promoting the conditions that will
support the maintenance, growth and development of competitive financial markets. This
emphasis reflects the reliance of the Australian economy on financial markets that operate in
a fair, resilient and efficient manner as an important means to enhance national productivity
and growth. The best way to meet this objective at present is to create and use opportunities
that can reinforce the commercial and public policy foundations that sustain effective financial
markets. This approach provides a clarity of direction that is necessary to channel both
government and business responses into actions that will achieve the central, overarching
economic purpose of markets.
p. 3
www.afma.com.au
© 2019 Australian Financial Markets Association Ltd. This report is subject to copyright. No part of it should be reproduced without the written consent of the copyright owner.
CONTENTS
CEO Report ....................................................................................................................................... 4
Policy Initiatives .............................................................................................................................. 9
Market Committees ...................................................................................................................16
Professionalism .............................................................................................................................19
Education .........................................................................................................................................21
International Engagement ....................................................................................................22
Activity on Australian Financial Markets .......................................................................24
AFMA in the Community .......................................................................................................26
AFMA Staff .......................................................................................................................................27
AFMA Committees .....................................................................................................................31
Governance ....................................................................................................................................32
2018/19 Submissions ...............................................................................................................33
AFMA Members ...........................................................................................................................35
About AFMA ...................................................................................................................................35
p. 4
Annual Report 2019
The outline of AFMA’s activities over the last year, which I
will now provide, illustrates the practical benefits that flow
from this leadership, when combined with members who are
committed to the Association. The actions taken by AFMA
to advocate for sound public policy in relation to financial
markets, to develop and manage industry standards and to
promote professionalism in the industry, including through
accreditation, have been productive for member firms. While
there is still much to be done, we have a good platform to build
for the future.
AFMA’s Focus on Financial Market Advancement
Over the last year, AFMA has maintained its focus on
promoting the conditions that will support the maintenance,
growth and development of competitive financial markets.
This emphasis reflects the reliance of the Australian economy
on financial markets that operate in a fair, resilient and
efficient manner as an important means to enhance national
productivity and growth.
The best way to meet this objective at present is to create and
use opportunities that can reinforce the commercial and public
policy foundations that sustain effective financial markets.
This approach provides a clarity of direction that is necessary
to channel both government and business responses into
actions that will achieve the central, overarching economic
purpose of markets.
In other words, regulatory reform, operational advancement,
technological innovation and better business practices can
each be directed to systematically guide the development
of financial markets in a manner that meets the community’s
saving and investment needs and supports the broader
economy. This all requires sound judgement and often the
ability to balance competing factors.
This process is more difficult than usual in the current policy
setting for more expansive and intensive regulation. AFMA
has sought to work constructively with government to ensure
policy precision and to prevent unintended effects from policy
and regulatory reforms.
Against this backdrop, AFMA has had a busy and productive
year in responding to the concerns and needs of member
firms. It is worth observing in this regard that more than 700
people participated in AFMA committees last year, with over
150 committee meetings taking place. This significant effort on
the part of all involved has generated good results for member
firms across the range of its activities undertaken by AFMA, as
I summarise below.
Of course, there is much more to be done over the next
year, as many policy and regulatory measures are still under
development or are in the process of being implemented.
However, AFMA’s credible, constructive and resolute approach
to these issues provides a strong base from which to pursue
the outcomes sought by members for the further development
of the industry.
I am pleased to advise members that the Association is performing well
in meeting the objectives set for it by members. Before I elaborate on this,
I would like to acknowledge the valuable contribution by John Knox, who
was AFMA’s Chair over the last three years, to achieving this outcome. He
expertly guided the work of the Board, which has provided the strategic
direction and vision that is so vital to our work. John’s commitment to this
task and the high quality of his advice is greatly appreciated.
CEO REPORT
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Financial Markets Growing in Importance to the Economy
The stability and operational efficiency of Australia’s financial
markets can sometimes mean that they are taken for
granted and the scale of their importance to the economy
is underestimated.
To provide some perspective on the vital role of financial
markers, I note that the Australian equity market daily average
turnover for the June 2019 quarter was $6.82 billion and
capital raisings on the ASX market exceeded $86 billion
in 2018-19. The debt capital market is also large, with the
outstanding amount of non-government securities in Australia
exceeding $840 billion at June 2019. Government debt
securities issued in Australia also exceeded $800 billion at
this time.
In July, AFMA welcomed the release of an ASIC report
that provided solid evidence that the Australian equities
market exhibits a high level of market cleanliness and fares
well by international comparison. This reflects the ongoing
commitment of resources by market participants to a fair and
efficient market and a thorough approach by ASIC to market
surveillance and enforcement.
Survey data indicates the extensive reliance on interest rate
and foreign exchange hedging and trading in a modern, open
economy with a liberalised financial system. For example, the
triennial BIS survey reported that, in April 2019, OTC interest
rate derivatives turnover in Australia averaged USD97 billion
per day and foreign exchange turnover averaged USD119
billion per day.
Promoting Sound Policy Settings
AFMA seeks to maintain an open and constructive dialogue
with government, that enables us to promote the vital role
of financial markets in economic development. Government
needs a deep understanding of this proposition for it to
properly prioritise, test and sharpen the design of public policy
and then implement the associated measures in an effective
and timely manner.
The effort to balance competing objectives in the design
of policy requires ingenuity and constructive engagement
between policy makers, financial regulators and market
participants. AFMA operates as an interlocutor in the dialogue
between the industry and government on these matters.
Arguably, AFMA’s role in this regard has never been more
important to the industry given the exceptional scrutiny on
the financial sector and the pace and scope of regulatory
change. The financial regulators have extended powers,
greater operating resources and can draw on greatly increased
penalties to deter corporate misconduct.
Over the last year, the Board met with senior representatives
from both sides of politics, including the Assistant Minister
Minister for Superannuation, Financial Services and Financial
Technology, Senator Jane Hume, and then Shadow Treasurer,
Chris Bowen, to discuss economic and financial sector
policies. The Board also met with senior regulators including
ASIC’s Chair, James Shipton, and APRA’s Chair, Wayne Byres,
to deepen our understanding of their priorities and approach
to wholesale financial markets regulation and discuss the
most effective and efficient way for the industry to meet their
expectations. The Board’s meetings were supplemented by
numerous secretariat engagements with government and
regulatory representatives.
A Busy Year for Policy Work
Consistent with our experience in recent years, AFMA has
been proactive in addressing a large number of technical
policy, tax and regulatory issues that impact member firms.
This is a major program of work for the secretariat and policy
committees, with more than 60 active issues receiving
attention. The range of issued covered included transaction
and data reporting, governance (including BEAR), financial
benchmark transition, energy policy and environmental product
markets, Australian financial service licensing requirements,
AML and taxation, amongst others.
AFMA made over 50 submissions to governments, regulators
and industry infrastructure and service providers both in
Australia and overseas over the course of the year. The
substance of this work is covered in a dedicated section of
the Annual Report and in the Key Achievements Summary
previously circulated to member firms.
Overall, AFMA’s work on these matters has had a positive
effect on the performance of member firms and the
industry through increased operational efficiency, business
opportunities and relative cost reductions.
CEO REPORT
In July, AFMA welcomed the release of an
ASIC report that provided solid evidence that
the Australian equities market exhibits a high
level of market cleanliness and fares well by
international comparison.
p. 6
Annual Report 2019
Technology and Information Security
One area that I would like to touch on briefly this year is
AFMA’s response to technological developments. The
financial system continues to be dynamic and innovative, with
technology being applied to open the way for new products
and services and presenting opportunities to improve the
efficiency of the financial services industry. The development of
applications using distributed ledger technology is an example
of this. AFMA’s members are leaders in this change process,
both as providers and users of new systems and services.
While the move to draw more heavily on technology should
be regarded as ‘normal course’ business in modern financial
markets, it does introduce new operating and regulatory
challenges. AFMA has responded by improving its capacity
to respond to, and manage, emerging issues in the way that
will best assist our members. For example, during the year,
AFMA established an Information Security Committee that
prepared submissions in response to multiple government
and market operator consultations and conducted a range
of related information sharing activities, including a half-day
conference involving the regulators, expert consultants and
market participants.
Professionalism
AFMA’s decision several years ago to accord a higher priority
to supporting professionalism in the financial markets has
been vindicated and the solid progress we have made has
been well received by government and regulators, as well as
member firms.
AFMA’s Professionalism Committee, capably led by its
independent Chair, Johanna Turner, provides strategic
guidance on conduct standard setting and accreditation
activities, so they provide a practical and achievable way of
meeting the expectations of market participants, regulators and
the broader community.
AFMA’s strategy in implementing the professionalism program
draws on the capability of member firms and their employees.
The strength of the program is its focus on delivering timely
and well-targeted measures that substantively embed
professionalism in the way business is done in financial
markets. We have quickly moved forward from a discussion
about high-minded professionalism principles to implementing
practical supporting actions and achieving material outcomes.
For example, AFMA was the first body to build a course to
teach the new VET sector training competencies for business
ethics in financial services, with the first tranche of students
commencing in March 2019. Further, the Board determined
in November 2018 that all new and existing accredited
individuals must demonstrate these competencies to retain
their AFMA accreditation.
Common standards and guidance support efficient and ethical
practices by the firms and individuals involved and, during
the year, the Professionalism Committee approved an internal
policy for the development of conduct standards.
The Chair of the UK’s FICC Markets Standards Board
(FMSB), Mark Yallop, visited AFMA in May 2019 and had
constructive meetings with the Board and with members of
the Market Governance and Professionalism Committees.
AFMA and the FMSB share a common interest in promoting
good practice in the FICC markets, so this provided for many
interesting points of discussion. AFMA Committees are now
routinely asked to consider if FMSB guidance, or similar
guidance, that is being developed might be usefully adopted,
or adapted, by AFMA for Australia’s financial market place.
International
Australia is a diligent observer of global regulatory standards
and the approach taken by domestic regulators will continue
to be influenced by the Financial Stability Board, FATF,
IOSCO and the Basel Committee. For instance, the corporate
plans of ASIC, AUSTRAC and APRA usually take account of
the reports and guidance issued by their corresponding
global body.
From an Australian perspective, it is desirable for our
regulators and the industry to represent the national interest
in the process of setting of global standards, to ensure that
their application will not constrain the efficient operation of our
financial markets or introduce unnecessary costs but rather will
facilitate efficient cross-border financing.
CEO REPORT
The financial system continues to be
dynamic and innovative, with technology
being applied to open the way for new
products and services and presenting
opportunities to improve the efficiency of
the financial services industry.
p. 7
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AFMA has been traditionally active in this regard and it recently
took a global industry leadership role when I was elected to
Chair of the International Council of Securities Associations
(ICSA). ICSA is comprised of 19 industry bodies from Asia,
Europe and North America and it advocates for regulatory
policies, regulations and initiatives across jurisdictions that will
promote efficient and well-functioning securities markets and
the flow of cross-border capital. ICSA has regular meetings
with international agencies including IOSCO, the Basel
Committee and the Financial Stability Board.
AFMA’s leadership role at ICSA complements its long
established and effective working relationships with regional
and global counterparts including the International Swaps
and Derivatives Association (ISDA) and the International
Capital Market Association (ICMA), whose work on standard
documentation and market protocols significantly influence
practice in Australia.
During the year, AFMA also arranged meetings for member
firms with senior overseas regulators who visited Australia,
including Commissioner Brian Quintenz of the US Commodity
Futures Trading Commission and Steven Maijoor, who is Chair
of the European Securities and Markets Authority.
Education Services
In the Australian financial markets, AFMA Accreditation is
recognised as a reliable indicator that an individual meets
the minimum industry competencies. Since its inception,
AFMA Accreditation has evolved in response to changes in
both the skills needs of member firms and the expectations
of regulators and the broader community. This is consistent
with our mission to promote high professional standards
for individuals employed in the financial markets. There is a
significant work program underway to update the core and
elective modules offered to students.
The most notable development last year was the launch of
the AFMA Professionalism Conduct and Ethics course. This
marked the completion of a substantial and innovative project
and the first students have now started graduating from
the course, receiving their statement of attainment for the
nationally recognised Business Ethics and Conduct Skill Set.
Looking to the future, the Board is committed to ensuring
that AFMA Accreditation continues to support the
effectiveness and professionalism of Australian financial
markets in a rapidly changing environment. Against this
backdrop, the education team has been asked to liaise with
the users of accreditation to assess the feasibility of an
Accreditation model that would rely substantially more on third
parties to deliver education courses to meet a curriculum that
is set by AFMA. Work on this is progressing with an eye to
providing more flexible arrangements for individuals to satisfy
the competence requirements.
CEO REPORT
David Lynch presenting at the Australian Regulatory Summit
p. 8
Annual Report 2019
Financial Markets Foundation for Children
AFMA has provided operational and administrative support
to the Financial Markets Foundation for Children for more
than two decades now. AFMA’s staff and members take great
pride in this contribution to a worthy cause, which helps
the Foundation to operate with zero overhead costs. The
Foundation continues to grow successfully, with nine new
grants for early stage paediatric research approved last year.
Membership & Financial Position
AFMA’s 130 members cover the full spectrum of participants
in the wholesale banking and financial markets and the
membership base is stable, providing a secure funding base
for AFMA’s activities. The composition of our membership
reflects the evolving shape of the industry and there is likely to
be a greater role for buy-side firms, especially in relation to the
setting of market conventions and standards.
AFMA is in a sound financial position and has accumulated
reserves that provides a good buffer for unanticipated events.
As in the past, the Board will plan the future activities of AFMA
in keeping with members’ collective priorities and will continue
to conduct its affairs in the prudent manner.
In Appreciation
The financial regulators have highlighted the importance of
industry level leadership on culture and risk management and
they specifically look to AFMA’s Board to provide leadership
on financial market matters. Moreover, governments are more
likely to listen to the views of experienced business leaders
who speak with authority and can provide a well-informed and
balanced assessment of public policy issues. In this context,
AFMA is fortunate to have a Board that is comprised of senior
industry leaders and I am grateful to all Directors for their
gracious contribution to the industry through AFMA.
As a member driven industry body, AFMA’s effectiveness
depends on a significant commitment of time and expertise
by member firms and their employees. As I have previously
mentioned, the demands placed on our policy and markets
committee members is very significant at times but their
willingness to work for better outcomes for their firm and the
industry as a whole is commendable.
AFMA’s partner members make a direct and significant
contribution to the industry through their involvement in our
activities, which is important to recognise and acknowledge.
The legal, tax, compliance and advisory expertise that they
contribute to AFMA submissions and representations on
behalf of industry participants is of great value and is
widely appreciated.
AFMA’s activities are managed and supported by a diligent and
able secretariat, which I am fortunate to lead. Their collective
backgrounds cover government policy advice, regulation and
taxation, as well as market trading and operations, and provide
a blend of in-house experience that is unique amongst their
peers. Working as a team, they manage a substantial work
program the Association’s policy, markets and education
activities with expertise and commitment.
My closing observation is one of optimism about AFMA’s
future contribution to the industry. The shared commitment and
enterprise of members and the secretariat, led by a respected
and capable Board, is the key ingredient to AFMA’s ongoing
success as an industry body. The Board’s recent appointment
of Rob Bedwell as its new Chair, and Andrew Hinchliff as
his Deputy, further boost the Association’s credentials as an
effective representative body for participants in Australia’s
financial markets. In this respect, the industry’s interests are in
good hands.
DAVID LYNCHChief Executive Officer
As a member driven industry body, AFMA’s
effectiveness depends on a significant
commitment of time and expertise by
member firms and their employees. The
demands placed on our policy and markets
committee members is very significant at
times but their willingness to work for better
outcomes for their firm and the industry as a
whole is commendable.
CEO REPORT
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www.afma.com.au
AFMA’s core policy objective is to promote the conditions, including official regulation, that best align with
the public interest in having efficient and fair financial markets that most effectively support the financial
system and the national economy. The policy positions adopted by AFMA are predicated on a free-market
philosophy, emphasising the importance of market discipline to the efficient operation of financial markets.
The Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry (Royal
Commission) was a dominant influence on the policy
landscape during the year. The Financial Services Regime,
introduced in 2001, was based on the assumption that well-
informed investors were responsible and accountable for
their own decisions and should be free to pursue their own
economic self interest free of government interference. Over
the last twenty years economic policy views in the Australian
community have changed and the government has assumed a
greater role in controlling economic relationships.
AFMA positions are also based on a view that official
regulation should only be imposed where there is a
demonstrated market failure and market-based solutions are
either not practical or are likely to be ineffective as a response.
AFMA has maintained a constructive, proportionate and
credible approach in its industry representations. Over the
course of the year, we have supported balanced, well-crafted
regulatory reforms that enhance integrity and trust even
where this may result in additional compliance cost and burden
for industry.
The AFMA Secretariat deals with a wide range of policy
developments and reforms that affect members’ businesses,
and some significant outcomes have been achieved during
the year.
OTC Markets
Industry Standards
AFMA’s work on industry standards, driven by the AFMA’s
Professionalism Initiative has focussed on conduct standards.
These include the Swaps Reference Price Transactions
Guidelines, which outline expected behaviours of wholesale
market participants that enter reference price transactions on
interest rate swaps.
Work has also commenced in relation to debt capital market
(DCM) activities; notably allocations, investor relations and
communications, where the potential for conduct standards to
support good practice is being explored.
During the year, AFMA also worked to align existing local
policies and procedures for the local market to international
equivalents, allowing for the adaption and adoption of
international standards where appropriate and to ensure that
such standards are fit-for-purpose in an Australian context.
IBOR Transition
Central banks and regulators globally are focussed on the
reform of interest rate benchmarks as a means to ensure
that they are fit for purpose given the wide range of financial
contracts that reference these benchmarks, including
derivatives, securities and loans. The focus is threefold:
• Strengthening existing benchmarks by anchoring them to a
greater number of transactions;
POLICY INITIATIVES
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Annual Report 2019
POLICY INITIATIVES
• Ensuring that robust fall-back provisions underpin
benchmarks deemed to be at risk of discontinuation, and
• Identification of alternative risk-free rates to which derivatives
contracts can be referenced.
This focus has subsequently evolved to the point where
authorities in the United State and Europe are now working
towards the phase-out of LIBOR rates, which are the most
common benchmark reference rates used in the financial
markets. Given the ubiquitous embedding of LIBOR reference
rates in financial instrument documentation, any phase-out has
major implications for the contractual fallback language used
in them.
AFMA took an early lead during the year in informing Australian
market about the great significance of the issues. This work
includes preparing for the effects of this offshore development
and close attention is being paid to the forums that are leading
discussions on alternative rates and the contractual language
that should be adopted to adapt to any change. AFMA has
provided the secretariat to the national working group through
the IBOR Transformation Working Group, which sets the
strategic agenda for market preparations here in consultation
with the authorities.
Equities and Futures Markets
Give Ups
AFMA has worked with the regulator and industry to resolve
inconsistencies in the regulatory framework underlying give-
ups. Through multiple meetings, papers and communications,
the Working Group has been able to work through a number of
potential approaches to resolve to a single industry preference
for the way forward.
Given the inherent legal structural complexities and variance
in business structures and practices the path to this way
forward was challenging. AFMA has put the agreed model
to the regulator for consideration and explication. If accepted,
the revisions to the framework could prove a model for
other jurisdictions.
CHESS Replacement
AFMA has been an active participant in consultations
and engagements with the ASX in relation to the CHESS
replacement project. We provide a forum for market
participants to discuss the practical issues that present and
to provide input to assist ASX in delivering the project. We
have had multiple touch points on both technical and strategic
issues and our submission to the consultation was recognised
as crystalising the concerns of the industry.
Various AFMA Committees have met directly with ASX and the
Markets IT Committee has established an ongoing program of
technical engagement.
We have succeeded in having issues of scope addressed and
have a number of matters still in train. AFMA will continue to
have deep engagement with the project as it moves through its
implementation phases.
Takeover Panel Treatment of Equity Derivatives
AFMA responded to the Takeover Panel’s consultation on
the use of Equity Derivatives. While recognising the potential
for a change to the current regime in the Corporations Act,
we recommended against extending the requirements to
circumstances in which a control transaction is not present
particularly where the changes were proposed to be
accomplished via a Guidance Note from the Panel.
Internal Dispute Resolution
As part of the response to the Royal Commission, the
Government is revising the definition of small business for
the purposes of requiring the provision of Internal Dispute
Resolution services. AFMA has argued through multiple
channels that the proposed definition of 100 or fewer
employees is an inappropriate metric for determining which
clients are a small business. The proposed change would
mean firms providing clients with 20 or fewer employees
would have to establish expensive IDR infrastructure, even if
the clients were otherwise wholesale in character.
AFMA worked to align existing local
policies and procedures for the local
market to international equivalents,
allowing for the adaption and adoption
of international standards where
appropriate and to ensure that such
standards are fit-for-purpose in an
Australian context.
p. 11
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Retail Broking
AFMA established a new Retail Committee in 2019, with an
initial focus on engagement with the Government on FASEA
related issues.
The Committee Chair met with the Minister with responsibility
for FASEA matters and conveyed the concerns raised. The
broad aim is to improve the workability of the scheme for
certain highly specialised service providers and for very
experienced providers of strategic advice, which would
benefit investors and help maintain the operational depth of
the industry.
The Committee was also able to directly assist the
Government with detailed front-line information and
understanding about certain products and the prevailing
practices in markets. This information will help inform decisions
that could directly affect investors and the industry and
therefore ensuring decisions are well-informed is important.
Resilience Requirements
AFMA has taken a leading role in responding to ASIC
proposals on industry resilience. ASIC’s Consultation Paper
314, which built on previous work it had done over recent
years on industry resilience, proposed a wide range of new
Market Integrity Rules in relation to system resilience, reliability,
security, integrity, and change management.
While we supported the aims of the proposals we argued that
a proper risk-adjustment of the responses would not result in
the rules-based approach for all market participants as well as
market operators.
ASIC’s work in this area is ongoing and we will continue to
stay involved as it progresses.
Banking regulation
BEAR Regime Implementation
In the first quarter of the 2019 calendar year, AFMA facilitated
two sessions between small and medium ADIs and APRA
on the implementation of the BEAR regime. Much of the
discussion and member issues related to three main themes:
• Inclusion of the senior officer outside Australia (SOOA)
as an accountable person (which is a particular issue for
foreign ADIs);
• Calculation of variable remuneration subject to the regime,
particularly where a person may hold multiple roles that do
not relate to the Australian ADI business; and
• For foreign ADIs, determining the appropriate number of
accountable persons and issues related to accountability
mapping.
The Royal Commission Report has added a degree of
complexity inasmuch that it proposes co-regulation of the
BEAR regime. AFMA is engaged in dialogue with government
and relevant regulators about how such co- regulation will
occur in practice. AFMA is also aware of the proposal by the
Government, in its response to the Royal Commission Report,
to require all financial entities holding an AFSL/ACL to comply
with requirements of a finance executive accountability regime
to be administered by ASIC.
APRA Proposed Prudential Remuneration Standard
AFMA has actively engaged with APRA in relation to its
proposals for executive remuneration standards consequent to
the Royal Commission.
The proposals, if approved for inclusion in the standard, will
have substantial impacts for a significant number of staff at
the potentially impacted ADIs. The APRA proposals require up
to 7 years deferral for CEOs and 6 years for many other staff,
with claw back periods of up to an additional 4 years for each.
AFMA is actively working to ensure that the final requirements
do not harm the competitiveness of the industry both within the
region and when competing for staff from other industries.
APRA Related Entities Framework for ADIs
In September 2018 AFMA represented operational concerns
from members around the proposed changes to APRA’s
Related Entities Framework for ADIs consultation. It is hoped
the representations make the final rules more workable in
relation to the risk analysis that is required to be done by
Australian ADIs in relation to associated firms and entities,
tasks that can be very difficult given their extraterritorial nature.
POLICY INITIATIVES
The Royal Commission Report has added
a degree of complexity inasmuch that
it proposes co-regulation of the BEAR
regime. AFMA is engaged in dialogue
with government and relevant regulators
about how such co- regulation will occur
in practice.
p. 12
Annual Report 2019
POLICY INITIATIVES
Information Security
AFMA created an Information Security Working Group which
made a well-targeted submission to the APRA consultation
on the new prudential security standard CPS 234. The
submission resulted in improvements including improved
workability around reporting obligations.
The Working Group was then formed into a full Committee,
which was launched in March. The Committee’s agenda
included consultation responses to the APRA guidance
relating to CPS 234, ASX’s guidance on cyber resilience
for clearing and settlement members and the ACCC Open
Banking’s consultation (proposing a separate but similar
information security standard for Open Banking). A focus for
the Committee has also been ASIC’s work on resilience CP
314 which has a substantial information security component.
AFMA is seeking to find commonality between the regulatory
initiatives so that financial services firms can have a clear
target that will satisfy all requirements.
The Committee will consider the potential for industry fire-drill
exercises in 2020.
Information Security Conference
In February 2019, AFMA hosted a half-day conference on
Information Security for members. This was well-attended
with around 120 attendees. Speakers included APRA, ASIC,
the Australian Cyber Security Centre (ACSC), KPMG and
co-host Ashurst. The focus of the conference was the rapidly
changing regulatory environment for information security in
financial services.
The event was well received and provided insights directly
from the key regulators while critical work was underway.
ADI Regulatory Reporting
AFMA’s Regulatory Reporting Committee’s ongoing
engagement with APRA on regulatory reporting matters has
delivered significant benefits to the ADI community. In January
2017 APRA proposed changes to the Economic and Financial
Statistics (EFS) collection administered by APRA on behalf
of the ABS and the RBA. In addition to greater granularity
and depth of data reported, a new data quality standard was
proposed that set the required level of accuracy for data
reported under the new regulatory reporting protocol.
Interpretation of the new reporting requirements created
challenges for ADIs, and AFMA undertook to serve as the
consolidation point for members’ questions. AFMA acted as
the intermediary between ADIs and APRA in a process that
facilitated responses by APRA to questions pertaining to the
EFS reporting protocol, which came into effect January 2019.
APRA has taken a more assertive approach to matters of
regulatory data that has highlighted the importance of work in
this area.
Open Banking
AFMA continued to engage constructively in the government
process to develop the Open Banking regime in 2019 through
three consultations with Treasury, one with the ACCC and
multiple dialogues.
In addition to directly affecting many members, the regime
sets up a framework for government regulation of business-to-
business communication that will be rolled out to many sectors
over time. We argued that extension of the program should be
led by the Minister rather than by published recommendations
from the regulator.
We voiced concern about elements of the process adopted
to create the Bill and wider scheme including the way the
Government ran a parallel process to create the legislation,
the scheme rules, the Application Programming Interface
and security standards, and building software and business
processes to meet all these evolving requirements at the same
time. We also raised concerns about the privacy implications
of the scheme, which were later reinforced by Treasury’s
Privacy Impact Assessment report.
From a security perspective, we were concerned that the
original draft provided that a scheme participant could be
obliged by the scheme to provide consumer data to firms
outside the scheme and the potential implications for privacy
and security this could cause. These concerns were accepted
and largely addressed in a later draft of the scheme.
The deferral of implementation that representations to
government including by AFMA achieved, allowed the scheme
to proceed to a far more measured and thorough plan that will
produce lower risks for consumers and ADIs.
AFMA continued to engage constructively
in the government process to develop the
Open Banking regime in 2019 through three
consultations with Treasury, one with the
ACCC and multiple dialogues.
p. 13
www.afma.com.au
We argued the case for real reciprocity to ensure that firms in
the scheme would have to provide equivalent information.
Financial Services
Foreign Financial Service Providers
AFMA has played a leading role in highlighting the issues
associated with ASIC’s proposed changes to the Foreign
Financial Service Providers (FFSP) regime. While ASIC’s
proposals were modified consequent to AFMA and member
submissions during the initial stage of consultation, a number
of significant concerns remain.
The proposed changes to the FFSP regime include moving
away from the class orders and towards a licencing regime,
an approach disproportionate with the identified risks, and
inconsistent with the original drafting rationales. AFMA
has also highlighted to the regulator the potential for
interaction of the changes of the scheme with other
government initiatives such as the proposed ASIC finance
executive accountability regime.
AFMA will continue to argue the case against the changes and
for any impacts to be minimised to protect competition and the
business environment.
Product Design and Distribution Obligations and Product Intervention Power
AFMA led work during the year in relation to product design
and distribution obligations.
AFMA responded to the Government’s Draft Bill and
Explanatory Memorandum second draft raising issues in
relation to scope, capital raising, personal advice, disclosure,
specifics around the Target Market Determination, and record
keeping. AFMA made representations on behalf of member
firms on a number of occasions during the development of
the legislation and secured changes that improve the law from
their perspective. The Treasury Laws Amendment (Design and
Distribution Obligations and Product Intervention Powers)
Act 2019 is now law and AFMA is working with members on
issues arising from implementation.
Other
Industry Funding of ASIC – Enforcement Special Account
ASIC should be properly funded to meet its responsibilities
and financial sector participants should pay a proportionate
amount of this funding through cost recovery. From this
standpoint, AFMA continues to engage on behalf of
members to have anomalies in the ASIC Industry Funding
model addressed.
In particular, we identified unfair outcomes and conflicts with
the principles that underpin the cost recovery model in the
current treatment of ASIC’s Enforcement’s Special Account
(ESA). For example, the funding of the ESA through the
cost recovery mechanism places a significant and unfair
financial burden on financial firms that are not the subject of
enforcement action by ASIC.
POLICY INITIATIVES
Mark McCarthy presenting at RISK Conference
p. 14
Annual Report 2019
The Government was alerted to member concerns and it
advised that the information provided by AFMA will help to
inform its future policy considerations on the proper treatment
of the ESA. AFMA will continue to argue against direct
industry funding of the ESA.
Capping claims on the National Guarantee Fund
AFMA negotiated and supported the regulation to cap claims
on the National Guarantee Fund (NGF). to ensure its long-
term sustainability. The NGF is a compensation scheme that
applies to members of the Securities Exchanges Guarantee
Corporation. The NGF provides compensation for retail
and wholesale clients who incur a loss in their dealings with
participants in four circumstances. The regulation made three
changes to the existing regime:
1. Introduced a cap of $1 million for claims made by the
same claimant that relate to the same participant and the
same event;
2. Introduced a sub-cap of $250,000 in relation to cash held
with a participant; and
3. Amended the existing per participant cap to cover all heads
of claim in the event of an insolvency.
Taxation
Defence of the Offshore Banking Unit Regime
AFMA has led the engagement with Treasury and Government
on behalf of members with respect to the review by the
OECD Forum on Harmful Tax Practices review of the
Offshore Banking Unit (OBU) regime. AFMA has made strong
representations regarding the many factors that ultimately
drive international financial services business being conducted
from Australia and to refute the proposition that the regime
facilitated harmful tax competition. We have also used the
review as an opportunity to reinforce other policy initiatives that
would enhance the competitiveness of Australia’s tax system
as it applies to international financial services firms.
ATO Justified Trust Reviews
During the course of the year, AFMA provided considerable
support to members that were reviewed by the Australian
Taxation Office (ATO) as part of their ‘Justified Trust’ program.
The support included liaison between member firms to share
experiences and best practice in terms of preparing and
conducting the reviews, together with engagement with the
ATO to ensure consistency of approach and to raise industry
issues. In addition, AFMA has commenced dialogue with the
ATO about the public messaging at the conclusion of the
review to ensure that any reputational issues that may arise,
either individually or collectively, are identified early.
Anti-Hybrid Rules
AFMA procured a carve-out for its foreign bank branch
members from the potentially onerous application of the
Anti-Hybrid rules that applies where the global entity has an
appropriate transfer pricing methodology. In addition, based
on AFMA’s submission, there was a consequential amendment
to level the playing field regarding the application of taxation
laws where the foreign bank branch is headquartered in
a jurisdiction that has not concluded a Double Taxation
Agreement with Australia.
Senate Standing Order on Taxation Information
AFMA worked with the ATO and members in relation to issues
arising from the Senate passing a Standing Order requiring
the disclosure of certain tax compliance information, dating
back to nearly twenty years. Ultimately the negotiated outcome
between the Senate and the ATO, whereby the requested
information was provided on a confidential basis, was an
outcome that mitigated risk for AFMA members.
Member of the Tax Treaties Advisory Panel
AFMA continues to play a crucial role as a private
sector representative on the Treasury Tax Treaties
Advisory Panel. The Panel sets the priorities for Treaty
negotiation (such as the conclusion this year of the Australia
– Israel Double Taxation Treaty) and provides technical
assistance with treaty negotiations. AFMA continues to
advocate for alignment between Australia’s taxation treaties
and free trade agreements.
Administration of SGE Penalty Regime
AFMA maintains dialogue with the ATO regarding the
administration of the Significant Global Entity (SGE) penalty
regime, through which the ATO may impose a penalty of up
to $525,000 for non-adherence to compliance obligations.
AFMA has highlighted ambiguities and anomalies with
the manner in which the law may apply and has obtained
assurance that the ATO will administer the law in accordance
with its policy intent.
Resolution of GST Treatment of Unibail-Rodamco French Financial Transactions Tax
On behalf of members, AFMA approached the ATO and
confirmed the GST treatment of the French Financial
Transactions Tax applicable to secondary market transfers
of the CDI issued over Unibail-Rodamco. Given the CDI
was consideration for the takeover of Westfield, there are
significant holdings of the CDI in the Australian market and
clarifying the GST treatment for all participants enhanced the
efficiency of the market.
POLICY INITIATIVES
p. 15
www.afma.com.au
Clarifying Taxation Consequences of Bail-In Rules
AFMA has commenced engagement with the ATO regarding
the effect on the tax characterisation of instruments issued by
Australian branches of foreign banks where there is a bail-in
mechanism. Given the increasing prevalence of prudential
regulators globally requiring instruments to be bailed-in in a
stress scenario, ensuring that the taxation outcomes align
with the commercial and regulatory outcomes is of
considerable importance.
Anti-Money Laundering
AFMA continued to lead engagement on behalf of its
members with AUSTRAC and Home Affairs in relation to
the implementation of the Phase 1.5 Bill, which will (when
enacted) significantly enhance the manner in which global
enterprises can share information and rely on other reporting
entities to identify and disrupt financial crime. The application
of the AML/CTF regime to Tranche 2 entities remains an
outstanding issue and AFMA continues to support the
broader application of the law, as it has since the law’s
inception in 2006. AFMA continues to be a key participant in
relation to the AUSTRAC Industry Contribution model and will
maintain its stance that the model is inequitable, insofar as it
does not place the burden of the levy on those that create the
need for regulation.
Energy Markets
Electricity
AFMA monitors certain issues that came from the design
of the now defunct National Energy Guarantee, including
potential requirements for trade reporting, and market making
obligations in electricity forward contracts. AFMA made
submissions to the Energy Security Board in October 2018
on behalf of our members, reflecting members’ issues on
both elements. AFMA also made submissions in the first half
of 2019 to the Australian Energy Markets Commission in the
first half of 2019 on the Short-Term Forward Market and the
Coordination of Generation and Transmission Investment
(COGATI) consultations.
AFMA supports transparency in the OTC markets by
publishing turnover data in both exchange traded and OTC
electricity derivative markets for several years, with data
compiled from a survey of the principal participants the ASX.
Data up until the end of the 2019 financial year is reflected
in the AFMA Electricity Derivatives Turnover Report, which is
available on the AFMA website.
Given continued regulatory interest in transaction reporting
of electricity derivatives from the regulatory bodies, AFMA
and member representatives have met with the Australian
Energy Market Commission (AEMC), Australian Energy
Regulatory (AER) and Energy Security Board (ESB) on several
occasions to discuss this survey, and potential areas of data
enhancement that AFMA members could provide.
In November 2017, the AEMC made a final rule to reduce the
time interval for financial settlement in the national electricity
market from 30 minutes to 5 minutes, starting on 1 July
2021. AFMA has established a working group of interested
member participants to discuss various issues pertaining
to the efficient functioning of the OTC electricity derivatives
market, with a view to determining market practices, market
conventions and documentation to cater for the introduction
of 5 minute settlement. The working group is currently working
on a number of changes to standard electricity derivative
documentation which would be required to enable financial
contracts to function both before and after the change.
Environmental products
The Environmental Products Committee met quarterly to
review market conditions and maintain the conventions and
standardised documentation for trading in the market. Further
to working on a revised standardised option confirmation
document, the Committee agreed to establish a working
group to undertake a holistic review of all Environmental
Product documentation.
A significant number of counterparties who deal in
environmental products are not AFMA members. In order
to assist these counterparties, a dedicated webpage on the
AFMA website has been developed with specific information
which would be useful to them, including a copy of the
environmental product conventions, long form documentation,
and an execution and settlements guide.
AFMA continued to lead engagement
on behalf of its members with AUSTRAC
and Home Affairs in relation to the
implementation of the Phase 1.5 Bill, which
will (when enacted) significantly enhance
the manner in which global enterprises can
share information and rely on other reporting
entities to identify and disrupt financial crime.
POLICY INITIATIVES
p. 16
Annual Report 2019
The Market Governance Committee
AFMA’s Market Governance Committee (MGC) is responsible
for the development and maintenance of market conventions
and protocols designed to promote efficiencies and facilitate
orderly operations in wholesale OTC markets in Australia.
As part of its remit, MGC regularly reviews the operational
performance of the OTC markets, including the cash market,
short and long term debt securities and the repo market for
these securities, together with a diverse range of derivative
products, including interest rate derivatives, electricity,
environmental and inflation products. MGC also promotes
the AFMA Code of Conduct and advises the AFMA Board
on material matters and concerning the operation of the
OTC markets.
The MGC oversees ten Market Committees (including
Environmental Products and Electricity), which are elected
biennially1. MGC regularly reviews the activities of the Market
Committees and has the authority to provide direction as
it considers necessary. The Committee has carriage of the
Market Committee Rules, which establish the structure of
these committees and the terms under which they operate.
Meeting regularly, the Market Committees develop market
consensus on technical matters such as transaction
documentation, standards, trading conventions, and market
guidelines, all necessary elements for efficient OTC markets
operation. Fundamental in its review of Australia’s financial
markets, MGC draws on individual committee surveys of
market quality, as appropriate directing committees to
meet challenges, garner efficiencies and consider issues
on the horizon.
Over the course of a typical year the committees address a
wide range of market-specific issues, leading to clarifications
and amendments to general practices and Market Conventions
as deemed appropriate.
Market Committee Activities
OTC Market Conventions
AFMA maintains the Australian OTC Market Conventions,
and where deemed appropriate over the course of the year
will amend or add to these, also clarifying aspects of the rules
governing markets. A number of amendments were made in
order to improve market performance or to add greater clarity
around market practices, including:
• Amended the Negotiable/Transferable Instruments (NTI)
Conventions to clarify that, while the buyer of an interbank
MARKET COMMITTEES
1 Committee elections will take place in November 2019.
As part of its remit, MGC regularly reviews the
operational performance of the OTC markets,
including the cash market, short and long
term debt securities and the repo market for
these securities, together with a diverse range
of derivative products, including interest rate
derivatives, electricity, environmental and
inflation products.
p. 17
www.afma.com.au
market parcel of NCDs or Bank Bills must accept Treasury
Notes as a substitute in a transaction, the substituted
Treasury Note will not be considered by the BBSW
Administrator to be an eligible transaction and will not form
part of the VWAP calculation methodology;
• Concurrent with ASX’s amendment to the calculation
methodology for 1-month BBSW, AFMA further amended
the NTI Conventions, narrowing the rolling maturity pool
for 1-month tenors from +/- 5 Business Days to +/- 3
Business Days around the straight run date;
• Amended the Standard Transaction Size matrix contained
within the Interest Rate Options Conventions, thereby
ensuring that these are fit for purpose in the current
environment;
• Amended the Interest Rate Derivatives Conventions in a
manner which applied the neutral date convention for single
currency basis swaps (i.e. excluding the last 2 days and first
2 days of each quarter) to cross currency basis swaps;
• Amended the standard transaction conventions size for
a range of Interest Rate Derivatives products, having the
effect of matching the interest rate risk (delta) for each
maturity bucket along the yield curve for most products
such as interest rate swaps, while also amending quotation
conventions for uncleared derivatives, aligning these with
AUD OIS curves;
• Amended the Environmental Product Conventions such that
greater clarity is provided to firmness conventions, while
also removing redundant sections dealing with artificial
markets, market manipulation and applicable legislation,
these being adequately covered by regulation and Codes of
Conduct; and
• Amended the Electricity Conventions to cater for the
introduction of five-minute settlement.
Cash
The Committee’s main focus remains on market liquidity
management and the intraday circulation of available system
cash, and on the interbank transactions which underpin the
benchmark Interbank Overnight Cash Rate (Cash Rate). The
Cash Rate is the Reserve Bank Board's operational target
for monetary policy, and which is calculated as the weighted
average of the interest rate at which overnight unsecured
funds are transacted in the domestic interbank market (the
cash market).
Debt Capital Markets
The Debt Capital Markets Committee continued with the work
that commenced in late 2018 to review debt market practices
for allocations in capital raisings, market communications
around transactions and institutional investor interactions for
the purpose of introducing debt market practice guidelines
for the Australian market. ASIC released REP 605 early in
the year which looked at allocations in equity capital raisings
and coupled with its announcement of a review of Australia’s
OTC fixed income market, prompted the DCM committee to
pause their work on market practices and seek engagement
with ASIC to discuss the upcoming review. Two meetings
were arranged with ASIC that led to constructive dialogue
between market participants and the regulator. The Committee
resolved to write a letter to ASIC outlining the market’s view of
appropriate market practices ahead of ASIC’s final report.
Debt Securities
The ASX‘s Interest Rate Working Group presented to the
Debt Securities Committee on its work in looking at issues
surrounding the bond futures roll. The ASX conducted a
series of meetings that looked at the economics of the roll and
crossing the spread, the customer experience of managing
orders and execution. Semi-government securities in interbank
trading activity remained thin. Given concerns over the global
economic outlook and the potential for further easing of
monetary policy in a number of economies, the Committee
discussed the prospect of quantitative easing and negative
interest rates for the Australian market.
Inflation Products
The Inflations Products committee reviewed the Inflation
Products conventions and found they were still fit for purpose
without any amendments. Liquidity issues have been prevalent
for some time in the Inflation Products market as a low inflation
and low interest rate environment has stifled client interest
which in turn has had a dampening effect on secondary trading
activity. Liquidity may remain constrained until the market sees
a pickup in inflation or higher interest rates. The Committee
discussed market infrastructure constraints in relation to
clearing of zero coupon swaps, noting that a provider was
unlikely to commence operations given the lack of scale in the
Australian market.
Interest Rate Options
The Committee’s primary focus in on caps and floors market
liquidity, where conditions have generally improved following
RBA actions to lower the cash rate and where market
sentiment favours further cuts.
MARKET COMMITTEES
p. 18
Annual Report 2019
MARKET COMMITTEES
Negotiable and Transferable Instruments (NTI)
The Committee further refined the NTI Conventions to ensure
appropriate alignment with the BBSW Administrator’s
conventions for this benchmark rate. It also provided input
to ASX’s consultation on 90 Day Bank Bill Futures contract,
noting inconsistency in brokered fractional quotations and the
maximum decimal place truncation of ASX futures.
Repo
The Committee’s main focus continues to be market liquidity
frictions and the circulation of system cash, particularly in the
morning trading session when repo trading predominantly
occurs, and the elevated levels of repo rates resulting from this
supply and demand friction. Greater buy-side participation in
markets is seen as a means of improving overall liquidity.
The Repo Committee, in concert with AFMA’s Debt Market
Operations Committee, is now finalising amendments to the
Repo Conventions which will provide guidance to market
participants on domestic margining practices.
Swaps
The Swaps Committee developed new guidelines for the
conduct of dealers when managing swaps reference price
transaction in the Australian market. The Swaps Reference
Price Transaction Guidelines apply to market participants in
the Australian swaps market and set out certain expected
behaviours of wholesale market participants that enter into a
type of transaction common in the swaps market known as a
reference price transaction. The Guidelines are consistent with
the relevant FMSB standard but they are more market specific
in content, take account of ASIC’s views and provide localised
practical examples
The Swaps Committee also made a number of conventions
amendments, the key one being an amendment of the
standard transaction size for a range of Interest Rate
Derivatives products, matching the interest rate risk (delta) for
each maturity bucket along the yield curve.
Commonwealth Government Bonds
According to the Australian Office of Financial Management data, secondary interbank market turnover in Australian Treasury Bonds fell almost 3% in 2018-19, however, total volume traded across all sectors was $1,296 billion, up slightly from 2017-18. Turnover in Treasury Indexed Bonds was $52.3 billion, an increase of 3.5% over 2017-18. Participation in these markets is global as set out in the charts below.
Commonwealth Government Bonds – Volume traded
Treasury Bonds – Volume traded by Tenor ($m – Face Value)
Treasury Indexed Bonds – Volume traded by Tenor ($m – Face Value)
Source: AOFM
60,000
50,000
40,000
30,000
20,000
10,000
0
17,6
88
19,1
89
14,7
26
14,3
55
16,8
85
19,1
30
7,64
6 12,6
48
52,3
20
50,5
76
41,8
80
7,72
4
1,86
4
2,07
1
10,7
40
0-5 years 5-10 years 10-20 years 20+ years Total
2016-17 2017-18 2018-19
2016-17 2017-18 2018-1930%
25%
20%
15%
10%
5%
0%
Interbank
Bank Balance Sheet
Other D
omestic
Japan
Asia (e
x. Japan)
UKEuro
pe
Americas
Other In
ternatio
nal
28.0
%26
.6%
23.8
%
9.0%
8.7%
7.2%
21.3
%18
.3%
22.7
%
5.3%
4.2%
1.1%
0.8%
0.7%
9.9%
8.3%
5.7%
9.2%11
.8%
10.6
%
10.7
%9.
2%6.
1%
12.1
%12
.0%
13.3
%
3.5%
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
174,
961
209,
779
212,
690
337,
057
388,
819
372,
458
226,
979
255,
321
1,29
6,01
81,
273,
817
1,08
0,81
3
73,3
2478
,609
99,3
26
367,
171
341,
290
242,
490
270,
374
0-2 years 2-5 years 5-9 years 9-12 years 12+ years Total
2016-17 2017-18 2018-19
p. 19
www.afma.com.au
AFMA Professionalism Conduct and Ethics course
A highlight of the year was the launch of the AFMA
Professionalism Conduct and Ethics course. This course,
based on government-recognised competencies in conduct
and ethics that AFMA was instrumental in creating, provides
the first externally verified competencies in conduct and ethics
education and sets a standard that can be used directly or
indirectly by all members and the wider finance industry.
The development of the course provides members with
a ready way to ensure that regulator expectations in
relation to conduct training can be met to a government
recognised standard.
AFMA updated the requirements of its accreditation program
to ensure all AFMA accredited individuals in the markets will
have achieved the competencies in conduct and ethics by the
end of 2021. This is a significant goal for the industry.
The course has been well received by the students who have
completed it, feedback has suggested that students found
it helpful and practical. Over the course of the year further
enhancements have been developed for the course that are
expected to add to the value of the course over time.
Conduct Standards Policy
In relation to conduct standards AFMA created a policy for
the design, creation, and lifecycle management of conduct
standards to ensure that these standards are soundly based,
are open to regulator review and have the appropriate level of
support in the markets. The policy has been well received both
domestically and internationally.
The approach to conduct standards designed into the policy
was reflected in the actions taken to develop the Swaps
Reference Price Transaction Guidelines and other work that is
underway in relation to conduct standards.
The importance of ensuring that conduct policies are executed
with appropriate care and precision was demonstrated during
the year when the UK Financial Conduct Authority (FCA)
announced that it would recognise the Global FX Code and
the UK Money Market Codes under its code recognition
scheme. The FCA indicated it will link the codes it recognises
with the obligation under its Senior Managers regime for
regulated entities to observe ‘proper standards of market
conduct’ and expect that regulated firms should train staff in
respect of associated individual conduct rules.
In Australia, ASIC’s Market Integrity Report for the second
half of 2018 advised of a project to verify whether bank
stakeholders are adhering to the FX Global Code, by acting
honestly and fairly in their dealings with FX clients regarding
the margins or mark-ups they charge. On 14 August
Commissioner Cathie Armour provided an insight into ASIC’s
use of the Global FX Code in its market surveillance over the
last year. It is apparent that ASIC’s targeted industry review
and its on-site reviews of individual banks had each sought to
examine banks’ adoption of specific principles in the Code.
Given the increased likelihood of regulators referencing
industry codes and conduct standards in their regulation of
AFMA’s strategy in implementing the professionalism program it developed in 2017 is innovative and offers
unique strengths because it integrates the adoption of collective measures both by the firms in the industry
and by their employees. Drawing on the capability this provides, it helps the industry in a practical and
achievable way to meet the expectations of market participants, regulators and the broader community. The
strength of the program is its focus on delivering timely and well-targeted measures that substantively embed
professionalism in the way business is done on financial markets. We have quickly moved forward from a
discussion of professionalism concepts to achieve practical supporting outcomes.
It is pleasing to report that solid progress has been made and AFMA’s Professionalism program passed some
significant milestones in FY 2019.
PROFESSIONALISM
p. 20
Annual Report 2019
market participants, it is vital that these standards are subject
to a rigorous and disciplined development process. This
should ensure the conduct standards are clear, practical,
consistent with the law and capable of being implemented by
market participants in certain and reliable manner.
Professionalism Committee
AFMA’s Professionalism Committee was appointed by the
Board and it has an independent Chair, Johanna Turner. The
Committee has had a busy first year of operation in 2018-19.
In addition to approving the Conduct Development Policy
and recommending mandatory completion of Conduct and
Ethics course to qualify for and retain AFMA Accreditation
as noted above, the Committee undertook a range of other
activities including:
• Monitoring the outcomes from the Royal Commission to
identify and responding to matters relevant to AFMA’s
professionalism program;
• Reviewing AFMA’s approach to conduct standard setting
by reference to the procedures adopted by the UK FICC
Markets Standards Board;
• Approving a draft Consequence Management Standard for
consultation with member firms;
• Comparing the structure/requirements of AFMA
Accreditation and the FASEA regime.
Members of the Professionalism Committee met with the Chair
of the UK FICC Markets Standards Board (FMSB), Mark
Yallop, when he visited Sydney in May 2019. The discussions
with Mr Yallop confirmed the great value of industry standards
that outline the norms of proper conduct in financial markets.
FMSB aims to contribute to the global convergence of
standards, which from AFMA’s perspective is a sound
objective though it does face some practical challenges.
The FX Global Code provides the best example of a global
standard but in practice fixed income, currencies, and
commodities (FICC) markets more generally are more
heterogeneous in nature than the FX market. While the
global convergence process is thus more difficult, AFMA
is operating on the basis that it is nonetheless possible to
achieve significant beneficial outcomes for market participants
by operating on a cooperative basis. The positive nature of the
interactions with FMSB are reflective of this.
Committee members (September 2019)
• Johanna Turner, Independent Chair
• Christine Jones, Independent Member
• Corey McHattan, Ashurst Australia
• Rakesh Jampala, Australia and New Zealand Banking
Group
• James Davies, Citi
• Andrew Hinchliff, Commonwealth Bank of Australia
• Guy Dickinson, HSBC Bank Australia
• Hilary Lewis, Macquarie Group
• Fiona Trigona, NSW Treasury Corporation
• Ross Moulton, Western Australian Treasury Corporation
• Michael Chadwick, AFMA Accreditation Board
Consequence Management
During the year, AFMA commenced work on a Consequence
Management standard for industry participants following a
recommendation by a Board working group. The importance
of the challenges of ensuring that consequences are
appropriately managed was subsequently demonstrated in
APRA’s Information paper: Self-assessment of governance,
accountability and culture, which highlights the need for sound
consequence management practices to enable appropriate
management of non-financial risks. APRA stated in its report
that “Self-assessments generally acknowledged the need to
enhance consequence management.”
The work will help ensure that that members have in place the
appropriate principles, options, processes, and procedures
to meet regulatory expectations around consequence
management.
Market Professionalism Survey
Under the guiding hand of the Professionalism Committee,
AFMA’s secretariat has worked with the Market Governance
Committee and market committees over the course of the
year to develop a refined version of the regular surveys of
professionalism within the markets. The revised survey takes
account of the need for greater assurance for the industry
that all appropriate and feasible measures are being taken to
support market professionalism.
PROFESSIONALISM
During the year, AFMA commenced work
on a Consequence Management standard
for industry participants following a
recommendation by a Board working group.
p. 21
www.afma.com.au
AFMA’s objective may be summarised as being to promote efficiency, integrity and professionalism in
Australia's financial markets. One of the means it employs to accomplish this is accrediting individuals
working in financial markets who demonstrate a required level of professional knowledge and skill. By
accrediting individual practitioners, AFMA, on behalf of its member firms, seeks to cultivate a disciplined,
risk-aware, and knowledgeable market place.
AFMA Accreditation provides benefits to all stakeholders in financial markets:
• For employers — comfort in knowing individual employees meet and maintain a benchmark level of education and training to work effectively in financial markets, as well as meeting any regulatory requirements for training and competence (eg RG104).
• For individuals — enhancement of future career opportunities through attainment of a nationally-recognised certification that they are equipped to work in financial markets.
• For regulators — assurance that those working in financial markets have obtained and maintain a benchmark level of skills, knowledge and professionalism.
For more than 20 years, AFMA Accreditation has provided minimum education and training standards for financial markets participants. The AFMA Accreditation framework has evolved over these years in response to changes in industry skills needs, regulatory expectations and education governance requirements.
AFMA’s accreditation services and education products continue to be widely used and recognised within the financial markets community. Over the course of 2018-19, there were over 700 module enrolments in AFMA’s qualification courses. Our accredited individual member base numbers around 2,400 and close to 200 new individuals were accredited in the
last financial year. AFMA’s professionalism initiatives continue to focus on making significant improvements to our offerings.
Over the last year, AFMA Education worked to enhance the standing of AFMA Accreditation as an indicator of professionalism by developing the course, Professionalism: Conduct & Ethics. The professionalism of those who work in finance is essential for an effective and efficient finance industry and, ultimately, contributes to the stronger performance of the wider economy. As ethical conduct is a key indicator of professionalism, training in conduct and ethics is important for finance industry firms, individuals who work in these firms and the regulatory environment in which the firms operate. Achievement of the key business ethics and conduct skill set contained within this course is now a mandatory requirement for all AFMA accredited individuals.
In June 2018 the Australian Industry and Skills Committee (AISC) approved funding for the review and redevelopment of financial markets qualifications, including the Diploma of Financial Markets, on which AFMA Accreditation is based. The review has provided the opportunity for AFMA Education, in consultation with member firms, to amend the financial markets qualifications to ensure they foster professional attributes and reflect the skills required to work in today’s financial markets. Over the course of FY 2019, AFMA staff have worked extensively with our education advisory committees to provide feedback on enhancing and updating the financial markets qualifications.
EDUCATION
1997Dealer
Handbook and Exam intructed
2003Diploma of Financial Markets/
AFMA becomes RTO
2008Operations pathway added to Diploma of
Financial Markets
2011CE Guidelines
enhanced
2012Diploma of AML/CTF
ManagementAccreditation pathway
2014Code of Conduct
commitment
2018Mandatory requirement
to complete Professionalism Conduct
& ethics
p. 22
Annual Report 2019
ICSA is the global organisation of 19 securities industry
associations from Asia, Europe and North America. It provides
a forum to raise awareness of regional developments,
exchange views and collaborate on efforts to improve global
capital markets. ICSA advocates appropriate regulatory
policies, regulations and initiatives across jurisdictions to
promote efficient and well-functioning securities markets and
the flow of cross-border capital.
Australian financial regulators will continue to be significantly
influenced by the work of their international peers (especially
in Europe and the US), as reflected in the work program of the
international standard setters.
ICSA is the primary global securities industry interlocutor
for dialogue with international agencies and has regular
interaction with IOSCO, the Basel Committee and the
Financial Stability Board. Relevant aspects of their work
programs are summarised below. This includes a range of
matters directly relevant to AFMA members such as harmful
fragmentation of financial markets, conduct (including ethical
use of technology), interest rate benchmark reform and
sustainable finance.
AFMA’s leadership role at ICSA complements its long
established and effective working relationships with regional
and global counterparts including ISDA, ASIFMA and ICMA,
whose work on standard documentation and debt securities
protocols significantly influence practice in Australia. This
makes a direct contribution to the efficient operation of the
Australian markets in their global context.
AFMA has established a good working relationship with the
UK FICC Markets Standards Board (FMSB), which is an
independent body set up by market practitioners in London
in 2015 to improve standards of conduct in wholesale FICC
markets in response to the Fair and Effective Markets Review.
Some AFMA member firms also hold FMSB membership and
agree to adopt its standards, including as relevant in their
Australian operations. AFMA held constructive meetings with
FMSB last year to discuss the promotion of good practice in
the FICC markets and coordination of related activities.
AFMA is also a member of the Asia Securities Forum. The
annual ASF meeting provides an excellent opportunity to
hear of the opportunities and threats for financial market
participants in the region. AFMA moderated a panel that
focussed on cross-border regulation, and some of the
potential effects of regulatory reforms that have an unexpected
extra-territorial reach, such as Benchmark Regulation and
MiFID. AFMA also participated on a panel that discussed
different regulatory approaches to Fintech, including
balancing the competing objectives of financial innovation and
investor protection.
INTERNATIONAL ENGAGEMENT
AFMA continued to be an active participant in international forums relating to financial market regulation,
which gives AFMA unparalleled access and first-hand knowledge of strategic thinking at the global level.
AFMA’s CEO, David Lynch, was elected Chair of the International Council of Securities Associations (ICSA) at its
32nd AGM held in June 2019. He is the first Australian representative to hold this position.
Rob Colquhoun (centre) presenting at the Asia Securities Forum 2019
p. 23
www.afma.com.au
AFMA joined in on the ASF declaration to encourage the
development and maintenance of markets that can assist the
United Nations Sustainable Development Goals, including
global initiatives around green and sustainability bonds. AFMA
is undertaking research on these issues in an Australian
context and can leverage the experience of other associations
in supporting the growth of demand for investments of this
type in an Australian context.
Supporting Regulatory Cohesion
There is an increasing tendency for major global economies
to impose regulation that deliberately, or occasionally
inadvertently, extends to businesses that operate outside of
their natural jurisdiction. To complicate matters, this can involve
regulatory overreach and is often inconsistent with the relevant
international standard or does not have regard to the approach
taken by other major economies or regions. This can lead to
business in Australia being directly regulated by a foreign
regulator (for example, several Australian banks are registered
US swaps dealers), which introduces additional compliance
obligations and costs and new constraints on business.
Extraterritorial regulation can also create a range of operational
costs and complexities. Australia needs to ensure that we
have the policies and processes in place to reasonably protect
our national interests in relation to cross border regulation.
AFMA collaborates with our international peers in responding
to global regulatory developments and to national policies
with extraterritorial application. This also requires active
engagement with offshore regulators in international forums.
AFMA works at a number of levels to support effective
dialogue with key international regulators on matters
concerning cross-border regulation. In November, we
facilitated meetings in Sydney and Melbourne between
member firms and Commissioner Brian Quintenz of the US
Commodity Futures Trading Commission (CFTC), at which
a range of matters concerning market developments and
cross border regulation were discussed. A particular focus
was around CFTC’s efforts to give greater deference to
comparable foreign regimes, abandoning the previous “stricter
rule applies” approach.
The positive value of such engagement can be seen from
the announcement in March 2019 by the CFTC that it had
unanimously approved a comparability determination finding
the margin requirements for uncleared swaps under the laws
of Australia and APRA regulation comparable in outcome
to those under the Commodity Exchange Act and CFTC
regulations. The effect of this determination is to make for a
level playing field for cross-border margin transactions for non-
US Swap Dealers which were subject to stricter rules than
their US counterparts.
Among other noteworthy meetings AFMA had with
international regulators was the one with Steven Maijoor
the Chair of the European Securities and Markets Authority
(ESMA). He is responsible for representing the Authority
as well as chairing ESMA’s Board of Supervisors and the
Management Board. This was most timely, as it allowed for
presentation of Australian views on EU benchmark regulation
in the context of the European Commission’s consultation on a
determination for equivalence with the European Union regime
in respect for the Australian financial benchmark regulation.
AFMA responded to the consultation, noting in its comments
that Australia represents an important component of the global
financial markets and there are many cross-border transactions
between our market and those in the EU. Many users in the
EU reference the BBSW, S&P/ASX 200 Index, ASX Bond
Futures Settlement Price, Australian Interbank Overnight Cash
Rate and Australian CPI and would want to continue to do so
after 1 January 2022. Soon after the meeting the Commission
decided on the equivalence of the legal and supervisory
frameworks applicable to benchmarks in Australia. This
decision marked the conclusion of an important component of
AFMA’s work on benchmarks that took place over an extended
period. AFMA’s initial discussions with European Commission
officials on this issue took place in 2014.
INTERNATIONAL ENGAGEMENT
Extraterritorial regulation can also create
a range of operational costs and
complexities. Australia needs to ensure
that we have the policies and processes in
place to reasonably protect our national
interests in relation to cross border regulation.
AFMA collaborates with our international
peers in responding to global regulatory
developments and to national policies with
extraterritorial application.
p. 24
Annual Report 2019
Bank for International Settlements’ Triennial Central Bank Survey
The Bank for International Settlements (BIS) recently launched
its 12th Triennial Central Bank Survey of Foreign Exchange
(FX) and OTC Derivatives Markets. The survey provides a
snapshot of daily trading volumes during April 2019 in FX and
interest rate markets from around the world.
In FX markets, the data revealed that trading reached US$6.6
trillion per day, up from US$5.1 trillion in 2016. The Australian
dollar (AUD) retained its position as the fifth most traded
currency and its share of global trading activity was largely
unchanged at just under 7%. Daily average turnover in the
Australian market was US$ 119 billion and accounted for
1.9% of global daily turnover.
By FX instrument, turnover in the Australian spot market
increased by 24% and activity in Australian dollar outright
forwards market increased by 57%. Surprisingly, turnover in
foreign exchange swaps decreased by 19% in the Australian
market, contrary to a substantial increase of 34% globally but
FX swaps still accounted for 55% of total foreign exchange
turnover. Turnover in currency swaps increased by 28% while
turnover in currency options increased by 58%. However,
both currency swaps and options account for a small share of
turnover in the Australian market.
OTC interest rate (IR) derivatives turnover in Australia
averaged US$97 billion per day during April 2019. This was a
substantial increase of more than 70% but still lagged global
growth of almost twice that amount. The substantial increase
in IR derivatives was attributed to increased hedging and
positioning amid shifting prospects for growth and monetary
policy, an increase in turnover of shorter-term contracts and
more comprehensive reporting of related party trades than in
previous surveys.
By instrument, interest rate swaps in Australia increased
by 63% over the period and more than half of the average
daily turnover of all interest rate swaps was due to turnover
in overnight interest swaps (OIS). Turnover in forward rate
agreements in Australia increased by 182% reversing a sharp
fall in volumes between the previous two surveys. Turnover of
Australian dollar-denominated instruments increased by 44%.
Equities
Total turnover on the Australian share market recorded a solid
increase last year (see Figure 1), rising by over 10%. The
June 2019 quarter set a monthly record for market activity
with $7.67 billion value traded per day – this compares to the
previous record of $6.14 billion in June 2107. Trading in ASX
equities futures increased by a healthy 16% in 2018-19.
The quoted spread for the S&P/ASX 200 index decreased
to 12 bps of the midpoint price over the June 2019 quarter,
compared to 12.5 bps in the previous year.
Australian Securities and Investments Commission (ASIC)
Report 623, issued on 31 July 2019, provided solid evidence
that the Australian equities market exhibits a high level of
market cleanliness and fares well by international comparison.
The findings recorded in the Report will help to maintain user
confidence in the market and its participants. The outcome
is consistent with the findings of ASIC’s previous research
and reflects the ongoing commitment of resources by market
participants to a fair and efficient market and a thorough
approach by ASIC to market surveillance and enforcement.
ACTIVITY ON AUSTRALIAN FINANCIAL MARKETS
In FX markets, the data revealed that trading
reached US$6.6 trillion per day, up from
US$5.1 trillion in 2016. The Australian dollar
(AUD) retained its position as the fifth most
traded currency and its share of global
trading activity was largely unchanged at
just under 7%. Daily average turnover in the
Australian market was US$ 119 billion and
accounted for 1.9% of global daily turnover.
p. 25
www.afma.com.au
FIGURE 1:Equities Average Daily Turnover
Equities Effective Bid-Offer Spreads
FIGURE 2:Total Non-government Bonds on Issue
Initial capital raised on ASX increased by 46% in 2018-19
compared to the previous year. This was offset to some extent
by reduced secondary capital raisings and total capital raised
rose by 5% to $86 billion.
The number of listed companies in Australia has been
generally increasing, with total capitalisation of ASX as a
percentage of GDP growing steadily since 2012. The average
listed company is becoming larger and the listed market
remains very sizable and relevant. Over the last five years the
listed technology sector has grown materially from 1.3% to
3.4% of the market by value.
Throughout 2019, Australian credit and non-government bond
markets have been influenced by geopolitical risks, including
trade tensions, Brexit and concerns over Iran. Nevertheless,
the Australian market has witnessed a solid flow of issuance
in 2019.
Non-Government Bonds
Well in excess of a $100 billion of credit securities and
Kangaroo bonds has been raised in the first 9-months of 2019
and with a heavy redemption schedule in the fourth quarter,
total issuance for the year is expected to substantially higher.
Issuance from financial institutions continues to dominate the
Australian market accounting for approximately 60% of total
supply. Diversity of foreign issuers has been a feature of the
second half of the year with financial offerings from Europe,
North America and Asia.
The Australian sustainable-finance market continues to grow
rapidly, with the issuance of green, social and sustainability
bonds in the AUD market for the 9-months to end-September
2019 now over $5.6 billion; exceeding last year’s record
issuance of $5.1bn.
ACTIVITY ON AUSTRALIAN FINANCIAL MARKETS
Aver
age
daily
turn
over
($bi
llion
)
8
7
6
5
4
Jun 11 Jun 13 Jun 15 Jun 17 Jun19
Months
8
7
6
5
4
Quo
ted
spre
ad d
ivid
ed b
y m
idpo
nt p
rice
(bps
)
35
30
25
20
15
10
5
Jun 11 Jun 13 Jun 15 Jun 17 Jun19
Months
35
30
25
20
15
10
5
All stock weighted averageASX 200 weighted average
$b
600
400
200
01994 1999 2004 2009 2014 2019
$b
600
400
200
0
Financials
Non-�nancialcorporations
Non-residents* Asset-backedsecurities
* Australian dollar-denominated bonds onlySources: ABS; Bloomberg; KangaNews; Private Placement Monitor; RBA
Source: ASIC
Source: ASIC
p. 26
Annual Report 2019
AFMA is proud to provide financial accounting and professional support to the Financial Markets Foundation for Children. The Foundation is pivotal in supporting ground-breaking medical research promoting the health and welfare of Australian children. During the financial year, the Foundation approved more than $1 million of grants, taking the total allocation of grants to over $22 million.
AFMA provides support both in terms of ensuring that the financial position of the Foundation is appropriately recorded and reflected in accounts, but also through co-ordinating
the grants application and approval processes. AFMA also provides support in terms of the organisation of the Foundation’s Gala Ball held in November 2018, the principal fundraiser for the Foundation which raised more than $1.6
million. AFMA provides all support on a pro-bono basis.
AFMA IN THE COMMUNITY
AFMA employee, Anne Collins, (3rd from left) with CMRI researchers at the 2018 Foundation for Children Enchanted Gala Ball
The Financial Markets for Children Foundation
Blindness in Australia has significant social and economic impact, affecting approximately 1 in 3,000 Australian children. Thanks to the Financial Markets Foundation for Children’s contributions to Children’s Medical Research Institute (CMRI), it has begun developing new gene therapy tools to cure blindness in children.
The Foundation, with funding from Australia’s financial community and individual donations, is driven to support research programs and other projects that aim to improve the health and welfare of Australia’s children. CMRI is fortunate to be one of a select few chosen to receive this support, enabling research into gene therapy.
Professor Robyn Jamieson who heads the Eye Genetics Unit, and Dr. Leszek Lisowski, who leads the Vector and Genome Engineering Facility (VGEF) at CMRI, are pursuing one of this area’s most promising therapies, trials using subretinal injections. CMRI is also addressing the challenges that have arisen from the current data, such as bridging the gap between preclinical animal models and clinical outcomes.
The Foundation has granted Prof. Jamieson’s and Dr. Lisowski’s latest innovative project, “Curing Blindness in Children Using New Gene Delivery Vectors that Target Human Retinal”, $160 000 across two years. With this essential funding, CMRI can directly target the human retina with highly promising gene therapies, namely the AAV vector.
CMRI is grateful to the Foundation, as this research has wide reaching impacts outside of the project. With this funding we can test our hypothesis that using human tissue can lead to superior therapeutic options compared to using preclinical animal models. This also supports the VGEF’s ongoing human liver genetic disease research and allows the scientific community to conduct more effective research, producing clinically-relevant tools for gene therapy.
The ongoing support for medical research and curing children’s diseases is a common mission for both the Foundation and CMRI.
Last year, Dr. Lisowski and Prof. Jamieson attended the Financial Markets’ Enchanted Ball in Melbourne as honoured guests. He presented his worldleading research, championing the Foundation’s work and patronage by highlighting the impact of their support.
For more information on Dr. Lisowski and the VGEF’s research, visit our website: https://www.cmri.org.au/Research/Research-Facilities/Vector-and-Genome-Engineering-Facility
For information on Eye Genetics, please visit https://www.cmri.org.au/Research/Research-Units/Eye-Genetics
p. 27
www.afma.com.au
Policy TeamManagement
DAVID LYNCHChief Executive Officer
Reporting to the Board, David is responsible for the overall
performance of AFMA in representing the interests of
members in dealing with industry policy issues (including
market operations) and in providing education and
documentation services to members. David leads the
Management Committee and is the Association’s primary
spokesperson. David is the current Chair of the International
Council of Securities Associations.
ROB COLQUHOUNCompany Secretary, Financial Controller and Director, Policy
Rob is a member of AFMA’s Management Committee and
performs financial control and company secretary functions
for the Association. From a policy perspective, Rob focuses
on AFMA’s taxation issues, encompassing corporate tax,
international tax and indirect taxes (such as GST), as well
as providing support to AFMA’s Anti-Money Laundering
Committee. Rob consults heavily with Treasury, the ATO
and AUSTRAC and is a member of the key Treasury
consultation groups.
DAVID LOVEGeneral Counsel and International Adviser
David manages AFMA’s legal and compliance risk and
deals with developments in the regulatory environment
for the Association. This role includes overseeing AFMA’s
documentation and market standards.
David plays a leading role in policy development for financial
market infrastructure, securities and derivatives markets
services, OTC and capital market practices, IBOR and other
benchmark issues, and setting the strategic regulatory policy
direction for the industry in Australia and other jurisdictions.
He plays a key role in AFMA’s ongoing relations with Treasury,
ASIC, APRA and the RBA.
David also has responsibility for AFMA’s international
relationships with counterpart associations and international
groups and authorities.
David is responsible for managing AFMA’s compliance
committees, the Documentation Committee along with the
OTC guide, and the legal committees for the equity and debt
capital markets.
AFMA STAFF
L-R: Rob Colquhoun & David Lynch
p. 28
Annual Report 2019
DAMIAN JEFFREE
Director of Policy and Professionalism r
Over 2018-19 Damian has led the work on thematic issues
in relation to information security, retail broking, CHESS
replacement, remuneration, and give-ups. Damian is also
responsible for a number of committees relevant to wholesale
equities and futures, retail broking, IT, operations, and
regulatory reporting. Damian has continued to lead work
on professionalism in relation to accreditation and policy
initiatives in relation to standards.
MARK McCARTHY
Director – Markets and Membership
Mark manages the operation of Market Committees in debt
securities, credit products and inflation linked products
and is a member of the RBA’s Australian Foreign Exchange
Committee. These roles reinforce the protocols and
conventions for OTC markets and address the regulatory and
market issues that arise in these sectors. Over the past year,
he has also been responsible for maintaining AFMA’s Public
Register of Statements of Commitment to the FX Global Code
and liaison with AFMA members and potential new members
to develop new relationships and promote further membership.
MURRAY REGANDirector – Markets and Rates
Murray has responsibility for the management of a number
of the Markets Committees, including the Cash Committee,
Interest Rate Options Committee, Negotiable / Transferable
Instruments Committee and the Repo Committee, and
with the interaction these committees have with the
Market Government Committee and the AFMA Board. In
this role he ensures that AFMA’s market conventions,
standards, documentation and market practices all promote
market efficiency.
Murray is also responsible for the Foreign ADI Working Group
and the Risk Management Committee. He plays a key role in
AFMA’s ongoing relations with APRA and the RBA, and was
directly involved in the management of AFMA’s benchmark
and reference rate products prior to and during the period
of transition to ASX of AFMA’s Benchmark Administrator and
Calculation Agent responsibilities.
CRYSTAL HAMSTEAD
Secretariat Manager
Crystal ensures the efficient operation of AFMA committees
and working groups, including the Board of Directors and
other governance committees. Crystal is also responsible
for the delivery of a range of projects originating from AFMA
committees and the Association’s affairs, including AFMA’s
annual Welcome event for market committee participants, Key
Achievements document, the Annual Report and the Annual
General Meeting.
AFMA STAFF
AFMA Policy Staff – L-R (back): David Love, Damian Jeffree, Mark McCarthy; L-R (front): Mike Chadwick, Murray Regan, Crystal Hamstead, Rob Colquhoun
Policy Team cont...
p. 29
www.afma.com.au
MIKE CHADWICKHead of Education and Director – Markets
As Head of Education, Mike is responsible for managing
and leading the strategic development and maintenance of
AFMA’s accreditation, education and training programs to
meet the specific needs of AFMA’s members in maintaining
high professional standards. Mike is the Executive Officer
of the AFMA registered training organisation (RTO), and
also serves as the education representative on AFMA’s
Professionalism Committee.
As Director – Markets, Mike is responsible for managing
the operation of various Market Committees, including the
Electricity, Environmental Products and Swaps Committees.
These committees set the trading protocols and conventions
that underpin the efficient operation of the wholesale OTC
financial markets in Australia. From a policy perspective, Mike
focuses on AFMA’s energy markets related issues, particularly
in the electricity sector.
KAREN BARRETTDirector – Education Programs and Innovation Strategies
Karen manages the development and maintenance of all
AFMA education and training. She has direct editorial
responsibility for the Financial Markets Core and the Equity
Markets modules in the Financial Markets Accreditation
Program. In addition, she manages the Professionalism:
Conduct & Ethics module. Karen is responsible for several
AFMA professional development workshops, including the
OTC Documentation series.
Karen represents AFMA on the Financial Services Industry
Reference Committee.
LISA AQUINOPublishing Manager
Lisa manages all aspects of production of learning materials
for AFMA education and training programs, from desktop
publishing duties, to liaising with printers and approving
printers’ proofs. In addition, Lisa develops and builds all
online courseware and assessment, and has administrative
responsibilities for the learning management system. Lisa
formats AFMA Member News for the Policy Team.
BOSA GRBIC
Education Development Manager – OTC Programs
Bosa has direct responsibility for development and
maintenance for the Financial Markets Core, Debt Markets
and Foreign Exchange Markets modules in the Financial
Markets Program. In addition, Bosa is responsible for several
AFMA professional development workshops including the
Markets in Focus series, the Financial Products series and the
Spreadsheet Skills series.
AFMA STAFF
L-R: Mike Chadwick, Lisa Aquino, Karen Barrett & Bosa Grbic L-R: Jason Sheil & May Huele
Education Team
p. 30
Annual Report 2019
ANNE COLLINS
Office Manager – Accounts and OTC Guide Administration
Anne is responsible for the day-to-day office management
and the management of accounts payable and receivable.
In addition, Anne supports the administration of OTC Guide
products and client databases, and the grants process for
the Financial Markets Foundation for Children. Anne supports
the Financial Controller by ensuring all AFMA processes and
procedures are adhered to.
MELINDA CUNNINGHAM
Business Information and Membership Officer
Melinda is responsible for the administration of AFMA’s
Membership and Business Information functions. Melinda’s
responsibilities include engagement with current and
prospective members about membership, maintenance of
membership records, collation of member communications
including marketing material and the coordination of the annual
membership renewal process. Melinda also manages the
subscription process for AFMA’s OTC Guide.
JUSTIN GILFEATHERSenior Information Technology Manager
Justin is responsible for all information and communication
technology within AFMA, including both internal and member-
facing technologies, as well as acting as the Information
Security officer.
MAY HUELELearning Services and Events Manager
May has two primary areas of responsibility — processing
all education and training registrations and scheduling
and managing the accreditation and continuing education
workshops. May also provides a high level of support
to students and delegates of AFMA’s education and
training products.
JASON SHEIL
Learning Services Manager
Jason is responsible for the student engagement, sales and
marketing activities of the education team. In addition, he
manages the accreditation and annual re-accreditation of
AFMA Accredited Individuals. The key focus of this role is
ensuring that customers of AFMA education and training
products receive a high level of support.
AFMA STAFF
Education Team cont...
L-R: Melinda Cunningham, Anne Collins & Justin Gilfeather
Services Team
p. 31
www.afma.com.au
AFMA COMMITTEES
Board of Directors
Professionalism CommitteeOperations Committee
Chief Executive Officer
Secretariat
Business Line Committees
Equities Steering
Futures Steering
COO Forum
Retail
Education Advisory Committees
Financial Markets Core
Accreditation Board
Debt
FX
AML / CTF
Policy Committees
Anti-Money Laundering
DCM Legal
Energy Regulatory
Equities Compliance
Equity COO
FICC Market Compliance
TaxationFutures Compliance
GST
Heads of Compliance
Risk Management
ECM Legal
Markets IT
Regulatory Reporting
Foreign ADI
Information Security
Market Governance Committee
Market Committees
Cash
Debt Capital Markets
Debt Securities
Documentation
Electricity
Environmental Products
Inflation Products
Interest Rate Options
Negotiable & Transferable Instruments
Repo
Swaps
p. 32
GOVERNANCE (current at 30 June 2019)
Board of Directors
John Knox Credit Suisse AG (Chair)
Shayne Collins Australia and New Zealand Banking Group Limited
James Gibson BNP Paribas
Andrew Hinchliff Commonwealth Bank of Australia
Anthony Miller Deutsche Bank AG
Ross Edwards EnergyAustralia
Simon Rothery Goldman Sachs Australia Pty Ltd
Robert Bedwell JP Morgan Chase Bank, N.A.
Mary Reemst Macquarie Group Limited
Richard Wagner Morgan Stanley Australia Limited
Drew Bradford National Australia Bank Limited
William Whitford Treasury Corporation of Victoria
Lyn Cobley Westpac Banking Corporation
Market Governance Committee
Tony Togher, Colonial First State Global Asset Management (Deputy Chair)
Rakesh Jampala, Australia and New Zealand Banking Group Limited
James Hayes, BNP Paribas
Luke Randell, Citi
Pierre Katerdjian, Commonwealth Bank of Australia
Andrew Banbury, Deutsche Bank AG
Guy Dickinson, HSBC Bank Australia Limited
Colin Gilbert, ICAP Australia Pty Ltd
Bradley Castellano, JP Morgan Chase Bank, N.A.
Tim McCaughey, National Australia Bank Limited
Fiona Trigona, NSW Treasury Corporation
Robert McCormack, Royal Bank of Canada
Andrew Kennedy, South Australian Government Financing Authority
Justin Lofting, Treasury Corporation of Victoria
Duncan Haig, UBS AG, Australia Branch
Daniel Park, Westpac Banking Corporation
Anthony Robson, Yieldbroker Pty Limited
Operations Committee
Steve Hackers, JP Morgan Chase Bank, N.A. (Chair)
Matthew McMahon, ABN AMRO Clearing Sydney Pty Limited
David Thomson, Australia and New Zealand Banking Group Limited
Allister Lambert, Commonwealth Bank of Australia
Matthew Gallagher, Credit Suisse AG
Sebastian Rebeiro, Deutsche Bank AG
Stuart Bunt, HSBC Bank Australia Limited
Rebecca Collins, Morgan Stanley Australia Limited
Steven Phillips, National Australia Bank Limited
Peter Lotz, Nomura Australia Limited
Keppel Smith, State Street Bank and Trust Company
Peter Rose, UBS AG, Australia Branch
Susan McAndrew, Westpac Banking Corporation
p. 33
www.afma.com.au
2018/19 SUBMISSIONSSignificant Submissions include:
Indicative benefit legend: Direct costs savings Better regulation Better for business
Submission Issue Policy Maker Indicative Benefit
Application for continuing exemptions from certain Derivative Transaction Reporting Rules ASIC
Consultation on Proposed AFCA Rules of Complaint Resolution Scheme AFCA
CHESS Replacement: New Scope and Implementation Plan ASX
Updates to AUSTRAC Compliance Guide re self-attestation of identity; independent review of AML/CTF programs
AUSTRAC
ESB National Energy Guarantee – Draft Detailed Design Consultation Paper Energy Security Board
International Banking Statistics Changes – Resubmissions APRA
Draft amendments to Chapters 4 and 15 of the AML/CTF Rules relating to corporate customers who are custodians
AUSTRAC
Application of CPS226 to physically settled precious metals forwards APRA
ASIC Consultation Paper 301 – Foreign Financial Service Providers ASIC
Corporate Governance Principles and Recommendations: 4th Edition Consultation Draft ASX
Feedback from Users of Cash Equities Clearing and Settlement Services ASX
Design and Distribution Obligations and Product Intervention Power Draft Legislation and Explanatory Memorandum
Treasury
ASIC CONSULTATION PAPER 302 – Proposed Changes to ASIC’s Capital Requirements for Market Participants
ASIC
Revisions to the related entities framework for ADIs APRA
Interbank Offered Rate (IBOR) Fallbacks for 2006 ISDA Definitions Consultation ISDA
Consumer Data Right Rules Framework ACCC
Treasury Laws Amendment (Consumer Data Right) Bill 2018: Provisions for further consultation Treasury
OTC Transparency in the NEM Consultation Paper Energy Security Board
Market Making Requirements in the NEM Consultation Paper Energy Security Board
Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2018 Exposure Draft and Indicative Draft AML/CTF Rules Phase 1.5
National Security and Law Enforcement Policy Division
Monthly Publication of the Consumer Price Index ABS
ASX 24 Futures API Enhancements ASX
BEAR - provision of draft accountability information by small and medium ADIs APRA
Industry funding of ASIC – Enforcement Special Account The Treasurer
Review of the AUSTRAC Industry Contribution Levy Arrangements – Issues Paper Acacia CRE
Treasury Laws Amendment (Consumer Data Right) Bill 2018 Treasury
Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018 Treasury
p. 34
Annual Report 2019
Submission Issue Policy Maker Indicative Benefit
OECD Review into Offshore Banking Units Industry Perspectives Treasury
GST Treatment of Clearing and Execution Commissions Paid on Futures and Options ATO
Proposed Compliance Framework Liquidity Management ATO
Enforceability of financial services industry codes Treasury
Markets Disciplinary Panel Regulatory Guide Consultation (CP 306) ASIC
Increasing the loss-absorbing capacity of ADIs to support orderly resolution APRA
ASX Listing Rules Update Consultation ASX
APRA Capability Review Treasury
Enforceability of financial services consumer industry codes Treasury
COGATI Implementation – Access and Charging AEMC
ASX 90 Day Bank Bill Futures Contract Changes Consultation ASX
Consultation on Determination under Paragraph 37EA(4)(b) of the Banking Act - BEAR variable remuneration
APRA
Consultation on Corporations Amendment (National Guarantee Fund Payments) Regulations 2019
Treasury
Proposed changes to Guidance Note 1 and Guidance Note 10 relating to business continuity and cyber resilience
ASX
Consumer Data Right Rules Exposure Draft ACCC
CPG 234 Information Security APRA
National Electricity Amendment (Short Term Forward Market) Rule 2019 AEMC
Guidance Note 20 Equity Derivatives Consultation Takeovers Panel Secretariat
ASIC Report 605 Allocations in equity raising transactions ASIC
Proposed ARS 722.0 ABS/RBA Derivatives Data Collection APRA
AUSTRAC Industry Contribution 2019-20 - Stakeholder Consultation Paper AUSTRAC
2019-20 Pre-Budget Submission Treasury
Proposed Reporting Rules for FX Gains and Losses in Local File Part A Financial Institutions ATO
2018/19 SUBMISSIONS cont'...
Significant Submissions include:
Indicative benefit legend: Direct costs savings Better regulation Better for business
p. 35
www.afma.com.au
AFMA MEMBERS (current at 30 June 2019)
Financial Markets MembersABN AMRO Clearing Sydney Pty Limited
AGL Energy Limited
Alinta Energy
AMP Limited
Arab Bank Australia
Arcadia Energy Trading
Arrow Energy Trading Pty Ltd
Associated Foreign Exchange Australia Pty Ltd
ASX Limited
Aurora Energy Pty Ltd
Australia and New Zealand Banking Group Limited
Australian Office of Financial Management
AxiCorp Financial Services Pty Ltd
Bank of America Merrill Lynch Australia
Bank of China Limited
Bank of Communications Co. Ltd Sydney Branch
Bank of Queensland
Bank of Sydney Limited
Barclays Bank PLC, Singapore Branch
Bendigo and Adelaide Bank Limited
BGC Partners (Australia) Pty Ltd
BNP Paribas
Chi-X Australia Pty Ltd
China Construction Bank, Sydney Branch
China Everbright Bank, Sydney Branch
Citi
CleanCo Queensland Limited
CLSA Australia Pty Ltd
CMC Markets Asia Pacific
CME Group Australia Pty Ltd
Colonial First State Global Asset Management
Commonwealth Bank of Australia
Credit Agricole CIB Australia Limited
Credit Suisse AG
Credit Union Australia Limited
CS Energy Limited
Cuscal Limited
DBS Bank Ltd
DDH Graham Limited
Delta Electricity
Deutsche Bank AG
EnergyAustralia
ENGIE
Ergon Energy Queensland Pty Ltd
ERM Power Limited
FIIG Securities Limited
Financial and Energy Exchange Ltd
GFI Australia Pty Ltd
Goldman Sachs Australia Pty Ltd
Greater Bank Limited
HSBC Bank Australia Limited
Hydro Tasmania
ICAP Australia Pty Ltd
IG Markets Limited
IMC Pacific Pty Ltd
Industrial and Commercial Bank of China Limited
Infigen Energy
ING Bank (Australia) Limited
InterGen (Australia) Pty Ltd
Invast Financial Services
Investec Australia Limited
JPMorgan Chase Bank, N.A.
LCH.Clearnet Ltd Sydney Branch
Macquarie Group Limited
Mizuho Bank Ltd
Morgan Stanley Australia Limited
MUFG Bank, Ltd.
National Australia Bank Limited
Natixis Australia Pty Ltd
Newcastle Permanent Building Society
Nikko AM Limited
Nomura Australia Limited
Northern Territory Treasury Corporation
NSW Treasury Corporation
OCBC Bank
OFX
Optiver Australia Pty Ltd
Origin Energy
Propex Derivatives Pty Ltd
QBE Insurance Group Limited
QIC
Queensland Treasury Corporation
Rabobank
Reserve Bank of Australia
Royal Bank of Canada
Shell Energy Australia Pty Ltd
Snowy Hydro Limited
Societe Generale
South Australian Government Financing Authority
Standard Chartered Bank
Stanwell Corporation Limited
State Street Bank and Trust Company
Sumitomo Mitsui Banking Corporation, Sydney Branch
Suncorp Metway Ltd
Susquehanna Pacific Pty Ltd
Tasmanian Public Finance Corporation
TD Securities
Teachers Mutual Bank Limited
The Northern Trust Company
Tibra Trading Pty Ltd
Toyota Finance Australia Limited
Travelex Limited
Treasury Corporation of Victoria
Tullett Prebon (Australia) Pty Limited
UBS AG, Australia Branch
United Overseas Bank Limited
Vanguard Investments Australia Ltd
Western Australian Treasury Corporation
Western Union Business Solutions
Westpac Banking Corporation
Yieldbroker Pty Limited
Partner MembersAllen & Overy Australia Pty Ltd
Ashurst Australia
Baker McKenzie
Bloomberg L.P.
Clayton Utz
Ernst & Young
Gilbert + Tobin
Herbert Smith Freehills
ICE Data Services Australia
Johnson Winter & Slattery
King & Wood Mallesons
KPMG
Minter Ellison
Norton Rose Fulbright
PricewaterhouseCoopers
Refinitiv Australia Pty Ltd
S&P Global
SWIFT Services Australia Pty Ltd
White & Case
Affiliate MembersAustralian Centre for Financial Studies
Australian Energy Market Operator Ltd
Clean Energy Regulator
International Capital Market Association
p. 36
Annual Report 2019
Well-functioning financial markets are critical to good
economic performance. AFMA pursues the policy and industry
conditions that best enable financial markets to support a
healthy economy by:
• Advocating policies and regulation that support
development of the financial markets and user confidence
in them;
• Encouraging responsible conduct and efficient markets
through industry codes, conventions, guides and preparing
and maintaining standard documentation; and
• Promoting high professional standards through education
and accreditation programs.
AFMA covers industry issues affecting the front, middle
and back office functions of members. This includes matters
concerning dealing, advising and operations for both the
over-the counter (OTC) and exchange markets for securities
and derivatives.
Policy advocacy and industry representation
AFMA seeks to promote efficient regulation that inspires
investor confidence in our markets. Our approach is built
on constructive engagement with politicians and a credible
approach to policy and regulatory matters. The Government
and regulators regularly seek AFMA’s views on public policy
matters relevant to the financial markets.
The financial regulators oversee the day-to-day operation of
banking and financial markets by administering government
policy. AFMA has a unique relationship with the regulators
that can handle a contest of ideas and views when necessary
and is founded in a common interest in the efficient delivery of
regulatory objectives.
Promoting market efficiency and Integrity
AFMA underpins official regulation by developing and
promoting industry standards and guidance that support
efficient and ethical practices across all of our financial
markets. In addition, AFMA’s conventions and standard
documentation for the OTC markets are widely accepted,
covering front office activities operational aspects of financial
transactions; notably confirmation, settlement, reconciliation
and risk management processes.
Promoting market professionalism
AFMA encourages high standards of professional conduct in
financial markets by delivering professional development and
accreditation programs to improve individual expertise in OTC
and exchange-traded markets. AFMA accords accreditation,
which enjoys widespread industry acceptance, to individuals
who achieve the required levels of competence.
Industry leadership
AFMA’s strategy is set by a Board comprising industry
leaders at CEO level. The advocacy, industry standards and
conventions process is supported by member firms though
our committees. They regularly assess suitability of the policy
and regulatory settings for our financial markets and the
degree of professionalism exhibited by market participants.
www.afma.com.au
The Australian Financial Markets Association (AFMA) is a member-driven and policy focused industry body
that represents participants in Australia’s financial markets and providers of wholesale banking services.
AFMA’s membership reflects the spectrum of industry participants including banks, stockbrokers, dealers,
market makers, energy companies, market infrastructure providers and treasury corporations.
ABOUT AFMA
p. 37
www.afma.com.au
www.afma.com.au
Australian Financial Markets Association Ltd ABN 69 793 968 987
Level 25, Angel Place, 123 Pitt Street Sydney NSW 2000 GPO Box 3655 Sydney NSW 2001 Telephone: + 61 2 9776 7900 Fascimile: + 61 2 9776 4488 Email: [email protected] Web: www.afma.com.au