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2014 Australian Financial Markets Report
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Compiled for AFMA by
Australia’s financial markets have grown over the last five years and are among the most
sophisticated in the Asia region. According to the latest AFMA data, total turnover in financial
markets is up 27% over the five years to June 2014. Australia’s financial markets collectively
turned over $125 trillion in 2013-14. The major markets in the Australian financial system include
the capital markets (shares and bonds), the money markets and derivatives markets.
Foreword
This year, as G20 President, Australia has had an unprecedented opportunity to steer
what is considered the world’s pre eminent forum for international economic and
financial cooperation.
Under Australia’s stewardship, the G20 has focused on completing key aspects of the
core financial regulatory reforms agreed in response to the crisis. These include making
derivatives markets safer, building resilient financial institutions, as well as addressing
the too big to fail problem and potential risks in the shadow banking sector.
These reforms are aimed at enhancing the resilience of the global financial system.
They are important to Australia because our financial markets are heavily integrated
with those overseas. Stable and efficient financial markets are essential to supporting
Australian economic growth and prosperity.
We have delivered key aspects of the core commitments we made in the wake of the
financial crisis, and we have been giving stronger emphasis within the G20 on the
implementation and monitoring of the impact of these reforms to ensure they are
having the desired effect.
It is important that we implement reforms in a way that creates greater certainty in
the regulatory environment to support confidence and growth. Our efforts should
continue to promote an internationally coordinated approach to implementation
because it is crucial to promoting an integrated global financial system, reducing
harmful fragmentation and avoiding unintended costs for business.
Australia has a strong interest in participating in the development and implementation
of carefully calibrated financial regulatory standards. It is important that Australia
continue to engage in international forums so that we can help shape the development
of this work.
To ensure that the financial system is in the best possible position to meet Australia’s
evolving needs and support Australia’s economic growth, we look forward to the final
report of the Financial System Inquiry due later this year. The Financial System Inquiry
will establish the direction for the future of Australia’s financial system and will lay out
a blueprint for the financial system over the next decade and beyond.
I congratulate the Australian Financial Markets Association (AFMA) on the publication
of the 2014 Australian Financial Markets Report. AFMA plays an important role in
representing Australia’s financial services industry domestically and internationally, and
has been closely engaged in the Financial System Inquiry, as well as initiatives that
enhance international regulatory coordination.
The Hon Joe Hockey MP
Treasurer
Australian Financial Markets Association
1
Summary of Market Turnover
The Australian Financial Markets Annual Turnover Summary By Market (AUD billion)
2009-10
2010-11
2011-12
2012-13
2013-14
% change
OTC Markets
Government Debt Securities
928
1,483
1,758
1,778
1,899
6.8
Non Government Debt Securities
675
908
592
777
772
(0.7)
Negotiable & Transferable Instruments
4,112
3,676
3,675
3,271
2,784
(14.9)
Repurchase Agreements
5,418
7,364
7,525
7,864
6,011
(23.6)
Swapsa
5,923
6,809
9,848
10,495
10,461
(0.3)
Overnight Index Swapsb
3,000
5,313
8,703
8,894
7,198
(19.1)
Forward Rate Agreements
4,519
5,857
6,184
5,937
3,893
(34.4)
379
370
516
475
565
18.8
Interest Rate Options
Credit Derivatives
280
321
398
229
230
0.3
Foreign Exchange
41,436
44,517
39,923
42,403
42,914
1.2
706
730
927
1,274
1,083
(15.0)
67,376
77,348
80,049
83,397
77,809
(6.7)
1,359
1,339
1,185
1,151
1,188
3.2
504
681
816
862
697
(19.2)
1,864
2,020
2,001
2,013
1,885
(6.4)
Futures
32,857
45,927
44,846
48,245
45,075
(6.6)
Options
324
507
310
437
415
(5.1)
Currency Options
Total OTC
Exchange Traded Markets
Equities
Shares
Options
Sub-Total
Futures
Sub-Total
Total Exchange Traded
ALL FINANCIAL MARKETS
33,181
46,434
45,157
48,682
45,490
(6.6)
35,045
48,454
47,158
50,696
47,375
(6.6)
102,421
125,802
127,207
134,093
125,184
(6.6)
221
315
227
291
251
(13.8)
Energy Markets
Electricity (million megawatt hours)
OTC Electricity Derivatives
399
549
437
342
387
13.1
620
864
664
633
637
0.7
Renewable Energy Certificates
21.5
47.3
61.7
77.8
18.9
(75.8)
NSW Greenhouse Gas Abatement Certificates
14.2
26.5
1.9
0.0
0.0
0.0
2.4
8.5
1.4
2.6
0.2
(91.5)
38.0
82.4
65.0
80.4
19.1
(76.3)
Electricity Futures and Options
Total Electricity
Environmental Products (million certificates)
Gas Electricity Certificates
Total Environmental Products
a Non AUD Cross Currency Swaps were surveyed for the first time in 2011-12.
b Non-AUD OIS were surveyed for the first time in 2013-2014
2
2014 Australian Financial Markets Report
The Australian Financial Markets annual Turnover Summary By Asset Class (AUD billion)
2009-10
2010-11
2011-12
2012-13
2013-14
% change
Debt Markets
Physical Market Turnover
Government Debt Securities
928
1,483
1,758
1,778
1,899
6.8
Non Government Debt Securities
675
908
592
777
772
(0.7)
Negotiable & Transferable Instruments
4,112
3,676
3,675
3,271
2,784
(14.9)
Repurchase Agreements
5,418
7,364
7,525
7,864
6,011
(23.6)
11,133
13,431
13,550
13,690
11,466
(16.2)
Swaps
5,923
6,809
9,848
10,495
10,461
(0.3)
Overnight Index Swaps
3,000
5,313
8,703
8,894
7,198
(19.1)
Forward Rate Agreements
4,519
5,857
6,184
5,937
3,893
(34.4)
379
370
516
475
565
18.8
Sub-Total
Derivative Market Turnover
Interest Rate Options
Credit Derivatives
Interest Rate Futures and Options
Sub-Total
Total Debt Markets
Derivative Market to Physical Market Activity
280
321
398
229
230
0.3
32,043
45,184
43,884
47,473
44,148
(7.0)
46,143
63,853
69,535
73,504
66,494
(9.5)
57,276
77,284
83,085
87,194
77,960
(10.6)
4.1
4.8
5.1
5.4
5.8
14,680
11,853
10,843
11,071
10,811
24,884
30,391
26,837
28,818
29,320
1.7
1,872
2,274
2,242
2,514
2,783
10.7
Currency Markets
Physical Market Turnover
Spot Foreign Exchange
(2.4)
Derivative Market Turnover
FX Swaps
Forward Foreign Exchange
706
730
927
1,274
1,083
(15.0)
27,462
33,395
30,006
32,606
33,186
1.8
42,142
45,248
40,849
43,677
43,997
0.7
1.9
2.8
2.8
2.9
3.1
1,359
1,339
1,185
1,151
1,188
3.2
504
681
816
862
697
(19.2)
Equity Futures and Options
1,139
1,250
1,272
1,209
1,342
11.0
Sub-Total
1,643
1,931
2,088
2,071
2,039
(1.6)
3,003
3,270
3,273
3,222
3,227
0.1
1.2
1.4
1.8
1.8
1.7
102,421
125,802
127,207
134,093
125,184
Currency Options
Sub-Total
Total Currency Markets
Derivative Market to Physical Market Activity
Equities Markets
Physical Market Turnover
Shares
Derivative Market Turnover
Options
Total Equities Markets
Derivative Market to Physical Market Activity
ALL FINANCIAL MARKETS
(6.6)
Australian Financial Markets Association
3
Contents
1
Foreword
2
Summary of Market Turnover Data
5
The Financial Market Landscape over the Past Five Years
9
Over-the-Counter Market Commentary
13
Exchange Traded Market Commentary
19
Chi-X Australia
20
LCH.Clearnet Ltd – SwapClear
21
Regulatory Data Architecture and Analytics
Market Data
4
23
Government Debt Securities
28
Non Government Debt Securities
35
Negotiable and Transferable Instruments
38
Repurchase Agreements
41
Swaps and Forward Rate Agreements
47
Interest Rate Options
49
Credit Derivatives
52
Foreign Exchange and Currency Options
55
Electricity
58
Environmental Products
61
Exchange Traded – ASX
66
Appendices
72
About AFMA
2014 Australian Financial Markets Report
The Financial Market
Landscape over the Past
Five Years
Peter Jolly, Global Head of Research – Fixed Income, Currencies & Commodities, Product & Markets, National Australia Bank
Australia’s financial markets have grown
over the last five years. According to
the latest AFMA data, total turnover in
financial markets is up 27% over the five
years to June 2014.
While overall volumes have continued
to rise, the experience on a market-bymarket basis has been disparate. Volumes in
Overnight Index Swaps, for example, have
increased nearly sixfold while we have seen
turnover in the Bank Bill and Negotiable
Certificates of Deposit markets halve.
Figure 1 gives a summary of changes in
turnover over the past five years.
Many factors have influenced these
changes in market volumes. There have
been big changes in global and Australian
economic settings, technology continues
to evolve rapidly, regulatory change
has been substantial, and, in general,
financial markets and investors have
continued to globalise.
In this article we take a look at some of the
factors that have shaped market turnover
over the past five years.
The Bond Market – The Return
of the Government
The shape and participants in Australia’s
bond market have changed significantly
over the past five years. Prior to the global
financial crisis (GFC) the majority of
issuance in the bond market was from the
private sector, including domestic banks/
lenders, foreigners and to a lesser extent
non-bank corporates.
$125 billion of outstandings from state
and Commonwealth governments – see
Figure 2.
In fact, by the early 2000s, successive
Commonwealth Government budget
surpluses, and bond retirements, raised
serious concerns about liquidity in the
Non-government
bonds
outstanding
totalled $346 billion at December
2007, well in excess of the combined
Figure 1: Turnover Change over past Five Years
% Interest Rate - Overnight Index Swaps
598
Government Debt Securities
140
Interest Rate Options
98
Interest Rate Swaps
83
Futures - Exchange traded
68
Total Exchange Traded
65
Non-Government Debt Securities
56
Currency Options
30
All Financial Markets
27
Equities - Exchange traded
25
Electricity
25
Bond Repurchase Agreements
17
Total OTC
11
-2
Environmental Products
Foreign Exchange
-3
Credit Derivatives
-28
Interest Rate FRA's
-28
NCD and Bank Bills
-50
Source: AFMA. % change in 2013/14 compared to 2008/09 for selected markets.
Australian Financial Markets Association
5
The Financial Market Landscape over the Past Five Years
fIGURE 2: Long Term Debt Issuance
term bonds totalled $540 billion in June
2014 and collectively are again larger than
private sector bonds issued in Australia at
$474 billion.
600
Non Government
Government - State and Commonwealth
500
AUD billion
400
300
200
100
Source: RBA Table D4
0
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
This increased demand is evidenced in both
narrow credit spreads and increased foreign
participation in our bond market.
fIGURE 3: Foreign Ownership of Australian Government Bonds
At 67% to March 2014, the share of
Commonwealth Government bonds held
by foreigners has fallen from the peak of
78% it reached in early 2012; however, this
is mostly because the Commonwealth has
continued to issue briskly as foreign buying
has slowed somewhat. In actual dollar terms,
foreigners owned a record $227 billion of
Commonwealth Government bonds in
March 2014.
90%
80%
share of total outstanding
70%
60%
50%
40%
30%
20%
10%
0%
1990
6
Against this backdrop of increased supply,
demand for Australian bonds has remained
strong. Global investors like Australia.
The economy has more or less grown
continuously2, the Australian Government
retained its AAA credit rating when many
other countries did not, and even though
interest rates in Australia are at 50-year
lows they remain high when compared to
other countries.
Source: ABS Financial Accounts 5232
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Commonwealth Government bond market.
Turnover had fallen and investors were
looking for alternatives – even though the
government could have retired its entire
debt, they decided to keep $50 billion of
government bonds on issue to support
the efficacy of other bond and interest
rate markets.
to deficit saw the Commonwealth become
the dominant issuer over the past five years.
Second, domestic bank bond issuance has
doubled since the end of 2007, although this
has slowed more recently as securitisation
markets have picked up again. Finally, what
hasn’t changed is that non-bank corporate
bond issuance has remained modest.1
The GFC changed the shape of Australia’s
bond markets. Firstly, and primarily, a return
The net of these changes is that combined
Commonwealth and state government long-
2014 Australian Financial Markets Report
Overall, Australia’s bond market has thrived
over the past five years; issuance is up and
demand is robust. Latest AFMA data shows
that turnover in government and nongovernment bonds is 140% and 56% higher
respectively than five years ago.
Increased turnover in the physical
government bond market has also been a
key contributor to the increased turnover
in associated markets like the bond repo
market, interest rate swap market and bond
futures market.3
Internationalisation of
Australia’s Markets
fIGURE 4: AUD Share of Global FX Turnover
10
Increased foreign participation in our bond
market is part of a broader uplift in foreign
involvement in Australia’s markets.
The past five years has been a flat period for
Australia’s foreign exchange markets. Latest
AFMA data shows turnover fell a slight 3%
in the five years to June 2014. Declining
volatility and reduced trading opportunities
for investors have been factors behind
subdued volumes.
However, against this subdued backdrop
the Australian dollar has actually risen in
its importance relative to other currencies.
The Bank for International Settlements
(BIS) triennial survey showed that in 2013
the AUD/USD was the fourth most traded
currency pair and the AUD the fifth most
traded currency, with its share of global
currency trade at 8.6% in 2013, up from
7.6% in 2010 and 6.6% in 2007 – see
Figure 4.
These volumes are well in excess of the
Australian economy’s share of global GDP,
which has remained a little over 1% over the
past five years.
8
share of global turnover
The foreign exchange market is a good
example.
AUD
9
7
6
5
4
3
2
1
Source: BIS Tiennial Survey of Interest Rate Derivatives
0
1998
2001
2004
2007
2010
2013
in Australia. Outstandings totalled $470
unwilling to take credit risk on each other.
billion in December 2007 and this accounted
Since then volumes have increased, with
for 35% of Australian banks’ liabilities.
centrally cleared derivatives becoming the
Basel III liquidity rules (prudential rules)
now require banks to have more stable
funding and to increase funding from
industry standard for interest rate swaps.
Market liquidity is now increasingly found in
centrally cleared swaps.
sources such as deposits and longer term
Trade reporting is now in place in most large
debt securities. Outstanding bank bills have
markets to some degree, although more
plunged, standing at $289 billion to June
work is being done to ensure full coverage
2014, a little over 20% of bank liabilities;
of derivative markets. It is now possible to
meanwhile, turnover is half what it was five
find out recent derivative turnover, at least in
years ago.
US markets, rather than wait for an annual
On the other side, changes in market
survey.
regulation may be impacting positively the
A clear theme over the five years is the
turnover in some over-the-counter (OTC)
global impact of local regulation. The US
Regulation Changes
markets, like interest rate swaps.
implementation of the G20 OTC derivative
The regulatory response to the GFC saw
changes to both prudential rules and market
regulations. These changes have impacted
turnover in a number of financial markets,
sometimes for the better and sometimes for
the worse.
The G20 meeting in 2009 included
An example is the short-term bank bill
market. Prior to the GFC, the short-term
bank bill market was the largest debt market
recommendations around:
reforms (Dodd-Frank Act) took a detour
from the more common domestic focus and
introduced us to the term ‘extra-territorial
–– central clearing
impact’. The Commodities and Futures
–– trade reporting
Trading Commission (CFTC) transformed
–– risk mitigation
from an agency with a focus on agricultural
and financial futures to regulating, in some
–– exchange or electronic trading.
way, the world’s OTC derivative trades. This
Immediately post-2008, interest rate swap
has resulted in inevitable tensions between
volumes dropped as counterparties were
local regulations and global markets. All
Australian Financial Markets Association
7
The Financial Market Landscape over the Past Five Years
Changes to the economic and fiscal landscape, increased regulation and ongoing technological development have been
some of the factors that have shaped markets in recent years. Through this period Australia’s financial markets have
expanded. As well, Australia’s standing in global markets and relevance to global investors has grown.
four of the major Australian banks registered
with the CFTC as a ‘Swap Dealer’ to ensure
continued access to global markets. One of
the downsides of this tension, despite the
increase in overall market activity, is the
impact differences in regulation are having
on local liquidity. Regulator responses have
varied, although cooperation is increasing
due to active participation in global
regulatory forums.
A key concern for Australian regulators and
The Treasury has been to ensure Australian
entities continue to be able to access global
capital markets. Australia’s regulators have
embraced the change, and after an initial
focus on setting up trade reporting, the
government is considering mandating central
clearing of G4 interest rate swaps together
with AUD interest rate swaps.
Interest rate swap volumes have already
improved a sharp 83% over the past
five years.
Technology and New Products
Technology has and will continue to be a key
influence on the shape of financial markets
and their volumes. Increased computing
power has allowed better price discovery and
broader access to markets, both of which
have encouraged an increase in liquidity.
This has been particularly true in foreign
exchange markets, where electronic trading
platforms (both one-to-many and many-tomany) are accounting for an increasing share
of foreign exchange transactions as reflected
in the increasing proportion of non-bank
transactions in BIS surveys.
These developments are also emerging
in interest rate markets, largely due to
the mandate by the CFTC for many US
counterparties. New providers, together
with traditional inter-dealer brokers, are
developing swap execution facilities (SEFS)
to provide electronic and voice markets,
which appear to be more like exchanges
(where central limit order books exist), or
provide a means to streamline requests for
quotes where exchange-like markets are more
difficult.
Increased computing power has also been
behind the rise of high-frequency trading
and so-called dark liquidity pools. As ASIC
wrote in 20134 ‘Advances in technology have
made it easier to trade away from exchange
markets and have facilitated a proliferation of
dark trading venues known as ‘crossing systems’
and ‘dark pools’… Advances in technology have
also fundamentally changed the way orders
are generated and executed by all users of the
market.’
Some are concerned that these dark pools and
high-frequency trading make markets more
opaque and this could lead to investors losing
confidence which would have a deleterious
impact on liquidity. There is no evidence
of this. ASIC’s taskforce found that “some of
the commonly held negative perceptions about
high-frequency trading are not supported by our
analysis of Australian markets.”
Summary
Recent years have seen huge change. There
was a bull market through the 2000s that
ended with the GFC. The five years post the
GFC have seen even more change.
Changes to the economic and fiscal
landscape, increased regulation and ongoing
technological development have been some
of the factors that have shaped markets in
recent years.
Through this period Australia’s financial
markets have expanded. As well, Australia’s
standing in global markets and relevance to
global investors has grown.
The years ahead may not see the scale of
upheaval of recent times but inevitably
there will be more change. Australia’s robust
economy and strong regulatory framework
puts our already deep and transparent
financial markets in a good position to keep
innovating and growing. n
1 Debelle G (Assistant Governor RBA) 2014, ‘The Australian bond market’, speech to the Economic Society of Australia, Canberra, 15 April.
2 Aside from negative GDP quarters in Q1 2011, Q4 2008, and Q4 2000, the Australian economy has grown continuously since Q3 1991.
3 The sharp increase in turnover volumes on the futures market is almost entirely due to the increased turnover in interest rate products like interbank cash rate futures, 90 day bank bill
futures and 3 and 10 year bond futures.
4 https://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/rep331-published-18-March-2013.pdf/$file/rep331-published-18-March-2013.pdf.
8
2014 Australian Financial Markets Report
Over-the-Counter Markets
Global Markets
The beginning of 2014 had most financial
market participants expecting a renewed
upward trend in global interest rates driven
by a winding back in the US Federal
Reserve’s (Fed) quantitative easing (QE)
program. This in turn was expected to drive
flows into US-dollar denominated assets,
increasing volatility and turnover across a
broad range of asset classes.
These expectations were soon disappointed,
with a continuation of the downtrend
in both nominal and real interest rates
globally. US 10 year Treasury yields fell
from 3.00% to 2.50% in the first half of
2014. Inflation-linked bonds recorded
similar declines, implying that markets are
expecting an extended period of subdued,
low-inflationary economic growth and low
short-term interest rates. The Fed’s preferred
measure of inflation remains below 2%,
implying that there is still little urgency to
normalising US monetary policy. The Fed’s
balance sheet, at 25.5% of GDP, is unlikely
to undergo a significant contraction any
time soon, with no official timetable for
interest rate normalisation.
Even larger declines were seen in European
yields, with German Bunds posting record
domestic prices in the absence of a stronger
external adjustment in the euro exchange
rate. The European Central Bank (ECB)
resumed easing monetary policy via cuts to
its refinance and deposit rates in June and
September, and introducing additional,
unsterilised, asset-buying programs, moving
it more firmly in the direction of outright
government bond purchases or QE.
The ECB will likely need to expand the
scope and magnitude of its outright asset
purchases in the year ahead to stabilise the
nominal side of the Eurozone economy.
Japanese government bonds have also
posted some of their lowest yields since the
global deflation scare of 2003. An increase
in Japan’s consumption tax in April induced
a significant expenditure shift, with a 6%
annualised expansion in GDP in the first
quarter of the year followed by a 7.1%
slump in the second quarter. Japanese
inflation remains below 1% and below the
Bank of Japan’s (BoJ) target of 2%, pointing
to the prospect of a further expansion of
its QE program. The BoJ’s balance sheet is
equal to 55% of GDP.
The continuation of monetary easing in
the Eurozone and Japan coupled with a
winding back of QE in the United States
The broad trade-weighted US dollar index
was little changed over the financial year in
both nominal and real terms, but should
continue to trend higher from the multidecade lows seen in 2011.
Measures of market volatility in global
interest rate, equity and foreign exchange
markets have been subdued and this has
been reflected in a broad-based narrowing
of spreads to relatively risk-free assets.
Global financial markets have also absorbed
a significant increase in geo-political
tensions throughout the world, including in
Ukraine, Gaza and Syria–Iraq, and tit-fortat economic sanctions against Russia. The
reduction in market volatility has a basis
in economic fundamentals, in that there
has also been a reduction in the realised
volatility of global industrial output and
other economic indicators. Measures of
economic policy uncertainty in the United
States have also declined. However, there
are also concerns that a low-volatility
environment might encourage increased
leverage and risk-taking in the search for
yield. Low market volatility has weighed on
turnover and rates of return across a broad
range of asset classes.
The beginning of 2014 had most financial market participants expecting a renewed upward trend in global interest rates
driven by a winding back in the US Federal Reserve’s (Fed) quantitative easing (QE) program.... These expectations were
soon disappointed, with a continuation of the downtrend in both nominal and real interest rates globally.
lows around 1.10% during 2013-14. The
Eurozone economies continue to face
disinflationary/deflationary
pressures,
with the single European currency forcing
internal devaluations through lower
points to a divergence in expectations for
G3 monetary policy that should broadly
favour flows into US dollar-denominated
assets. However, the exchange rate response
to this divergence has so far been muted.
Australian Markets
The reduction in market volatility globally
found expression locally, with turnover in
Australian financial markets down 7% over
the financial year. Turnover in debt markets
Australian Financial Markets Association
9
Over-The-Counter Markets
The Reserve Bank of Australia (RBA) has kept the official cash rate steady at a record low in nominal terms since August
2013. The real cash rate has turned slightly negative for the first time since the financial crisis, consistent with the decline in
real interest rates globally.
fell 11% over the year. Turnover in currency
markets was up modestly, while turnover in
equities markets was virtually flat. Over-thecounter (OTC) markets saw a 7% decline
in turnover, while exchange-traded market
turnover also fell 7%.
for residential mortgage-backed securities
issuance since 2008. Corporate issuance was
subdued, reflecting reduced funding needs
on the part of major issuers, although the
emergence of new issuers in the market was
a highlight.
Australian
sovereign
fixed
income
outperformed for much of the year,
especially at the long end of the curve.
The 3 year bond yield rallied 14 basis
points, while the 10 year rallied 22 basis
points over the course of 2013-14. The
Australia–US 10 year bond spread narrowed
to below 100 basis points during the
year for the first time since 2006. Semigovernment and corporate bond spreads
to Australian Commonwealth Government
Securities (ACGS) have also narrowed to
historically low levels. Government and
semi-government securities have benefited
from demand associated with increased
prudential liquidity requirements ahead
of the Australian Prudential Regulation
Authority’s implementation of its liquidity
coverage ratio, as well as their relatively high
yielding status in absolute terms, despite the
narrowing in spreads to offshore.
The federal government sought to
implement a fiscal consolidation equal to
4% of GDP over 10 years in its May 2014
budget. However, key budget initiatives
have met with resistance in the minor-party
controlled Senate, putting the government’s
fiscal consolidation plans at risk. Australian
Government net debt is projected to rise
from an estimated 13.9% of GDP in 201415 to 14.6% of GDP by 2016-17, ensuring
further growth in ACGS outstanding to
around $450 billion by 2017-18 from $320
billion in 2013-14. State government central
borrowing authorities had $230 billion in
bonds outstanding as at June 2014, with a
further $31 billion in issuance planned for
2014-15.
Government bond turnover rose 7% over
2013-14, with Commonwealth Government
bond turnover up 6% and foreign bond
turnover up 39% over the same period.
Semi-government bond turnover fell 11%.
Non-government debt securities saw little
change in turnover, although mortgagebacked securities turnover rose 6%, with
issuance up around 13%, the best year
10
Uncertainty with respect to the repeal of the
carbon tax mechanism and the Review of the
Renewable Energy Target (RET) restricted
turnover in energy markets over the
course of 2013-2014.
The Reserve Bank of Australia (RBA)
has kept the official cash rate steady at a
record low in nominal terms since August
2013. The real cash rate has turned
slightly negative for the first time since the
financial crisis, consistent with the decline
in real interest rates globally. The RBA has
2014 Australian Financial Markets Report
signalled an extended period of steady rates,
with inflation expected to remain consistent
with the 2–3% medium-term target range
into the second half of 2015. With the long
end of the curve supported by the decline
in bond yields globally, the yield curve has
flattened, pointing to subdued economic
growth over the medium term.
The spread between BBSW and Overnight
Indexed Swap (OIS) rates traded within a
very narrow range of 8–23 basis points over
the year. With official interest rates steady
for such an extended period, turnover in
interest rates products is likely to remain
subdued. Turnover in AUD OIS fell
significantly over 2013-14, while negotiable
and transferable instruments turnover was
down 15%, reflective of expectations of a
stable interest rate environment. Turnover in
forward rate agreements was down 34% in
2013-14. A renewed RBA tightening cycle
could be expected to increase both volatility
and turnover in the second half of 2015
as the upper bound of the RBA’s inflation
target range comes under challenge.
The AUD exchange rate rose over the 201314 year by 0.8% on a trade-weighted index
basis and 1.6% against the USD. The AUD
remains stronger than the narrowing in
interest rate differentials and a 40%
decline in commodity export prices from
their 2011 highs would otherwise imply.
However, still positive yield differentials
and safe-haven appeal have underpinned
continued strong offshore demand for
AUD-denominated assets. The RBA has
Figure 1: Annual Turnover by Market
140,000
Exchange Traded
expressed dissatisfaction with the resilience
of the exchange rate, but official jawboning
is at best a temporary downward influence
in the absence of further easing in the
official cash rate. The intra-day trading
range for AUD–USD remains well below its
long-run average, consistent with subdued
trading ranges across other major currency
pairs. The narrower trading range reduced
hedging demand and this was reflected in
foreign exchange market turnover.
Over the Counter (OTC)
120,000
AUD billion
100,000
80,000
60,000
40,000
20,000
0
2009-10
2010-11
2011-12
2012-13
2013-14
Figure 2: Annual Turnover by Asset Class
140,000
Equities Markets
Currency Markets
Debt Markets
120,000
AUD billion
100,000
80,000
60,000
40,000
20,000
0
2009-10
2010-11
2011-12
2012-13
2013-14
Australian equities have underperformed
the United States, but have otherwise
participated in the extended global rally in
equity markets from the financial crisis lows.
S&P/ASX 200 VIX futures trended lower
for much of the year since their launch in
October 2013, consistent with low readings
in offshore equity volatility indices. The
decline in volatility has weighed on equity
market turnover.
The main challenges to the Australian
economy in the year ahead will be managing
the transition from the investment to the
production stage of the mining boom.
Resource export volumes are at record
levels, and a lower exchange rate supports
Australian dollar export values; however,
non-mining business investment and new
dwelling construction will need to pick
up the slack left by mining investment.
The prospect of a further slowing in the
Chinese economy, which now accounts
for more than one-third of exports by
value, can be expected to further weigh on
the terms of trade and growth in national
income. Economic growth is expected by
the RBA to be somewhat below trend at
around 3% during 2014-15, before firming
to be somewhat above trend at around
3.5% in 2015-16. This is expected to see
inflation remain consistent with the 2–3%
target range into the second half of 2015.
Monetary policy will need to balance its
Australian Financial Markets Association
11
accommodation of subdued underlying
inflation pressures with continued house
price inflation driven by low interest rates
and supply-side rigidities in the housing
market.
Financial System Inquiry
AFMA put in a first round submission to
the Financial System Inquiry (FSI) and
responded to the interim report released in
July 2014 with a second round submission.
AFMA has also met with the FSI committee
on issues of specific interest to OTC markets.
Key issues highlighted by AFMA include the
need for an integrated approach to reforming
the financial system that will drive the further
development of Australia’s financial markets
and their integration with regional and
global markets. AFMA also highlighted the
need for a more consistent and principlesdriven approach to regulation that seeks to
promote efficiency and economic growth as
well as prudential, supervisory and consumer
protection objectives. The Inquiry is due to
report to the Treasurer by November this year
and the Government’s response is likely to
follow some time afterwards. Implementation
of the inquiry’s recommendations and the
government’s response will have to run the
gauntlet of the minor parties in the Senate.
has been pushing the G20 to implement
an agenda to raise the level of GDP by 2%
above its current trajectory across member
economies through structural reform
measures. However, it will be difficult to
measure performance against this target given
the long lead times and lags entailed in the
implementation of structural reforms. The
G20 meetings will be monitored for further
progress in the implementation of OTC
derivatives reforms and prudential liquidity
measures. AFMA wrote to the Treasurer in
August to highlight the importance to the
Australian economy and financial system of
the proposals of the Financial Stability Board
to achieve greater financial market regulatory
coordination, to resolve the incoherence
in the regulation of global financial market
activity and to seek his support in moving
this agenda item forward. n
G20 Meeting in Brisbane
Australia has the G20 Presidency in 2014
ahead of the G20 Summit in Brisbane in
November. The Australian Government
www.afma.com.au
AFMA wrote to the Treasurer in August to highlight the importance to the Australian economy and financial system
of the proposals of the Financial Stability Board to achieve greater financial market regulatory coordination, to resolve
the incoherence in the regulation of global financial market activity and to seek his support in moving this agenda
item forward.
12
2014 Australian Financial Markets Report
Exchange Traded Market
In the 2014 financial year (FY14), Australian Securities Exchange strengthened its position as a leading exchange group in the
region and one of the top 10 listed exchanges in the world. The exchange’s business mix and size give it the financial strength
to invest in Australia’s central financial market infrastructure. This in turn gives Australian investors access to services that are
innovative, relevant and globally competitive.
The Year in Review
In the 2014 financial year (FY14),
Australian Securities Exchange strengthened
its position as a leading exchange group
in the region and one of the top 10 listed
exchanges in the world. The exchange’s
business mix and size give it the financial
strength to invest in Australia’s central
financial market infrastructure. This in turn
gives Australian investors access to services
that are innovative, relevant and globally
competitive.
New global regulations are changing the
way financial markets operate, particularly
in post-trade and risk management areas.
This creates new business opportunities for
exchanges. In FY14, ASX launched several
new services, including a clearing service
for over-the-counter (OTC) derivatives that
helps Australia meet its G20 commitments
and provides investors with the choice
of a domestic clearing service that is
regulated under Australian law. A collateral
management service was also offered,
which reduces collateral costs for clients by
allowing them to use fixed income securities
held in Austraclear, ASX’s securities
depository, as collateral for financial market
transactions.
New listings and capital raising activity
were particularly strong in FY14. There
were 107 initial public offerings for the year,
up from 82 in FY13, and $66.0 billion in
total capital raised, 42.3% higher than 12
months earlier.
There was modest growth in overall equity
market activity, with on-market value
traded per day increasing 4.3% and ASX’s
on-market value traded per day flat at $3.3
billion.
The daily average number of futures
contracts traded on ASX 24 was up 1.7%
to more than 461,000 contracts, while ASX
equity derivatives (mainly exchange-traded
options) underperformed, with the daily
average number of contracts traded down
21.1%. ASX is rebuilding liquidity in the
exchange-traded options (ETO) market
with a new marketing and education
campaign, and by changing the crossing
rules and improving market-maker liquidity
arrangements.
Across the year, ASX launched a range of
product and service innovations designed
to stimulate market growth and broaden
the choices available for customers and end
investors. These included:
––
reduced timetable for rights issues from
26 to 19 days, balancing the needs of
companies for timely access to capital
with the opportunity for existing
shareholders to participate in raisings
––
mFund settlement service, giving retail
investors access to unlisted managed
funds through their broker platforms
––
Renminbi settlement service, enabling
Australian companies to take or make
payments in the Chinese currency in
near real time, reducing their risk and
cost of doing international business.
In addition, legislation will soon be passed
to improve retail investor access to the
corporate bond market and, subject to
regulatory approval, ASX hopes to add
international equities to its product suite in
the near future.
An important initiative in FY14 was the
establishment of a Code of Practice for
ASX’s equity market clearing and settlement
services. The Code makes commitments
to ASX clients on transparent and nondiscriminatory access to its services and
pricing. Under the Code, a Forum of
senior industry representatives was created
that provides valuable input into the
development of the ASX services.
The Forum recently recommended that ASX
moves from a T+3 to a T+2 settlement cycle
in early 2016. This will reduce risk, create
savings for the industry and deliver faster
settlement of transactions for investors. In
June 2014, the Forum received a report
produced by independent economics
consulting firm Oxera, which benchmarks
the costs of clearing and settlement services
in Australia against the costs in other
financial centres. The report concludes
that ‘the costs of post-trading services in
Australia are in line with the costs of similar
services provided in financial centres of
comparable size’.
The Code of Practice and Forum are
consistent with ASX’s advocacy of policies
that support investors and promote market
quality. So too is its participation in public
Australian Financial Markets Association
13
Exchange Traded market
policy debates, such as the Financial System
Inquiry and the Competition Policy Review.
These allow for choices to be made that
help secure the future and competitiveness
of Australia, and which make the most of
the opportunities in Asia.
ASX provides critical infrastructure that sits
at the centre of Australia’s financial markets.
ASX has announced that it will reduce its
fees and increase growth incentives for
electricity futures, interest rate futures and
OTC clearing.
The new fee schedule recognises that
customers use exchange-traded and OTC
interest rate products together and positions
ASX to compete for liquidity within an
evolving global market structure. It also
signals the next phase in the development
of ASX’s Derivatives and OTC Markets
business – continued investment in critical
platforms, launch of new products that
further integrate the exchange-traded
futures and OTC markets (known as
‘futurisation’), and improved alignment
between ASX and its clients.
in the mining sector was subdued compared
with previous years.
Nine Entertainment Co. Holdings Ltd
had the highest market capitalisation of
$1.93 billion upon listing. Spotless Group
Holdings Ltd and Z Energy Ltd were also
notable listings, raising $994.6 million and
$741.6 million in new capital respectively.
ASX
increased
global
investment
opportunities for local investors as a number
of foreign firms completed successful
listings. The majority came from New
Zealand, with two of the most significant
floats, Meridian Energy Ltd and Genesis
Energy Ltd, formerly New Zealand stateowned enterprises, raising $1.12 billion and
$680.6 million respectively. Z Energy Ltd is
also New Zealand-based.
Secondary raisings of equity capital in
FY14 totalled $33.4 billion, up 2.9% on
FY13. Placements accounted for 55.1% of
secondary raisings or $18.4 billion. The
largest placements were completed by the
big banks: National Australia Bank ($1.7
billion raised). Use of dividend reinvestment
plans (DRPs) continued its downward
trend, falling 33.8% to $4.6 billion in FY14.
Secondary Equity Market
Australian equities produced another year
of double-digit returns. The S&P/ASX
All Ordinaries index rose 12.7% while the
accumulation index finished 17.6% higher.
In comparison, the MSCI World Index was
up 21.6% and the S&P 500 was up 22.0%
in FY14.
Consolidated average daily turnover was
$4.6 billion, which was in line with the
previous year. With turnover flat and higher
market capitalisations, velocity softened to
76%. Volatility continued on a downward
trajectory with the S&P/ASX 200 VIX
averaging 13.3 and approaching single
figures towards the end of the financial
year. A daily average 719,000 trades were
executed on ASX in FY14, which was up
3.7% on the previous corresponding period
(pcp). Across all markets there were 881,000
daily trades, which was up 7.8% on FY13.
Australian equities produced another year of double-digit returns. The S&P/ASX All Ordinaries index rose 12.7% while the
accumulation index finished 17.6% higher. In comparison, the MSCI World Index was up 21.6% and the S&P 500 was up 22.0%
in FY14.
Primary Markets
Initial capital raised in cash equity markets
nearly tripled in FY14, from $9.9 billion in
FY13 to $27.7 billion, due to a particularly
strong December quarter. Overall, 107 new
entities listed in FY14, a 30.5% increase
on last year. The largest floats came from
the utilities, commercial and professional
services, and real estate industries. Activity
14
billion placement of convertible preference
shares), ANZ Bank ($1.6 billion placement
of capital notes) and Westpac Banking
Corporation ($1.3 billion placement of
Capital Notes II). Rights and accelerated
issues almost doubled from FY13, raising
$7.7 billion or 23.1% of secondary capital
raised (FY13: $4.0 billion and 12.2%) with
Transurban playing a significant role ($2.3
2014 Australian Financial Markets Report
ASX matched 91.2% of lit market trades
and captured 85.5% of the gross traded
and reported value in Australian equities.
Fragmentation slowed in the second half
of the year with ASX maintaining a market
share of trading above 90%. Following the
meaningful price improvement reforms in
2013 there were fewer dark pools operating
in the Australian market by the end of
FY14. The number of crossing systems
registered with the Australian Securities and
Investments Commission fell from a peak of
22 in 2013 to 16 in July 2014.
ASX continued to invest in enhancements
to its trading platform throughout FY14,
and in February added regulatory data fields
to order messages ahead of Participants
being required to provide additional order
information on 28 July 2014.
From February through to June 2014, ASX
made a number of market structural changes
to ETO crossings. Non-special size crossings
were changed so that the transaction must
be completed on a price-time priority
basis through the screen. This was a major
change from the traditional trade report
mechanism previously employed, and is
expected to result in better execution for the
end client. Special size crossing levels were
changed to incorporate both a premium
of total volumes traded, with ASX SPI 200®
futures trading 9.7 million contracts in
contrast to just under half a million SPI 200
options being traded during the course of
the financial year. Notional value traded for
ASX SPI 200® futures and options increased
in FY14 by 9.5% and 55.5% respectively.
The market rally offset the decline in futures
volumes to increase the notional value
traded, and options benefited from both an
increase in activity and the market rally.
The ETP market continued to see significant growth, both in terms of number of products, issuers and funds under
management. Thirteen new funds commenced trading on the ASX, with Market Vectors, State Street Global Advisers,
BetaShares and UBS issuing new funds (compared to eight new funds in the previous year).
ASX ETO Market
ETO market volumes were down 20.1%
in FY14 compared to the pcp. Despite the
overall decline in volumes, the notional
value of Low Exercise Price Options
(LEPOs) traded increased by 30.2%. The
ETO market observed a sustained shift
to European-style flex options over the
traditional American-style single stock
options accounting for approximately
25% of traded volume. During the last
financial year, the Australian equity option
market experienced the lowest volatility
environment in its history, which is
predominantly the reason for the decline in
overall volumes.
In February 2014, ASX introduced a new
market-making scheme with a significant
increase in the minimum requirements
covering both minimum quote size and
number of option series quoted. This
has significantly increased the displayed
liquidity in the market to the benefit of
both retail and institutional investors.
and notional value component to more
accurately and fairly reflect the properties of
option contracts.
ASX is continuing with further reforms in
FY15 to improve the ETO market offering.
ASX will be launching Equity FlexClear™
for wholesale clients to report customised
option trades for central clearing, while
also listing new weekly, serial and TORESS
(Total Return Single Stock) option contracts.
ASX SPI 200® Futures and
Options
Despite the Australian equity market
benchmark index, the S&P/ASX 200,
rallying from the 4800 mark to finish the
year some 13% higher near 5400, ASX SPI
200® futures and options volume was mixed.
ASX SPI 200® futures volume decreased
slightly by 5.3% while options volume
increased by 35.6% compared to pcp.
However, any comparison in futures versus
options trading activity needs to be mindful
ASX Warrants
The ASX warrant market experienced a
year of change in FY14. Two long-term
issuers pulled back on their involvement
leaving only one major issuer of MINI
warrants, while other issuers focused on
more traditional products like instalment
and trading warrants. There was a total
of 3,564 warrants listed (down 17.14%);
however, this was expected as the high level
in the previous year included the issuance
of a whole product suite by an entirely
new issuer. Value traded of $3.8 billion
was virtually unchanged and MINI-style
warrants remained the most popular type of
new product (around $2.6 billion of value
traded).
Exchange-traded Products
(ETPs)
The ETP market continued to see significant
growth, both in terms of number of products,
issuers and funds under management.
Thirteen new funds commenced trading
Australian Financial Markets Association
15
Exchange Traded market
ASX 24 interest rate futures volumes were slightly stronger throughout the second half of FY14 compared to the first half of
FY14. Market activity was driven by a reduction in interest rate volatility in 2014 given glimpses of an improving global economic
environment and divergent monetary policy actions by the major global central banks.
on the ASX, with Market Vectors, State
ASX Hybrid Securities Market
Street Global Advisers, BetaShares and
The ASX hybrid securities market includes
convertible notes, capital notes and
preference shares. The market for hybrid
securities continued to attract issuers and
investors with the total value traded during
the year exceeding $5.6 billion, up 7.7%,
and the total market capitalisation for the
sector exceeding $28.1 billion, up 17.4%.
UBS issuing new funds (compared to eight
new funds in the previous year). Market
capitalisation of traded market ETPs
continued to see strong growth with around
$11.8 billion of funds under management,
up over 40% from around $8.4 billion the
year before. The number of trades in ETPs
also grew from 29,800 trades per month
to around 31,700 trades per month at the
end of FY14, and value traded per month
was up around 13% to just under $1 billion
each month.
ASX Bond Market
The ASX bond market includes government
bonds (Treasury bonds and Treasury indexed
bonds) and corporate bonds (fixed and
floating rate). A total of 54 bonds are now
available to retail investors with maturities
extending out as far as August 2035. A
key milestone in the development of the
retail corporate bond market is the passage
through federal parliament in August 2014
of the Simple Corporate Bonds Bill. The
legislation introduces a new streamlined
disclosure regime for issuers of simple
corporate bonds (SCBs) on ASX. It also
lays the foundation for SCBs issued into the
wholesale market and held in Austraclear
to be assessed on ASX by retail investors in
the form of a depository interests (DI). It
is anticipated that in the year ahead these
market developments will greatly expand
the number and range of bonds quoted on
ASX.
16
ASX 24 Interest Rate
Futures Market
ASX 24 interest rate futures volumes were
slightly stronger throughout the second half
of FY14 compared to the first half of FY14.
Market activity was driven by a reduction
in interest rate volatility in 2014 given
glimpses of an improving global economic
environment and divergent monetary
policy actions by the major global central
banks. The Reserve Bank of Australia (RBA)
indicated that the current accommodative
monetary policy stance was appropriate and
the prudent course of action was stability in
interest rates.
Volume in the 30 day interbank cash rate
futures was the benchmark interest rate
futures contract most affected by the
flat short-term yield curve, with volume
declining 26.4% on a pcp basis. The 90
day bank bill futures contract performed
better given the market environment with
volume growth in FY14 on par with FY13.
Activity in contract months in the bank bill
futures further out along the yield curve has
improved, offsetting the decline in activity
due to low volatility in contracts at the
2014 Australian Financial Markets Report
short end of the yield curve. Longer dated
bond futures were either flat or increased;
this was due to higher volatility at the
longer end of the yield curve and increased
demand for Australian Government bonds,
given the global search for AAA-rated
securities offering a yield premium over
other developed market government bonds.
The 3 year Treasury bond futures saw flat
volume growth, while volume in the 10 year
Treasury bond futures increased 20.3% on
a pcp basis.
One-session options on 3 year bond futures
declined slightly following an improvement
in the previous financial year. Volume
decreased 9% on a pcp basis given the
decline in underlying market volatility.
Liquidity, as measured by order book depth,
continued to increase across all benchmark
interest rate futures contracts. The increase
in liquidity was significant in the shorter
dated futures given the reduction in interest
rate volatility. The depth in 3 and 10 year
futures also increased albeit to a smaller
degree.
Activity through the exchange-for-physicals
continued to be strong, increasing 12.4%.
Exchange-for-physical
transactions
contributed 10.3% of interest rate futures
activity in FY14, up slightly on the
pcp. Block trade activity in bond futures
contracts decreased 46.1% on the pcp.
Trading Activity in a 24-hour
Trading Day
The SYCOM (ASX Trade24) trading
system permits near 24-hour trading of
Figure 1: ASX Trade24 traded volume by hour (ASX non-daylight savings / US and UK daylight saving)
60,000
4.30pm ASX Trade24
Day Session Closes
11.30am Australian
Economic Releases
50,000
40,000
Average Volume
8.30am - ASX Trade24
Day Session Opens
30,000
2.30pm Cash Rate
Announcements
5.10pm ASX
Trade24 Night
Session Opens
20,000
10.20pm Chicago Markets Open
10,000
ASX’s futures contracts, making the market
accessible at any time from many major
global financial centres through the ASX
Trade24 distribution network. The above
chart shows average trading activity that
occurs over a 24-hour period.
Activity
during
the
day
session
predominantly occurs with the opening of
the interest rate and ASX SPI 200 contracts
market; around economic and RBA cash
rate announcements; and in the lead-up
to market close. During the night session,
trading activity centres around the session
open and early trading in the European
and US markets. Night session activity
represented 27.5% of total trading activity
during FY14, an increase on previous years.
Austraclear
Austraclear is the major central securities
depository for the domestic debt market.
It primarily provides settlement, custody
and issuer services for Australian dollardenominated debt securities and has a
direct link to the Reserve Bank Information
and Transfer System (RITS), facilitating
real-time gross settlement of Australian
dollar debt, cash, foreign exchange and
derivatives transactions. Austraclear has
just over 850 participants, including banks,
Commonwealth and state government
authorities, trustee companies, custodian
banks, other non-bank financial institutions
and large corporates.
Total Austraclear debt holdings experienced
moderate growth in FY14 rising by 11.7%,
to $1,571.8 billion at the end of June 2014
from $1,406.8 billion at the end of the
pcp. This growth continues to be driven
by strong increases in floating rate notes
(up 21.3% to pcp) and Treasury bond (up
24.6% to pcp) issuances.
16:00 14:00 07:00 01:00
15:00 13:00 06:00 00:00
14:00 12:00 05:00 23:00
13:00 11:00 04:00 22:00
12:00 10:00 03:00 21:00
11:00 09:00 02:00 20:00
10:00 08:00 01:00 19:00
09:00 07:00 00:00 18:00
08:00 06:00 23:00 17:00
07:00 05:00 22:00 16:00
06:00 04:00 21:00 15:00
05:00 03:00 20:00 14:00
04:00 02:00 19:00 13:00
03:00 01:00 18:00 12:00
02:00 00:00 17:00 11:00
01:00 23:00 16:00 10:00
00:00 22:00 15:00 09:00
23:00 21:00 14:00 08:00
22:00 20:00 13:00 07:00
21:00 19:00 12:00 06:00
20:00 18:00 11:00 05:00
19:00 17:00 10:00 04:00
Australian Time
18:00 16:00 09:00 03:00
London Time
Singapore/HK Time
17:00 15:00 08:00 02:00
0
Chicago Time
Austraclear also experienced an uptick in
membership, rising from 778 Participants
to 854 in the 12 months to 30 June
2014. Participants admitted in the last 12
months included a number of credit unions,
building societies and retail energy providers,
the last being special purpose participants
(energy) to settle daily margins on electricity
supply contracts with the Australian Energy
Market Operator (AEMO) that acts as a
clearing house.
Austraclear also admitted one other Special
Purpose (Collateral Manager) Participant in
the last 12 months.
ASX Energy and Environmental
Markets
The ASX Australian electricity market
continued to deliver robust liquidity over
the FY14 period, with volume increasing
3.0% from FY13. Traded volume equated to
Australian Financial Markets Association
17
Exchange Traded market
$16.5 billion in face value, or 386.7 TWh of
traded energy or 216.5% of the underlying
national electricity market (NEM) system
demand. The average daily volume of energy
traded was 1.5 TWh with a face value of
$65 million. With the introduction of new
options products the options market grew
30% to 143.7 TWh with a face value of
$6.5 billion, representing 80.5% of annual
underlying NEM system demand.
Activity continued to concentrate in the
base load calendar quarter futures, where
traded volume represented 50.9% of traded
energy, followed by the base load calendar
year options at 20.8%, base load financial
year options at 14.1%, base load $300 cap
futures at 11.0%, base load average rate
quarter options at 2.2%, peak load calendar
quarter futures at 0.9% and base load
calendar month futures at 0.1%. The bulk
of the annual traded energy was in New
South Wales at 37.2%, followed by Victoria
at 33.0%, Queensland at 26.6% and South
Australia at 3.2%.
Similarly in South Australia, prices rose until
October and then continued to decrease by
6.6% to close at $44.10.
www.asx.com.au
ASX Agricultural Derivatives
Trading activity on the ASX grain futures
and option market was less active in FY14
than in FY13. The total volume traded
was 182,846 contracts, which equates
to 3,668,120 tonnes of Australian grain
and oilseed – a 49.1% decline in volume on
the pcp.
ASX has reviewed the grain market contract
offering and has implemented a number
of changes and introduced incentives that
will foster greater market activity in FY15.
The deregulation of Australia’s bulk wheat
export marketing framework is expected to
continue to be supportive for future market
growth. A promising winter season for the
crops across Australia has growers and the
industry alike hopeful of a solid harvest of
high-quality milling wheat in FY15. n
ASX has reviewed the grain market contract offering and has implemented a number of changes and introduced incentives that
will foster greater market activity in FY15. The deregulation of Australia’s bulk wheat export marketing framework is expected to
continue to be supportive for future market growth.
Price ($/MWh) movements in the 2015
base load calendar futures were all down
across the regions. Throughout the year,
Victoria slowly declined to finish the year
down 23.3% to reach $31.65. In New
South Wales, prices fell by 21.8% to $35.63.
In Queensland, the year began with a slight
upward trend; however, it gradually declined
to finish the year down by 10.7% to $43.26.
18
2014 Australian Financial Markets Report
Chi-X Australia
During the 2013-14 financial year, exchange
trading in cash equities was impacted by
significant macro factors including the high
Australian dollar, secular trading trends and
the business performance of the main index
constituents and industry sectors.
In this environment, trading on Chi-X has
been shaped by the continued growth and
diversity of the Australian exchange trading
community: over 30% of all aggressive flow
on the Chi-X market comes from retail
investors and the variety of participants
posting to the order book has also increased.
Noteworthy trading metrics for Chi-X in
the past financial year, the first in which
Chi-X traded the complete universe of
Australia Securities Exchange-listed cash
equities, include the following:
–– total market share of 29.57% on 18
June 2014
–– total daily value traded of over $2.1
billion on 18 June 2014
–– continuous trading value of $552.3
million on 4 February 2014
–– continuous trading market share of
20.52% on 11 June 2014.
The continued development of the
Australian exchange-trading community
during the year also enabled Australian
investors to:
–– improve fill rates and obtain price
improvement on exchange traded
orders – the presence of an alternate
market operator and the increase in
posting by liquidity providers across all
platforms have decreased queue times
and improved the available prices and
fill rates for all investors
–– access innovative order types – in
December 2013, Chi-X became the
first exchange in Asia to execute a
market-on-close order
–– lower execution costs – costs charged
by market operators have decreased
significantly in the areas where market
operators compete (e.g. trade report fees
for some participants have decreased
from over $500,000 per annum to no
more than $12,000 per annum). n
fIGURE 1: Chi-x Australia DAILY Total Turnover
$3,000,000,000.00
$2,500,000,000.00
$2,000,000,000.00
$1,500,000,000.00
$1,000,000,000.00
$500,000,000.00
2013-07-01
2013-07-04
2013-07-09
2013-07-12
2013-07-17
2013-07-22
2013-07-25
2013-07-30
2013-08-02
2013-08-07
2013-08-12
2013-08-15
2013-08-20
2013-08-23
2013-08-28
2013-09-02
2013-09-05
2013-09-10
2013-09-13
2013-09-18
2013-09-23
2013-09-26
2013-10-01
2013-10-04
2013-10-09
2013-10-14
2013-10-17
2013-10-22
2013-10-25
2013-10-30
2013-11-04
2013-11-07
2013-11-12
2013-11-15
2013-11-20
2013-11-25
2013-11-28
2013-12-03
2013-12-06
2013-12-11
2013-12-16
2013-12-19
2013-12-24
2013-12-31
2014-01-06
2014-01-09
2014-01-14
2014-01-17
2014-01-22
2014-01-28
2014-01-31
2014-02-05
2014-02-10
2014-02-13
2014-02-18
2014-02-21
2014-02-26
2014-03-03
2014-03-06
2014-03-11
2014-03-14
2014-03-19
2014-03-24
2014-03-27
2014-04-01
2014-04-04
2014-04-09
2014-04-14
2014-04-17
2014-04-24
2014-04-30
2014-05-05
2014-05-08
2014-05-13
2014-05-16
2014-05-21
2014-05-26
2014-05-29
2014-06-03
2014-06-06
2014-06-12
2014-06-17
2014-06-20
2014-06-25
2014-06-30
$-
Equity Trading on Chi-X Australiaa
Survey Year
Number of shares per annum
(million)
Annual value
(AUD million)
Trades per annum
('000)
Average daily trades
Average daily value
(AUD million)
2012-13b
25,409
105,097
31,389
124,560
2013-14
70,986
178,818
42,857
169,394
707
179.4
70.1
36.5
36.0
69.5
% change
417
a Chi-X Australia had their market launch on 31 October 2011.
b The 2012-2013 financial year was the first full financial year of Chi-X Australia operations.
Australian Financial Markets Association
19
LCH.Clearnet Ltd –
SwapClear
Over the last year, LCH.Clearnet Ltd’s
interest rate derivative (IRD) clearing
service, SwapClear, significantly increased
its activity and presence in Asia-Pacific,
particularly in Australia. The service
currently clears 99% of all cleared Australian
dollar IRDs and over 41% of the entire
Australian dollar IRD market. Following
approval from the Australian government
in 2013, Australian banks are now able to
join SwapClear as direct clearing members,
dramatically increasing the depth of liquidity
available to Asia-Pacific participants. In
addition, LCH.Clearnet recently opened an
office in Sydney to support plans to extend
clearing and collateral operations into this
region and time zone.
July – June 2012/13 vs 2013/14 saw an
increase of 42% year on year of notional and
registered IRD AUD trades cleared through
SwapClear, with the average daily notional
currently standing at AUD 22 billion*, 25%
of which is made up of client cleared trades.
In May 2014, SwapClear successfully
completed its first AUD triReduce
compression run. 24,616 trade sides were
compressed amounting to AUD1.07 trillion
reduction in outstanding notional (USD1
trillion), representing 28.5% of the IRD
AUD portfolio. n
*As at June 2014
Figure 1: Total SwapClear A$ Cleared Notional – July - June 2012/13 vs July - June 2013/14
700,000
600,000
Millions
500,000
400,000
300,000
200,000
100,000
July
September
October
November
December
January
February
March
April
May
343,453,068,404 379,824,653,304
493,334,047,834
519,379,775,292
379,633,402,362
539,217,550,504
489,557,207,854
402,436,275,418
627,349,020,881
498,213,806,426
478,127,494,000
556,900,223,977
Notional Registered 2012/13 156,685,327,000 209,117,464,000
138,175,784,000
204,937,200,000
192,321,001,000
197,551,512,000
269,464,974,400
261,235,278,000
464,132,290,000
325,215,423,000
474,486,877,000
429,955,622,000
Notional Registered 2013/14
20
August
2014 Australian Financial Markets Report
June
Regulatory Data
Architecture and Analytics
Dr Kingsley Jones, Research Fellow, Centre for International Finance and Regulation (CIFR)
Since the global financial crisis (GFC),
there has been a greater appreciation of
the importance of accurate and timely data
within the regulatory system. Recall the
story of one John Paulson, the US hedge
fund manager, who successfully bet against
the US sub-prime mortgage lending market
in the lead-up to the financial meltdown.
Paulson was successful, in part, due to
having invested in a comprehensive dataset
of mortgages which guided his team to
those collateralised debt obligation (CDO)
deals to short.1
Certainly, there is value in data when used
wisely. However, there is also a growing
appreciation of the opportunities presented
by new forms of analysis. The Office of
Financial Research (OFR) has been active
in researching both new data sources and
improved visual tools for their analysis.2
Just as ‘big data’ and ‘analytics’ have become
popular in commercial applications, there
is a growing realisation that regulatory
agencies may benefit from new technology.
The Australian Securities and Investments
Commission (ASIC) adopted the very
same commercial technology typically used
by algorithmic traders when constructing
their new Market Analysis Intelligence
(MAI) system.3
The Role of CIFR
The Centre for International Finance and
Regulation (CIFR) is well placed to help
shape the research agenda emerging around
the ‘regulatory data architecture’. This term
describes the full body of data which is
available to the regulatory community, but
which may not be suitably linked together,
or is found residing in formats which are not
readily capable of being queried or analysed.
The new technologies of big data are
rapidly expanding the scope of potential
data sources that can be examined, and
accelerating the process of unlocking
unstructured and semi-structured data in
ways that make them useable for academic
research and regulatory purposes.
Within the CIFR community, there are
a number of leading centres for financial
data and technology. In addition to our
university partners4, we mention SIRCA
Ltd and the Capital Markets CRC Ltd.
The wide range of technologies employed,
from collecting financial tick data to parsing
text, requires an interdisciplinary research
program drawing on the strengths of our
research partners.
Furthermore, as new data initiatives are
put before the private sector, such as the
proposed Legal Entity Identifier (LEI)
initiative5, it becomes important to engage
with industry bodies such as the Australian
Financial Markets Association (AFMA) and
its members.
CIFR Data Architecture Project
The CIFR Regulatory Data Architecture
and Analytics project will examine the
architecture for the gathering, provisioning
and analysis of data in the financial services
sector. It aims to establish a baseline for
current practice and a future vision from
three perspectives:
–– global best practice – locate case studies on
noteworthy projects in financial sectors
which plugged data gaps, improved data
quality or extended access to data, such as
via a public web portal
–– data mapping and gap analysis – survey
datasets and their custodians, and
assess the data gaps and data linkage
and analytical challenges based on
stakeholder input
–– regulatory analytics – identify barriers to
adoption and distribution of analytics,
including the prototyping of platforms
for the calculation and dissemination of
regulatory indicators.
The term ‘architecture’ in the context of this
project refers not only to the data itself, but
Just as ‘big data’ and ‘analytics’ have become popular in commercial applications, there is a growing realisation that regulatory
agencies may benefit from new technology.
Australian Financial Markets Association
21
also to the important network effects, such
as who has custody of the data, who owns
it, who can see it and who has knowledge
of analytical methods that might be usefully
deployed against that data.
Every organisation has
its own purpose, culture
and resource constraints
Every organisation has its own purpose,
culture and resource constraints that limit the
extent to which it can collect and utilise data.
Hence we need to consider the bigger picture
of linkages in knowledge and data across
organisations in the context of technology
and regulatory trends.
that limit the extent
The project draws upon input from industry
and regulatory stakeholders. It will ask a
series of questions in three phases:
organisations in the
‒ The first phase will seek to identify
important data access issues and initiatives
(with positive or negative outcomes) from
around the world that represent useful case
studies for discussion. The purpose is to
create a narrative around the importance
of moving beyond raw data to insight.
‒ The second phase of the project will
survey financial sector experts on the
collection, custody and usage of data to
produce a gap analysis on the available
data against such strategic policy questions
as: What do we know about self-managed
superannuation funds and their asset
allocations? Could the supervisory activity
of regulators be enhanced by predictive
indicators of financial stress? Can future
retirement income planning be improved
through richer cohort-based data on
income needs?
‒ The third phase of the project aims to
bring stakeholders together at a regulatory
to which it can collect
and utilise data. Hence
we need to consider
the bigger picture of
linkages in knowledge
and data across
context of technology
and regulatory trends.
analytics workshop to exhibit proof-ofconcept indicators, facilitate discussion
and debate and marshal the best available
technical expertise to foster regulatory and
industry insights.
The final stage of the project will focus on
disseminating the outcomes of the first
three phases and other outputs using CIFR’s
multimedia and digital communication
capabilities. There are many new and
interesting opportunities for disseminating
regulatory analytics using digital technology.
aspects of the financial business process. In
partnership with our regulatory stakeholders
and research partners, CIFR aims to develop
use of such technology in the emerging
sphere of regulatory analytics as an important
step towards enhancing financial stability. n
Conclusion
The role of data in the financial system
has become more prominent due to the
increasing role of digital technologies in all
1 Zuckerman G 2010, The greatest trade ever: The behind-the-scenes story of how John Paulson defied Wall Street and made financial history, Crown Business, New York.
2 Flood MD, Lemieux VL, Varga M & Wong BLW 2014, The application of visual analytics to financial stability monitoring, Office of Financial Research (OFR) Working Paper
Series 14-02, US Treasury, Washington.
3 http://www.afr.com/p/business/sunday/asic_targets_insider_traders_with_UbmmHE8v9cFZaGDfir6QGO
4 For a comprehensive list of CIFR partners and sponsored research, see www.cifr.edu.au/.
5 www.leiroc.org/
22
2014 Australian Financial Markets Report
Government Debt Securities
Rates had risen slightly in the 2012-13 period after the previous five
years of market turmoil instigated by the global financial crisis. The
2013-14 financial year started with the anticipation that further
stability would lead to an increase in rates globally, including
Australia. Despite the Reserve Bank of Australia (RBA) reducing the
cash rate in August 2013 from 2.75% to 2.50%, the only rate move
in the year, rates began to climb as markets anticipated a return to
‘normal rates’ in the US and a reduction in the Fed’s quantitative
easing program (bond buying program).
By January 2014, 10 year yields had risen to 4.38% after starting at
3.76%, and 3 year yields had risen to 3.10% from 2.76%. However,
by the end of June 2014, the 10 year rate fell to 3.54% and the 3
year fell to 2.69%, despite the Fed tapering (reducing quantitative
easing). There was no move in the Fed’s funds rate and inflation
around the globe remained low, while weakness persisted in the
European economies.
Domestically, a tough budget was announced, inflation remained
low and the unemployment rate increased over the year. These
factors ensured that a stable, low-interest rate environment persisted
longer than expected, and relative to other markets, Australian
yields looked highly attractive to foreign investors.
Issuance from the Commonwealth and the states increased over the
year. Total long-term government securities increased from $461
billion to $540 billion. The majority of this was an increase in
the total outstandings of Commonwealth Government Securities
(CGS), increasing from $233 billion to $291 billion.
The low and stable interest rate environment was also conducive to
a continued contraction of the spreads between state government
securities and CGS. New South Wales Treasury Corporation
(NSWTC) indicative 3 year bond yields contracted from 38 to 17
basis points over CGS during the year, and the NSWTC indicative
10 year bonds contracted from 76 to 34 basis points.
Over the next year, issuance will depend on the passage of the
budget and the pace of economic growth, particularly with
respect to the unemployment rate. The RBA has held rates steady
since August 2013 and has continued to signal that rates are
appropriate. This should be conducive for another year of stable
and low interest rates. n
fIGURE 1: Annual turnover
2,000
Index Linked
Floating
Fixed
1,800
1,600
AUD billion
The 2013-14 financial year could be best described as featuring a
stable, low-interest rate environment.
1,400
1,200
1,000
800
600
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: Turnover by issuer
Foreign Government
21%
Commonwealth
Government
58%
State Government
21%
fIGURE 3: Turnover by counterparty
Other Counterparties
8%
Offshore Central Banks
6%
Government
13%
Survey Respondents
13%
Other Banks
15%
Fund Managers
Traditional
26%
Inhouse Transactions
19%
Australian Financial Markets Association
23
Government Debt Securities
Government Debt Securities Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
23,375
30,209
452,482
Other
Total
Commonwealth Government Bonds
2009-10
84,470
45,851
122,162
81,020
15
65,380
2010-11
150,885
52,502
216,234
120,504
2,355
49,983
58,537
38,834
689,834
2011-12
183,565
77,667
211,011
201,486
1,944
73,214
187,414
37,905
974,206
2012-13
187,918
89,244
184,724
269,762
4,639
88,572
185,499
39,052
1,049,411
2013-14
150,609
144,337
206,273
328,065
5,157
112,282
95,914
66,239
1,108,876
(19.9)
61.7
11.7
21.6
11.2
26.8
(48.3)
69.6
5.7
71,256
71,652
25
114,768
10,276
13,628
394,775
% change
State Government Bonds
2009-10
78,780
34,390
2010-11
127,592
35,758
98,994
120,457
1,209
173,887
14,238
25,541
597,676
2011-12
114,618
27,752
119,800
114,109
192
128,469
9,822
15,295
530,057
2012-13
98,106
25,036
67,991
108,222
3,860
125,189
9,018
7,796
445,217
2013-14
77,810
48,538
67,005
97,209
781
87,009
7,978
11,483
397,813
(20.7)
93.9
(1.5)
(10.2)
(79.8)
(30.5)
(11.5)
47.3
(10.6)
% change
Foreign Government Bonds
2009-10
7,840
2,941
26,479
11,861
0
2,033
2,363
26,978
80,495
2010-11
32,270
19,594
71,841
13,511
262
1,878
4,181
51,650
195,187
2011-12
34,694
40,226
50,848
37,209
159
45,083
4,736
40,560
253,515
2012-13
26,601
56,149
46,388
43,711
275
53,036
11,483
45,641
283,285
2013-14
11,255
97,634
91,709
59,183
1,329
56,941
4,397
70,027
392,474
(57.7)
73.9
97.7
35.4
383.8
7.4
(61.7)
53.4
38.5
2009-10
171,090
83,182
219,896
164,533
40
182,181
36,014
70,815
927,751
2010-11
310,747
107,853
387,069
254,472
3,826
225,748
76,956
116,025
1,482,696
2011-12
332,877
145,644
381,659
352,804
2,295
246,766
201,972
93,760
1,757,777
2012-13
312,624
170,430
299,104
421,694
8,774
266,797
206,000
92,489
1,777,914
2013-14
239,675
290,509
364,986
484,457
7,267
256,232
108,289
147,749
1,899,164
(23.3)
70.5
22.0
14.9
(17.2)
(4.0)
(47.4)
59.7
6.8
% change
Total
% change
24
2014 Australian Financial Markets Report
Fixed Government Debt Securities Annual Turnover (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
Commonwealth Government Bonds
2009-10
78,061
45,007
114,411
68,390
15
58,167
23,241
29,620
416,912
2010-11
143,163
51,294
209,456
106,329
2,355
2011-12
175,005
74,847
206,497
181,082
1,913
48,483
58,366
38,007
657,453
70,956
187,357
36,857
934,514
2012-13
175,561
87,548
180,593
247,271
4,487
85,722
185,265
37,294
1,003,740
2013-14
141,331
140,815
199,623
304,985
5,102
102,483
94,887
64,247
1,053,474
(19.5)
60.8
10.5
23.3
13.7
19.6
(48.8)
72.3
5.0
% change
State Government Bonds
2009-10
73,398
33,971
68,315
65,937
25
112,744
9,854
12,263
376,507
2010-11
126,218
35,557
97,803
111,312
1,209
172,593
14,058
25,338
584,088
2011-12
113,042
27,339
118,194
108,691
191
126,679
9,822
14,888
518,846
2012-13
94,910
24,022
63,514
100,919
3,803
120,016
8,978
7,436
423,600
2013-14
75,331
43,907
64,211
94,749
778
80,815
7,766
11,368
378,924
(20.6)
82.8
1.1
(6.1)
(79.5)
(32.7)
(13.5)
52.9
(10.5)
2,016
2,363
26,914
79,290
% change
Foreign Government Bonds
2009-10
7,637
2,925
25,792
11,643
0
2010-11
31,979
19,545
71,231
12,910
262
1,873
4,181
47,133
189,114
2011-12
34,601
35,573
50,351
37,018
159
44,656
4,736
39,993
247,087
2012-13
26,391
54,096
46,191
43,348
275
52,882
11,417
43,734
278,334
2013-14
11,081
97,121
91,136
58,795
1,323
56,432
4,155
69,247
389,291
(58.0)
79.5
97.3
35.6
381.5
6.7
(63.6)
58.3
39.9
% change
Total
2009-10
159,096
81,903
208,518
145,969
40
172,928
35,458
68,796
872,708
2010-11
301,359
106,396
378,490
230,551
3,826
222,949
76,605
110,478
1,430,654
2011-12
322,649
137,759
375,042
326,791
2,264
242,291
201,914
91,738
1,700,448
2012-13
296,863
165,666
290,298
391,539
8,565
258,620
205,659
88,464
1,705,674
2013-14
227,743
281,843
354,971
458,528
7,203
239,730
106,809
144,862
1,821,689
(23.3)
70.1
22.3
17.1
(15.9)
(7.3)
(48.1)
63.8
6.8
% change
Australian Financial Markets Association
25
Government Debt Securities
Index Linked Government Debt Securities Annual Turnover (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
0
7,213
134
Other
Total
Commonwealth Government Bonds
2009-10
6,344
825
7,750
12,630
589
35,485
2010-11
7,722
1,208
6,778
14,175
0
1,499
2011-12
8,560
2,820
4,514
20,404
31
2,258
171
827
32,380
58
1,048
39,693
2012-13
12,356
1,697
4,132
22,491
152
2,851
235
1,758
45,671
2013-14
9,278
3,521
6,649
23,081
55
9,799
1,027
1,992
55,402
% change
(24.9)
107.5
60.9
2.6
(63.8)
243.7
337.7
13.3
21.3
2009-10
5,276
399
2,941
5,694
0
1,875
417
1,366
17,968
2010-11
1,334
201
1,190
9,140
0
1,227
180
203
13,475
2011-12
1,274
257
1,604
4,360
0
744
0
347
8,586
2012-13
1,543
122
1,520
5,845
57
797
0
326
10,210
337
124
499
2,183
3
512
2
18
3,679
(78.2)
2.0
(67.2)
(62.7)
(94.7)
(35.7)
na
(94.4)
(64.0)
17
0
9
1,146
State Government Bonds
2013-14
% change
Foreign Government Bonds
2009-10
203
13
687
217
0
2010-11
18
4
462
208
0
5
0
22
719
2011-12
6
0
278
57
0
20
0
206
567
2012-13
11
0
6
168
0
142
27
0
354
2013-14
72
34
50
218
6
191
42
119
732
577.6
na
698.0
30.1
na
34.5
54.4
na
107.0
2009-10
11,824
1,236
11,378
18,540
0
9,104
551
1,964
54,597
2010-11
9,074
1,412
8,431
23,523
0
2,731
351
1,052
46,574
2011-12
9,839
3,077
6,395
24,821
31
3,023
58
1,601
48,845
2012-13
13,910
1,819
5,658
28,504
209
3,790
261
2,084
56,235
2013-14
9,687
3,680
7,198
25,482
64
10,502
1,071
2,129
59,813
% change
(30.4)
102.3
27.2
(10.6)
(69.3)
177.1
309.4
2.1
6.4
% change
Total
26
2014 Australian Financial Markets Report
Commonwealth Government Bonds Liquidity Ratio (AUD million)
Survey Year
Outstandingsa
Turnover
Ratio
2009-10
110,199
452,481
4.1
2010-11
158,801
689,834
4.3
2011-12
208,877
974,206
4.7
2012-13
241,412
1,049,411
4.3
2013-14
296,886
1,108,876
3.7
a Outstandings was calculated as an average of monthly data on Commonwealth Government Bonds as published by AOFM
Government Debt Securities Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
28.3
28.3
2009-10
88.0
2
19.6
47.8
2010-11
76.7
3
12.5
60.4
2011-12
80.1
4
10.8
71.1
2012-13
85.3
5
9.2
80.3
2013-14
95.7
6
6.1
86.5
7
4.8
91.3
8
4.5
95.7
a Market share data excludes Inhouse transactions
a Market share data excludes Inhouse transactions
Australian Financial Markets Association
27
Non Government Debt Securities
With the global markets reverting to a more stable and predictable
level, the number of significant market shocks that created periods
of reduced or no issuance have dissipated over the course of 201314. To a certain extent the Australian dollar market has suffered
from the fact that core markets (USD and EUR) have stabilised and
their yields are returning to more normal levels. Additionally, the
perception (rightly or wrongly) that the Australian economy is more
susceptible to a slowdown in the economies of core trading partners,
coupled with an increased budget deficit, has seen a slowing down of
additional allocation to AUD of the larger offshore fund managers
and sovereign wealth funds.
establishment of a longer dated nominal bond curve should provide
the basis for fund managers to benchmark portfolios and for issuers
to have a more liquid and identifiable term benchmark. While it
is too early to see evidence of this, there is an increasing level of
acceptance of longer dated deals from a select group of SSA and
semi-government borrowers. n
fIGURE 1: Annual turnover
1,000
Index Linked
900
Issuance in non-government debt securities in 2013-14 was
characterised by a period of relative stability in the first half,
which coincided with a period of regular and diversified supply.
The second half of 2013-14 was less robust with respect to total
volume of issuance, and the lack of corporate bond supply has been
a notable feature.
Corporate issuance for the first half was robust. Encouragingly, the
market was provided with access to numerous new credits. Also
beneficial was the ability to access tenors out past the traditional five
years which influenced companies to issue in AUD as opposed to
USD, EUR or JPY. Furthermore, the increased risk appetite from
investors created greater interest in lower rated paper with BBB
deals becoming increasingly popular.
The financial institutions sector similarly benefited from the
additional risk appetite, with borrowers (both domestic and
Kangaroo) accessing longer tenors, and a selection of new borrowers
coming to market in senior unsecured format. A recent development
has been the growth of the institutional market for Basel IIIcompliant bank capital transactions.
Supranational, sovereign and agency issuers (SSA) Kangaroo
borrowers continued to access the market in a regular manner;
however, the form of issuance was increasingly in smaller sized deals
combined with more regular increases of the same lines. The focus
has increasingly been on the longer dated maturities which have
appealed to a number of life insurance companies.
It is worth noting that the 2013-14 year saw two benchmark
syndicated transactions from the Australian Office of Financial
Management (AOFM). Both these deals broke new ground in
respect of total volume issued. The new 2033 bond represents
the longest dated maturity on the government nominal curve.
The significance of this to the non-government sector is that the
28
2014 Australian Financial Markets Report
Fixed
800
AUD billion
While global factors have taken some of the focus away from AUD,
reflected in generally smaller transactions in the rates space, the
outlook remains positive from an issuance perspective, particularly
given how entrenched the AUD is in core global investors’ portfolios
as well as domestic accounts.
Floating
700
600
500
400
300
200
100
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: Turnover by instrument
Foreign Non Government Issues
15%
Mortgage Backed Securities
28%
Bank Securities
Commonwealth Guaranteed
1%
Corporate Securities
15%
Bank Securities
40%
Bank Securities Covered Bonds
1%
fIGURE 3: Turnover by counterparty
Other Counterparties
17%
Offshore Central Banks
1%
Government
2%
Fund Managers
Traditional
36%
Survey Respondents
8%
Other Banks
18%
Inhouse Transactions
18%
Non Government Debt Securities Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional
Fund Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
CORPORATE Securities
2009-10
16,167
17,096
18,754
38,662
49
10,095
1,687
20,735
123,245
2010-11
19,221
40,993
40,741
32,848
504
3,942
1,521
36,744
176,514
2011-12
9,533
10,478
11,061
29,481
11
1,616
1,177
16,484
79,841
2012-13
11,930
17,726
13,133
37,123
67
2,289
1,590
23,557
107,416
2013-14
9,225
13,163
18,097
48,446
52
2,300
1,947
22,875
116,105
% change
(22.7)
(25.7)
37.8
30.5
(22.5)
0.5
22.4
(2.9)
8.1
2009-10
67,172
100,262
47,582
57,685
5
11,182
1,209
48,909
334,006
2010-11
93,845
108,023
85,506
48,709
46
10,639
3,287
30,209
380,264
2011-12
64,591
42,624
65,744
46,160
34
5,972
2,967
33,863
261,955
2012-13
39,319
78,490
71,709
56,947
104
9,282
4,628
38,133
298,612
2013-14
32,727
76,511
75,637
68,030
44
5,017
7,428
40,783
306,177
(16.8)
(2.5)
5.5
19.5
(57.7)
(45.9)
60.5
6.9
2.5
bANK Securities
% change
Bank Securities Covered bonds
2009-10
-
-
-
-
-
-
-
-
0
2010-11
-
-
-
-
-
-
-
-
0
2011-12
1,864
581
6,832
2,410
6
125
5
405
12,228
2012-13
561
297
1,376
1,010
2
80
56
363
3,746
2013-14
% change
312
779
936
1,761
1
15
1
316
4,120
(44.4)
162.5
(32.0)
74.3
(50.0)
(81.4)
(97.8)
(12.9)
10.0
5
1,301
30
1,848
52,783
Bank Securities Commonwealth Guaranteed
2009-10
4,025
24,143
13,256
8,175
2010-11
2,548
5,222
7,341
6,684
0
1,206
183
1,102
24,286
2011-12
3,454
2,002
2,722
4,731
25
307
335
1,254
14,830
2012-13
2,372
1,343
5,364
4,417
166
279
648
657
15,245
2013-14
911
3,724
1,689
2,275
0
93
166
492
9,349
(61.6)
177.3
(68.5)
(48.5)
(100.0)
(66.7)
(74.4)
(25.1)
(38.7)
% change
Mortgage Backed Securities
2009-10
4,693
35,407
9,268
74,985
0
1,672
378
16,709
143,112
2010-11
10,101
16,182
18,646
111,858
0
2,348
129
20,247
179,511
2011-12
5,321
3,686
9,080
74,217
0
972
0
8,057
101,333
2012-13
6,388
25,449
13,190
114,288
51
967
0
42,173
202,507
2013-14
8,822
26,658
19,575
139,094
105
2,249
90
18,125
214,720
38.1
4.8
48.4
21.7
105.9
132.5
na
(57.0)
6.0
1,171
329
946
0
20
0
1,063
3,552
% change
Other Asset Backed securities
2009-10
23
2010-11
0
0
142
44
0
0
0
351
537
2011-12
407
887
337
854
0
64
0
1,559
4,108
2012-13
502
0
108
160
0
66
0
165
1,001
2013-14
72
486
76
616
0
62
0
154
1,467
(85.7)
na
(29.1)
284.8
na
(5.6)
na
(6.6)
46.6
% change
cont...
Australian Financial Markets Association
29
NON Government Debt Securities
Non Government Debt Securities Annual Turnover Summary (AUD million)...cont’
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
Offshore AUD Issues
2009-10
1,378
716
5,180
171
0
10
0
527
7,982
2010-11
679
425
2,039
279
0
83
120
891
4,516
2011-12
704
2,240
4,450
2,526
0
16
14
315
10,265
2012-13
0
0
0
1
0
0
0
0
2
2013-14
0
11
67
132
0
11
0
25
246
% change
na
na
na
13100.0
na
na
na
na
16217.3
477
71
1,574
10,674
Foreign Non Government Issues
2009-10
2,495
3,264
1,901
891
1
2010-11
21,433
10,823
24,108
15,795
70
507
1,770
67,588
142,094
2011-12
11,855
19,466
19,385
12,989
41
1,320
1,273
41,190
107,519
2012-13
14,423
25,860
27,209
20,034
0
1,724
1,698
57,146
148,093
2013-14
9,833
19,752
24,276
14,269
0
1,638
644
49,031
119,442
% change
(31.8)
(23.6)
(10.8)
(28.8)
na
(5.0)
(62.1)
(14.2)
(19.3)
2009-10
95,952
182,059
96,271
181,517
60
24,756
3,376
91,365
675,356
2010-11
147,828
181,668
178,522
216,217
620
18,725
7,011
157,131
907,722
2011-12
97,729
81,964
119,611
173,367
116
10,390
5,771
103,128
592,076
2012-13
75,495
149,165
132,089
233,980
390
14,687
8,621
162,195
776,622
2013-14
61,901
141,083
140,353
274,623
202
11,385
10,276
131,802
771,626
(18.0)
(5.4)
6.3
17.4
(48.2)
(22.5)
19.2
(18.7)
(0.6)
Total
% change
Fixed Non Government Debt Securities Annual Turnover (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
Corporate Securities
2009-10
9,921
7,034
12,144
20,152
38
7,666
1,624
13,008
71,587
2010-11
9,649
8,685
27,105
18,179
3
1,853
1,350
22,357
89,181
2011-12
5,428
5,367
7,161
19,800
8
1,060
1,165
13,806
53,795
2012-13
7,448
5,210
6,782
26,127
58
751
1,416
17,719
65,510
2013-14
6,816
7,220
13,389
35,940
35
860
1,686
18,572
84,518
% change
(8.5)
38.6
97.4
37.6
(39.8)
14.5
19.1
4.8
29.0
2009-10
56,728
51,745
25,679
35,863
0
6,296
1,081
30,371
207,763
2010-11
73,773
64,181
59,773
29,372
24
5,880
2,958
17,926
253,887
2011-12
52,469
25,936
42,305
28,542
20
2,185
2,917
21,599
175,973
Bank Securities
2012-13
23,003
43,005
39,055
32,521
20
4,200
4,310
25,770
171,883
2013-14
17,624
34,765
45,751
34,420
24
1,823
5,752
25,053
165,212
(23.4)
(19.2)
17.1
5.8
20.0
(56.6)
33.5
(2.8)
(3.9)
% change
cont..
30
2014 Australian Financial Markets Report
Fixed Non Government Debt Securities Annual Turnover (AUD million)...cont’
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
Bank Securities Commonwealth Guaranteed
2009-10
2,787
4,984
6,197
5,708
5
403
22
1,554
21,660
2010-11
1,515
1,971
4,818
4,513
0
525
183
818
14,343
2011-12
0
0
0
0
0
0
0
0
0
2012-13
2,109
754
4,472
3,622
0
62
538
566
12,123
558
1,421
745
981
0
46
166
378
4,295
(73.5)
88.4
(83.3)
(72.9)
na
(25.8)
(69.1)
(33.2)
(64.6)
0
28
0
0
0
56
143
2013-14
% change
Mortgage Backed Securities
2009-10
2
57
2010-11
119
224
810
816
0
0
0
549
2,518
2011-12
131
0
2,574
39
0
0
0
53
2,797
2012-13
0
0
254
241
0
0
0
24
519
2013-14
75
78
714
489
0
0
0
4
1,359
% change
na
na
181.1
102.8
na
na
na
(84.6)
162.0
0
0
62
90
Other Asset Backed Securities
2009-10
0
0
0
28
0
2010-11
0
0
28
10
0
0
0
3
41
2011-12
0
0
50
4
0
50
0
13
117
2012-13
0
0
66
5
0
66
0
1
139
2013-14
0
0
62
5
0
62
0
1
131
% change
na
na
(5.6)
(5.5)
na
(5.6)
na
(9.3)
(5.7)
716
5,180
171
0
10
0
527
7,982
Offshore AUD Issues
2009-10
1,378
2010-11
432
325
1,713
279
0
83
120
415
3,367
2011-12
569
2,088
3,916
1,838
0
16
14
35
8,476
2012-13
0
0
0
1
0
0
0
0
2
2013-14
0
11
67
132
0
11
0
25
246
% change
na
na
na
13100.0
na
na
na
na
16217.3
Foreign Non Government Issues
2009-10
2,260
3,113
1,871
627
1
477
71
1,359
9,779
2010-11
19,263
10,534
16,670
14,991
69
488
1,710
58,828
122,553
2011-12
11,082
16,617
17,294
11,168
41
1,290
1,244
38,212
96,948
2012-13
13,279
22,203
23,565
16,514
0
1,694
1,620
51,956
130,832
2013-14
8,755
16,729
21,433
12,120
0
1,566
607
45,551
106,760
% change
(34.1)
(24.7)
(9.0)
(26.6)
na
(7.6)
(62.5)
(12.3)
(18.4)
2009-10
73,076
67,650
51,071
62,578
44
14,853
2,798
46,936
319,006
2010-11
104,752
85,920
110,917
68,160
96
8,829
6,321
100,895
485,890
2011-12
71,996
50,443
75,785
63,966
69
4,833
5,507
74,458
347,057
2012-13
45,838
71,172
74,194
79,031
78
6,773
7,884
96,036
381,007
2013-14
33,828
60,224
82,162
84,087
59
4,368
8,211
89,583
362,521
(26.2)
(15.4)
10.7
6.4
(24.5)
(35.5)
4.1
(6.7)
(4.9)
Total
% change
a Hedge Funds/CTA’s and Offshore Central Banks are included in Other
Australian Financial Markets Association
31
NON Government Debt Securities
Floating Non Government Debt Securities Annual Turnover (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
Corporate Securities
2009-10
6,195
10,055
6,598
14,545
11
2,330
63
7,587
47,384
2010-11
9,530
32,304
13,573
14,401
501
2,062
171
14,344
86,886
2011-12
4,106
5,105
3,804
9,536
3
556
12
2,621
25,743
2012-13
4,470
12,514
6,349
10,847
9
1,533
175
5,803
41,700
2013-14
2,409
5,943
4,701
12,382
17
1,430
261
4,291
31,433
% change
(46.1)
(52.5)
(25.9)
14.1
88.9
(6.8)
49.4
(26.1)
(24.6)
2009-10
10,443
48,510
21,903
21,678
5
4,872
128
18,522
126,061
2010-11
20,068
43,842
25,700
19,208
22
4,759
330
12,275
126,204
2011-12
12,121
16,687
22,760
17,531
14
3,787
50
12,264
85,214
2012-13
16,315
35,479
32,654
24,001
84
5,082
318
12,363
126,296
2013-14
15,102
41,745
29,886
33,182
20
3,189
1,677
15,731
140,532
(7.4)
17.7
(8.5)
38.3
(76.2)
(37.3)
427.2
27.2
11.3
0
898
8
294
31,121
Bank Securities
% change
Bank Securities Commonwealth Guaranteed
2009-10
1,238
19,158
7,059
2,466
2010-11
1,033
3,250
2,523
2,171
0
681
0
284
9,942
2011-12
1,136
1,568
237
2,156
25
75
168
514
5,879
2012-13
263
588
892
795
166
217
110
91
3,123
2013-14
353
2,303
944
1,294
0
47
0
114
5,054
% change
34.0
291.3
5.8
62.8
(100.0)
(78.3)
(100.0)
25.0
61.8
Mortgage Backed Securities
2009-10
4,691
35,350
9,268
74,956
0
1,672
378
16,628
142,943
2010-11
9,981
15,958
17,830
111,042
0
2,348
129
19,695
176,985
2011-12
3,946
3,586
6,390
71,274
0
960
0
7,365
93,521
2012-13
6,388
25,449
12,936
114,047
51
967
0
42,149
201,988
2013-14
8,747
26,580
18,861
138,606
105
2,249
90
18,122
213,360
36.9
4.4
45.8
21.5
105.9
132.5
na
(57.0)
5.6
1,171
329
884
0
20
0
966
3,393
% change
Other Asset Backed securities
2009-10
23
2010-11
0
0
100
34
0
0
0
345
479
2011-12
407
887
287
849
0
14
0
1,546
3,990
2012-13
502
0
42
155
0
0
0
164
862
2013-14
72
486
14
611
0
0
0
153
1,336
(85.7)
na
(66.3)
294.7
na
na
na
(6.5)
55.0
% change
Offshore AUD Issues
2009-10
0
0
0
0
0
0
0
0
0
2010-11
248
100
326
0
0
0
0
476
1,150
2011-12
135
152
534
688
0
0
0
280
1,790
2012-13
0
0
0
0
0
0
0
0
0
2013-14
0
0
0
0
0
0
0
0
0
% change
na
na
na
na
na
na
na
na
na
cont...
32
2014 Australian Financial Markets Report
Floating Non Government Debt Securities Annual Turnover (AUD million)...cont’
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
Foreign Non Government Issues
2009-10
234
90
30
214
0
0
0
215
783
2010-11
2,170
289
7,438
805
2
19
60
8,760
19,542
2011-12
773
2,848
2,091
1,820
0
30
29
2,979
10,570
2012-13
1,144
3,657
3,644
3,519
0
29
78
5,190
17,261
2013-14
1,078
3,023
2,843
2,149
0
72
37
3,480
12,682
% change
(5.8)
(17.3)
(22.0)
(38.9)
na
144.4
(52.8)
(32.9)
(26.5)
2009-10
22,824
114,334
45,187
114,743
16
9,792
577
44,212
351,685
2010-11
43,030
95,744
67,490
147,660
525
9,869
690
56,179
421,187
2011-12
22,625
30,833
36,104
103,854
42
5,421
259
27,569
226,707
2012-13
29,083
77,688
56,516
153,363
310
7,829
681
65,759
391,229
2013-14
27,761
80,080
57,250
188,223
142
6,986
2,064
41,890
404,396
(4.5)
3.1
1.3
22.7
(54.2)
(10.8)
203.2
(36.3)
3.4
Total
% change
Bank Securities Covered Bonds Annual Turnover (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds/
CTA’S
Government
Offshore
Central Banks
Other
Total
Bank Securities Covered Bonds – AUD Domicile, AUD Currency
2009-10
-
-
-
-
-
-
-
2010-11
-
-
-
-
-
-
-
-
2011-12
1,646
562
6,469
2,286
6
125
5
404
11,503
2012-13
457
295
1,322
901
2
80
56
253
3,366
2013-14
228
760
703
791
1
15
0
273
2,771
(50.2)
158.1
(46.8)
(12.2)
(50.0)
(81.4)
(100.0)
7.9
(17.7)
-
% change
Bank Securities Covered Bonds – Other
2009-10
-
-
-
-
-
-
-
2010-11
-
-
-
-
-
-
-
-
2011-12
218
19
363
125
0
0
0
1
726
2012-13
104
2
54
110
0
0
1
110
380
2013-14
% change
84
18
233
970
0
0
1
43
1,350
(18.7)
814.6
330.8
783.3
na
na
128.8
(60.7)
255.1
-
-
-
-
-
-
-
-
Total
2009-10
2010-11
-
-
-
-
-
-
-
-
2011-12
1,864
581
6,832
2,410
6
125
5
405
12,228
2012-13
561
297
1,376
1,010
2
80
56
363
3,746
2013-14
% change
312
779
936
1,761
1
15
1
316
4,120
(44.4)
162.5
(32.0)
74.3
(50.0)
(81.4)
(97.8)
(12.9)
10.0
Australian Financial Markets Association
33
NON Government Debt Securities
Non Government Debt Securities Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
38.6
38.6
2009-10
98.9
2
23.4
62.0
2010-11
90.4
3
16.2
78.2
2011-12
90.6
4
9.2
87.4
2012-13
96.9
2013-14
100.0
5
7.6
95.0
6
3.0
98.0
7
1.3
99.3
8
0.7
100.0
a Market share data excludes Inhouse transactions
34
2014 Australian Financial Markets Report
a Market share data excludes Inhouse transactions
Negotiable and Transferable Instruments
The strength seen in funding markets in the prior year continued into
2013-14, with financial conditions globally still accommodative,
enabling access by the major Australian banks to large amounts of
term funding at tight levels. On the asset side, while the housing
market strengthened domestically, credit growth still remained
subdued. Given the backdrop of subdued balance sheet activity
there was not a large requirement for Prime banks to increase
their short-term funding through the negotiable and transferable
instruments (NTI) market, and as a result annual turnover in the
market reflected this, falling approximately 15%.
With low supply in the NTI market, the RBA on hold and OIS very
stable, volatility in BBSW was significantly reduced. The spread
between 3M BBSW and 3M OIS (often seen as a gauge of bank
funding pressures) was very stable, setting at an average of 15 basis
points over the year, and trading within a tight range over the year,
from 8 basis points to 23 basis points, making it the most stable year
since the global financial crisis (GFC).
On 27 September 2013, AFMA refined the BBSW calculation
methodology, which was previously calculated using panellist
observations of the mid-point rate at which Prime Bank Eligible
Securities traded in the open market. On this date, BBSW
transitioned to a calculation methodology using live and executable
prices in the market for Prime Bank Eligible Securities as the
price discovery mechanism, such national best bid and best offer
(NBBO) methodology being deemed to meet IOSCO principles for
benchmark rates. BBSW remains underpinned by an actively traded
market, measured in a two-minute window around 10:00am.
AFMA continuously monitors BBSW to ensure it remains current
and responsive to changing market conditions and to its users’
expectations. Given its systemic importance, it is important for
the health of the financial markets that confidence in BBSW is
maintained and as necessary enhanced.
Looking forward, while the second half of 2014 will likely see
continued stability in the NTI market, over the latter half of the
financial year there is a possibility of a move higher in short-term
rates. Market participants will closely analyse the minutes of RBA
meetings and the sentiment, and therefore volumes will play out
commensurate with expectations as to whether short-dated products
like OIS and forward-rate agreements (FRAs) will see higher rates,
which will also impact volatility in BBSW and the BBSW–OIS
spread. Similarly, any changes in domestic credit growth will be
closely monitored as they could lead to a temporary increase in
supply of NTI eligible securities, such scenario also putting upward
pressure on BBSW–OIS spreads.
Barring any major global financial shocks, conditions in funding
markets are unlikely to change substantially, although the prospect
of the US Fed finishing tapering and possibly increasing the Fed’s
funds rate will need to be monitored. Locally, banks will be finetuning their balance sheets as the Australian Prudential Regulation
Authority’s liquidity coverage ratio (LCR) requirements will be
implemented on 1 January 2015. n
fIGURE 1: Annual turnover
6,000
5,500
5,000
AUD billion
Over the 2013-14 financial year, the Reserve Bank of Australia
(RBA) cash rate was predominantly left on hold, with only one move
over the year being a 25 basis points cut in August 2013 to 2.50%.
Despite financial conditions remaining very accommodative,
domestic and global growth was below average. Domestically, this
was expected as the economy adjusted to lower levels of mining
investment and the unemployment rate edged higher. While the
exchange rate was lower than in prior years it was still generally
considered to be too high, hindering a rebalancing of growth in
the economy. Given the economic backdrop, this led the market to
expect the RBA would remain on hold for a long period of time.
Given the outlook for the RBA cash rate, pricing of short-dated
overnight indexed swap (OIS) was very stable and trading volumes
were significantly reduced as market participants looked to take
risk further out the curve where RBA decisions were considered to
be likely.
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: Turnover by instrument
Corporate Paper
5%
Treasury Notes
1%
Semi-Government Paper
2%
Bank Paper
92%
fIGURE 3: Turnover by counterparty
Other Counterparties
28%
Government
6%
Survey Respondents
11%
Other Banks
4%
Inhouse Transactions
33%
Fund Managers
Hedge Funds/CTAs
1%
Fund Managers Traditional
17%
Australian Financial Markets Association
35
Negotiable and Transferable Instruments
Negotiable and Transferable Instruments Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
Other
Grand Total
Treasury Notes
2009-10
4,576
5,399
1,601
3,659
587
9,877
5,273
7,313
38,285
2010-11
5,854
3,877
2,396
1,314
0
12,247
9,905
5,591
41,184
2011-12
4,948
2,698
1,178
1,258
0
11,937
13,662
6,545
42,226
2012-13
8,581
5,826
1,896
6,134
2,154
23,082
5,386
18,893
71,953
2013-14
2,511
2,912
1,226
1,511
2,172
7,103
1,767
5,232
24,434
% change
(70.7)
(50.0)
(35.3)
(75.4)
0.8
(69.2)
(67.2)
(72.3)
(66.0)
5,052
1,994
5,590
0
68,243
723
758
88,524
Semi Government Paper
2009-10
6,164
2010-11
4,406
971
500
6,474
0
37,116
1,176
512
51,155
2011-12
3,526
3,724
3,093
13,004
0
49,206
1,892
1,204
75,649
2012-13
3,981
4,189
2,361
12,983
0
54,294
845
1,001
79,655
2013-14
2,003
9,364
6,315
10,984
0
38,128
821
251
67,866
% change
(49.7)
123.5
167.5
(15.4)
na
(29.8)
(2.8)
(74.9)
(14.8)
449,519
223,430
1,347,595
609,678
29,252
167,336
11,701
575,495
3,414,006
Bank Paper
2009-10
2010-11
533,669
202,998
1,243,709
501,197
24,761
200,400
9,946
487,599
3,204,279
2011-12
503,618
260,752
1,211,224
579,088
27,641
185,218
11,315
526,215
3,305,071
2012-13
378,552
114,524
1,039,514
435,912
29,357
126,462
8,548
816,390
2,949,259
2013-14
294,507
76,365
909,494
398,477
24,146
123,436
8,887
730,420
2,565,731
(22.2)
(33.3)
(12.5)
(8.6)
(17.7)
(2.4)
4.0
(10.5)
(13.0)
% change
Corporate Paper
2009-10
34,791
57,797
94,997
163,412
0
6,503
0
213,696
571,196
2010-11
31,849
16,606
40,075
118,562
0
3,618
0
168,055
378,765
2011-12
21,749
24,385
9,763
92,295
0
5,461
0
97,710
251,363
2012-13
18,351
26,581
3,200
60,419
381
1,897
0
59,226
170,055
2013-14
10,009
11,242
1,842
47,378
90
1,684
33
53,822
126,100
% change
(45.5)
(57.7)
(42.5)
(21.6)
(76.3)
(11.2)
na
(9.1)
(25.8)
Foreign Government Paper
2009-10
33
65
0
0
0
0
0
0
98
2010-11
53
413
0
0
0
0
0
36
502
416
2011-12
32
358
0
0
0
0
0
26
2012-13
0
0
0
0
0
0
28
0
29
2013-14
0
0
14
0
0
0
0
0
14
0.0
na
na
na
na
na
(100.0)
na
(50.5)
495,082
291,744
1,446,188
782,339
29,839
251,959
17,697
797,263
4,112,111
% change
Total
2009-10
2010-11
575,831
224,865
1,286,680
627,547
24,761
253,380
21,027
661,793
3,675,884
2011-12
533,873
291,917
1,225,259
685,646
27,641
251,821
26,869
631,699
3,674,725
2012-13
409,465
151,120
1,046,971
515,449
31,891
205,735
14,808
895,511
3,270,951
2013-14
309,030
99,883
918,890
458,349
26,408
170,350
11,509
789,725
2,784,145
(24.5)
(33.9)
(12.2)
(11.1)
(17.2)
(17.2)
(22.3)
(11.8)
(14.9)
% change
36
2014 Australian Financial Markets Report
Treasury Note Liquidity Ratio (AUD million)
Survey Year
Outstandingsa
Turnover
Ratio
2009-10
11,467
38,285
3.3
2010-11
14,908
41,184
2.8
2011-12
13,317
42,226
3.2
2012-13
14,667
71,953
4.9
2013-14
3,000
24,434
8.1
a Outstandings was calculated as an average of monthly data on Treasury Notes from March to June 2014 as published by AOFM
Bank Paper Liquidity Ratio (AUD million)
Survey Year
Outstandingsa
Turnover
Ratio
2009-10
296,130
3,414,007
11.5
2010-11
258,834
3,204,279
12.4
2011-12
254,312
3,305,072
13.0
2012-13
235,884
2,949,259
12.5
2013-14
225,646
2,565,731
11.4
a Outstandings was calculated as an average of monthly data on Bank Paper as reported by APRA
Negotiable and Transferable instruments Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
32.6
32.6
2009-10
93.0
2
20.2
52.8
2010-11
90.9
3
19.3
72.1
2011-12
95.2
4
18.4
90.5
2012-13
92.9
5
3.0
93.4
2013-14
97.5
6
1.8
95.3
7
1.2
96.5
8
1.1
97.5
a Market share data excludes Inhouse transactions
a Market share data excludes Inhouse transactions
Australian Financial Markets Association
37
Repurchase Agreements
The introduction of the Reserve Bank of Australia’s (RBA) sameday settlement of Direct Entry (DE) payments in late November
2013 has seen some structural change in the markets, necessitating
behavioural changes by market participants in order to adjust to
the new system and how to respond to the resultant increase in
second-round operations conducted by the RBA. The effect of this,
along with other factors, was a spike in GC repo rates in January
and early February 2014. The AFMA Repo and Cash committees,
working collaboratively with the RBA, sought to ensure all market
participants were aware of the issues. While this ultimately saw GC
funding rates normalise for a period, a general increase in secure
funding rates relative to the cash rate continues to be a feature of
this market.
The RBA’s Committed Lending Facility (CLF) will come into effect
on 1 January 2015, forming part of the introduction of Basel III
liquidity standards. This and other regulatory changes, such as the
Supplementary Leverage Ratio (SLR) in the United States and the
Financial Stability Board’s (FSB) recommendations on securities
lending and repos, will have an impact on our market, as will the
move to T+2 settlement of securities, and which will be a focus of
committee undertakings in 2015.
The development and use of collateral management platforms is
ongoing with support from a number of market participants. To
date, outstanding balances are modest, while it is anticipated that a
number of participants will undertake further testing in Q4.
The market evidenced a pick-up in bonds trading tight in late 2013
and early 2014. A number of issues traded up to 25 basis points
below cash with an example seen at 50 basis points below cash for
a short tenor. The tightness tended to be short-lived, persisting
for a week or two, and may have resulted from either settlement
mismatches that required stock to be borrowed the same day, or
shortages of the bonds in the domestic market. Overall, postsettlement trading tended to ease, reverting back to normal levels.
The regular issuance of bonds by the Australian Office of Financial
Management (AOFM), and whose net issuance for 2013-14 is
expected to be approximately $52 billion, continues to be a feature
of this market and which ensures a regular supply of trading stock
for the repo market.
The low incidence of settlement failures served to allow both
repo and cash markets to function as optimally as conditions
permitted. In an effort to strengthen the guidance provided to
38
2014 Australian Financial Markets Report
market participants with regard to settlement obligations and the
avoidance of settlement failures, the AFMA Repo Committee added
new conventions in March 2014 dealing with market best practice.
These new conventions require that a party dealing on-screen and
via brokers will either directly access stock lending facilities provided
by the AOFM or engage an eligible party on its behalf to access
these facilities whenever is it apparent that its settlement obligation
is compromised in any way, and that settlement failure is likely. n
fIGURE 1: Annual turnover
9,000
8,000
7,000
AUD billion
Reflecting the steady increase in both Commonwealth and state
government debt issuance over the course of the year, the Australian
repo market showed strong gains in outstanding volumes, up 19%
over 2013, excluding in-house transactions. The market has also
seen greater interest in term financing, with general collateral (GC)
trades out to six months taking place on a more frequent basis and
a pick-up in reverse enquiries. This trend towards a greater use of
term financing is partly evident in the decline in repo turnover,
which overall is down 24% from 2013, and largely flat against
2013, excluding in-house transactions.
6,000
5,000
4,000
3,000
2,000
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: Turnover by instrument
Semi-Government Promissory Notes
2%
Treasury Notes
1%
Residential Mortgage Backed Securities
1%
Corporate & Bank Bonds
16%
Other Government
Guaranteed Bonds
3%
Commonwealth
Government Bonds
42%
State Government Bonds
35%
fIGURE 3: Turnover by counterparty
Offshore Central Banks
2%
Government Other
2%
Government RBA
14%
Fund Managers
Hedge Funds/CTAs
1%
Fund Managers Traditional
11%
Other Counterparties
7%
Survey Respondents
17%
Other Banks
12%
Inhouse Transactions
34%
Repurchase Agreements Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional
Fund
Managers
Hedge Funds
/ CTA’s
Government
– RBA
Government
– Other
Offshore
Central Banks
Other
Total
Commonwealth Government Bonds
2009-10
518,025
272,208
849,405
140,948
0
88,544
15,133
66,003
26,813
1,977,079
2010-11
642,364
426,969
1,413,025
231,512
0
121,262
7,929
109,037
107,355
3,059,453
2011-12
508,053
375,765
1,561,955
268,187
0
265,406
13,587
70,626
53,591
3,117,170
2012-13
461,437
268,863
1,536,573
432,758
77,862
415,566
4,952
89,644
124,802
3,412,457
2013-14
529,200
269,121
692,175
348,595
77,519
403,764
9,650
111,981
56,130
2,498,137
14.7
0.1
(55.0)
(19.4)
(0.4)
(2.8)
94.9
24.9
(55.0)
(26.8)
22,101
60,437
2,502,457
% change
State Government Bonds
2009-10
419,543
267,539
1,217,107
156,320
0
269,052
90,358
2010-11
425,667
378,829
1,411,633
253,063
0
287,464
88,483
5,404
101,100
2,951,643
2011-12
388,508
303,111
1,654,497
241,733
0
361,685
65,917
18,682
54,000
3,088,133
2012-13
355,653
236,253
1,367,591
318,720
7
279,130
45,854
25,005
73,490
2,701,703
2013-14
428,099
221,163
841,553
268,645
2,324
173,399
24,177
8,300
122,064
2,089,725
20.4
(6.4)
(38.5)
(15.7)
33106.8
(37.9)
(47.3)
(66.8)
66.1
(22.7)
% change
Other Government Guaranteed Bonds
2009-10
41,077
21,841
66,290
22,725
0
11,913
60
8,996
15,986
188,888
2010-11
79,283
96,118
149,646
32,533
0
26,932
471
9,775
35,650
430,408
2011-12
100,513
148,813
290,776
40,316
0
23,999
460
39,759
20,421
665,057
2012-13
38,847
43,405
179,965
45,142
0
31,991
0
7,663
34,444
381,457
2013-14
6,459
41,395
61,557
27,146
0
32,206
0
35
43,377
212,175
% change
(83.4)
(4.6)
(65.8)
(39.9)
na
0.7
na
(99.5)
25.9
(44.4)
Corporate & Bank Bonds
2009-10
10,776
8,634
100,382
3,890
0
71,977
152
41,704
920
238,435
2010-11
15,047
51,612
381,852
61,106
0
104,545
1,241
492
17,109
633,004
2011-12
23,466
52,545
270,513
34,352
0
77,693
1,025
101
4,315
464,010
2012-13
30,751
143,776
665,198
76,604
0
64,053
100
57,954
61,420
1,099,856
2013-14
15,550
138,102
390,671
37,002
0
131,134
57,812
2,450
203,954
976,674
(49.4)
(3.9)
(41.3)
(51.7)
na
104.7
57711.9
(95.8)
232.1
(11.2)
0
51,241
0
0
6,840
0
0
0
88,786
71,850
% change
Treasury Notes
2009-10
30,705
2010-11
13,852
3,858
36,914
0
0
17,214
0
0
12
2011-12
6,450
12,904
25,359
266
0
27,078
0
0
0
72,057
2012-13
10,966
55,077
76,360
138
0
26,941
0
0
661
170,143
2013-14
5,660
36,616
9,614
0
0
13,400
0
0
3,358
68,648
% change
(48.4)
(33.5)
(87.4)
(100.0)
na
(50.3)
na
na
408.0
(59.7)
0
Semi Government Promissory Notes
2009-10
0
0
0
0
0
0
0
0
0
2010-11
0
0
0
0
0
0
0
0
0
0
2011-12
0
31
5,292
0
0
998
0
0
0
6,321
2012-13
0
98
1,521
0
0
4,710
0
0
0
6,329
2013-14
578
24,401
32,624
253
0
30,056
0
0
5,619
93,531
% change
na
24799.0
2044.9
na
na
538.1
na
na
na
1377.8
cont..
Australian Financial Markets Association
39
Repurchase Agreements
Repurchase Agreements Annual Turnover Summary (AUD million)...cont’
Survey
Respondents
Survey Year
Other Banks
Inhouse
Transactions
Traditional
Fund
Managers
Hedge Funds
/ CTA’s
Government
– RBA
Government
– Other
Offshore
Central Banks
5,467
0
26,788
0
0
3,412
354,353
Other
Total
Corporate & Bank Paper
2009-10
16,076
64,994
237,616
2010-11
11,736
26,672
110,264
924
0
15,550
0
0
30,693
195,839
2011-12
632
22,455
62,528
2,230
0
3,533
0
0
14,344
105,722
2012-13
993
1,902
18,779
430
778
11,532
0
0
1,422
35,836
1
3,611
411
7
0
24,481
0
0
0
28,511
(99.9)
89.8
(97.8)
(98.3)
(100.0)
112.3
na
na
(100.0)
(20.4)
2013-14
% change
Residential Mortgage Backed Securities
2009-10
0
0
29,275
1,087
0
35,685
0
0
0
66,047
2010-11
74
0
0
0
0
19,616
0
0
0
19,690
2011-12
0
415
2,083
0
0
1,912
0
0
0
4,410
2012-13
792
0
29,240
0
0
26,417
0
0
0
56,449
2013-14
0
0
35,933
0
0
7,798
0
0
0
43,731
(100.0)
na
22.9
na
na
(70.5)
na
na
na
(22.5)
% change
Asset Backed Commercial Paper
2009-10
0
0
0
2,447
0
0
0
0
0
2,447
2010-11
0
0
0
0
0
1,780
0
0
0
1,780
2011-12
0
0
0
0
0
1,663
0
0
0
1,663
2012-13
0
0
0
0
0
0
0
0
0
0
2013-14
0
0
0
0
0
0
0
0
0
0
% change
na
na
na
na
na
na
na
na
na
na
2009-10
1,036,202
635,215
2,551,316
332,884
0
510,799
105,702
138,803
107,569
5,418,490
2010-11
1,188,023
984,057
3,503,335
579,138
0
594,364
98,124
124,708
291,918
7,363,667
2011-12
1,027,621
916,039
3,873,004
587,084
0
763,965
80,989
129,168
146,670
7,524,540
2012-13
899,440
749,373
3,875,228
873,792
78,646
860,339
50,907
180,267
296,240
7,864,232
2013-14
985,548
734,407
2,064,539
681,649
79,844
816,238
91,639
122,766
434,502
6,011,132
9.6
(2.0)
(46.7)
(22.0)
1.5
(5.1)
80.0
(31.9)
46.7
(23.6)
Total
% change
Repurchase Agreements Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
25.6
25.6
2009-10
96.2
2
18.6
44.2
2010-11
95.7
3
10.0
54.2
2011-12
92.9
4
8.3
62.5
2012-13
88.6
5
8.2
70.8
2013-14
84.6
6
5.4
76.2
7
4.5
80.7
8
3.8
84.6
a Market share data excludes Inhouse transactions
40
2014 Australian Financial Markets Report
a Market share data excludes Inhouse transactions
Swaps and Forward Rate Agreements
fIGURE 1: Annual turnover
24,000
OIS
FRA
IRCC
21,000
18,000
AUD billion
The interest rate swaps (IRS) market has seen a quiet year in
terms of underlying volatility in market conditions, largely due
to the Reserve Bank of Australia keeping interest rates on hold
since August last year. The 3 year outright swap has had a 60
basis point range over that period. We have seen a slow but steady
movement lower in yields over that time, largely due to the sheer
weight of money flooding to the Australian bond market (and
currency market) with foreign investors in search of yield which
they are not seeing offshore.
15,000
12,000
9,000
6,000
3,000
0
While the IRS market conditions have been somewhat muted,
activity behind the scenes has been anything but. The past year
has seen the move by all major market participants to voluntarily
clear all standardised AUD IRS. The commencement of a clearing
service at the Australian Securities Exchange (ASX) has given
a choice of central counterparty clearing to the limited group of
ASX members; however, LCH. Clearnet is still attracting the bulk
of liquidity. Platform trading on Swap Execution Facilities has had
limited impact but is mostly avoided by participants not required to
comply. Compression activity between participants has been gaining
traction with the completion of the most successful multilateral
compression of AUD IRS by TriOptima in late February. There are
further initiatives regarding date rolls currently being worked on to
improve the success rate for the next compression run later this year.
In addition to increased activity on the clearing front, there has been
an increase in focus on Basel III as we head towards 1 January 2015.
It appears that the focus on clearing and Basel III will continue for
the coming year.
Ahead, it seems an end to quantitative easing in the United States
and a continued focus on a potential recovery post the mining
boom in Australia will be the focus of the Australian interest
rate market. n
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: IRCC Turnover by counterparty
Other Counterparties
22%
Fund Managers
Hedge Funds / CTAs
2%
Fund Managers Traditional
6%
Survey Respondents
14%
Other Banks
29%
Inhouse Transactions
27%
fIGURE 3: FRA Turnover by counterparty
Other Counterparties
10%
Fund Managers Traditional
6%
Inhouse Transactions
43%
Survey Respondents
17%
Other Banks
28%
fIGURE 4: OIS Turnover by counterparty
Other Counterparties
10%
Fund Managers Hedge Funds / CTAs
6%
Fund Managers Traditional
6%
Survey Respondents
28%
Other Banks
20%
Inhouse Transactions
30%
Australian Financial Markets Association
41
Swaps and Forward Rate Agreements
Interest Rate and Cross Currency Swaps Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
126,394
9,613
21,806
Other
Grand Total
287
510,427
4,029,814
Fixed AUD:Floating AUD
2009-10
760,185
592,417
2,008,685
2010-11
820,384
590,706
2,499,354
74,965
136,025
37,318
541
511,049
4,670,342
2011-12
907,005
854,243
1,741,223
177,152
140,430
24,625
736
432,993
4,278,407
2012-13
1,331,585
1,732,416
1,922,865
489,147
284,571
40,981
2,879
988,004
6,792,447
2013-14
993,083
2,269,880
1,722,950
526,171
145,572
17,416
12,899
1,790,873
7,478,845
(25.4)
31.0
(10.4)
7.6
(48.8)
(57.5)
348.0
81.3
10.1
% change
Floating AUD:Floating AUD
2009-10
90,608
61,713
447,963
245
0
0
0
15,211
615,740
2010-11
94,541
40,225
700,497
601
0
320
0
26,661
862,845
2011-12
104,563
64,511
355,526
28,232
0
292
0
42,179
595,302
2012-13
95,364
105,194
377,519
25,657
1,153
0
0
83,194
688,081
2013-14
42,031
124,036
355,935
11,905
1,304
105
265
115,926
651,505
(55.9)
17.9
(5.7)
(53.6)
13.1
na
na
39.3
(5.3)
% change
Fixed AUD:Non AUD
2009-10
3,330
15,190
213,605
1,147
2,057
50
334
10,770
246,483
2010-11
9,007
18,436
300,152
2
133
166
2,542
22,070
352,508
2011-12
4,081
12,756
431,923
1,385
754
232
1,612
8,931
461,674
2012-13
224
9,562
135,793
33
0
11
1,596
15,110
162,329
2013-14
151
9,515
21,206
1,218
100
110
306
7,554
40,160
(32.7)
(0.5)
(84.4)
3548.0
na
882.1
(80.8)
(50.0)
(75.3)
% change
Floating AUD:Non AUD
2009-10
315,552
254,486
391,974
5,786
1,067
246
0
61,774
1,030,885
2010-11
301,773
224,294
305,170
4,823
5,578
427
567
72,830
915,462
2011-12
232,253
305,167
215,698
24,271
7,367
569
115
32,354
817,793
2012-13
287,550
290,086
392,118
68,973
90,327
667
0
91,558
1,221,280
2013-14
266,029
303,851
366,955
55,100
30,452
568
766
96,787
1,120,507
(7.5)
4.7
(6.4)
(20.1)
(66.3)
(14.9)
na
5.7
(8.3)
0
0
0
0
0
0
0
0
% change
Inflation-linked Swaps
2009-10
0
2010-11
5,276
943
1,113
3,903
350
417
0
173
12,175
2011-12
9,359
1,640
1,142
4,497
735
1,995
0
1,531
20,899
2012-13
4,748
2,044
2,671
4,134
52
294
0
594
14,537
2013-14
9,233
6,906
350
2,136
10
161
0
655
19,450
94.5
237.8
(86.9)
(48.3)
(80.8)
(45.4)
na
10.3
33.8
2009-10
1,169,676
923,807
3,062,228
133,572
12,737
22,102
621
598,183
5,922,926
2010-11
1,230,980
874,604
3,806,286
84,294
142,086
38,648
3,650
632,783
6,813,331
2011-12
1,257,260
1,238,316
2,745,512
235,538
149,286
27,713
2,463
517,987
6,174,075
% change
Total
2012-13
1,719,471
2,139,302
2,830,967
587,944
376,103
41,953
4,475
1,178,459
8,878,675
2013-14
1,310,527
2,714,188
2,467,396
596,531
177,438
18,359
14,236
2,011,795
9,310,469
(23.8)
26.9
(12.8)
1.5
(52.8)
(56.2)
218.1
70.7
4.9
% change
42
2014 Australian Financial Markets Report
Cross Currency Swap Annual Turnover Summary – Non AUD (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
0
0
0
0
0
Other
Grand Total
Fixed Non AUD:Floating Non AUDa
2009-10
0
0
0
0
2010-11
0
0
0
0
0
0
0
0
0
2011-12
243,971
1,166,778
879,377
22,375
27,419
210
5,047
61,520
2,406,697
2012-13
248,085
167,302
409,077
268,018
46,043
45
656
264,784
1,404,012
2013-14
15,951
9,031
17,908
5,491
10,167
282
20
12,502
71,352
(93.6)
(94.6)
(95.6)
(98.0)
(77.9)
521.7
(97.0)
(95.3)
(94.9)
0
% change
Floating Non AUD:Floating Non AUDa
2009-10
0
0
0
0
0
0
0
0
2010-11
0
0
0
0
0
0
0
0
0
2011-12
42,977
38,202
1,177,798
1,945
0
1,070
237
5,433
1,267,662
2012-13
35,355
41,008
87,730
4,959
22,626
0
993
19,223
211,894
2013-14
29,589
26,874
39,820
2,985
5,163
0
430
11,702
116,563
(16.3)
(34.5)
(54.6)
(39.8)
(77.2)
na
(56.7)
(39.1)
(45.0)
% change
Fixed Non AUD:Floating Non AUD – SINGLE CROSS CURRENCY SWAPS
2009-10
0
0
0
0
0
0
0
0
0
2010-11
0
0
0
0
0
0
0
0
0
2011-12
0
0
0
0
0
0
0
0
0
2012-13
0
0
0
0
0
0
0
0
0
2013-14
64,832
136,797
209,246
25,964
30,350
100
5,659
450,769
923,719
na
na
na
na
na
na
na
na
na
% change
Floating Non AUD:Floating Non AUD – SINGLE CROSS CURRENCY SWAPS
2009-10
0
0
0
0
0
0
0
0
0
2010-11
0
0
0
0
0
0
0
0
0
2011-12
0
0
0
0
0
0
0
0
0
2012-13
0
0
0
0
0
0
0
0
0
2013-14
1,149
7,742
15,048
1,523
594
0
1,551
10,806
38,414
na
na
na
na
na
na
na
na
na
2009-10
0
0
0
0
0
0
0
0
0
2010-11
0
0
0
0
0
0
0
0
0
2011-12
286,949
1,204,981
2,057,174
24,319
27,419
1,280
5,283
66,953
3,674,358
% change
Total
2012-13
283,440
208,310
496,807
272,977
68,670
45
1,649
284,007
1,615,905
2013-14
111,520
180,444
282,023
35,963
46,275
382
7,661
485,780
1,150,048
(60.7)
(13.4)
(43.2)
(86.8)
(32.6)
741.8
364.5
71.0
(28.8)
% change
a Non AUD Cross Currency Swaps were surveyed for the first time in 2011-12.
Australian Financial Markets Association
43
Swaps and Forward Rate Agreements
Interest Rate and Cross Currency Swaps Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
24.7
24.7
2009-10
95.4
85.7
2
17.0
41.6
2010-11
3
13.5
55.1
2011-12
89.3
2012-13
85.8
2013-14
96.4
4
11.5
66.6
5
9.5
76.1
6
9.2
85.4
7
6.1
91.5
8
5.0
96.4
a Market share data excludes inhouse transactions
Note: Non AUD Cross Currency Swaps were surveyed for the first time in 2011-12.
a Market share data excludes inhouse transactions
Note: Non AUD Cross Currency Swaps were surveyed for the first time in 2011-12.
Overnight Index Swaps Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
2009-10
720,544
Other Banks
529,478
Inhouse
Transactions
Traditional Fund
Managers
1,493,627
38,579
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
Other
Grand Total
31,025
4,148
0
183,015
3,000,416
5,313,340
2010-11
1,642,986
901,433
2,184,362
110,370
91,634
9,332
0
373,223
2011-12
2,354,502
2,591,129
1,954,447
459,450
802,416
44,918
1,570
495,059
8,703,491
2012-13
2,576,782
1,848,193
2,132,283
325,052
1,324,972
6,220
2,095
678,848
8,894,445
2013-14
2,051,382
1,409,519
2,183,836
408,347
420,077
24,522
7,382
692,551
7,197,616
(20.4)
(23.7)
2.4
25.6
(68.3)
294.2
252.4
2.0
(19.1)
% changea
a 2013-14 Turnover data includes NZD OIS and Other Non-AUD OIS
Overnight Index Swaps Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
34.1
34.1
2009-10
99.6
2
14.8
48.9
2010-11
94.9
3
12.7
61.7
2011-12
87.2
4
12.4
74.0
2012-13
87.3
5
8.9
83.0
2013-14
99.6
6
8.4
91.3
7
5.8
97.2
8
2.4
99.6
a Market share data excludes Inhouse transactions
44
2014 Australian Financial Markets Report
a Market share data excludes Inhouse transactions
Forward Rate Agreements Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Offshore
Central Banks
Government
Other
Grand Total
AUD
2009-10
832,698
715,501
2,042,536
3,975
8,000
2,446
0
182,473
3,787,629
2010-11
1,390,206
802,722
1,564,432
2,249
2,510
2,567
0
250,887
4,015,573
2011-12
1,295,869
1,381,494
1,142,343
395,224
2,000
2,415
600
89,329
4,309,274
2012-13
1,445,226
1,069,249
728,068
54,704
2,965
2,477
0
152,859
3,455,548
2013-14
599,621
889,481
550,962
55,987
18,250
700
1,055
96,694
2,212,749
(58.5)
(16.8)
(24.3)
2.3
515.5
(71.7)
na
(36.7)
(36.0)
128,923
322,747
52,973
0
0
0
0
108,573
613,216
% change
USD
2009-10
2010-11
165,739
227,517
70,431
28
0
0
0
97,096
560,811
2011-12
124,737
428,959
35,593
15,897
0
120
0
90,793
696,099
2012-13
149,259
325,964
62,744
7,383
0
0
56
403,645
949,052
2013-14
19,262
81,240
67,542
7,898
1,031
0
0
205,186
382,161
% change
(87.1)
(75.1)
7.6
7.0
na
na
(100.0)
(49.2)
(59.7)
NZD
2009-10
21,546
40,983
7,464
221
0
0
0
9,836
80,050
2010-11
96,859
101,741
773,357
177
0
0
0
48,282
1,020,416
2011-12
60,118
147,683
859,716
387
0
0
701
19,139
1,087,744
2012-13
125,427
112,817
1,079,307
14,665
2,889
0
0
38,200
1,373,306
2013-14
28,454
130,056
1,038,034
10,577
2,443
343
0
28,513
1,238,421
% change
(77.3)
15.3
(3.8)
(27.9)
(15.4)
na
na
(25.4)
(9.8)
11,864
16,196
2,675
0
0
0
0
7,272
38,007
259,975
Other
2009-10
2010-11
22,458
13,481
2,172
0
0
0
0
221,864
2011-12
27,702
55,105
20
0
0
0
0
8,322
91,149
2012-13
21,078
76,618
3,548
0
0
0
0
57,979
159,224
74
1,862
1,202
0
0
0
0
56,619
59,757
(99.6)
(97.6)
(66.1)
na
na
na
na
(2.3)
(62.5)
2013-14
% change
Sub Total (non AUD)
2009-10
162,333
379,926
63,112
221
0
0
0
125,682
731,274
2010-11
285,056
342,740
845,960
205
0
0
0
367,242
1,841,203
2011-12
212,557
631,747
895,329
16,284
0
120
701
118,254
1,874,992
2012-13
295,764
515,400
1,145,599
22,049
2,889
0
56
499,824
2,481,582
2013-14
47,791
213,158
1,106,779
18,475
3,474
343
0
290,318
1,680,338
(83.8)
(58.6)
(3.4)
(16.2)
20.2
na
(100.0)
(41.9)
(32.3)
% change
Total
2009-10
995,031
1,095,427
2,105,648
4,196
8,000
2,446
0
308,154
4,518,902
2010-11
1,675,262
1,145,462
2,410,392
2,454
2,510
2,567
0
618,129
5,856,776
2011-12
1,508,427
2,013,240
2,037,672
411,508
2,000
2,535
1,301
207,583
6,184,266
2012-13
1,740,990
1,584,649
1,873,667
76,753
5,854
2,477
56
652,683
5,937,129
2013-14
647,411
1,102,639
1,657,741
74,463
21,724
1,043
1,055
387,012
3,893,087
(62.8)
(30.4)
(11.5)
(3.0)
271.1
(57.9)
1768.3
(40.7)
(34.4)
% change
Note: Turnover or Outstandings reported in non-AUD amounts was converted to AUD using the RBA daily average exchange rate from July 2013 to June 2014
Australian Financial Markets Association
45
Swaps and Forward Rate Agreements
Forward Rate Agreements Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
40.0
40.0
2009-10
92.5
2
24.4
64.4
2010-11
89.8
3
11.9
76.3
2011-12
97.7
4
11.6
88.0
2012-13
92.3
2013-14
100.0
5
8.7
96.7
6
1.6
98.3
7
1.6
99.9
8
0.1
100.0
a Market share data excludes Inhouse transactions
46
2014 Australian Financial Markets Report
a Market share data excludes Inhouse transactions
Interest Rate Options
The main story over the year was a steady fall in implied volatilities
across the surface. 1y1y swaption volatility fell from around 90 basis
points to 55 basis points. 5y5y swaption volatility fell from 90 basis
points to 77 basis points. These declines were roughly in line with
the changes in realised volatility over the period.
Market liquidity and integrity was strong over the year with good
transparency and orderly pricing being a key feature. Greater than
90% of interbank transactions are now executed on a forward
premium basis, with the resulting swap at expiry being nominated
to clear on one of the three established exchanges (LCH, CME,
ASX). OTC derivative reform continues apace with stricter rules
on reporting of trades with US counterparties being instituted over
the year. These changes have been adopted with relative ease by the
AUD interest rate option (IRO) market. The next major step will
be when AUD IROs themselves become clearable. n
fIGURE 1: Annual turnover
600
500
AUD billion
Aggregate turnover in interest rate options increased 19% over
2013-14, against a backdrop of a stable official cash rate and a
relatively stable interest rate swap curve compared to prior years.
The bulk of the trading was in swaptions, which saw turnover
increase 20%, with caps/floors also gaining, notwithstanding the
sense that corporates were less inclined to hedge given the relative
stability of the markets. Over-the-counter (OTC) bond option
volumes declined, albeit from a low base.
400
300
200
100
0
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: Turnover by instrument
Bond Options
1%
Caps/Floors
11%
Swaptions
88%
fIGURE 3: Turnover by counterparty
Other Counterparties
24%
Fund Managers
Hedge Funds / CTAs
12%
Survey Respondents
15%
Other Banks
22%
Fund Managers Traditional
13%
Inhouse Transactions
14%
Australian Financial Markets Association
47
Interest Rate Options
Interest Rate Options Annual Turnover Summary (AUD million)
Survey
Respondents
Survey Year
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
Other
Grand Total
Bond Options
2009-10
0
195
589
2,169
320
12
0
120
3,405
2010-11
0
261
292
3,411
214
550
200
915
5,843
2011-12
0
200
100
3,784
45
200
0
3,947
8,276
2012-13
0
0
1,800
4,430
0
900
50
2
7,182
2013-14
0
0
0
1,580
0
1,850
0
845
4,275
% change
na
na
(100.0)
(64.3)
na
105.6
(100.0)
42151.8
(40.5)
4,890
8,362
40,328
50,502
8,500
0
0
34,431
147,013
2010-11
981
13,056
7,696
4,285
0
0
0
29,020
55,038
2011-12
5,381
15,561
10,737
5,952
0
0
0
21,936
59,567
2012-13
5,226
25,678
1,836
672
2,300
0
0
17,521
53,233
2013-14
4,165
8,814
9,791
8,112
2,100
0
0
28,733
61,716
% change
(20.3)
(65.7)
433.3
1107.2
(8.7)
na
na
64.0
15.9
2009-10
18,518
31,724
120,604
11,766
9,724
1,100
0
34,699
228,135
2010-11
34,679
68,469
122,245
32,917
22,494
3,085
0
25,171
309,060
2011-12
66,551
149,909
50,067
55,619
71,949
470
0
53,394
447,959
Caps / Floors
2009-10
Swaptions
2012-13
75,848
91,940
51,075
62,694
66,213
1,140
100
65,874
414,884
2013-14
82,429
114,609
70,162
64,160
62,580
70
0
104,724
498,734
8.7
24.7
37.4
2.3
(5.5)
(93.9)
(100.0)
59.0
20.2
2009-10
23,408
40,281
161,522
64,437
18,544
1,112
0
69,250
378,554
2010-11
35,659
81,786
130,233
40,613
22,708
3,635
200
55,106
369,940
2011-12
71,931
165,671
60,904
65,355
71,994
670
0
79,277
515,802
2012-13
81,074
117,618
54,711
67,796
68,513
2,040
150
83,396
475,298
2013-14
86,594
123,423
79,953
73,852
64,680
1,920
0
134,302
564,725
6.8
4.9
46.1
8.9
(5.6)
(5.9)
(100.0)
61.0
18.8
% change
Total
% change
Interest Rate Options Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
27.1
27.1
2009-10
99.6
2
24.5
51.6
2010-11
98.8
3
13.7
65.3
2011-12
100.0
4
10.0
75.3
2012-13
100.0
5
9.4
84.8
2013-14
97.1
6
7.0
91.8
7
5.4
97.1
a Market share data excludes Inhouse transactions
48
2014 Australian Financial Markets Report
a Market share data excludes Inhouse transactions
Credit Derivatives
The US Federal Reserve’s deliberations on tapering (i.e. widening
back of quantitative easing) in 2013 had the initial impact of
causing panic in the market as participants were initially caught off
guard by the move. This had the impact of a significant widening in
credit spreads while US Treasuries sold off. However, after further
clarity and direction was provided by the Fed in September, the
market actually rallied strongly when tapering began.
Concerns over a potential hard landing in China or instability in
their financial system at the start of 2014 drove spreads wider again,
particularly in those companies extensively involved with China,
such as the mining sector. However, measures taken by China to
address financial stability concerns helped in easing ongoing fears
and settled the market.
Towards the end of the year, the conflict in Eastern Europe also had
the impact of causing generic spreads to widen, and some specific
names as well. However, this effect has also dissipated over the last
few months, although it is an ongoing issue.
However, it is fair to say that credit spreads have been relatively
stable, particularly in comparison to the last few years, as global
financial crisis effects are not as prevalent. Consequently, turnover
has remained relatively stable over the year as well.
The physical market has experienced increased depth over the past
year, which assists the credit derivative market. There has been a
large number of first-time issuers coming to the Australian market
and more longer term issues as well. Participation from offshore
issuers has also strengthened. Nevertheless, liquidity is still an issue
in this market, and in particular the relatively small number of
market-making participants. The concentration of market share in
a small number of participants remains a concern.
Looking forward, the market should continue to develop with more
issuers and tenors in Australia. We may see the high-yield market
develop further in the next year as well. However, liquidity in the
secondary market will continue to be an issue. n
fIGURE 1: Annual turnover
450
400
350
300
AUD billion
There were three key events that impacted credit spreads over
the course of 2013-14. In each instance, the event caused initial
widening in credit spreads, followed by stabilisation and even
tightening of spreads thereafter.
250
200
150
100
50
0
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: Turnover by instrument
Single Name
Credit Default Swaps
28%
Credit Indices
72%
fIGURE 3: Turnover by counterparty
Other Counterparties
25%
Survey Respondents
13%
Other Banks
17%
Fund Managers
Hedge Funds / CTAs
11%
Fund Managers Traditional
4%
Inhouse Transactions
30%
Australian Financial Markets Association
49
Credit Derivatives
Global Credit Derivatives Annual Turnover Summary (AUD million)
Survey Year
Survey
Respondents
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
Other
Grand Total
Single Name Credit Default Swaps
2009-10
18,500
29,372
25,072
1,829
2,370
1,555
57
44,665
123,420
2010-11
29,866
44,380
21,753
4,874
4,551
1,879
10
17,742
125,055
2011-12
20,005
48,299
29,680
2,503
3,608
585
0
12,609
117,290
2012-13
6,537
17,631
5,823
7,541
4,622
1,243
0
4,756
48,153
2013-14
11,115
12,759
10,719
3,320
10,850
248
174
15,951
65,136
70.0
(27.6)
84.1
(56.0)
134.8
(80.0)
na
235.4
35.3
% change
Total Rate of Return Swaps
2009-10
19
39
0
39
0
0
0
266
363
2010-11
0
0
0
0
0
0
0
0
0
2011-12
10
95
0
0
0
0
0
115
220
2012-13
97
0
292
0
0
0
0
0
389
2013-14
0
0
0
0
0
0
0
0
0
(100.0)
na
(100.0)
na
na
na
na
na
(100.0)
2009-10
21,962
35,927
66,318
1,775
4,088
1,759
443
24,402
156,674
2010-11
36,777
78,707
59,586
1,738
2,093
1,661
0
15,040
195,603
2011-12
35,018
121,479
104,266
3,648
3,382
1,133
0
11,790
280,714
2012-13
15,889
56,567
70,782
3,619
4,454
1,372
0
27,383
180,066
2013-14
19,303
26,125
58,504
4,610
14,819
205
0
40,986
164,551
21.5
(53.8)
(17.3)
27.4
232.7
(85.1)
na
49.7
(8.6)
% change
Credit Indices
% change
Total
2009-10
40,481
65,338
91,390
3,643
6,458
3,314
500
69,334
280,457
2010-11
66,643
123,086
81,339
6,612
6,644
3,540
10
32,783
320,657
2011-12
55,033
169,873
133,945
6,151
6,990
1,718
0
24,514
398,224
2012-13
22,523
74,198
76,897
11,160
9,076
2,615
0
32,139
228,608
2013-14
30,417
38,884
69,224
7,931
25,668
453
174
56,936
229,687
35.1
(47.6)
(10.0)
(28.9)
182.8
(82.7)
na
77.2
0.5
% change
Note: Turnover or Outstandings reported in non-AUD amounts was converted to AUD using the RBA daily average exchange rate from July 2013 to June 2014
50
2014 Australian Financial Markets Report
Australian Credit Derivatives Annual Turnover Summary (AUD million)
Survey
Respondents
Survey Year
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
2,367
1,555
57
Other
Grand Total
Single Name Credit Default Swaps
2009-10
16,608
26,177
24,614
1,829
43,497
116,704
2010-11
27,713
39,072
19,182
4,384
3,984
1,858
10
12,498
108,702
2011-12
18,854
42,280
26,208
2,474
3,561
585
0
11,371
105,334
2012-13
6,326
16,875
5,614
7,282
4,622
1,243
0
4,147
46,108
2013-14
10,705
11,940
10,511
2,619
10,810
248
174
15,644
62,651
69.2
(29.2)
87.2
(64.0)
133.9
(80.0)
na
277.3
35.9
295
% change
Total Rate of Return Swaps
2009-10
10
19
0
0
0
0
0
266
2010-11
0
0
0
0
0
0
0
0
0
2011-12
10
95
0
0
0
0
0
115
220
2012-13
97
0
292
0
0
0
0
0
389
2013-14
0
0
0
0
0
0
0
0
0
(100.0)
na
(100.0)
na
na
na
na
na
(100.0)
% change
Credit Indices
2009-10
19,458
24,791
47,490
1,775
4,088
1,759
443
21,776
121,580
2010-11
29,446
42,800
37,126
1,737
2,068
1,661
0
10,071
124,908
168,524
2011-12
29,188
67,893
53,292
3,558
3,382
1,133
0
10,079
2012-13
10,373
28,293
39,952
3,555
4,399
1,211
0
1,987
89,771
2013-14
14,219
14,349
38,690
4,543
13,191
153
0
16,209
101,355
37.1
(49.3)
(3.2)
27.8
199.8
(87.3)
na
715.7
12.9
% change
Total
2009-10
36,076
50,987
72,104
3,604
6,455
3,314
500
65,539
238,579
2010-11
57,159
81,872
56,308
6,121
6,052
3,520
10
22,568
233,611
2011-12
48,052
110,268
79,500
6,032
6,943
1,718
0
21,566
274,079
2012-13
16,796
45,169
45,858
10,836
9,021
2,454
0
6,134
136,268
2013-14
24,924
26,290
49,201
7,162
24,001
402
174
31,852
164,005
48.4
(41.8)
7.3
(33.9)
166.1
(83.6)
na
419.3
20.4
% change
Note: Turnover or Outstandings reported in non-AUD amounts was converted to AUD using the RBA daily average exchange rate from July 2013 to June 2014
Credit Derivatives Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
73.9
73.9
2009-10
98.7
99.7
2
13.8
87.7
2010-11
3
4.8
92.5
2011-12
100.0
2012-13
100.0
2013-14
100.0
4
2.9
95.3
5
2.3
97.6
6
1.4
99.0
7
1.0
100.0
a Market share data excludes inhouse transactions
a Market share data excludes Inhouse transactions
Australian Financial Markets Association
51
Foreign Exchange and Currency Options
The US dollar was quite mixed in the weeks following the
confirmation of Fed tapering. There was no broad wave of USD
demand although selected currencies did struggle at times. Reserve
Bank of Australia (RBA) Governor, Glenn Stevens, noted in March
2014 that investors had not fled from risk indiscriminately, rather
that they had drawn distinctions between alternative classes of
investment and the differing outlook across countries.
Bouts of weakness in emerging market (EM) currencies such as
the Argentine peso, Turkish lira and Russian ruble appeared to be
justified to at least some degree by poor domestic fundamentals.
In contrast, currencies supported by improving economies, such
as the British pound and New Zealand dollar, posted healthy gains
against the US dollar.
The Australian dollar meanwhile extended its 2013 sell-off to under
0.87 in late January 2014, its weakest level since 2010. However,
sustained recovery began in early February when EM markets
improved and the RBA moved to a neutral bias on the cash rate.
The AUD, like many other major currencies strengthened against
the US dollar into Q2 2014 as US yields were capped by the US
economy’s struggles with a severe winter and other headwinds. The
US 10 year Treasury note for instance mostly traded around 2.60–
2.80% from February to April, compared to yields above 3.00% in
early January.
Measures of FX volatility remain low, consistent with the overall
relative stability in FX volumes. Over the remainder of 2014 there
are numerous potential factors that could boost volatility and FX
turnover, including possible further stimulus from the Bank of Japan
and/or the European Central Bank, and geopolitical risk such as the
Ukraine crisis. n
fIGURE 1: Annual turnover
50
45
40
AUD trillion
The broad narrative in global FX markets gradually changed from
mid-2013 into 2014. Earlier in 2013, the mere mention by thenchairman of the US Federal Reserve (Fed), Ben Bernanke, of the
prospect of a reduction in quantitative easing (QE) was enough
to spark steep rises in global yields and heavy losses for most
currencies against the US dollar, particularly in emerging markets.
However, the US dollar ended up benefiting little from the belated
commencement of QE ‘tapering’. The Fed opted not to taper in
September as a US government shutdown loomed and another
political battle seemed assured over raising the debt ceiling in
October. In December 2013, once these issues had been resolved,
the Fed started a process of reducing QE by $10 billion per meeting
from the $85 billion per month pace that had prevailed for the
previous 12 months.
35
30
25
20
15
10
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 2: Turnover by instrument
Non-AUD Swap
31%
AUD Swap
37%
AUD Spot
10%
Non-AUD Spot
16%
AUD Forward
4%
Non-AUD Forward
2%
fIGURE 3: Currency Options Turnover by Currency Pair
USD/EURO 5%
USD Other 1%
USD/NZD 7%
Aggregate FX volumes in Australia increased marginally to $42.9
trillion; currency options volumes declined 15%. AUD spot
volumes fell 5%, while AUD forward and AUD swap volumes
increased 20% and 7% respectively. The upswing in turnover from
2012 to early 2013 was driven largely by anticipation of the Bank
of Japan’s aggressive new monetary policy, which was announced in
April 2013 and has not been significantly altered since. Price action
outside EMs has become more subdued.
52
2014 Australian Financial Markets Report
USD/GBP 1%
USD/JPY 10%
AUD Other 1%
AUD/EURO 2%
AUD/NZD 4%
AUD/GBP 1%
AUD/JPY 7%
AUD/USD
61%
Foreign Exchange Annual Turnover Summary (AUD billion)
Survey Year
With local financial institutions
With overseas financial institutions
With non-financial institutions
Total
2009-10
1,025
2,881
1,311
5,217
2010-11
855
2,833
1,208
4,896
2011-12
778
2,941
1,229
4,949
2012-13
774
2,687
851
4,312
2013-14
747
2,896
455
4,099
% change
(3.5)
7.8
(46.5)
(4.9)
2009-10
765
7,753
945
9,463
2010-11
880
5,651
425
6,957
2011-12
804
4,891
199
5,895
AUD Spot
Non AUD Spot
2012-13
853
5,715
192
6,759
2013-14
788
5,746
177
6,712
% change
(7.5)
0.6
(7.7)
(0.7)
2009-10
459
466
246
1,172
2010-11
498
520
310
1,328
2011-12
523
501
410
1,434
2012-13
605
468
509
1,581
2013-14
840
554
506
1,900
% change
39.0
18.3
(0.5)
20.2
2009-10
135
521
43
700
2010-11
171
694
81
946
2011-12
173
551
84
808
AUD Forward
Non AUD Forward
2012-13
171
635
127
932
2013-14
177
580
126
883
% change
3.6
(8.6)
(0.7)
(5.3)
AUD Swap
2009-10
3,912
8,399
431
12,742
2010-11
3,878
11,928
574
16,380
2011-12
4,149
10,012
827
14,988
2012-13
3,418
10,611
728
14,757
2013-14
4,232
11,164
406
15,803
23.8
5.2
(44.3)
7.1
2009-10
2,872
8,901
369
12,142
2010-11
2,725
10,864
422
14,011
2011-12
1,465
9,811
573
11,850
% change
Non AUD Swap
2012-13
1,599
11,607
855
14,061
2013-14
1,349
11,761
406
13,517
% change
(15.6)
1.3
(52.5)
(3.9)
cont..
Australian Financial Markets Association
53
Foreign Exchange and currency Options
Foreign Exchange Annual Turnover Summary (AUD billion)...cont’
Survey Year
With local financial institutions
With overseas financial institutions
With non-financial institutions
Total
Total
2009-10
9,169
28,922
3,345
41,436
2010-11
9,007
32,491
3,019
44,517
2011-12
7,893
28,708
3,322
39,923
2012-13
7,419
31,721
3,262
42,403
2013-14
8,135
32,702
2,077
42,914
9.6
3.1
(36.3)
1.2
% change
FX data is supplied by the RBA
Currency Options Annual Turnover Summary (AUD million)
Survey
Respondents
Survey Year
Other Banks
Inhouse
Transactions
Traditional Fund
Managers
Hedge Funds
/ CTA’s
Government
Offshore
Central Banks
Other
Grand Total
Currency Options (AUD leg)
2009-10
55,784
254,152
113,133
4,180
14,091
1,110
653
86,279
529,382
2010-11
53,538
202,463
89,307
19,468
2,121
1,895
19
100,607
469,418
2011-12
47,783
205,216
168,017
12,846
2,032
594
294
140,884
577,666
2012-13
68,547
301,978
321,284
36,035
5,245
119
0
289,584
1,022,792
2013-14
48,673
225,411
259,364
35,083
4,373
172
0
253,805
826,881
(29.0)
(25.4)
(19.3)
(2.6)
(16.6)
44.2
na
(12.4)
(19.2)
% change
Currency Options (no AUD leg)a
2009-10
10,870
97,245
34,730
2,183
5,535
352
1,079
24,271
176,265
2010-11
23,262
139,317
67,678
9,153
1,896
93
1,608
17,661
260,668
2011-12
21,235
181,767
118,085
4,688
2,648
56
1,689
19,543
349,711
2012-13
17,116
100,178
80,984
8,896
706
0
2,202
41,349
251,431
2013-14
15,562
102,409
77,966
13,078
415
0
0
46,643
256,075
(9.1)
2.2
(3.7)
47.0
(41.2)
na
(100.0)
12.8
1.8
2009-10
66,654
351,398
147,863
6,363
19,626
1,462
1,732
110,550
705,648
2010-11
76,799
341,780
156,985
28,621
4,017
1,988
1,627
118,268
730,085
2011-12
69,018
386,983
286,102
17,534
4,680
650
1,983
160,427
927,377
2012-13
85,664
402,155
402,268
44,931
5,951
119
2,202
330,933
1,274,223
2013-14
64,235
327,820
337,330
48,162
4,788
172
0
300,448
1,082,955
(25.0)
(18.5)
(16.1)
7.2
(19.5)
44.2
(100.0)
(9.2)
(15.0)
% change
Total
% change
a Turnover for currency with no AUD leg was collected in USD and converted to AUD using an average end of month exchange rates as reported by the RBA.
Currency Options Trading Concentration
Market Rank
% Market Sharea
% Cumulative Share
Top 8 Respondents
% Market Sharea
1
44.0
44.0
2009-10
99.7
2
22.0
66.0
2010-11
98.9
3
14.1
80.1
2011-12
100.0
4
10.0
90.2
2012-13
100.0
5
9.8
100.0
2013-14
100.0
a Market share data excludes Inhouse transactions
54
2014 Australian Financial Markets Report
a Market share data excludes Inhouse transactions
Electricity
Looking ahead, the removal of the carbon pricing mechanism is likely
to have a positive impact upon liquidity, in particular with respect
to futures contracts, although uncertainties remain with respect
to a future possible emissions trading scheme. These uncertainties
have the potential to dampen liquidity, particularly in longer dated
contracts. In this context, the AFMA Carbon Addendum will
continue to be valuable in managing future carbon price uncertainty.
The sale process for generation assets in New South Wales and
impending sale in Queensland could impact negatively on liquidity
if it leads to further vertical integration of generation and retail. n
ASX
600,000,000
Financial Options
Month Futures
Calendar Options
Quarterly Options
Quarterly Futures
Caps
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
0
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
fIGURE 4: 2012-13 & 2013-14 turnover by instrument
Other Options
8%
Collars and Asian Option
1%s
Total - Electricity
Swaptions
8%
Caps
4%
800
700
Million megawatt hours
Average Rate Options
2012-2013
fIGURE 1: Annual turnover
900
fIGURE 3: Exchange Traded TURNOVER BY PRODUCT
Traded Volumes (megawatt hours)
During 2013-14, the electricity market was again impacted by
uncertainty regarding carbon pricing and in particular the prospect
of the retrospective repeal of the carbon pricing mechanism. The
combination of this uncertainly coupled with continued decline
in demand had an adverse impact upon liquidity. Consequently,
turnover fell over the course of the year in over-the counter contracts,
offset by increases in exchange traded contracts..
600
500
Swaps
79%
400
300
200
100
0
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
2013-2014
fIGURE 2: State annual turnover
250
NSW
SA
VIC
Swaptions
6%
QLD
Million megawatt hours
200
Collars and Asian Options
3%
Caps
13%
150
Swaps
78%
100
50
0
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13 FY13-14
Australian Financial Markets Association
55
Electricity
Electricity Annual Turnover Summary (megawatt hours)
Survey Year
Generators
Retailers
Intermediaries
Other
Total
≤ 12 months (%)
> 12 months (%)
Swaps
2009-10
54,591,445
58,917,668
37,716,340
11,549,882
162,775,335
82
17.5
2010-11
55,495,212
45,339,753
53,164,419
7,795,126
161,794,510
86.5
13.5
2011-12
41,823,620
50,847,189
60,137,201
0
152,808,010
93.1
6.9
2012-13
106,386,757
98,303,627
24,004,474
205,230
228,900,088
61.3
38.7
2013-14
73,734,278
61,595,315
52,016,882
7,960,988
195,307,462
68.5
31.5
(30.7)
(37.3)
116.7
3779.1
(14.7)
2009-10
15,137,089
12,868,469
1,146,720
2,038,830
31,191,108
78
21.7
2010-11
58,743,193
20,277,730
1,432,040
3,697,875
84,150,838
18.9
81.1
2011-12
4,529,727
5,593,927
3,308,004
0
13,431,658
99.2
0.8
% change
Caps
2012-13
8,400,609
3,935,266
296,040
90,000
12,721,915
79.2
20.8
2013-14
11,930,012
8,557,454
1,074,813
11,645,160
33,207,439
39.0
61.0
42.0
117.5
263.1
12839.1
161.0
2009-10
3,409,800
1,781,171
951,420
4,817,400
10,959,791
77
23.3
2010-11
2,304,520
788,400
0
4,996,920
8,089,840
88.2
11.8
% change
Swaptions
2011-12
4,461,480
3,706,620
49,219,824
0
57,387,924
95.9
4.1
2012-13
14,961,600
5,830,380
2,338,440
0
23,130,420
33.2
66.8
2013-14
5,756,900
3,588,500
827,400
3,585,000
13,757,800
42.2
57.8
(61.5)
(38.5)
(64.6)
na
(40.5)
0
887,400
0
1,029,600
100
0.0
% change
Collars and Asian Options
2009-10
142,200
2010-11
175,180
7,651,104
195,840
0
8,022,124
100.0
0.0
2011-12
322,140
1,042,740
1,122,360
0
2,487,240
100.0
0.0
2012-13
2,603,160
629,145
1,025,955
0
4,258,260
96.8
3.2
2013-14
3,360,420
2,237,025
1,681,500
300,000
7,578,945
94.2
5.8
29.1
255.6
63.9
na
78.0
% change
Other Options
2009-10
197,460
14,859,720
0
0
15,057,180
5
94.8
2010-11
110,040
49,105,800
320,400
3,002,496
52,538,736
6.4
93.6
2011-12
552,600
336,000
27,300
0
915,900
60.6
39.4
2012-13
11,212,440
10,956,000
0
0
22,168,440
1.0
99.0
2013-14
799,020
109,500
0
0
908,520
100.0
0.0
(92.9)
(99.0)
na
na
(95.9)
2009-10
73,477,994
88,427,027
40,701,880
18,406,112
221,013,013
78
22.0
% change
Total
2010-11
116,828,145
123,162,787
55,112,699
19,492,417
314,596,048
55.4
44.6
2011-12
51,689,567
61,526,475
113,814,689
0
227,030,731
94.1
5.9
2012-13
143,564,566
119,654,417
27,664,909
295,230
291,179,122
55.8
44.2
2013-14
95,580,630
76,087,794
55,600,595
23,491,148
250,760,166
64.0
36.0
(33.4)
(36.4)
101.0
7856.9
(13.9)
% change
56
2014 Australian Financial Markets Report
ASX Energy, ASX Electricity Traded Volumes (megawatt hours)
Average Rate
Optionsa
Survey Year
Futures
2009-10
258,787,929
211,425
na
104,879,280
2010-11
322,631,835
73,200
na
160,075,200
2011-12
253,121,325
na
na
139,738,464
2012-13
192,093,153
na
na
93,337,800
2013-14
200,404,656
na
8,590,248
80,597,400
4.3
na
na
% change
Quarterly Options
Calendar Options
Financial Options
Caps
Total
na
35,018,496
398,897,130
na
65,861,904
548,642,139
na
44,045,112
436,904,901
7,621,200
48,643,080
341,695,233
54,583,584
42,522,840
386,698,728
616.2
(12.6)
13.2
(13.6)
Data is supplied by ASX Energy
a Average Rate Options first listed in 2013
Electricity Liquidity Ratio (megawatt hours)
Survey Year
NEM System Demanda
Turnover
Ratio
2009-10
195,336,797
619,910,143
3.2
2010-11
192,295,774
863,238,186
4.5
2011-12
188,952,811
663,935,631
3.5
2012-13
183,727,278
632,874,555
3.4
2013-14
178,614,319
587,177,866
3.3
a NEM System Demand data is supplied by ASX
Electricity Trading Concentration
% Market Share
% Cumulative Share
Top 8 Respondents
% Market Share
1
20.2
20.2
2009-10
79.2
2
19.9
40.1
2010-11
90.9
3
15.3
55.5
2011-12
91.1
4
11.8
67.3
2012-13
92.0
5
9.7
77.0
2013-14
95.8
6
8.1
85.1
7
6.3
91.3
8
4.5
95.8
Market Rank
Australian Financial Markets Association
57
Environmental Products
Both state and federal environmental schemes have continued to
face significant regulatory risk, which has created uncertainty in
these markets. Due to this uncertainty, these markets have generally
suffered from a lack of trading activity. This is evident in that
total traded volume year-on-year has decreased significantly, thus
resulting in reduced liquidity. Broker trade volume for the year was
down about 25% from 2013 to 2014.
The Large-Scale Renewable Energy market has been on a downtrend
recently. The government has been undertaking a review of
the renewable energy target (RET) (large and small-scale) in 2014.
This review comes less than two years after the last review and is
related to the federal government’s focus on reducing consumer
electricity costs.
Consequently, regulatory uncertainty has increased in this market.
Many future projects have been frozen at the project-approval stage
and building works delayed until the outcome of the 2014 review
is clearer.
The Queensland Gas Scheme closed at the end of the 2013
compliance year, with no further Gas Electricity Certificates (GECs)
creation or liability after this time.
The Victoria Energy Efficiency Target is going through an economic
valuation of its products and services by the state government. This
has created more regulatory risk in a fragile market. The results of
the review should be announced in the second half of 2014.The
New South Wales Energy Savings Scheme is yet another scheme
facing regulatory risk by experiencing a state review.
Australian Carbon Credit Units will now be abolished due to the
repeal of the carbon tax in July 2014. n
fIGURE 3: Large Scale Generation Certificate Turnover by
Instrument period
2017+
2%
2013
13%
2016
13%
The spot Small-Scale Renewable Technology market has been
trading within $1.50 of the Clearing House price ($40) and has
traded as high as $39.40. This is mostly due to the balance between
supply and demand being very tight. As a result, traded volume for
the year is down considerably.
2015
36%
2014
36%
fIGURE 4: SMall Scale technology certificate turnover by
instrument period
fIGURE 1: Total RECS Annual Turnover
2015
1%
80
Million certificates
70
60
50
40
2013
49%
2014
50%
30
20
10
0
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
fIGURE 2: Total RECS Turnover by instrument Period
12-13 FY13-14
fIGURE 5: Gas certificates annual turnover
2016
3%
10.00000
2015
10%
2014
47%
Million certificates Transacted
8.00000
2013
40%
6.00000
4.00000
2.00000
0.00000
2009-10
58
2014 Australian Financial Markets Report
2010-11
2011-12
2012-13
2013-14
Total Renewable Energy Certificates Annual Turnover Summary (certificates)
Survey Year
Eligible Producer
Liable Party
Intermediaries
Total
2009-10
7,712,653
5,040,791
8,736,038
21,489,482
2010-11
32,562,638
9,916,500
4,869,075
47,348,213
2011-12
32,503,717
9,804,744
19,429,597
61,738,057
2012-13
20,668,565
26,768,857
30,356,781
77,794,203
2013-14
9,726,734
2,410,794
6,499,796
18,637,324
(52.9)
(91.0)
(78.6)
(76.0)
% change
Total Renewable Energy Certificates Annual Turnover Summary 2013-14 (certificates)
Instruments
Eligible Producer
Liable Party
Intermediaries
Total
2013
Forwards
Options
Sub Total
4,641,742
534,985
2,226,251
0
75,000
0
7,402,978
75,000
4,641,742
609,985
2,226,251
7,477,978
4,098,986
1,173,303
2,598,525
7,870,813
2014
Forwards
Options
205,000
155,002
425,009
785,011
4,303,986
1,328,305
3,023,534
8,655,824
Forwards
200,006
107,503
395,006
702,515
Options
190,000
290,001
625,003
1,105,004
Sub Total
390,006
397,504
1,020,009
1,807,519
Sub Total
2015
2016
Forwards
150,000
0
95,000
245,000
Options
175,000
75,000
125,003
375,003
Sub Total
325,000
75,000
220,003
620,003
66,000
0
10,000
76,000
0
0
0
0
66,000
0
10,000
76,000
9,156,734
1,815,791
5,324,781
16,297,306
570,000
595,003
1,175,015
2,340,018
9,726,734
2,410,794
6,499,796
18,637,324
2017+
Forwards
Options
Sub Total
Total RECs
Forwards
Options
Total
Renewable Energy Certificates Trading Concentration
Market Rank
% Market Share
% Cumulative Share
Top 4 Respondents
% Market Sharea
1
37.4
37.4
2009-10
86.5
2
25.5
62.9
2010-11
89.3
3
17.6
80.5
2011-12
93.4
4
9.5
90.0
2012-13
86.3
2013-14
90.0
a Large and small scale RECs combined
Australian Financial Markets Association
59
Environmental Products
Gas Electricity Certificates Annual Turnover Summary (certificates)
Survey Year
Eligible Producer
Liable Party
2009-10
1,027,500
1,013,994
322,500
2,363,994
2010-11
7,404,740
1,134,744
0
8,539,484
2011-12
842,000
598,950
0
1,440,950
2012-13
826,250
1,089,707
709,069
2,625,026
2013-14
0
223,048
0
223,048
(100.0)
(79.5)
(100.0)
(91.5)
% change
Intermediaries
Total
Gas Electricity Certificates Annual Turnover Summary 2013-14 (certificates)
Instruments
Eligible Producer
Liable Party
Intermediaries
Total
2013
Forwards
0
223,048
0
Options
0
0
0
223,048
0
Sub Total
0
223,048
0
223,048
0
0
0
0
2014
Forwards
Options
0
0
0
0
Sub Total
0
0
0
0
2015
Forwards
0
0
0
0
Options
0
0
0
0
Sub Total
0
0
0
0
2016
Forwards
0
0
0
0
Options
0
0
0
0
Sub Total
0
0
0
0
2017 +
Forwards
0
0
0
0
Options
0
0
0
0
Sub Total
0
0
0
0
Forwards
0
223,048
0
223,048
Options
0
0
0
0
Total
0
223,048
0
223,048
Total Gas
60
2014 Australian Financial Markets Report
Exchange Traded Market Data
Primary Market Activity
New Capital Raisings for Cash (AUD million)
Survey Year
Floats
Rights
Placement
Calls
Options
Employee
DRP
SP Plans
Other*
Total Cash
Raisings
% of Average
Market cCap
2009-10
11,460
23,182
23,120
683
138
2,300
10,186
5,474
4
76,547
5.8%
2010-11
29,387
7,362
8,952
119
251
1,856
7,768
1,123
6,314
63,132
4.6%
2011-12
10,187
8,060
12,234
9
275
2,118
9,327
535
1
42,745
3.5%
2012-13
9,908
3,952
18,663
50
390
1,904
6,939
548
0
42,355
3.2%
2013-14
27,659
7,699
18,394
1
210
1,177
4,593
1,304
0
61,037
4.0%
179.2
94.8
(1.4)
(98.0)
(46.2)
(38.2)
(33.8)
138.0
% change
44.1
* Includes privatisations and prospectuses
Data may not add properly due to rounding
Companies Listed on ASX at 30 June 2014
Survey Year
No. of Companies with Quoted
Securities
2009-10
1,975
1,341,797
1,893
1,253,711
662
2010-11
2,034
1,445,469
1,941
1,348,534
695
2011-12
2,012
1,270,579
1,916
1,185,936
619
2012-13
1,989
1,495,715
1,888
1,347,186
714
2013-14
1,991
1,633,536
1,891
1,551,594
821
0.1
9.2
0.2
15.2
15.0
% change
Market Capitalisation of all
Listed Equities
Domestic Companies with
Quoted Equities
Market Capitalisation with
Listed Domestic Equities
Market Value of Average
Domestic Company
Secondary Market Activity
Equity Trading on ASX
Survey Year
Number of Shares
(million)
Annual Value
(AUD million)
Trades(‘000)
Average
Daily Trades
Average Daily Value
(AUD million)
2009-10
659,424
1,359,304
132,250
522,729
5,373
2010-11
670,096
1,339,140
144,321
570,440
5,293
2011-12
510,530
1,185,327
165,806
655,359
4,685
2012-13
415,121
1,045,952
174,750
693,454
4,151
2013-14
398,708
1,008,897
181,861
718,817
3,988
(4.0)
(3.5)
4.1
3.7
(3.9)
% change
Australian Financial Markets Association
61
Exchange Traded Market Data
Turnover as % of Average Market Cap (AUD billion)
Survey Year
Equity Turnover
Average Domestic Market Cap
2009-10
1,359
1,325
% Liquidity
103
2010-11
1,339
1,383
97
2011-12
1,185
1,230
96
2012-13
1,046
1,341
78
2013-14
1,009
1,517
67
% change
(3.5)
13.1
(14.7)
Equity Derivatives
Equity Derivatives Contract Volume (‘000)
Survey Year
Call Tradesa
Put Tradesa
Total Contractsa
SPI 200® Futures
SPI 200® Options
2009-10
11,977
9,677
21,654
9,738
352
2010-11
27,316
19,932
47,248
10,506
379
2011-12b
94,755
69,143
163,898
11,811
477
2012-13
90,937
66,356
157,293
10,259
349
2013-14
72,031
52,561
124,592
9,715
473
% change
(20.8)
(20.8)
(20.8)
(5.3)
35.6
a Includes Stock Options, Cash Index Options and LEPOs
b In May 2011 contract sizes for ETOs were converted from 1000 to 100.
Equity Derivatives Turnover by Notional Value (AUD billion)
Survey Year
Cash Index Optionsa
Stock Options
LEPOs
SPI 200® Futures
SPI 200® Options
2009-10
297.0
197.0
10.4
1,099
40
2010-11
352.0
314.0
14.5
1,206
44
2011-12
337.4
474.2
4.5
1,222
50
2012-13
313.1
538.7
10.6
1,169
40
2013-14
273.5
409.7
13.8
1,280
62
% change
(12.6)
(23.9)
30.2
9.5
55.5
a Includes Cash Index LEPOs
Warrants: No. of Issues, Turnover by Number of Trades and Contract Value
Survey Year
Number of Issues
Contract Value (AUD million)
2009-10
2,226
485
5,987
2010-11
2,409
282
2,948
2011-12
4,743
333
3,630
2012-13
5,140
319
3,758
2013-14
3,564
350
3,815
% change
(30.7)
9.7
1.5
Data from previous years has been reviewed and some figures have been adjusted.
62
Trades ('000)
2014 Australian Financial Markets Report
SPI 200® Futures to Cash Equity Turnover
SPI 200® Futures Turnover
Futures to Cash ratio
150%
1,400
130%
1,200
110%
1,000
90%
800
70%
600
50%
400
30%
200
10%
0
2009-10
2010-11
2011-12
-10%
2013-14
2012-13
SPI 200® Futures / Cash Equity Turnover Ratio
Notional value (AUD billion)
Cash Equity Turnover
1,600
Cash Equity Turnover has decreased slightly over the past 5 years while SPI 200® Futures notional value turnover has increased.
As a result there is a longer term trend for an increasing Futures to Cash Turnover Ratio.
Interest Rate and Energy Derivatives
Futures and Options Turnover Contract Volume
Survey Year
30 Day IB
90 Day Bills
3 Year Bonds
16,538
30,196
10 Year Bonds
Electricity
Graina
Otherb
Total Exchangec
Futures Volume
2009-10
3,691
11,274
145.1
386.1
9,753
71,597
2010-11
6,195
20,729
38,832
15,230
203.0
473.8
10,513
91,702
2011-12
5,334
21,652
42,499
17,216
170.9
432.5
11,836
98,992
2012-13
4,780
25,866
47,492
21,211
161.0
353.3
10,278
110,141
2013-14
3,517
25,903
47,886
25,520
157.0
181.3
9,720
112,884
% change
(26.4)
0.1
0.8
20.3
(2.5)
(48.7)
(5.4)
2.5
Options Volume
2009-10
0
37
2,459
6
12.3
1.7
352
2,866
2010-11
0
52
4,105
8
18.3
10.0
379
4,562
2011-12
0
25
2,354
3
15.9
12.9
477
2,886
2012-13
0
7
3,882
20
11.5
6.9
349
4,276
0
4
3,466
25
19.9
1.5
474
3,990
0.0
(43.3)
(10.7)
25.9
73.0
(78.4)
36.0
(6.7)
2013-14
% change
Total
2009-10
3,691
16,575
32,655
11,280
157.3
387.8
10,105
74,463
2010-11
6,195
20,781
42,937
15,238
221.3
483.2
10,892
96,264
2011-12
5,334
21,677
44,853
17,219
186.8
445.5
12,313
101,878
2012-13
4,780
25,873
51,374
21,231
172.5
360.2
10,626
114,417
2013-14
3,517
25,907
51,352
25,545
176.9
182.8
10,194
116,874
% change
(26.4)
0.1
0.0
20.3
2.6
(49.2)
(4.1)
2.1
Data does not include NZ dominated contracts
a Where the exchange is that operated by Australian Securities Exchange Ltd
b ASX Grain Futures & Options market was migrated to ASX 24 on 24.10.2011. The data listed is not included in the “Total Exchange” data.
c Other includes SPI 200 Futures and Options, Wool Futures and Options and environmental contracts
Australian Financial Markets Association
63
Exchange Traded Market Data
Futures and Options Turnover by Contract Value (AUD billion)
Survey Year
30 Day IB
90 Day Bills IR
3 Year Bonds YT
10 Year Bonds XT
Electricity
Graina
Otherb
Total Exchangec
Futures Volume
2009-10
11,073
16,538
3,020
1,127
11.6
n.a.
1,117
32,887
2010-11
18,586
20,729
3,883
1,523
13.9
n.a.
1,224
45,959
2011-12
16,001
21,652
4,250
1,722
13.4
n.a.
1,248
44,887
2012-13
14,340
25,866
4,749
2,121
14.7
n.a.
1,215
48,308
2013-14
10,551
25,904
4,789
2,552
15.6
1.0
1,280
45,092
% change
(26.4)
0.1
0.8
20.3
5.9
na
5.3
(6.7)
0
37
246
1.0
4.3
na
39.7
328
Options Volume
2009-10
2010-11
0
52
410
1.0
6.2
na
43.8
513
2011-12
0
25
235
0.3
7.3
na
50.4
318
2012-13
0
7
388
2.0
5.5
0.04
39.5
442
2013-14
0
4
347
2.5
6.0
0.01
62.1
421
0.0
(43.3)
(10.7)
25.9
8.4
(75)
57.4
(4.7)
% change
TOTAL
2009-10
11,073
16,575
3,266
1,128
15.9
na
1,157
33,216
2010-11
18,586
20,781
4,293
1,524
20.1
na
1,268
46,472
2011-12
16,001
21,677
4,485
1,722
20.7
na
1,299
45,205
2012-13
14,340
25,873
5,137
2,123
20.2
0.0
1,255
48,750
2013-14
10,551
25,908
5,135
2,555
21.6
1.0
1,342
45,513
% change
(26.4)
0.1
0.0
20.3
6.6
na
7.0
-6.6%
a Where the exchange is that operated by Australian Securities Exchange Ltd
b ASX Grain Futures & Options market was migrated to ASX 24 on 24.10.2011. The data listed is not included in the “Total Exchange” data.
c Other includes SPI 200 Futures and Options, Wool Futures and Options and environmental contracts.
Data from previous years has been reviewed and some figures have been adjusted.
Futures and Options Open Interest at 30 June 2014
Otherb
65,536
89,395
446,657
2,357,940
46,360
108,774
428,880
2,975,956
374,093
43,421
52,974
436,731
2,235,568
436,194
45,117
29,832
314,574
2,441,828
731,156
598,736
55,729
19,418
314,841
2,826,252
47.0
37.3
23.5
(34.9)
0.1
15.7
30 Day IB
2009-10
271,465
662,475
577,552
334,255
2010-11
463,462
898,667
728,919
409,668
2011-12
200,978
697,579
429,792
2012-13
224,404
894,281
497,426
2013-14
170,400
935,972
(24.1)
4.7
% change
90 Day Bills IR
Graina
Survey Year
3 Year Bonds YT
10 Year Bonds XT
Electricity
a Where the exchange is that operated by Australian Securities Exchange Ltd
b ASX Grain Futures & Options market was migrated to ASX 24 on 24.10.2011. The data listed is not included in the “Total Exchange” data.
c Other includes SPI 200 Futures and Options, Wool Futures and Options and environmental contracts.
64
2014 Australian Financial Markets Report
Total Exchangec
Bonds and Hybrids
Survey Year
Number
Market cap (A$ b)
Value (A$ m)
Volume
Total trades (#)
Australian Government Bonds (AGBs)
2012-13
23
$277.5
$4.4
39,988
148
2013-14
26
$347.8
$53.8
481,172
1,173
13.0
25.3
1116.1
1103.3
692.6
% change
Corporate Bonds – Fixed Rate
2012-13
4
$0.3
$55.6
524,915
2,595
2013-14
4
$0.3
$39.8
382,501
1,612
0.0
0.9
(28.4)
(27.1)
(37.9)
% change
Corporate Bonds – Floating Rate (FRNs)
2012-13
24
$13.3
$3,172.7
32,424,382
145,631
2013-14
24
$14.6
$3,020.5
30,478,678
114,246
% change
0.0
9.6
(4.8)
(6.0)
(21.6)
33
$22.2
$4,878.6
44,784,403
245,594
2013-14
34
$26.3
$5,264.1
52,175,470
209,994
% change
3.0
18.8
7.9
16.5
(14.5)
17
$1.8
$357.4
14,109,567
20,837
14
$1.8
$377.4
43,865,423
16,535
(17.6)
0.5
5.6
210.9
(20.6)
Preference shares
2012-13
Convertible notes
2012-13
2013-14
% change
Number and Market Cap are as at 30 June. Value, volume and number of trades are the totals for the financial year.
Australian Financial Markets Association
65
APPENDIX A
Methodology
The Australian Financial Markets Report (AFMR) is produced by
aggregating and analysing data submitted by the over-the-counter
(OTC) market participant organisations as determined by the
relevant AFMA Market Committees.
Integrity Checks
Before publishing survey results, comprehensive analyses are
undertaken to ensure data integrity, including checking for:
–– variations from prior years in participant data (where available)
and aggregated data
First, the survey reports transactions:
––
––
––
––
––
–– consistency with other data sources.
––
Data Sources
––
Twenty seven participants submitted 106 data surveys including
Foreign Exchange data as provided to the Reserve Bank of Australia.
Data relating to exchange-traded financial products was provided by
the Australian Securities Exchange (ASX) and Chi-X Australia.
Sources of Data Utilised
Financial Market
Data Source
–– Over-the-Counter (except FX) –– Respondent surveys
–– Equities and Futures
–– Australian Securities Exchange
–– Foreign Exchange
–– Reserve Bank of Australia
Survey Respondents and Coverage
The 2014 survey covers the period 1 July 2013 to 30 June 2014.
dealt and risk managed by offices in Australia but settled by
offices offshore (offshore booking entity)
dealt by offices offshore but risk managed and settled by offices
in Australia (Australian booking entity)
dealt and settled by offices in Australia but risk managed by
offices offshore (Australian booking entity)
The survey excludes transactions:
–– comparative variations in trends of participant data
consistency in aggregated data for individual markets through to
summary results
The bulk of the data is related to OTC markets. As no central
repository of such data exists, an extensive survey of OTC market
participants is conducted.
dealt, risk managed and settled by offices in Australia (Australian
booking entity)
dealt and settled by offices offshore but risk managed by offices
in Australia (offshore booking entity)
dealt and risk managed by offices offshore but settled by offices
in Australia (Australian booking entity)
dealt, risk managed and settled by offices offshore (offshore
booking entity).
Second, to provide the best possible picture of the state of Australian
OTC markets, the survey aims to capture the vast majority of activity
in each market. This is achieved in two related ways:
1. Participants in each survey were determined by the
relevant AFMA Market Committee, thus ensuring all major
participants in that market were included. Appendix B is a
summary of respondents.
2. Provided at least one party to any transaction is a survey
respondent, it will be captured. Although transactions between
non respondents are not captured, their magnitude is considered
not to be significant given the process of respondent selection.
The market concentration data presented in each section
also supports this assumption. Transactions between survey
respondents are aggregated separately and double counting is
thus avoided. n
Two important points should be noted regarding the survey coverage.
The first relates to the types of transactions included and the second
to respondent selection.
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66
2014 Australian Financial Markets Report
Respondents
(8)
(11)
ü
HSBC Bank Australia Limited
ü
Nomura Australia Limited
ü
ü
UBS AG Australia Branch
Westpac Banking Corporation
Suncorp Metway Ltd
Royal Bank of Canada
Rabobank Nederland (Australia Branch)
ü
National Australia Bank Limited
Morgan Stanley Australia Limited
ü
ü
ü
ü
ü
ü
ü
ü
ü
JP Morgan Chase Bank, N.A.
ü
ü
ü
ü
ü
ING Bank (Australia) Limited
ü
ü
Deutsche Bank AG
ü
ü
Commonwealth Bank of Australia
ü
ü
Citi
ü
ü
ü
BNP Paribas
ü
(13)
Instruments
Transferable
Negotiable &
ü
ü
Securities
Securities
ü
Debt
Non-Gov.
Debt
Government
Bank of Queensland Limited
ANZ Banking Group Limited
(17)
Repurchase
ü
ü
ü
ü
ü
ü
ü
ü
ü
(9)
Agreements
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
(10)
Swaps
ü
ü
ü
ü
ü
ü
ü
ü
(8)
Agreements
Rate
Forward
ü
ü
ü
ü
ü
ü
ü
ü
(8)
Options
Rate
Interest
Credit
ü
ü
ü
ü
ü
ü
ü
(7)
Derivatives
ü
ü
ü
ü
ü
(5)
Options
Currency
Appendix B
Survey Respondents
Over-the-Counter Markets
Australian Financial Markets Association
67
Appendix B
Energy Markets
Respondents
Electricity
Environmental Products
(11)
(7)
AGL Energy Limited
ü
ü
ANZ Banking Group
ü
Energy Australia
ü
Ergon Energy Corporation Limited
ü
ERM Power
ü
Intergen (Australia) Pty Ltd
ü
Macquarie Group Limited
ü
Origin Energy
ü
ü
Snowy Hydro
ü
ü
Stanwell
ü
ü
Westpac Banking Corporation
ü
ü
(11)
68
2014 Australian Financial Markets Report
ü
ü
Appendix C
Survey Design
The surveys for each OTC market covered a range of activity attributes. Data was collected on turnover, number of transactions,
outstandings, maturity and brokered activity by instrument type and counterparty.
Counterparty types, instruments and other survey attributes are defined below.
Counterparty Definitions
Counterparty Type
Survey Definitions
Survey Respondents
Those organisations identified in Appendix B.
Other Banks
Non survey respondents who are Authorised Deposit-Taking Institutions classified as banks (Australian Owned, Foreign Subsidiary or
Branches of Foreign Banks licensed under the Commonwealth Banking Act 1959) and regulated by APRA.
In-house
Internal trading desks and internal divisions, both onshore and offshore.
Funds Managers –
Life Offices, other Insurance Companies, Superannuation Funds and other Nominee and Trust Structures.
Traditional
Funds Managers –
Hedge Funds and Commodity Trading Advisors.
Hedge Funds/CTAs
Government
Commonwealth and State Governments, Reserve Bank of Australia and Central Borrowing Authorities, including semi-government bodies
and the Australian Office of Financial Management
Offshore Central Banks
Foreign Central Banks and OECD foreign government sponsored authorities and instrumentalities.
Offshore Counterparties
Organisations located in a country other than Australia, including branches and subsidiaries of survey respondent organisations.
Brokers
Market participants which do not take positions but bring together two counterparties to a transaction.
Retailers
Entities whose predominant business is selling electricity.
Generators
Entities whose predominant business is producing electricity.
Eligible Producers
Entities able to create Renewable Energy Certificates (RECs), NSW Greenhouse Abatement Certificates (NGACs) or Gas Electricity
Certificates (GECs) from accredited forms of activity under the applicable scheme rules.
Liable Parties
Entities required to surrender RECs/NGACs/GECs to the appropriate regulatory body.
Intermediaries
Entities undertaking Electricity/RECs/NGACs/GECs transactions that are not Retailers, Generators, Eligible Producers or Liable Parties.
Other Counterparties
Counterparties not identified in the above categories.
Definitions of Instruments
Instrument
Definition
Government Debt Securities
Commonwealth Government Bonds
Interest bearing bonds that are debt obligations of the Commonwealth Government.
State Government Bonds
Interest bearing State Government bonds (e.g. NSW TCorp) that are issued by States and Territories.
Foreign Government Bonds
Interest bearing bonds (denominated in any currency) that are issued by foreign sovereigns, supranationals or government agencies.
Australian Financial Markets Association
69
Appendix C
Instrument
Definition
Non-Government Debt Securities
Corporate Securities
Interest bearing obligations issued by a corporation.
Bank Securities
Interest bearing obligations (Negotiable certificates of deposit and Transferable certificates of deposit) issued by an Authorised DepositTaking Institution (Australian Owned Banks, Foreign Subsidiary or Branches of Foreign Banks licensed under the Commonwealth Banking
Act 1959 and regulated by APRA).
Bank Securities Commonwealth Guaranteed
Interest bearing bonds issued by an Authorised Deposit-Taking Institution with the support of a Commonwealth Government guarantee.
Mortgage Backed Securities
Residential Mortgage Backed Securities (RMBS) and Commercial Mortgage Backed Securities (CMBS). Australian RMBS are securitised prime
and non-prime residential mortgages. CMBS reference a commercial mortgage loan pool.
Other Asset Backed Securities (ABS)
Securities collateralised by assets other than mortgage loans, for example, receivables derived from motor vehicle loans, credit cards,
personal loans and royalties.
Offshore AUD Issues
Australian Eurobonds that are sold offshore and denominated in Australian currency (e.g. ‘Uridashi’ issuance).
Foreign Non Government Issues
Kangaroo bonds (or notes) that are issued in the Australian domestic market by foreign non-government borrowers.
Covered Bonds
Covered bonds are debt securities backed by cash flows from mortgages and remain on the issuer’s consolidated balance sheet.
Negotiable and Transferable Instruments
Treasury Notes
Notes issued by the Commonwealth of Australia.
Semi Government Paper
State Government, Defence Housing Authority, Civil Aviation Authority, Federal Airports Corporation and other government
instrumentalities’ paper.
Bank Paper
Bank accepted bills and negotiable certificates of deposits of banks licensed under the Banking Act.
Corporate Paper
Commercial bills and promissory notes.
Foreign Government Paper
Paper issued by foreign sovereigns, supranationals or government agencies in any currency.
Reciprocal Purchase Agreements
Commonwealth Government Bonds
Bonds where interest is paid at a predetermined and unchanging rate for a specified period. Interest bearing bonds that are debt
obligations of the Commonwealth Government.
State Government Bonds
State-Government bonds (e.g. NSW TCorp) that are issued by States and Territories.
Other Government Bonds
Foreign Government bonds (e.g. supranationals).
Corporate and Bank Bonds
Long-term instruments including bonds and Floating Rate Notes.
Treasury Notes
Includes notes issued by the Reserve Bank of Australia.
Semi-Government Promissory Notes
Includes State Government instruments and Defence Housing Authority, Civil Aviation Authority, Federal Airports Corporation and other
government instrumentalities’ paper.
Corporate and Bank Paper
Short-term money market instruments including bank bills, certificates of deposits and promissory notes.
Residential Mortgage Backed Securities
Residential Mortgage Backed Securities with maturities of greater than one year.
Asset Backed Commercial Paper
Asset Backed Commercial Paper with maturities of less than one year.
Swaps
Fixed AUD:Floating AUD
One party makes fixed AUD interest payments and the other floating AUD.
Floating AUD:Floating AUD (basis swaps)
Both parties make floating AUD interest payment.
Fixed AUD:Non-AUD
One party makes fixed AUD interest payments and the other fixed or floating non-AUD.
Floating AUD:Non-AUD
One party pays floating AUD interest payments and the other fixed or floating non-AUD.
Non-AUD:Non-AUD
Both parties make Non-AUD interest payment.
Inflation-linked Swaps
One party make payments linked to the inflation rate and the other pays fixed.
Overnight Index Swaps
An exchange of a fixed for floating interest rate with a designated overnight index tied to the floating rate.
Forward Rate Agreements
Forward rate agreements (FRA) types include: AUD (in AUD), USD (in USD), JPY (in JPY), GBP (in GBP), EURO (in EUR), NZ (in NZD) and other (in USD).
Interest Rate Options
70
Bond Options
Where the buyer has the right to buy (call option) or to sell (put option) a given bond at a specified rate on or before a specified future date.
Swaptions
Where the buyer has the right to enter into a swap on a future date at a predetermined fixed rate.
Caps
A series of options which places a ceiling on the level of interest on a floating rate borrowing. On prescribed reference dates, the seller will
compensate the buyer if the settlement index is greater than the strike rate.
Floors
A series of options which protects the buyer from a fall in interest rates below a specified rate. On prescribed reference dates, the seller will
compensate the buyer if the settlement index is less than the strike rate.
2014 Australian Financial Markets Report
Instrument
Definition
Credit Derivatives
Single Name Credit Default Swaps
One party pays a premium to transfer the credit risk of a single defined reference entity to a second party in return for a contingent
payment should a defined credit event take place.
Total Rate-of-Return (TROR) Swaps
One party pays the positive credit and market performance on an underlying asset in return for receipt of a funding payment plus any
negative credit and market performance on an underlying asset.
Credit Indices
Reference a portfolio of single name credit default swaps where the risk is additive rather than non-linear or correlated. It includes credit
default swap indices.
Currency Options
Currency pairs include: AUD/USD, AUD/JPY, AUD/GBP, AUD/NZD, AUD/EUR, all in AUD; and USD/JPY, USD/GBP, USD/NZD, USD/EUR and other all in USD.
Foreign Exchange
Local Financial Institutions
All financial institutions located in Australia including banks, currency funds, hedge funds and the Reserve Bank of Australia.
Overseas Financial Institutions
Foreign financial institutions.
Non-Financial Institutions
Institutions not identified above.
Electricity
Swaps
The exchange of the difference between a fixed price per megawatt hour (MWh) of electric energy and a variable price that is referenced to
the pool price, as determined by the market operator, in a stated reference node.
Caps
A series of options which places a ceiling on the pool price for electricity. The seller compensates the buyer, on the prescribed reference
dates, if the pool price is greater than the strike rate.
Swaptions (receiver’s/payer’s)
The buyer of a call (put) swaption has the right, but not the obligation, to buy (sell) a swap on a future date at a predetermined fixed price.
The fixed price of the swap is the strike price of the swaption.
Collars and Asian Options
A series of options with a floating strike price which is determined according to the unweighted arithmetic mean of the relevant price for
each calculation period between 0000 and 2400 in the calendar month, that is the calendar month in which the last calculation period with
respect to the settlement date falls.
Other options
All other options not included in the above definitions.
Environmental Products
Forwards
The exchange of a specific quantity of RECs, NGACs or GECs at a fixed price at pre-nominated delivery date.
Options
Includes put and call options, swaptions, caps, floors and collars.
Definitions of Survey Attributes
Survey Term
Survey Definition
Turnover
All sales and purchases, including both primary and secondary market, aggregated.
Outstandings
The amount of an instrument calculated by adding the absolute value of short and long positions as at 31 May 2012.
In the Repurchase Agreements (Repo) Market, Outstandings is the gross value of all unexpired repurchase agreements, excluding any forward repo transactions. Short and long positions are not netted. The value is calculated as the “face value” of the underlying stocks.
Maturity
The remaining time until the final payment under the transaction. For options it is the expiry or exercise date.
Data Accuracy Conventions
The data in the market turnover summaries on pages 2-3 are rounded to the nearest AUD billion. Up to nine decimal places are carried forward
in calculations. Thus, year-on-year percentage changes in the summary tables may not exactly match other table percentage changes due
to rounding.
In addition, for all tables, percentage change and total calculations are based on the actual survey data collected rather than the aggregate
numbers presented in the tables. Slight variations may occur due to rounding adjustments. n
Australian Financial Markets Association
71
About AFMA
The Australian Financial Markets Association (AFMA) was formed in 1986. Today we are the leading industry
association promoting efficiency, integrity and professionalism in Australia’s financial markets – including the
capital, credit, derivatives, foreign exchange and other specialist markets.
We have more than 130 members, from Australian and international banks, leading brokers, securities
companies and state government treasury corporations to fund managers, energy traders and industry
service providers. Our role is to provide a forum for industry leadership and to advance the interests of all these
market participants.
Promoting best practice
–– AFMA promotes best practice in financial markets so they can continue to contribute to Australia’s
economic health. We do this by:
–– Effectively managing Australia’s $78 trillion over-the-counter (OTC) markets;
–– Developing widely accepted industry standards for transactional processing;
–– Dealing with policy makers on effective regulation of Australia’s financial markets to inspire investors’
confidence; and
–– Encouraging high standards of professional conduct through our professional development and
accreditation programs.
Our mission – advancing the interests of members
–– Promote Australia as a global centre for financial services;
–– Help members grow their businesses and contribute to Australia’s economic wellbeing;
–– Develop new markets for financial products;
–– Encourage existing markets to reach their full potential;
–– Lead and sustain effective management of OTC financial markets;
–– Represent market participants in exchange-traded markets to ensure effective and efficient market
processes and regulation;
–– Encourage high standards of professional conduct;
–– Develop individual expertise through professional development and accreditation programs; and
–– Promote government policies and business conditions that support a strong financial sector.
Enquiries
Phone: 02 9776 7900
Email: [email protected]
GPO Box 3655 Sydney NSW 2001
Web
www.afma.com.au
72
2014 Australian Financial Markets Report
Australian Financial Markets Association
GPO Box 3655 Sydney NSW 2001
Telephone: + 61 2 9776 7900 Email: [email protected]
Disclaimer: Whilst every care has been taken by AFMA in preparing the content of this report, the content covered is not intended nor should it be relied upon as a
substitute for other appropriate professional advice, and AFMA will not be liable for errors or omissions in the content, or for any consequences resulting from any
errors or omissions, including any loss resulting from reliance on this content.
Copyright: © Australian Financial Markets Association – AFMR 2014. This report is subject to copyright. All or part of it can be reproduced for bona fide research or public
policy purposes with appropriate acknowledgement of the Australian Financial Markets Association.
ISSN 1444 7215
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