2015 Australian Financial Markets Report - AFMA AFMR.pdf · FINANCIAL MARKETS ARE AN ESSENTIAL link...

Compiled for AFMA by

2015 Australian Financial Markets Report

The 2014-15 financial

year saw the return of asset

price volatility in global

and domestic financial

markets, driven by offshore

macroeconomic and

geopolitical developments

as well as structural

changes in market

structure, regulation and

liquidity. Turnover across

Australia’s financial markets

rose 8% over the year to a

total of $136,368 billion.

Over-the-counter markets

recorded a 7.7% increase in

turnover to $84,817 billion.

Exchange-traded markets

turnover rose nearly 9% to

$51,552 billion.

AUSTRALIAN FINANCIAL MARKETS ASSOCIATION | 1

FINANCIAL MARKETS ARE AN ESSENTIAL link in the chain of production that is our national economy. Australia’s experience over many years is that efficient and well-managed financial markets promote a productive and competitive economy. The securities markets are a vital source of finance to business, help fund national infrastructure development and enable governments to finance budgets over the economic cycle. Australian companies and investors use derivatives to manage the financial risks that are inherent in a modern and internationally open economy.

The 2015 Australian Financial Markets Report provides a unique and valuable insight into market activity and trends over the last year. Turnover on both the exchange and over-the-counter markets increased, though the level remains within the boundaries of recent experience. Our markets are performing solidly and contributing to the competitiveness and stability of the Australian economy.

Structural change in the financial system, partly due to global regulatory reform, is creating greater reliance on market-based financing to fund economic growth. The future of Australia’s financial markets is bright, but we must strive to realise this potential.

Australia’s well-functioning financial markets are the product of large investments by traders, brokers and market infrastructure providers. The cost of maintaining and improving the operational performance of financial markets is growing. Regulation is an essential input to confidence in the financial system, but is also a contributory factor to higher costs.

Rising living standards will depend on the right business, policy and regulatory settings being put in place to promote effective financial markets. Government initiatives such as new bilateral free trade agreements, the Asia Regional Funds Passport and infrastructure development are positive forces for change.

Australia’s longstanding aspiration to become a leading regional and global financial centre demands continued support from government policy settings. There’s a lot more work to be done. Sydney ranks 15th in the Z/Yen Group Global Financial Centres Index, an improvement on previous years but below regional peers such as Singapore, Hong Kong and Seoul.

Tax reform can be a driver of productivity and economic development that will lift our competitiveness. Implementation of the Financial System Inquiry recommendations needs to be managed in a way that facilitates innovation, promotes competition and contains business costs, so the cost of financial intermediation to the Australian economy is kept reasonable and we build our international competitiveness. Australia must remain open to the flow of capital, people and ideas from the rest of the world if it is to fully capitalise on the emerging opportunities in the Asia region.

Of course, it is the market participants who will do the most to shape the further development of our financial markets. The Australian Financial Markets Association (AFMA) provides the forum for industry participants to engage with each other and work with government on the measures required to improve our markets. AFMA provides thought leadership on policy matters and provides practical leadership through its market conventions, conduct guidance and industry education programs that promote efficiency in market dealings and support the integrity of our markets. It is a demonstration of the industry’s commitment to support the future development of our financial markets.

STEVE HARKERAFMA Chairman

Foreword

2 | 2015 AUSTRALIAN FINANCIAL MARKETS REPORT

The Australian Financial Markets Annual Turnover Summary By Market (AUD billion)

2010-11 2011-12 2012-13 2013-14 2014-15 % change

OTC MARKETS

Government Debt Securities 1,483 1,758 1,778 1,899 1,830 (3.6)

Non-Government Debt Securities 908 592 777 772 788 2.1

Negotiable & Transferable Instruments 3,676 3,675 3,271 2,784 2,768 (0.6)

Repurchase Agreements 7,364 7,525 7,864 6,011 8,124 35.1

Swaps 6,809 9,848 10,495 10,461 12,249 17.1

Overnight Index Swaps 5,313 8,703 8,894 7,198 10,700 48.7

Forward Rate Agreements 5,856 6,184 5,937 3,877 6,564 69.3

Interest Rate Options 320 496 411 565 444 (21.4)

Credit Derivatives 321 398 228 230 173 (24.9)

Foreign Exchange 44,517 39,923 42,403 43,847 39,103 (10.8)

Currency Options 730 927 1,274 1,083 913 (15.7)

Total OTC 77,296 80,029 83,332 78,725 83,656 6.3

EXCHANGE-TRADED MARKETS

Equities

Shares 1,339 1,185 1,151 1,188 1,328 11.8

Options 681 816 862 697 865 24.1

Sub-Total 2,020 2,001 2,013 1,885 2,193 16.3

Futures

Futures 45,927 44,852 48,257 45,076 49,088 8.9

Options 507 310 437 415 271 (34.6)

Sub-Total 46,434 45,163 48,694 45,491 49,359 8.5

Total Exchange-Traded 48,453 47,164 50,708 47,376 51,552 8.8

ALL FINANCIAL MARKETS 125,750 127,193 134,040 126,101 135,208 7.2

ENERGY MARKETS

Electricity (million megawatt hours)

OTC Electricity Derivatives 315 227 291 251 88 (65.1)

Electricity Futures and Options 549 437 342 387 446 15.4

Total Electricity 863 664 633 637 534 (16.3)

Environmental Products (million certificates)

Small Scale Renewable Energy Certificates 0 0 64 14 14 3.5

Large Scale Renewable Energy Certificates * 50 67 19 5 9 82.5

Total Environmental Products 50 67 84 19 23 23.3

* 2010-11 and 2011-12 includes Small Scale Renewable Energy Certificates

SUMMARY OF MARKET TURNOVER


The Australian Financial Markets Annual Turnover Summary By Asset Class (AUD billion)

2010-11 2011-12 2012-13 2013-14 2014-15 % change

DEBT MARKETS

Physical Market Turnover

Government Debt Securities 1,483 1,758 1,778 1,899 1,830 (3.6)

Non-Government Debt Securities 908 592 777 772 788 2.1

Negotiable & Transferable Instruments 3,676 3,675 3,271 2,784 2,768 (0.6)

Repurchase Agreements 7,364 7,525 7,864 6,011 8,124 35.1

Sub-Total 13,430 13,549 13,690 11,466 13,510 17.8

Derivatives Market Turnover

Swaps 6,809 9,848 10,495 10,461 12,249 17.1

Overnight Index Swaps 5,313 8,703 8,894 7,198 10,700 48.7

Forward Rate Agreements 5,856 6,184 5,937 3,877 6,564 69.3

Interest Rate Options 320 496 411 565 444 (21.4)

Credit Derivatives 321 398 228 230 173 (24.9)

Interest Rate Futures and Options 45,184 43,891 47,485 44,149 47,872 8.4

Sub-Total 63,803 69,521 73,451 66,479 78,002 17.3

Total Debt Markets 77,233 83,070 87,140 77,945 91,512 17.4

Derivatives Market to Physical Market Activity 4.8 5.1 5.4 5.8 5.8

CURRENCY MARKETS


Spot Foreign Exchange 11,853 10,843 11,071 11,108 11,789 6.1


FX Swaps 30,391 26,837 28,818 29,981 24,269 (19.1)

Forward Foreign Exchange 2,274 2,242 2,514 2,758 3,045 10.4

Currency Options 730 927 1,274 1,083 913 (15.7)

Sub-Total 33,395 30,007 32,606 33,822 28,227 (16.5)

Total Currency Markets 45,247 40,850 43,677 44,930 40,017 (10.9)


EQUITIES MARKETS


Shares 1,339 1,185 1,151 1,188 1,328 11.8


Options 681 816 862 697 865 24.1

Equity Futures and Options 1,250 1,272 1,209 1,342 1,487 10.8

Sub-Total 1,931 2,088 2,071 2,039 2,351 15.3

Total Equities Markets 3,270 3,273 3,222 3,227 3,679 14.0


ALL FINANCIAL MARKETS 125,750 127,193 134,040 126,101 135,208 7.2


Estimated Full-Time Equivalent (FTE) Employees – Financial Markets*

Australian-Based FTEs Offshore-Based FTEs Total

ALL MARKET-MAKING ACTIVITIES

Trading Staff 210 194 404

Sales Staff 604 335 939

Operations, Finance & Quantitative Analysts 470 175 646

Total 1,284 705 1,98844 18 62

GOVERNMENT DEBT SECURITIES


Sales Staff 13 6 19


Total Government Debt Securities 44 18 6244 18 62

NON-GOVERNMENT DEBT SECURITIES




Total Non-Government Debt Securities 35 37 7244 18 62

REPURCHASE AGREEMENTS


Sales Staff 3 4 7


Total Repurchase Agreements 30 10 4044 18 62

NEGOTIABLE & TRANSFERABLE INSTRUMENTS

Trading Staff 8 0 8

Sales Staff 11 0 11


Total Negotiable & Transferable Instruments 54 1 5544 18 62

INTEREST RATE DERIVATIVES




Total Interest Rate Derivatives 216 71 28744 18 62

CREDIT DERIVATIVES


Sales Staff 3 2 5


Total Credit Derivatives 15 7 2344 18 62

FOREIGN EXCHANGE




Total Foreign Exchange 233 86 319

* Not all organiations responded to the questions relating to FTEs. FTEs have therefore been estimatd by using a log regression model of reported FTEs against turnover.

SUMMARY OF MARKET TURNOVER


Estimated Full-Time Equivalent (FTE) Employees – Electricity and Environmental Products*

Australian-Based FTEs Offshore-Based FTEs Total

ALL MARKET-MAKING ACTIVITIES


Sales Staff 12 0 12


Total 101 0 101

* Not all organisations responded to the questions relating to FTEs. FTEs have therefore been estimatd by using a log regression model of reported FTEs against turnover.

NOTE: Estimated full-time equivalent (FTE) employees represents AFMA’s estimate of FTE employees engaged in market-making activities in Australian markets, including those based offshore with market-making activity in Australia.

Markets covered include equities, commodities, debt and foreign exchange markets. Overall, AFMA estimate that there are just under 2000 FTE employees engaged in market-making activities, with around 1300 onshore and 700 offshore.

FTE employee estimates for particular markets and instrument categories are also shown. These account for about 960 or 48% of the approximately 2000 FTE employees involved in market-making activities. The remaining 1030 or 52% are employed in other markets not shown, most notably equities, as well as those market-making employees that do not fit into the individual market categories reported here.

Foreign exchange is the single largest category shown with 319 or 16% of total FTE employees, followed by interest rate derivatives with 287 or 14% of total FTE employees.

Previous Australian Financial Market Reports have not included employee estimates and so no history is available for these series to determine growth rates. This may become a feature of future reports.

Estimated Collateral Posted and Received from all Market-Making Activities*

Collateral Posted – Held in Australia

Collateral Received – Held in Australia

Collateral Posted – Held Offshore Collateral Received – Held Offshore

ALL PRODUCTS 5,241,606,743 6,728,274,857 19,590,951,160 29,771,628,879

* Not all organisations responded to the questions relating to collateral posted and received. Collateral figures have therefore been estimated by scaling by the reported collateral / turnover (IRD, Repo and NTI) for reporting organisations x turnover for organisations not reporting collateral.


Foreword ............................................................................................................................... 1

Summary of Market Turnover Data ............................................................................. 2

The Return of Volatility ..................................................................................................... 7

Exchange-Traded Market Commentary ..................................................................... 12

Chi-X Australia ..................................................................................................................... 17

LCH.Clearnet Ltd – SwapClear ....................................................................................... 18

MARKET DATA

Government Debt Securities ......................................................................................... 19

Non-Government Debt Securities and Credit Derivatives ................................... 22

Negotiable and Transferable Instruments ................................................................ 28

Repurchase Agreements ................................................................................................. 31

Interest Rate Derivatives ................................................................................................. 33

Foreign Exchange and Currency Options ................................................................. 43

Energy Products ................................................................................................................. 48

Exchange-Traded – ASX ................................................................................................... 52

Appendices .......................................................................................................................... 56

About AFMA ........................................................................................................................ 63

CONTENTS


THE 2014-15 FINANCIAL YEAR saw the return of asset price volatility in global and domestic financial markets, driven by offshore macroeconomic and geopolitical developments as well as structural changes in market structure, regulation and liquidity.

Turnover across Australia’s financial markets rose 8% over the year to a total of $135,208 billion. Over-the-counter markets recorded a 7.7% increase in turnover to $83,656 billion. Exchange-traded markets turnover rose nearly 9% to $51,552 billion.

Regulations designed to shift risk from the banking system to financial markets have reduced the balance sheet capacity traditionally supplied by banks for market-making activities. Globally, banks’ holdings of financial assets have declined by 40% since the financial crisis of 2008-09, according to PwC. The reduction in bank balance sheet capacity available for market-making has not been accommodated by other market participants, leading to a reduction in market-maker inventories. New prudential, liquidity and collateral requirements have resulted in banks hoarding high-quality liquid assets, reducing the availability of traditionally safe short-term assets. These regulatory developments have led to a reduction in market liquidity and an increase in price volatility across most asset classes.

Global Markets

Central banks around the world either commenced or extended easing cycles during the 2015 financial year (FY15), with 31 central banks having eased policy in the first half of 2015 and most central banks having partly or fully reversed their

post-financial crisis tightening cycles. The European Central Bank (ECB) announced a program of quantitative easing in January 2015 before commencing outright purchases of euro-denominated government debt securities in March. The ECB plans to purchase 850 billion euros of government bonds by September 2016.

The US Federal Reserve (FED) was a notable exception to this trend, ending its quantitative easing program in October 2014, and with expectations for an increase in US official interest rates centred on a tightening in the second half of 2015 or early 2016. The divergence in monetary policy expectations between the US and other major developed economies set much of the direction for relative asset prices in FY15.

Global bond markets extended their secular rally for most of the year, led by German 10-year bund yields, which fell to as little as 0.07% in April, before sharply reversing along with the long-end of the US yield curve. This sharp sell-off still left bond yields generally lower at the end of the financial year than they had been at the beginning of the year. The US yield curve flattened as the Fed’s prospective tightening cycle loomed larger. US inflation remained persistently below the Fed’s 2% target, suggesting that any new tightening cycle will be modest in magnitude. Volatility in bond markets was around 40% higher in 2015 than in 2014.

The US dollar trended higher on a trade-weighted basis from the beginning of the financial year until March 2015, before tracking sideways. This broad-based US dollar outperformance set the tone for global currency markets. On 15 January 2015, the Swiss National Bank removed its exchange rate floor of 1.20 Swiss francs per euro, leading to a 10-standard-deviation

The Return of VolatilityMARKETS OVERVIEW

Stephen Kirchner, Economist

THE 2014-15 FINANCIAL

YEAR SAW THE

RETURN OF ASSET

PRICE VOLATILITY IN

GLOBAL AND DOMESTIC

FINANCIAL MARKETS,

DRIVEN BY OFFSHORE

MACROECONOMIC

AND GEOPOLITICAL

DEVELOPMENTS AS

WELL AS STRUCTURAL

CHANGES IN

MARKET STRUCTURE,

REGULATION AND

LIQUIDITY.


move in the EUR–CHF currency pair. Foreign exchange markets saw decreased liquidity, particularly in longer dated forward markets.

Global equity markets trended higher for most of the year, extending their rally from the financial crisis lows of 2009, although weakened into 30 June as Greece threatened to default on its sovereign debt. The CBOE volatility index (VIX) also spiked into year end.

Global markets were characterised by some pronounced episodes of short-term volatility, a theme likely to continue into 2015-16. Most notably, the 15 October 2014 ‘flash rally’ in US Treasuries, when the US 10 year Treasury note experienced a 37-basis-point intra-day trading range before closing near its opening level. The move was even more notable because of the absence of significant policy

announcements or other fundamental news on the day. While the causes of this volatility have not been definitively determined by official investigations, this and other episodes of market volatility have prompted a debate about the adequacy of liquidity in key markets and the extent to which the regulatory response to the 2008-09 financial crisis has changed the structure of markets and impaired market liquidity. Turnover ratios in bond markets have declined globally, with trading volumes not keeping pace with increased issuance by both governments and corporates. Market depth in US Treasuries was found to be as much as 30% below long-term averages in 2014.

Australian Markets

The Reserve Bank of Australia (RBA) followed its offshore counterparts and resumed its easing cycle in the first half of 2015, with interest rate cuts in February and May, taking the official cash rate to a record low of 2.00%. Inflation remained subdued, ending the year with an annual rate of 1.5%. The unemployment rate ended the financial year where it began at 6.1% in both trend and seasonally adjusted terms. With inflation and unemployment stable, expectations for further easing waned into financial year end, but some further easing remained priced into the front end of the Australian yield curve.

Markets misjudged the timing of some of the RBA’s moves in official interest rates. Most notably, an interest rate cut was priced for the April Board meeting that did not eventuate until the following month. This resulted in some volatility in bank bill and overnight index swap (OIS) rates, as well as the Australian dollar exchange rate, which saw some significant movements in yield around RBA official cash rate announcement windows.

Yield Curve and Issuance

The front end of the curve was impacted by the new Liquidity Coverage Ratio that commenced on 1 January 2015. This saw banks extend the duration of their short-dated issuance and led to a steepening in

bank bill/OIS spreads in the second half of 2014, before stabilising at higher spreads in the first half of 2015.

The long end of the yield curve rallied in line with global markets until the mid-April global bond market rout that was led by German bunds. The Australian yield curve flattened during the second half of 2014 with the 3/10 spread bottoming out around 50 basis points in early 2015 before the curve steepened again on the back of renewed RBA easing. This left the 3/10 spread little changed on the year at around 100 basis points.

The Australia–US 10 year bond spread narrowed to levels not seen since the early 2000s, reflecting divergent expectations for Australian and US monetary policy and Australian economic underperformance, with a re-test of parity seen as a possibility for 2015-16.

Total Australian Commonwealth Government Securities (ACGS) on issue rose from $319.5 billion to $370 billion as the federal government continued to run large budget deficits, now larger as a share of GDP than in the US. Issuance is not expected to peak until around 2018-19 at around $540 billion. However, new supply has met with strong offshore and local demand for safe assets and this has been reflected in rising bond prices/falling yields.

The Australian Office of Financial Management continued to extend the duration of Commonwealth Government bond issuance to take advantage of low interest rates at the long end of the curve. This included issuance of 20-year bonds, with 30-year bonds also being contemplated. A new 20-year bond futures contract is to be released in the second half of 2015, reflecting the growing depth in physical issuance at the long end of the curve. The initial basket of securities underpinning the contract will consist of 2033, 2035 and 2037 maturities.

Semi-government bond yields fell, but spreads widened, partly due to negative credit rating actions reflecting deteriorating fiscal and economic performance on the part of some states. The states issued $38 billion in new long-term bonds in 2014-15, with New South Wales, Queensland and Western Australia

THE RESERVE BANK

OF AUSTRALIA (RBA)

FOLLOWED ITS OFFSHORE

COUNTERPARTS AND

RESUMED ITS EASING CYCLE

IN THE FIRST HALF OF 2015,

WITH INTEREST RATE CUTS IN

FEBRUARY AND MAY, TAKING

THE OFFICIAL CASH RATE TO

A RECORD LOW OF 2.00%.

OVER-THE-COUNTER MARKETS


accounting for the bulk of the issuance, bringing total outstandings in semis to $235 billion. A further $28 billion in semi-government issuance is expected in 2015-16.

The Australian debt market continued to benefit from net foreign capital inflows, with the foreign ownership share of ACGS remaining high at around 66%. The foreign capital inflows needed to finance Commonwealth and state government deficits provided some support to the Australian dollar and weighed on net exports.

Total turnover in government debt securities fell by 3.6%, reflecting the global trend towards tighter liquidity conditions and more volatile pricing.

Corporate Bonds

Non-financial corporate bond issuance remained subdued at around $10 billion, with major names having reduced funding needs or issuing into offshore markets. Credit spreads to ACGS and swap rates tended to widen over the year across the spectrum of credit quality, with the credit curve experiencing a bear flattening. Top-line revenue growth was held back by subdued nominal GDP growth, with the level of nominal GDP falling below its long-term low inflation period trend. Subdued nominal GDP growth in turned reflected subdued commodity prices, which weighed on the resources sector in particular.

Australian banks continued to issue offshore, with most of that issuance US-dollar-denominated. Euro-denominated issuance fell as the cost of hedging back into AUD rose on the back of euro exchange rate volatility. Spreads of bank bonds to the ACGS curve widened somewhat, but remain below the levels seen for the period since the financial crisis.

Australian Dollar Exchange Rate and Foreign Exchange Markets

The Australian dollar exchange rate trended lower against the US dollar and on a trade-weighted basis over the year. The AUD–USD began the financial year at 0.9454 and ended the year at 0.7680, or a 19% decline over the year. The AUD trade-weighted index (TWI) fell around 12% over the same period. The average daily trading range for AUD–USD was somewhat above its 2000-15 average during late 2014 and the first half of 2015, consistent with a more volatile trading environment across foreign exchange markets and other asset classes.

The decline in the Australian dollar reflected broad-based USD strength, a resumption of the RBA’s easing cycle and substantial falls in commodity prices. The Australian dollar’s decline was helped along at critical times by comments from RBA officials that the exchange rate needed to fall further to be in line with fundamentals. The RBA’s commodity price index fell 20% in IMF Special Drawing Rights terms over the year, with the decline in the terms of trade weighing on national income.

Emerging market foreign exchange rates remained volatile, particularly net commodity producers and exporters with significant exposures to commodity prices. The decline in commodity prices reflected a subdued global outlook, weighed down by Europe, as well as concerns about the strength of the Chinese economy, subdued global inflation pressures and the increase in global commodity supply induced by the former boom in commodity prices.

The weaker exchange rate supported the economy in the context of weaker commodity prices, keeping commodity prices relatively strong in AUD terms and supporting AUD export values and

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2010-11 2011-12 2012-13 2013-14 2014-15

AUD

bill

ion

Over-the-Counter (OTC) Exchange-Traded

Figure 1: Annual Turnover by Market

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2010-11 2011-12 2012-13 2013-14 2014-15

AUD

bill

ion

Debt Markets Currency Markets Equities Markets

Figure 2: Annual Turnover by Asset Class


volumes, the latter rising to record levels. The weaker exchange rate also makes Australian-dollar denominated assets more attractive to foreign investors.

The Australian dollar underperformed other dollar bloc commodity currencies for most of the year. Having commenced the financial year above parity against the Canadian dollar, the AUD–CAD exchange rate ended the year at around 0.9500. The Australian dollar also underperformed the New Zealand dollar until April 2015, before reversing its downtrend to end the year higher after the Reserve Bank of New Zealand began easing again in June.

The Australian dollar also underperformed the UK pound given the strength in the UK economy. The Australian dollar held its own against the troubled EUR over the year, as Eurozone economies underperformed.

The trend reversal in AUD–USD and the AUD TWI reduced the demand for hedging on the part of Australian corporates and funds. Total turnover in spot, forward and swap markets was down 10.9% over the year. Both AUD and non-AUD forwards turnover increased by 11.5% and 8% respectively. Non-AUD spot turnover also increased by 17%, reflecting the volatility in some non-AUD currency pairs.

Exchange-Traded Markets

Australian equities participated in the continued global rally from the post-financial crisis lows of 2009, but underperformed US and other equity markets. The S&P/ASX 200 posted a modest gain of 1.2% over the year, although it rose 5.7% on an accumulation basis. By contrast, US equities rose 7.4% on an accumulation basis. The S&P/ASX 200 VIX index trended

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

5,500,000,000

6,000,000,000

6,500,000,000

Jun-

10

Aug-

10

Oct

-10

Dec

-10

Feb-

11

Apr

-11

Jun-

11

Aug-

11

Oct

-11

Dec

-11

Feb-

12

Apr

-12

Jun-

12

Aug-

12

Oct

-12

Dec

-12

Feb-

13

Apr

-13

Jun-

13

Aug-

13

Oct

-13

Dec

-13

Feb-

14

Apr

-14

Jun-

14

Aug-

14

Oct

-14

Dec

-14

Feb-

15

Apr

-15

Jun-

15

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

Jun-

10

Aug-

10

Oct

-10

Dec

-10

Feb-

11

Apr

-11

Jun-

11

Aug-

11

Oct

-11

Dec

-11

Feb-

12

Apr

-12

Jun-

12

Aug-

12

Oct

-12

Dec

-12

Feb-

13

Apr

-13

Jun-

13

Aug-

13

Oct

-13

Dec

-13

Feb-

14

Apr

-14

Jun-

14

Aug-

14

Oct

-14

Dec

-14

Feb-

15

Apr

-15

Jun-

15

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

Jun-

10

Aug-

10

Oct

-10

Dec

-10

Feb-

11

Apr

-11

Jun-

11

Aug-

11

Oct

-11

Dec

-11

Feb-

12

Apr

-12

Jun-

12

Aug-

12

Oct

-12

Dec

-12

Feb-

13

Apr

-13

Jun-

13

Aug-

13

Oct

-13

Dec

-13

Feb-

14

Apr

-14

Jun-

14

Aug-

14

Oct

-14

Dec

-14

Feb-

15

Apr

-15

Jun-

15

2014

-07-

01

2014

-08-

01

2014

-09-

01

2014

-10-

01

2014

-11-

01

2014

-12-

01

2015

-01-

01

2015

-02-

01

2015

-03-

01

2015

-04-

01

2015

-05-

01

2015

-06-

01

5

7

9

11

13

15

17

19

21

23 5000

5100

5200

5300

5400

5500

5600

5700

5800

5900

6000

S&P/ASX 200 (lhs) S&P/ASX 200 VIX (inverted) (rhs)

Figure 3: S&P/ASX 200 & VIX

Figure 4: Value Traded, Daily Average ($) ASX and Chi-X

Figure 5: Number of Trades (Daily Average) ASX and Chi-X

Figure 6: Average Trade Size ($) ASX and Chi-X

OVER-THE-COUNTER MARKETS


higher throughout the year, reflecting increased global equity market volatility on the back of concerns about a possible Greek sovereign debt default, geopolitical tensions in eastern Europe and emerging market volatility.

Total value traded across ASX and Chi-X peaked at a daily average of $6.1 billion in May 2015, the highest seen since August 2011. Total equity market turnover rose 14% to $3.679 billion.

Industry and Policy Developments

The finance and insurance sector grew by an inflation-adjusted 6.6% in 2014-15 compared to 2013-14, outperforming real GDP growth of 2.4% over the same period. The sector directly employed 392,700 Australians as at May 2015, down from 404,400 in May 2014. The strong growth in output relative to employment highlights the increased productivity of the sector. Multi-factor productivity in the sector has continued to outperform economy-wide productivity. The finance and insurance sector is the single largest industry sector in the Australian economy, with a 9.9% share of market sector GDP, edging out mining at 9.8%.

The Financial System Inquiry handed down its Final Report in December 2014. The federal government consulted on the Final Report’s recommendations in early 2015 and has begun the

process of responding to the Report’s recommendations.

Australia’s presidency of the G20 concluded in the second half of 2014 with the Leaders’ Summit in Brisbane. The summit agreed to Australia’s objective to raise global growth by 2% by 2018, while progressing other items on the G20’s agenda with a bearing on OTC and other markets.

The RBA has assigned AFMA the task of coordinating the move of Australian fixed income markets from a T+3 to a T+2 settlement cycle. This development is expected to lower operational risks, increase efficiencies in collateral management and bring Australian markets into line with international markets already settling on a T+2 basis. T+2 settlement is expected to commence from 7 March 2016, which will align with the delivery date for cash equities and New Zealand equities and fixed income.

Also with a RBA mandate, AFMA has worked on the development of a credit risk-free interest rate benchmark based on the RBA’s unsecured overnight cash rate. The new benchmark is intended to complement the BBSW benchmark.

The federal government conducted a consultation on its moratorium in relation to competition in clearing cash equities, with an announcement expected in the second half of 2015 as to whether the moratorium will continue. n

www.afma.com.au

THE FINANCE AND

INSURANCE SECTOR

GREW BY AN INFLATION-

ADJUSTED 6.6% IN 2014-15

COMPARED TO 2013-14,

OUTPERFORMING REAL GDP

GROWTH OF 2.4% OVER THE

SAME PERIOD.


The Year in Review

ASX operates at the heart of Australia’s financial markets. A large and diverse range of customers rely on its infrastructure, including listed companies and issuers, participants in the cash equities and derivatives markets, other market operators, and millions of institutional and retail investors.

Over the course of the 2015 financial year (FY15) the pace of activity in public markets picked up modestly, a continuation of the upward trend and firming confidence of the past couple of years.

Cash equity market activity levels generally rose across a range of ASX metrics:

• 120 new entities were listed, the most since 2011. During the year, ASX focused on promoting listings from

innovative companies operating in the biotech and fintech sectors, as well as encouraging a new suite of listed investment entities which offer investors exposure to a diverse range of assets.

• Total capital raised through initial public offerings (IPOs) and secondary raisings rose 35% to $89 billion with major new listings including Medibank Private, Healthscope and MYOB Group.

• Average daily on-market trading was 16% higher, valued at $3.8 billion, around 90% of total on-market trading.

The story was more mixed in derivatives markets:

• Futures volumes grew, supported by fee changes to improve the alignment of ASX with its largest customers. These changes are an important investment in the long-term sustainability of the derivatives business, which is ASX’s largest.

• Options volumes declined during the year. The collapse of broker BBY Limited (a major player in the options market) in May 2015 had an impact. ASX is working hard to revitalise activity via rule changes, and marketing and education campaigns.

ASX is investing significantly in its long-term strategic position. This includes higher customer engagement and improved service delivery; product and service innovations that give investors greater flexibility and choice; world-class trading and post-trade infrastructure; and leading skills and market expertise. All are designed to ensure Australia remains competitive in a changing global marketplace. The major initiatives in FY15 included:

• ASX has begun a program to upgrade all of its main trading and post-trade technology platforms. This will improve the ability of the exchange to innovate

and bring products to market quickly, make it easier for clients to connect to ASX and reduce their internal operating costs.

• The introduction of new execution services in cash equities to give customers more choice and control over their orders in a fragmented marketplace.

• A continued focus on the interest rate derivatives market where the changing regulatory environment is having a significant impact on exchanges and their clients. ASX acquired 49% of Yieldbroker, a business that operates an electronic market for Australian and New Zealand debt securities and interest rate derivatives. The investment provides another way to improve liquidity and develop infrastructure to provide efficiencies to customers who access both over-the-counter and exchange-traded products.

• ASX continues to bring the broadest suite of investment options to Australian investors, including foreign listings, government bonds, corporate bonds, exchange-traded funds, listed investment companies and managed funds.

• In April 2015, ASX opened its 24-hour Customer Support Centre at the Australian Liquidity Centre, integrating the operations, technology and market surveillance teams that operate ASX’s financial markets. This is helping ASX deliver an outstanding customer experience.

ASX is an advocate for regulations that support end investors and strengthen Australia’s global competitive position. It works closely with regulators to ensure Australia’s settings are positive and consistent with international standards.

Most of the post global financial crisis regulatory settings are in place.

Exchange-Traded Market

MARKETS OVERVIEW

ASX OPERATES AT THE

HEART OF AUSTRALIA’S

FINANCIAL MARKETS. A

LARGE AND DIVERSE RANGE

OF CUSTOMERS RELY ON ITS

INFRASTRUCTURE, INCLUDING

LISTED COMPANIES AND

ISSUERS, PARTICIPANTS IN

THE CASH EQUITIES AND

DERIVATIVES MARKETS, OTHER

MARKET OPERATORS, AND

MILLIONS OF INSTITUTIONAL

AND RETAIL INVESTORS.


Developments over the last three years have been aimed at supporting end- investors and managing systemic risk. In FY15, the government initiated a review of the market structure for clearing cash equities. ASX is currently the sole provider of this service and believes it is the right model for a market the size of Australia, recommending the current market structure be extended for a further five years. This would give ASX certainty to proceed with a significant investment in Australia’s equities clearing and settlement infrastructure, including a ‘once in a generation’ replacement of CHESS. ASX has also committed to implementing a new clearing fee schedule that would provide savings to its clients, and to strengthen the Code of Practice that sets out how ASX manages the infrastructure on behalf of the market. The Code was first introduced in August 2013 and has delivered outcomes consistent with a competitively dynamic marketplace. It is an effective form of industry-led regulation that supports collaboration and service innovation.

In the derivatives market, the regulations are more global in nature. During FY15, ASX became the first exchange in the world to obtain an exemption from the US regulator, the Commodity Futures Trading Commission, to provide certain clearing services to US bank branches. It was also one of the first exchanges to be granted regulatory recognition by the European Securities and Markets Authority. These important regulatory outcomes ensure that Australian derivatives markets remain globally connected, providing investors with efficiency and the highest international standards.

Primary Markets

The market capitalisation of new listings in cash equity markets increased by 40.4% in FY15, from $27.7 billion in FY14 to $38.9 billion. Overall, 120 new entities listed in FY15, a 12.1% increase on FY14. The largest IPOs came from the financial, health care, information technology and consumer discretionary sectors.

Medibank Private had the highest market capitalisation of new IPOs with $5.7 billion. Healthscope and MYOB

Group were also notable listings, with market capitalisations of $3.6 billion and $2.1 billion respectively. The BHP Billiton demerger of South32 created the largest new listing of any sort on ASX in over 16 years. At the time of listing, South32 had a market capitalisation of $11.3 billion.

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, Orion Health and The a2 Milk Company, listing with market capitalisations of $820 million and $310.3 million respectively.

Secondary raisings of equity capital in FY15 totalled $38.8 billion, up 16.2% on FY14. Placements accounted for 38.2% of secondary raisings, or $14.8 billion. Rights and accelerated issues almost doubled from FY14, raising $14.2 billion or 36.6% of secondary capital raised (FY14: $7.7 billion and 23.1%). Use of dividend reinvestment plans (DRPs) also increased compared to FY14, rising by 43.3% to $6.6 billion in FY15.

Secondary Equity Market

The slowdown in Asian economic growth had an impact on Australia’s resources sector, with the resources index falling 19.8% in FY15. More broadly, the S&P/ASX All Ordinaries index climbed marginally by 1.3%, while the Accumulation Index finished 5.7% higher over FY14. Recent volatility in Greece and speculation surrounding a potential US rate hike later this year also weighed upon global sentiment, with the MSCI World Index down 0.5% and the S&P 500 index up only 5.3% compared to 22.0% over the previous corresponding period.

Consolidated on- and off-market average daily turnover was $5.3 billion, up 14% over the previous year. Higher turnover tracked higher market capitalisations, with velocity averaging 82%. Average volatility picked up again with the S&P/ASX 200 VIX index averaging 14.4, tracking higher towards the 15–20 range in the last quarter of FY15. Over the year, we also saw a daily average of 750,578 trades executed on ASX, up 4.4% on FY14. Across all markets

there were 983,000 daily trades on average, up 8.2% on FY14.

ASX matched 90.9% of lit market trades and captured 82.5% of the gross traded and reported value in Australian equities. Fragmentation increased over the latter half of the year, particularly in dark on-market trading with price improvement. ASX Centre Point matched $75 billion in FY15 and $204 billion since inception, delivering $475 million of price improvement.

Throughout FY15, ASX continued to invest in enhancements to its trading platform, introducing innovative block trading services, and is currently in the process of upgrading all of its major trading and post-trade platforms over the next three to four years. The investment program has been implemented in phases, and is starting with the replacement of ASX’s derivatives and equities trading platforms, risk management systems and market monitoring systems. This is expected to take 18 to 24 months and will be followed by further improvements in ASX’s post-trade services.

ASX Exchange-Traded Options (ETOs)

ETO market volumes were down 3.3% in FY15 compared to the prior year. Despite the overall decline in volumes, index option volumes grew significantly (up 37.5%)

EXCHANGE-TRADED MARKET

THROUGHOUT FY15, ASX

CONTINUED TO INVEST

IN ENHANCEMENTS TO

ITS TRADING PLATFORM,

INTRODUCING INNOVATIVE

BLOCK TRADING SERVICES,

AND IS CURRENTLY IN THE

PROCESS OF UPGRADING ALL

OF ITS MAJOR TRADING AND

POST-TRADE PLATFORMS

OVER THE NEXT THREE TO

FOUR YEARS.


due in part to both institutions and retail investors implementing ‘put’ protection over share portfolios. Continuing the trend from last financial year, European-style single stock flex options are increasingly being used to avoid early exercise.

In FY15, ASX launched an education campaign to demystify options and entice share investors to consider using them to protect and/or enhance their income. The program attracted approximately 1,000 new account holders to the ETO market.

ASX will be listing new weekly, serial and TORESS (Total Return Single Stock) option contracts in the coming months, while in 2016 it is expected single stock option expiry will move to the same day as index option expiry (third Thursday of the month).

ASX SPI 200® Futures and Options

The Australian equity market benchmark index, the S&P/ASX 200, closed the year close to where it started, up only 1% to 5459. In contrast, ASX SPI 200® futures volumes were up 6%. The strong volume increase experienced in the options market in FY14 did not continue this financial year with volumes down 3.9%, although once again on a much smaller volume than futures. Notional value traded for ASX SPI 200® futures and options increased in FY15 by 11.9% and 0.02% respectively, while open interest in futures was up 3.0%

ASX Warrants

With the exit in FY14 of two long-term issuers, activity continued to be constrained. In addition, a high level of allocations to cash by retail investors dampened demand for gearing solutions. There was a total of 2,818 warrants listed, down 20.9%. There was a significant decline in the value traded, down $2.6 billion or 32.1%. MINI-style

warrants remained the most popular type of new product and comprised around $1.4 billion of value traded.

Exchange-Traded Products (ETPs)

The ETP market continued to see significant growth, in terms of number of products, issuers and funds under management, with 67 new funds commencing trading on ASX. K2, Magellan, ANZ/ETFS, Australian Corporate Bond Company, Market Vectors, State Street Global Advisers, BlackRock, Vanguard, BetaShares, Russell and UBS all issued new funds, compared to 13 new funds in the previous year.

Market capitalisation of traded market ETPs continued to see strong growth with around $18.5 billion of funds under management, up over 57% from around $11.8 billion the previous year. The number of trades in ETPs also grew from 31,700 trades per month to around 45,300 trades per month, and value traded per month was up around 43% to just under $1.5 billion per month.

ASX-Quoted Bonds

ASX-quoted bonds include government bonds (Treasury bonds and Treasury indexed bonds) and corporate bonds (fixed and floating rate). A total of 53 bonds are available to retail investors with maturities

extending out as far as August 2040. The average monthly turnover in these products during FY15 was in excess of 10,000 trades per month, with an annual turnover of over $2.4 billion.

In May 2015, ASX introduced a standardised security naming convention and description for all ASX-quoted debt and hybrid securities to provide investors with greater clarity, transparency and granularity as to a security’s particular features. The descriptors enable investors to also search, classify or group together debt and hybrid securities of similar features and attributes. To understand what each description or letter means, ASX also produced a guide explaining the naming conventions and security descriptions for ASX-quoted debt and hybrid securities, which can be downloaded from the ASX website: www.asx.com.au/products/hybrid-securities.htm

ASX Hybrid Securities

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 $6.9 billion, up 23.1%, and the total market capitalisation for the sector exceeding $28.6 billion, up 8.7%.

ASX 24 Interest Rate Futures

ASX 24 interest rate futures volumes were stronger in FY15 compared to FY14. Market activity was primarily driven by greater interest rate volatility, particularly in the second half of FY15, given economic growth concerns for the Australian economy, which subsequently led to the Reserve Bank of Australia (RBA) cutting the overnight cash rate twice by 0.25%.

Regarding short-term products, volume in the 30 Day Interbank Cash Rate Futures in FY15 was up 5% on a prior year basis, having been strongly influenced by the two rate cuts. ASX introduced a market-making scheme for the 90 Day Bank Bill Futures in September 2014, covering the second, third and fourth year contracts which has tightened spreads

IN MAY 2015, ASX INTRODUCED

A STANDARDISED SECURITY

NAMING CONVENTION AND

DESCRIPTION FOR ALL

ASX-QUOTED DEBT AND

HYBRID SECURITIES TO PROVIDE

INVESTORS WITH GREATER

CLARITY, TRANSPARENCY

AND GRANULARITY AS TO

A SECURITY’S PARTICULAR

FEATURES.



0

10,000

20,000

30,000

40,000

50,000

60,000 17

:00

15:0

0 0

8:00

02:

00

18:0

0 16

:00

09:

00 0

3:00

19:0

0 1

7:00

10:

00 0

4:00

20:0

0 1

8:00

11:

00 0

5:00

21:0

0 1

9:00

12:

00 0

6:00

22:0

0 2

0:00

13:

00 0

7:00

23:0

0 2

1:00

14:

00 0

8:00

00:0

0 2

2:00

15:

00 0

9:00

01:0

0 2

3:00

16:

00 1

0:00

02:0

0 0

0:00

17:

00 1

1:00

03:0

0 0

1:00

18:

00 1

2:00

04:0

0 0

2:00

19:

00 1

3:00

05:0

0 0

3:00

20:

00 1

4:00

06:0

0 0

4:00

21:

00 1

5:00

07:0

0 0

5:00

22:

00 1

6:00

08:0

0 0

6:00

23:

00 1

7:00

09:0

0 0

7:00

00:

00 1

8:00

10:0

0 0

8:00

01:

00 1

9:00

11:0

0 0

9:00

02:

00 2

0:00

12:0

0 1

0:00

03:

00 2

1:00

13:0

0 1

1:00

04:

00 2

2:00

14:0

0 1

2:00

05:

00 2

3:00

15:0

0 1

3:00

06:

00 0

0:00

16:0

0 1

4:00

07:

00 0

1:00

Ave

rage

Vol

ume

8:30am - ASX Trade24Day Session Opens

11:30am AustralianEconomic Releases

2:30pm Cash RateAnnouncements

10:20pm Chicago Markets Open

5:10pm ASXTrade24 NightSession Opens

4:30pm ASX Trade24Day Session Closes

Chicago Time

London Time

Singapore/HK Time

Australian Time

Figure 1: ASX Trade24 Traded Volume by Hour (ASX Non-daylight Savings / US and UK Daylight Saving)

and increased liquidity in these contract months. This scheme, together with greater interest rate volatility in the second half of FY15, led to an 11% increase in activity on a prior year basis.

Bond futures contracts also saw strong activity growth in FY15. The 3 Year Treasury Bond Futures contract, the most actively traded futures contract on ASX 24 with an average daily volume (ADV) of 194,000 contracts, saw a 4% increase over the year on a prior year basis. A strong increase in activity was evident in the 10 Year Treasury Bond Futures contract given a 16% increase on FY14 (ADV of 115,000 contracts). Greater market participation in the 10 Year Bond Futures contract, as well as more spread activity, has contributed to growth in activity. The 10 year US–Australian sovereign bond yield spread has continued to converge over the course of the year, reaching a historic low in March 2015. ASX also narrowed the tick increment in FY15 for 10 Year Treasury Bond Futures over the roll period from 0.5 bps to 0.25 bps.

Following a series of overnight cash rate increases in late FY14 and early FY15, the Reserve Bank of New Zealand started to reduce the benchmark New Zealand cash rate at the end of FY15. Prior concerns

surrounding inflation turned into concerns for growth prospects given falling export prices. The New Zealand 90 Day Bank Bill Futures product consequently saw a 20% increase from the prior year with ADV reaching 5,445 contracts.

Liquidity, as measured by order book depth, declined throughout the course of FY15 across all benchmark interest rate futures contracts. The decrease in liquidity for the 90 Day Bank Bill Futures was contained in the spot contracts, particularly with interest rate volatility increasing into the second half of FY15. Three and 10 year futures depth also declined, albeit to a smaller degree.

Activity through the exchange for physicals continued to be strong, increasing 14.8%. Exchange for physical transactions contributed 13.5% of interest rate futures activity in FY15, up slightly on FY14. Block trade activity in bond futures contracts decreased 15.7% on the prior year.

Trading Activity in a 24-hour Trading Day

The SYCOM (ASX Trade24) trading system facilitates near 24-hour trading of

ASX’s futures contracts, making the market accessible at any time from many major global financial centres through the ASX Trade24 distribution network. Figure 1 shows average trading activity that occurs over a 24-hour period.

Activity during the day session predominantly occurs with the open 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 on the session open and early trading in the European and US markets. Night session activity represented 28% of total trading activity during FY15, on par with the prior year.

Austraclear

Austraclear is the major central securities depository for the domestic debt market. It primarily provides settlement, custody and issuer services for Australian dollar-denominated 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 840 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 FY15, rising by 11.5% to $1,752.5 billion at year end from $1,571.8 billion at the end of FY14. This growth continues to be driven by strong increases in floating rate note (up 22.1%) and Treasury bond (up 15.2%) issuances.

Austraclear membership remained flat, from 847 at the end of FY14 to 846 at the end of June 2015; however, there were 84 new participants that joined Austraclear in the 12 months to 30 June 2015. Participants admitted in the last 12 months included a number of credit unions, building societies and retail energy providers, the latter 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.

ASX Energy Derivatives

The ASX Australian electricity market delivered strong activity in FY15. The year started with ASX lowering its headline exchange fees and the repeal of carbon legislation, and finished with traded volume increasing 32% from FY14. FY15 traded volume was $16 billion in face value, or 446.1 TWh of traded energy, which represented 250% of the underlying National Electricity Market (NEM) system demand. The ADV of energy traded was 1.7 TWh with a face value of $62.8 million.

Activity continued to concentrate in the base load quarterly futures, where traded volume represented 58% of total energy traded. Base load $300 cap futures were 11.4% of traded volume, base load financial/calendar year options at 21.0% and base load average rate quarter options at 8.1%. The remaining activity was distributed between peak load calendar quarter futures and base load calendar month futures. The most actively traded state was Queensland at 37%, followed by New South Wales at 35%, Victoria at 26% and South Australia at 2%.

Price ($/MWh) movements in the calendar 2016 base load strip futures were all up during FY15; Victoria had

the smallest rise of 3.1% to $32.99, New South Wales prices increased by 10% to $40.28, Queensland prices rose by 8.4% to $50.39 and South Australia had the largest price rise of 10.7% to $51.66.

ASX Agricultural Derivatives

Trading activity on the ASX grain futures and options market was less active in FY15 than FY14 alongside reduced activity in the physical market. The total volume traded was 141,780 contracts, which equates to 2,835,600 tonnes of Australian grain and oilseed, a 22.5% decline in volume on the prior year.

To increase liquidity, ASX implemented a number of initiatives and incentives in FY15. This was supported by a new ASX Agricultural Product Advisory Committee consisting of grain industry participants. ASX will launch a new Eastern Australia Wheat contract in early FY16, which features an expanded delivery arc providing additional flexibility and increased confidence to deliver wheat across the east coast of Australia. n

www.asx.com.au

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

Trad

ed M

Wh

Exchange-Traded Options Exchange-Traded Futures (inc. Caps) Underlying Physical Demand

Jan-

10

May

-10

Sep-

10

Jan-

11

May

-11

Sep-

11

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Figure 2: ASX Electricity


TOTAL AUSTRACLEAR DEBT

HOLDINGS EXPERIENCED

MODERATE GROWTH IN FY15,

RISING BY 11.5% TO $1,752.5

BILLION AT YEAR END FROM

$1,571.8 BILLION AT THE

END OF FY14. THIS GROWTH

CONTINUES TO BE DRIVEN

BY STRONG INCREASES IN

FLOATING RATE NOTES (UP

22.1%) AND TREASURY BOND

(UP 15.2% ON THE PRIOR YEAR)

ISSUANCES.


Chi-X Australia

DURING THE 2014/15 FINANCIAL YEAR, exchange trading in cash equities was impacted by notable changes in influential macro factors, including the Chinese economy, the Australian dollar and selected domestic property markets. The net result over the 12-month period was an overall market trend toward range bound-trading with some notable sector-based exceptions.

Against this backdrop, the Chi-X market continued to grow as an established execution platform and saw trading volumes increase in line with aggregate increases in Australian exchange-traded turnover, showing a turnaround in the previous secular trends toward lower levels of trading (see Figure 1).

Some noteworthy features over the financial year of trading on the Chi-X market included: • retail investors continued to make up approximately

30% of the total aggressive flow on the Chi-X order book (see Figure 2).

• the market share of principal trading/market making firms continued a downward trend (see Figures 3 & 4).

• institutional trading continued an upward trend of market share in both passive and aggressive liquidity (see Figures 2, 3 and 4).

• the volume of trading executed at the mid-point increased as this product gained market share against other forms of hidden execution. Noteworthy trading metrics for Chi-X in the past financial

year include the following:• total market share of 29.97% and total daily turnover of

$2.16 billion on 25 February 2015.• continuous trading value of $918 million on 6 May 2015.• continuous trading market share of 20.28% on 6 October

2014. Chi-X continued to provide innovation in the Australian

marketplace during financial year 2014-15, consulting upon and making substantial progress in developing proposals for: • a new @Last trading phase, commencing at 4:12pm each day,

and that enables orders to be matched at the closing price. • a new investment products platform that will enable Chi-X to

quote derivatives and managed investment products for the first time. n

Figure 1: Chi-X Australia Daily Total Turnover

$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

Net Value Traded

2014

-07-

0120

14-0

7-11

2014

-07-

2320

14-0

8-04

2014

-08-

1420

14-0

8-26

2014

-10-

0720

14-1

0-17

2014

-10-

1720

14-1

1-10

2014

-11-

2020

14-1

2-02

2014

-12-

1220

14-1

2-24

2015

-01-

0820

15-0

1-20

2015

-02-

0220

15-0

2-12

2015

-02-

2420

15-0

3-06

2015

-03-

1820

15-0

3-30

2015

-04-

1320

15-0

4-23

2015

-05-

0520

15-0

5-15

2015

-05-

2720

15-0

6-09

2015

-06-

19

Figure 2: Chi-X Australia Participant Aggressive Flow Breakdown

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100% Market Maker Retail Mid Tier Large Institutional

Aug-

13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Figure 3: Chi-X Australia Participant Passive Flow Breakdown

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


Aug-

13

Sep-

13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-1

4

Aug-

14

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

Apr

-15

May

-15

Jun-

15

Jul-1

5

Aug-

15

Figure 4: Chi-X Australia Executed Order Flow

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%


Aug-

12Se

p-12

Oct

-12

Nov

-12

Dec

-12

Jan-

13Fe

b-13

Mar

-13

Apr

-13

Ma y

-13

Jun-

13Ju

l-13

Aug-

13Se

p-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14Fe

b-14

Mar

-14

Apr

-14

Ma y

-14

Jun-

14Ju

l-14

Aug-

14Se

p-14

Oct

-14

Nov

-14

Dec

-14

Jan-

15Fe

b-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug-

15


Financial Years 2013/14 vs 2014/15 Monthly Cleared AUD Notional

0

100

200

300

400

500

600

700

800

900

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

AUD

Not

iona

l Cle

ared

(bill

ions

)

FY14 FY15

f Largest day FY15: AUD128.8 billion

The Clear Leader

SwapClear continues to lead the cleared market in interest rate swaps (IRSs) denominated in Asia-Pacific currencies and clears over 80% of the cleared market in AUD IRSs. Of the entire AUD interest rate derivative (IRD) market (i.e. cleared and non-cleared), SwapClear clears 65% of this total.1 SwapClear has seen consistent growth in cleared AUD-denominated IRSs and currently holds over AUD10 trillion in cleared notional outstanding (as at the end of June 2015). The average monthly cleared notional in 2015 has risen to AUD734 billion (9,153 trades per month), an increase of 25% (compared to the 2014 monthly average). SwapClear cleared a record AUD128.8 billion in IRSs on a single day (1 August 2014). Of the 17 currencies listed in SwapClear, AUD is the sixth largest currency (based on notional cleared).

SwapClear continues to connect both onshore and offshore AUD IRS liquidity with over 60 clearing member banks globally and 340 client accounts clearing AUD IRS products. Additionally, the four major Australian banks have all become direct members of the SwapClear service over the last two years.

Our commitment to service improvements and expansion in the Asia-Pacific region has continued to set precedents; in March 2015, LCH.Clearnet became the only overseas licensed central counterparty to operate an Exchange Settlement Account (ESA) with the Reserve Bank of Australia, and has started settling all Australian-dollar payments for variation margin via this account, with initial margin being introduced later this year.

Compression

As members and their clients seek capital efficiencies, there has been a significant ramp-up in compression activity in the Asia-Pacific region and worldwide. In AUD-denominated IRSs, SwapClear has compressed AUD3.6 trillion of notional outstandings in the first half of 2015. In June 2015, 20 SwapClear members participated in a record-breaking TriReduce compression cycle, reducing the notional outstandings of AUD IRSs by AUD2.15 trillion (21% of the total outstanding notional AUD IRSs in SwapClear). Additionally, over AUD302 billion notional has been compressed using LCH.Clearnet’s blended rate service in 2015.

This reflects a fundamental change in member and client activity and a sustained appetite for firms to reduce their notional outstanding for capital and operational efficiencies.

Regional Expansion

Following the opening of its Sydney office in 2014, LCH.Clearnet has built out this base to act as the regional operational hub. The Sydney team now comprises 14 dedicated staff, covering operations, risk, collateral, compliance, sales and relationship management. The SwapClear service opens in Sydney, before handing operations over to London, followed by New York, and then handed back to Sydney. In addition, SwapClear support for the Asia-Pacific time zone is managed out of the Sydney office, bringing expertise and assistance closer to the region’s members and clients. LCH.Clearnet has also opened an office in Japan. n

LCH.Clearnet Ltd – SwapClear

f AUD10 trillion in cleared

notional outstandings (as at

30 June 2015)

f AUD3.6 trillion compressed

in H1 2015

f Largest day – 898 AUD IRS

trades cleared on 3 March

2015

f Over 62,000 AUD IRS trades

cleared in 2015

1 Total AUD IRS* outstanding notional, AUD15.3 trillion (from DTCC Global Trade Repository). Total SwapClear outstanding notional, AUD10.0 trillion. *Includes basis swap, vanilla IRS, overnight indexed swap.


Figure 1: Annual Turnover

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15

AU

D b

illio

n Foreign Index Linked Floating Fixed

Figure 2: Turnover by Issuer

State Government 23%

Foreign Government 17%

CommonwealthGovernment

60%

Figure 3: Turnover by Counterparty

Survey Respondents15%

Other Banks13%

In-houseTransactions

19%

Fund Managers28%

Government13%

O�shore Central Banks6%

Other Counterparties6%

THE 2014-15 FINANCIAL YEAR could be described as a continuation of the multi-decade downtrend in Australian bond rates, reflecting the long-term decline in global bond yields. Ten year bond rates fell from 3.54% to 3.01%, and 3 year bond rates fell from 2.69% to 2.05% over the financial year.

Initially rates started to climb as there was an expectation that the US Federal Reserve would begin to ‘normalise’ the Fed’s fund rate. In September, Australian rates peaked for the year with the 10 year rate hitting 3.73% and the 3 year rate climbing to 2.93%. The expectation of the Fed moving early proved to be premature and inflation around the globe remained low. These factors saw rates resume their decline.

Lower than expected inflation in Australia, combined with rising unemployment and lower commodity prices, allowed the Reserve Bank of Australia (RBA) to lower the cash rate from 2.5% to 2.25% in February and then down to 2.00% in May. During this period there was also growing concern about the prospect of Greece’s sovereign debt default and exit from the Eurozone, and concerns about the broader Eurozone economy. The low in yields for the year were set in April at the height of the uncertainty surrounding Europe. Ten year rates fell to 2.28% and 3 year rates to 1.68%.

Following the panic in April, yields began to rise again as US equity markets stabilised and the focus shifted back to the positive story surrounding the US economy and its improving labour market. Yields did not rise to the levels seen in September and renewed concerns regarding a Greek default and exit, and fluctuations in the Chinese stock markets, saw yields fall slightly into the year end.

During FY15, the Australian Office of Financial Management (AOFM) issued approximately $72 billion face value of securities. Long-term government securities (federal plus state) on issue climbed from $548.6 billion at the end of June 2014 to $605 billion at the end of June 2015. The AOFM, with $27 billion of maturities, accounted for the bulk of new issuance, with the states essentially issuing to cover maturities. State governments also resorted to the issuance of more floating rate notes, which was sensible given the lowering of the cash rate.

The AOFM also increased their maturity profile by bringing a new 2037 bond in October and a new 2035 bond in March. Increased activity and the need for a more appropriate hedging tool saw ASX announce in May that it would launch a 20-year government bond futures contract to commence trading in the first quarter of the 2015-16 financial year.

Secondary market liquidity in bonds issued by the AOFM remained strong, although at times the long-dated issues could have benefited from increased liquidity. Secondary market liquidity in state government bonds has decreased however. Turnover in floating rate securities increased substantially as a result of increased state government issuance.

The outlook for 2015-16 is for another year of low inflation both globally and domestically. This should set the stage for accommodative monetary policy settings, although markets will continue to focus on the timing and magnitude of any Fed tightening cycle, as well the possibility of a change in the direction of Australian monetary policy on the part of the RBA. n

Government Debt Securities


Fixed Government Debt Securities Annual Turnover (AUD million)

Survey YearSurvey

Respondents Other BanksIn-house

Transactions Fund Managers GovernmentOffshore

Central Banks Other Total

COMMONWEALTH GOVERNMENT BONDS

2012-13 175,561 87,548 180,593 251,758 85,722 185,265 37,294 1,003,740

2013-14 141,331 140,815 199,623 310,087 102,483 94,887 64,247 1,053,474

2014-15 158,669 126,034 199,110 285,024 93,016 104,293 76,872 1,043,017

% change 12.3 (10.5) (0.3) (8.1) (9.2) 9.9 19.7 (1.0)

STATE GOVERNMENT BONDS

2012-13 94,910 24,022 63,514 104,722 120,016 8,978 7,436 423,600

2013-14 75,331 43,907 64,211 95,527 80,815 7,766 11,368 378,924

2014-15 75,802 46,157 57,386 104,720 69,092 9,185 10,703 373,045

% change 0.6 5.1 (10.6) 9.6 (14.5) 18.3 (5.9) (1.6)

TOTAL

2012-13 270,472 111,570 244,107 356,481 205,738 194,243 44,730 1,427,340

2013-14 216,662 184,722 263,834 405,613 183,298 102,654 75,615 1,432,398

2014-15 234,471 172,190 256,497 389,743 162,108 113,478 87,575 1,416,061

% change 8.2 (6.8) (2.8) (3.9) (11.6) 10.5 15.8 (1.1)

Government Debt Securities Annual Turnover Summary (AUD million)

Survey YearSurvey





2012-13 187,918 89,244 184,725 274,401 88,572 185,499 39,052 1,049,411

2013-14 150,609 144,337 206,273 333,222 112,282 95,914 66,239 1,108,876

2014-15 171,144 128,685 203,088 309,343 98,767 104,941 77,917 1,093,884

% change 13.6 (10.8) (1.5) (7.2) (12.0) 9.4 17.6 (1.4)


2012-13 98,105 25,036 67,990 112,081 125,189 9,018 7,796 445,217

2013-14 77,810 48,538 67,005 97,990 87,009 7,978 11,483 397,813

2014-15 82,634 50,215 69,832 106,532 89,612 9,282 10,962 419,069

% change 6.2 3.5 4.2 8.7 3.0 16.4 (4.5) 5.3

FOREIGN GOVERNMENT BONDS

2012-13 26,601 56,149 46,388 43,986 53,036 11,483 45,641 283,285

2013-14 11,255 97,634 91,709 60,511 56,941 4,397 70,027 392,474

2014-15 13,177 54,777 74,411 91,172 47,650 4,639 31,500 317,327

% change 17.1 (43.9) (18.9) 50.7 (16.3) 5.5 (55.0) (19.1)

TOTAL

2012-13 312,624 170,430 299,103 430,468 266,798 206,000 92,490 1,777,913

2013-14 239,675 290,509 364,986 491,724 256,232 108,289 147,749 1,899,164

2014-15 266,955 233,677 347,330 507,048 236,029 118,862 120,379 1,830,280

% change 11.4 (19.6) (4.8) 3.1 (7.9) 9.8 (18.5) (3.6)



Index Linked Government Debt Securities Annual Turnover (AUD million)

Survey YearSurvey





2012-13 12,356 1,697 4,132 22,643 2,851 235 1,758 45,671

2013-14 9,278 3,521 6,649 23,136 9,799 1,027 1,992 55,402

2014-15 12,475 2,651 3,978 24,319 5,751 648 1,045 50,867

% change 34.4 (24.7) (40.2) 5.1 (41.3) (36.9) (47.5) (8.2)


2012-13 1,543 122 1,520 5,902 797 0 326 10,210

2013-14 337 124 499 2,186 512 2 18 3,679

2014-15 388 85 326 1,256 62 55 41 2,213

% change 15.1 (31.7) (34.7) (42.6) (87.9) 2544.2 126.1 (39.9)

TOTAL

2012-13 13,899 1,819 5,652 28,545 3,648 235 2,084 55,881

2013-14 9,615 3,646 7,148 25,322 10,311 1,029 2,010 59,081

2014-15 12,863 2,736 4,303 25,575 5,813 703 1,087 53,080

% change 33.8 (25.0) (39.8) 1.0 (43.6) (31.7) (45.9) (10.2)

Market Rank % Market Sharea % Cumulative Share

1 22.9 22.9

2 19.6 42.5

3 13.8 56.3

4 12.1 68.4

5 9.6 78.0

6 8.0 86.0

7 5.2 91.2

8 5.1 96.3a Market share data excludes in-house transactions.

Top 8 Respondents % Market Sharea

2012-13 85.3

2013-14 95.7

2014-15 96.3a Market share data excludes in-house transactions.

Government Debt Securities Trading Concentration

Commonwealth Government Bonds Liquidity Ratio (AUD million)Survey Year Outstandingsa Turnover Ratio

2012-13 240,929 1,049,411 4.4

2013-14 291,622 1,108,876 3.8

2014-15 342,780 1,093,884 3.2

a Outstandings was calculated as an average of monthly data on Commonwealth Government Bonds as published by AOFM


IN A CONTINUATION of the gradual improving trend in global capital markets seen in 2013-14, 2014-15 has been constructive and accommodating for new issuance in non-government debt securities. With the exception of the issues surrounding Greece in June and July of 2015, and the impacts of Chinese stock market volatility and currency devaluation, the global economy has proven to be particularly resilient.

The issue of Australia’s economy and exposure to China (and other large consumers of resources) has impacted the local currency as it has depreciated versus the US dollar while holding relatively stable versus the euro and the yen. The interest rate environment sees the Reserve Bank of Australia (RBA) slightly out of sync with the US Federal Reserve, with Australia maintaining a slight easing basis as the economy transitions from a resource focus to services and manufacturing. These factors had both a positive and negative impact on the market, with the net impact being somewhat neutral in terms of aggregate issuance volumes.

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. Credit derivatives

turnover continues to decline, and is now at levels not seen since before the global financial crisis.

Corporate issuance over the period was well received. 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 a senior unsecured format. A recent development has been the growth of the institutional market for Basel III-compliant bank capital transactions.

Supranational, sovereign and agency (SSA) issuers 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. n

Non-financial Corporate A-rated Bonds: Spread to Swap (Basis Points)

50 60 70 80 90

100 110 120 130 140

Jul-2

014

Aug-2014

Sep-2014

Oct-2014

Nov-2014

Dec-2014

Jan-2015

Feb-2015

Mar-2015

Apr-2015

May-2015

Jun-2015

3 year 5 year 7 year 10 year

Non-financial Corporate A-rated Bonds: Spread to AGS (Basis Points)

50

70

90

110

130

150

170

190 3 year 5 year 7 year 10 year

Jul-2

014

Aug-2014

Sep-2014

Oct-2014

Nov-2014

Dec-2014

Jan-2015

Feb-2015

Mar-2015

Apr-2015

May-2015

Jun-2015

Non-Government Debt Securities and Credit Derivatives

Non-financial Corporate BBB-rated Bonds: Spread to Swap (Basis Points)

50

70

90

110

130

150

170

190

210


Jul-2

014

Aug-2014

Sep-2014

Oct-2014

Nov-2014

Dec-2014

Jan-2015

Feb-2015

Mar-2015

Apr-2015

May-2015

Jun-2015

Non-financial Corporate BBB-rated Bonds: Spread to AGS (Basis Points)

50 70 90

110 130 150 170 190 210 230 250


Jul-2

014

Aug-2014

Sep-2014

Oct-2014

Nov-2014

Dec-2014

Jan-2015

Feb-2015

Mar-2015

Apr-2015

May-2015

Jun-2015


Non-Government Debt Securities


Fixed Floating & Index

100

200

300

400

500

600

700

800

900

1,000

AUD

bill

ion

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15


Corporate Securities15%

Bank Securities35%

MBS / ABS / Covered Bonds28%

Foreign Non- Government Issues22%



Other Banks12%


20%Fund Managers39%

Government1%



Credit Derivatives


AU

D b

illio

n

0

50

100

150

200

250

300

350

400

450

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15


Single Name CreditDefault Swaps

30%

Credit Indices70%



Other Banks18%

In-house Transactions29%

Fund Managers11%



Non-Government Debt Securities Annual Turnover Summary (AUD million)

Survey YearSurvey




CORPORATE SECURITIES

2012-13 11,930 17,726 13,133 37,190 2,289 1,590 23,557 107,416

2013-14 9,225 13,163 18,097 48,498 2,300 1,947 22,875 116,105

2014-15 9,293 14,169 17,178 41,086 1,248 1,899 30,849 115,722

% change 0.7 7.6 (5.1) (15.3) (45.7) (2.5) 34.9 (0.3)

BANK SECURITIES

2012-13 41,691 79,833 77,073 61,635 9,561 5,276 38,791 313,859

2013-14 33,637 80,245 77,392 70,481 5,121 7,594 41,300 315,772

2014-15 32,115 44,164 76,135 67,500 6,805 7,393 42,659 276,771

% change (4.5) (45.0) (1.6) (4.2) 32.9 (2.7) 3.3 (12.4)

ASSET-BACKED - ALL INC. COVERED BONDS

2012-13 7,451 25,746 14,675 115,511 1,114 56 42,701 207,254

2013-14 9,206 27,923 20,587 141,577 2,326 91 18,596 220,307

2014-15 6,411 5,271 29,930 177,766 688 6 4,719 224,790

% change (30.4) (81.1) 45.4 25.6 (70.4) (93.4) (74.6) 2.0

FOREIGN NON-GOVERNMENT ISSUES

2012-13 14,423 25,860 27,209 20,034 1,724 1,698 57,146 148,093

2013-14 9,833 19,752 24,276 14,269 1,638 644 49,031 119,442

2014-15 13,469 34,830 34,478 21,122 2,039 3,042 61,431 170,411

% change 37.0 76.3 42.0 48.0 24.5 372.4 25.3 42.7

TOTAL

2012-13 75,495 149,165 132,089 234,370 14,687 8,621 162,195 776,622

2013-14 61,901 141,083 140,353 274,825 11,385 10,276 131,802 771,626

2014-15 61,288 98,434 157,721 307,475 10,780 12,339 139,658 787,695

% change (1.0) (30.2) 12.4 11.9 (5.3) 20.1 6.0 2.1

NON-GOVERNMENT DEBT SECURITIES AND CREDIT DERIVATIVES


Fixed Non-Government Debt Securities Annual Turnover (AUD million)

Survey YearSurvey





2012-13 7,448 5,210 6,782 26,185 751 1,416 17,719 65,510

2013-14 6,816 7,220 13,389 35,975 860 1,686 18,572 84,518

2014-15 7,514 10,097 12,407 30,939 582 1,818 27,004 90,360

% change 10.2 39.8 (7.3) (14.0) (32.3) 7.8 45.4 6.9

BANK SECURITIES

2012-13 25,111 43,759 43,527 36,164 4,262 4,848 26,336 184,007

2013-14 18,182 36,197 46,563 35,558 1,880 5,918 25,456 169,753

2014-15 20,549 18,842 46,366 35,083 3,591 5,383 29,722 159,536

% change 13.0 (47.9) (0.4) (1.3) 91.0 (9.0) 16.8 (6.0)


2012-13 561 297 1,697 1,259 147 56 388 4,404

2013-14 387 857 1,712 2,255 77 1 321 5,611

2014-15 335 616 1,431 2,250 69 0 1,754 6,454

% change (13.5) (28.1) (16.4) (0.2) (11.4) (100.0) 446.2 15.0


2012-13 13,279 22,203 23,565 16,514 1,694 1,620 51,956 130,832

2013-14 8,755 16,729 21,433 12,120 1,566 607 45,551 106,760

2014-15 12,060 29,837 30,416 17,180 2,010 2,183 55,646 149,331

% change 37.7 78.4 41.9 41.8 28.3 259.7 22.2 39.9

TOTAL

2012-13 46,399 71,469 75,571 80,122 6,853 7,940 96,400 384,753

2013-14 34,140 61,002 83,097 85,908 4,383 8,212 89,899 366,642

2014-15 40,457 59,391 90,620 85,451 6,251 9,383 114,126 405,680

% change 18.5 (2.6) 9.1 (0.5) 42.6 14.3 26.9 10.6


Floating & Index Linked Non-Government Debt Securities Annual Turnover Summary (AUD million)

Survey YearSurvey





2012-13 4,482 12,516 6,351 11,005 1,538 175 5,838 41,906

2013-14 2,409 5,943 4,707 12,523 1,440 261 4,303 31,587

2014-15 1,780 4,073 4,770 10,148 666 81 3,845 25,363

% change (26.1) (31.5) 1.3 (19.0) (53.7) (68.9) (10.6) (19.7)

BANK SECURITIES

2012-13 16,580 36,074 33,546 25,471 5,299 428 12,455 129,852

2013-14 15,455 44,048 30,830 34,924 3,241 1,677 15,845 146,020

2014-15 11,567 25,322 29,769 32,417 3,214 2,010 12,937 117,236

% change (25.2) (42.5) (3.4) (7.2) (0.8) 19.9 (18.4) (19.7)


2012-13 6,891 25,449 12,978 114,252 967 0 42,312 202,850

2013-14 8,819 27,066 18,875 139,322 2,249 90 18,275 214,696

2014-15 6,076 4,655 28,499 175,516 619 6 2,965 218,336

% change (31.1) (82.8) 51.0 26.0 (72.5) (93.3) (83.8) 1.7


2012-13 1,144 3,657 3,644 3,519 29 78 5,190 17,261

2013-14 1,078 3,023 2,843 2,149 72 37 3,480 12,682

2014-15 1,409 4,993 4,062 3,943 29 859 5,785 21,080

% change 30.8 65.2 42.9 83.5 (59.1) 2221.5 66.2 66.2

TOTAL

2012-13 29,096 77,696 56,518 154,248 7,834 681 65,795 391,869

2013-14 27,761 80,081 57,256 188,917 7,002 2,064 41,902 404,984

2014-15 20,831 39,042 67,101 222,024 4,529 2,956 25,531 382,015

% change (25.0) (51.2) 17.2 17.5 (35.3) 43.2 (39.1) (5.7)


1 42.2 42.2

2 21.5 63.6

3 10.7 74.4

4 9.4 83.7

5 5.8 89.5

6 3.8 93.4

7 3.4 96.8



2012-13 96.9

2013-14 100.0


Non-Government Debt Securities Trading Concentration

NON-GOVERNMENT DEBT SECURITIES AND CREDIT DERIVATIVES


Total Credit Derivatives Annual Turnover Summary (AUD million)

Survey YearSurvey


TransactionsFund

Managers GovernmentOffshore

Central Banks Other TotalAustralian/NZ

Reference Entities

SINGLE NAME CREDIT DEFAULT SWAPS

2012-13 6,537 17,631 5,823 12,163 1,243 0 4,756 48,153 46,108

2013-14 11,115 12,759 10,719 14,170 248 174 15,951 65,136 62,651

2014-15 3,580 10,892 8,911 7,350 0 0 20,863 51,595 67,570

% change (67.8) (14.6) (16.9) (48.1) (100.0) (100.0) 30.8 (20.8) 7.9

CREDIT INDICES

2012-13 15,889 56,567 70,782 8,073 1,372 0 27,383 180,066 89,771

2013-14 19,303 26,125 58,504 19,429 205 0 40,986 164,551 101,355

2014-15 8,296 20,926 41,482 11,367 0 0 38,914 120,985 57,863

% change (57.0) (19.9) (29.1) (41.5) (100.0) na (5.1) (26.5) (42.9)

TOTAL

2012-13 22,426 74,198 76,605 20,235 2,615 0 32,139 228,218 135,879

2013-14 30,417 38,884 69,200 33,599 453 174 56,936 229,687 164,005

2014-15 11,876 31,817 50,393 18,717 0 0 59,777 172,580 125,433

% change (61.0) (18.2) (27.2) (44.3) (100.0) (100.0) 5.0 (24.9) (23.5)

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


1 69.8 69.8

2 11.4 81.2

3 6.6 87.8

4 6.5 94.4

5 4.6 98.9



2012-13 100.0

2013-14 100.0

2014-15 100.0a Market share data excludes in-house transactions..

Credit Derivatives Trading Concentration


D OMESTICALLY, IN THE FIRST HALF of the 2014-15 financial year, the Australian cash rate was left on hold, reflecting the Reserve Bank of Australia’s (RBA) sense that a period of stability in rates was the most prudent course of action. However, the collapse in commodity prices, in particular in coal and iron ore prices, led to a significant fall in Australia’s terms of trade which had negative flow-on effects to national income. In February 2015, the RBA cut the official cash rate 25 basis points and revised down its economic growth forecasts, which implied a longer period of below-trend growth and a higher peak of the unemployment rate than previously expected, and implied that inflation was likely to remain low over the forecast horizon. The RBA cut the cash rate again in May by another 25 basis points, finishing the 2014-15 financial year at 2.00%.

The strength seen in the funding markets in the prior year continued into 2014-15. Financial conditions globally were accommodative, enabling Australian banks to access large amounts of term funding at favourable spreads. While the housing market strengthened domestically, credit growth remained subdued.

The Australian Prudential Regulation Authority’s introduction of the Liquidity Coverage Ratio (LCR) on 1 January 2015 had an effect on short-term issuance appetite in the second half of the financial year, resulting in static annual turnover in the domestic short-term markets.

Looking forward, the second half of 2015 will likely see continued stability in the negotiable and transferable instruments (NTI) market. The market is currently pricing in the possibility of an additional RBA rate cut over the next six months, while the RBA sees current monetary policy set appropriately to foster sustainable growth and inflation consistent with the target. The RBA will however assess incoming information on economic and financial conditions to form their outlook meeting to meeting.

Accordingly, absent any major global financial shocks, conditions in the funding markets are unlikely to change substantially. However, the market currently expects the US Federal Reserve (Fed) to raise the Fed funds rate by the end of 2015, which could bring about unintended volatility in financial markets. Even though the Fed is about to embark on ‘lift-off ’, the Bank of Japan and European Central Bank are expected to maintain their monetary stimulus programs, thereby keeping global monetary conditions very accommodative in the year ahead. n

Negotiable and Transferable Instruments


03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000

AU

D b

illio

n Figure 2: Turnover by Instrument

Treasury Notes1%

Semi-Government Paper3%

Bank Paper92%

Corporate Paper4%



Other Banks5%


30%

Fund ManagersTraditional

20%

Government7%


1.9000 2.0000 2.1000 2.2000 2.3000 2.4000 2.5000 2.6000 2.7000 2.8000 2.9000

01-Jul-1

4

01-Aug-14

01-Sep-14

01-Oct-1

4

01-Nov-14

01-Dec-1

4

01-Jan-15

01-Feb-15

01-Mar-1

5

01-Apr-1

5

01-May-15

01-Jun-15

01-Jul-1

5

O�cial Cash Rate 1m 2m 3m

01-Jul-1

4

01-Aug-14

01-Sep-14

01-Oct-1

4

01-Nov-14

01-Dec-1

4

01-Jan-15

01-Feb-15

01-Mar-1

5

01-Apr-1

5

01-May-15

01-Jun-15

01-Jul-1

5 0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

Official Cash and BBSW (%) BABs-OIS Spread, 3 month (%)


Negotiable and Transferable Instruments Annual Turnover Summary (AUD million)

Survey YearSurvey



Central Banks Other Grand Total

TREASURY NOTES

2012-13 8,581 5,826 1,896 8,288 23,082 5,415 18,893 71,981

2013-14 2,512 2,912 1,240 3,682 7,103 1,767 5,232 24,448

2014-15 2,112 1,578 872 4,715 11,007 1,239 6,228 27,750

% change (15.9) (45.8) (29.7) 28.0 55.0 (29.9) 19.0 13.5

SEMI-GOVERNMENT PAPER

2012-13 3,981 4,189 2,361 12,983 54,294 845 1,001 79,655

2013-14 2,003 9,364 6,315 10,984 38,128 821 251 67,866

2014-15 3,142 14,325 6,415 11,800 44,998 815 2,672 84,167

% change 56.9 53.0 1.6 7.4 18.0 (0.7) 964.5 24.0

BANK PAPER

2012-13 378,552 114,524 1,039,514 465,269 126,462 8,548 816,390 2,949,259

2013-14 294,507 76,365 909,494 422,623 123,436 8,887 730,420 2,565,731

2014-15 134,545 101,763 821,013 476,902 118,967 12,667 866,750 2,532,607

% change (54.3) 33.3 (9.7) 12.8 (3.6) 42.5 18.7 (1.3)

CORPORATE PAPER

2012-13 18,351 26,581 3,200 60,800 1,897 0 59,226 170,056

2013-14 10,009 11,242 1,842 47,468 1,684 33 53,822 126,100

2014-15 2,083 11,998 1,802 49,582 5,921 0 52,126 123,512

% change (79.2) 6.7 (2.2) 4.5 251.6 (100.0) (3.2) (2.1)

TOTAL

2012-13 409,465 151,120 1,046,971 547,340 205,735 14,808 895,511 3,270,951

2013-14 309,030 99,883 918,890 484,758 170,350 11,509 789,725 2,784,145

2014-15 141,881 129,663 830,102 542,999 180,893 14,721 927,776 2,768,036

% change (54.1) 29.8 (9.7) 12.0 6.2 27.9 17.5 (0.6)

NEGOTIABLE AND TRANSFERABLE INSTRUMENTS

Treasury Note Liquidity Ratio (AUD million)Survey Year Outstandingsa Turnover Ratio

2012-13 14,667 71,981 4.9

2013-14 3,000 24,448 8.1

2014-15 6,708 27,750 4.1a Outstandings was calculated as an average of monthly data on Treasury Notes from March to June 2014 as published by AOFM



1 41.6 41.6

2 21.2 62.8

3 15.7 78.5

4 14.7 93.2

5 2.6 95.8

6 1.6 97.4

7 0.7 98.1



2012-13 92.9

2013-14 97.9

2014-15 98.8a Market share data excludes in-house transactions..

Negotiable and Transferable Instruments Trading Concentration

Bank Paper Liquidity Ratio (AUD million)Survey Year Outstandingsa Turnover Ratio

2012-13 235,884 2,949,259 12.5

2013-14 225,646 2,565,731 11.4

2014-15 233,969 2,532,607 10.8a Outstandings was calculated as an average of monthly data on Bank Paper as reported by APRA.



2 015 WAS RELATIVELY uneventful in terms of market events impacting fixed income secured financing. The marketplace is now more attuned to the reality of fluctuating financing rates, and key events such as bond redemptions and changes in the Reserve Bank of Australia’s (RBA) balance sheet are closely monitored as they impact the overall level of general collateral rates.

The regular issuance of both Commonwealth and state government bonds, which forms the greater majority of all repo collateral, continues to be a feature of this market ensuring a deep pool of trading stock for the repo market. This notwithstanding, new regulatory requirements, both domestically and internationally, have resulted in generally lower activity, both intermediated and direct, a consequence of the increased ‘hold’ demand for high-quality liquid assets in response to liquidity rules and increased collateral requirements and thus lower availability to support repo transactions.

In-house use of repo increased significantly in terms of both gross positions maintained and market turnover, the latter reflecting the short-term nature of in-house repo; that is, 80% being less than two weeks duration, and the high figures resulting from this.

The market has generally been slow to use the tri-party collateral management services. Nevertheless, the market control environment remains strong, there being negligible instances of settlement failures.

In March 2015, the RBA consulted with industry, through the use of a survey, on whether the capacity of the Australian repo market to safely, efficiently and continuously support the funding and liquidity needs of the Australian financial system would be improved by the availability of a repo central counterparty clearing (CCP). It was determined from this process that there is general support within our membership for the principle of central clearing of repos. Issues raised in the survey responses are practical ones around whether it would be viable for a central clearer to provide a central clearing service to the Australian market, and if a central clearer was to do so, it would need to offer attractive pricing to encourage participants to use its service. n

Repurchase Agreements


2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

AUD

bill

ion

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15

Figure 2: Turnover by Instrument

CommonwealthGovernment

Bonds andTreasury Notes

32%

State GovernmentBonds and

Promissory Notes15%

Corporate and Bank bonds (All)3%

Total50%



Other Banks7%


60%

Fund Managers7%

Government15%




Repurchase Agreements Annual Turnover Summary (AUD million)

Survey YearSurvey



Central Banks Other TotalTotal

Non-AUD Repo

COMMONWEALTH GOVERNMENT BONDS AND TREASURY NOTES

2012-13 511,250 367,345 1,792,898 555,900 479,450 97,307 159,907 3,964,057 107,228

2013-14 541,320 347,131 763,346 453,261 459,020 112,016 102,865 2,778,960 115,428

2014-15 333,805 381,233 3,013,058 483,115 725,280 71,819 194,212 5,202,522 86,984

% change (38.3) 9.8 294.7 6.6 58.0 (35.9) 88.8 87.2 (24.6)

STATE GOVERNMENT BONDS AND PROMISSORY NOTES

2012-13 355,653 236,351 1,369,112 318,727 329,694 25,005 73,490 2,708,032 170

2013-14 428,677 245,564 874,177 271,223 227,633 8,300 127,683 2,183,256 33,043

2014-15 127,324 123,951 1,710,307 70,367 285,386 1,395 58,190 2,376,920 113,215

% change (70.3) (49.5) 95.6 (74.1) 25.4 (83.2) (54.4) 8.9 242.6

CORPORATE AND BANK BONDS (ALL)

2012-13 31,744 145,678 683,977 77,812 75,685 57,954 62,842 1,135,692 301,225

2013-14 15,551 141,712 391,082 37,009 213,426 2,450 203,954 1,005,185 448,187

2014-15 14,345 70,495 144,731 6,839 201,181 0 68,130 505,721 50,547

% change (7.8) (50.3) (63.0) (81.5) (5.7) (100.0) (66.6) (49.7) (88.7)

ASSET-BACKED (ALL)

2012-13 792 0 29,240 0 26,417 0 0 56,449 0

2013-14 0 0 35,933 0 7,798 0 0 43,731 22

2014-15 0 0 21,913 0 16,840 0 92 38,845 0

% change na na (39.0) na 116.0 na na (11.2) (100.0)

TOTAL

2012-13 899,440 749,373 3,875,228 952,438 911,246 180,267 296,240 7,864,232 408,623

2013-14 985,548 734,407 2,064,539 761,493 907,877 122,766 434,502 6,011,132 596,680

2014-15 475,473 575,679 4,890,009 560,321 1,228,687 73,214 320,624 8,124,007 250,746

% change (51.8) (21.6) 136.9 (26.4) 35.3 (40.4) (26.2) 35.1 (58.0)


1 43.6 43.6

2 12.4 56.0

3 11.1 67.2

4 9.5 76.7

5 8.4 85.1

6 6.1 91.2

7 4.9 96.1



2012-13 88.6

2013-14 84.0


Repurchase Agreements Trading Concentration

REPURCHASE AGREEMENTS


Interest Rate Derivatives

Interest Rate Swaps

THE RESERVE BANK OF AUSTRALIA’S reductions in the official cash rate in February and May, and market expectations of further easing, all contributed to it being an interesting year for the swaps market. Economic weakness in the Eurozone helped Australian 10 year bonds decline 70 points in yield over the year. Highlighting the extent to which Europe provided much of the direction for global debt markets, the Australian 10 year bonds exhibited a 90% correlation with German bunds.

The market has now moved to central clearing of interest rate derivatives, and is now the market standard, with regular compressions occurring to further reduce individual counterparty exposures. Moving forward, there is a high probability the Australian swaps market will move to no name give-ups and increased use of electronic trading platforms (ETPs) following the model of US swaps.

Of particular interest, the market has seen the development of the BOB (Bill OIS Basis) market in terms out to 30 years. While still in its infancy, this market will provide the basis for term OIS, and looking forward, a potential alternative interest rate for swaps.

The year ahead will likely see interest rate increases from the US Federal Reserve, while the RBA remains focused on whether to further extend its easing cycle. Historically, it is a very rare occurrence for the RBA to be cutting interest rates while the Federal Reserve is raising them.

Interest Rate Options

THROUGH MOST OF 2014-15, AUD-implied interest rate volatilities were in an uptrend, which broadly retraced the slide, lower from the previous year. Higher option prices were supported generally by a steepening yield curve as well as various specific events such as the unexpected resumption of policy easing by the Reserve Bank of Australia (RBA) in February and another round of Eurozone and Greek sovereign debt trouble in June and July. Diverging macro trends between Australia and the US have also led to higher realised volatility in Australian long-end rates. Short-end gamma spiked early in the year as the RBA changed tack, but has since settled down as the outlook has reverted back to ‘rates-on-hold’.

Despite the impact of multiple volatility events over 2014-15, overall transaction volumes were down on the previous year. The number of active market participants also fell as the trend for global banks to focus back on ‘home’ markets continued. Nonetheless, the markets remained well-curated overall and achieved high levels of price discovery and transparency. Over 95% of swaptions were traded on a forward premium basis with the underlying swap clearable on one of three main exchanges (ASX, LCH, CME). On the client side, participants continue to see growth in the breadth of end users, with increased activity from global real money accounts as well as investor driven structures alongside the traditional flows from domestic real money, hedge funds and the corporate sector. n



0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

AUD

bill

ion

IRS / TBS Index-Linked Cross-Currency OIS & BOBs FRA IRO

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15

Figure 2: Total IRD Turnover by Counterparty


Other Banks22%

Inhouse Transactions29%

Fund Managers13%


Figure 3: IRS Turnover by Counterparty


Other Banks25%


Fund Managers11%


Figure 4: Index Linked Turnover by Counterparty


Other Banks10%


Fund Managers27%

Government3%


Figure 5: Cross-Currency Turnover by Counterparty


Other Banks27%


Fund Managers6%


Figure 6: OIS Turnover by Counterparty


Other Banks20%


Fund Managers21%


Figure 7: FRA Turnover by Counterparty


Other Banks21%


Fund Managers1%


Figure 8: IRO Turnover by Counterparty


Other Banks42%


Fund Managers25%




Interest Rate Derivatives Annual Turnover Summary by Product Category (AUD million)

Survey YearSurvey




INTEREST RATE AND TENOR BASIS SWAPS

2012-13 1,426,949 1,837,610 2,300,384 800,528 40,981 2,879 1,071,197 7,480,528

2013-14 1,101,096 2,538,455 2,303,180 743,383 17,620 20,375 2,368,375 9,092,483

2014-15 1,881,253 2,587,815 2,541,311 1,204,240 34,780 7,344 2,256,184 10,512,927

% change 70.9 1.9 10.3 62.0 97.4 (64.0) (4.7) 15.6

INFLATION-LINKED SWAPS

2012-13 4,748 2,044 2,671 4,186 294 0 594 14,537

2013-14 9,233 6,906 350 2,146 161 0 655 19,450

2014-15 3,099 1,112 1,242 2,981 408 0 2,335 11,177

% change (66.4) (83.9) 255.0 38.9 154.1 na 256.6 (42.5)

CROSS-CURRENCY SWAPS

2012-13 571,215 507,958 1,024,719 500,979 724 3,245 390,675 2,999,514

2013-14 311,719 349,270 445,889 110,677 960 1,521 128,546 1,348,583

2014-15 418,756 472,735 595,721 99,564 447 2,728 134,758 1,724,710

% change 34.3 35.3 33.6 (10.0) (53.4) 79.3 4.8 27.9

OIS & BOBS

2012-13 2,576,782 1,848,193 2,132,283 1,650,025 6,220 2,095 678,848 8,894,445

2013-14 2,051,382 1,409,519 2,183,836 828,425 24,522 7,382 692,551 7,197,616

2014-15 2,703,676 2,095,133 2,198,816 2,295,168 7,889 12,000 1,386,858 10,699,540

% change 31.8 48.6 0.7 177.1 (67.8) 62.6 100.3 48.7

FRAS

2012-13 1,740,990 1,584,649 1,873,667 82,607 2,477 56 652,683 5,937,129

2013-14 647,392 1,102,133 1,657,279 96,187 1,043 1,055 372,117 3,877,206

2014-15 709,862 1,368,404 3,267,085 108,176 2,960 250 1,107,473 6,564,211

% change 9.6 24.2 97.1 12.5 183.9 (76.3) 197.6 69.3

INTEREST RATE OPTIONS

2012-13 67,637 101,466 43,507 131,061 2,040 150 64,883 410,744

2013-14 86,594 123,423 79,953 138,532 1,920 0 134,302 564,725

2014-15 55,433 184,592 13,602 112,165 1,070 0 77,088 443,949

% change (36.0) 49.6 (83.0) (19.0) (44.3) na (42.6) (21.4)

TOTAL

2012-13 6,388,320 5,881,920 7,377,230 3,169,387 52,736 8,426 2,858,880 25,736,898

2013-14 4,207,415 5,529,707 6,670,486 1,919,350 46,225 30,334 3,696,546 22,100,063

2014-15 5,772,079 6,709,792 8,617,778 3,822,294 47,554 22,322 4,964,696 29,956,515

% change 37.2 21.3 29.2 99.1 2.9 (26.4) 34.3 35.5

SWAPS AND FORWARD RATE AGREEMENTS


Interest Rate Derivatives Annual Turnover by Product (AUD million)

Survey YearSurvey




FIXED / FLOATING SWAPS - AUD

2012-13 1,331,585 1,732,416 1,922,865 773,718 40,981 2,879 988,004 6,792,447

2013-14 993,083 2,269,880 1,722,950 671,743 17,416 12,899 1,790,873 7,478,845

2014-15 1,185,177 1,644,413 1,860,972 993,179 28,574 4,943 1,608,634 7,325,892

% change 19.3 (27.6) 8.0 47.9 64.1 (61.7) (10.2) (2.0)

TENOR BASIS SWAPS - AUD

2012-13 95,364 105,194 377,519 26,810 0 0 83,194 688,081

2013-14 42,031 124,036 355,935 13,209 105 265 115,926 651,505

2014-15 602,378 597,692 320,323 27,593 5,001 0 400,105 1,953,091

% change 1333.2 381.9 (10.0) 108.9 4685.5 (100.0) 245.1 199.8

XCCY SWAPS - INCLUDING AUD LEG

2012-13 287,774 299,648 527,912 159,333 679 1,596 106,668 1,383,609

2013-14 266,180 313,365 388,161 86,871 678 1,072 104,341 1,160,667

2014-15 375,050 399,010 523,586 96,223 447 2,224 118,603 1,515,143

% change 40.9 27.3 34.9 10.8 (34.0) 107.5 13.7 30.5

XCCY SWAPS - NO AUD LEG (IN AUD)

2012-13 283,440 208,310 496,807 341,647 45 1,649 284,007 1,615,905

2013-14 45,539 35,905 57,728 23,806 282 450 24,205 187,915

2014-15 43,706 73,726 72,135 3,341 0 504 16,154 209,566

% change (4.0) 105.3 25.0 (86.0) (100.0) 12.0 (33.3) 11.5

NON-AUD SINGLE CURRENCY (IN AUD)

2012-13 – – – – – – – –

2013-14 65,981 144,539 224,295 58,432 100 7,211 461,575 962,132

2014-15 93,498 345,042 354,343 183,192 1,205 2,401 246,104 1,225,786

% change 41.7 138.7 58.0 213.5 1105.6 (66.7) (46.7) 27.4

INFLATION-LINKED SWAPS - AUD

2012-13 4,748 2,044 2,671 4,186 294 0 594 14,537

2013-14 9,233 6,906 350 2,146 161 0 655 19,450

2014-15 3,099 1,112 1,242 2,981 408 0 2,335 11,177

% change (66.4) (83.9) 255.0 38.9 154.1 na 256.6 (42.5)

BILLS OIS BASIS (BOB SWAP) - AUD

2012-13 – – – – – – – –

2013-14 – – – – – – – –

2014-15 6,140 10,276 6,680 9,717 0 0 961 33,774

% change na na na na na na na na

OVERNIGHT INDEX SWAPS - AUD

2012-13 2,576,782 1,848,193 2,132,283 1,650,025 6,220 2,095 678,848 8,894,445

2013-14 1,881,060 1,227,611 1,621,393 745,235 16,800 7,275 483,504 5,982,877

2014-15 2,575,160 1,779,000 1,975,847 2,024,457 606 12,000 1,281,783 9,648,852

% change 36.9 44.9 21.9 171.7 (96.4) 64.9 165.1 61.3

OVERNIGHT INDEX SWAPS - NZD (IN AUD)

2012-13 – – – – – – – –

2013-14 152,828 124,190 438,464 82,340 7,722 0 63,827 869,371

2014-15 107,288 279,666 193,247 249,695 7,283 0 86,677 923,856

% change (29.8) 125.2 (55.9) 203.2 (5.7) na 35.8 6.3

cont...



Interest Rate Derivatives Annual Turnover by Product (AUD million) cont....

Survey YearSurvey




OVERNIGHT INDEX SWAPS - OTHER (IN AUD)

2012-13 – – – – – – – –

2013-14 17,494 57,718 123,979 849 0 107 145,220 345,367

2014-15 15,089 26,191 23,042 11,298 0 0 17,437 93,058

% change (13.7) (54.6) (81.4) 1230.2 na (100.0) (88.0) (73.1)

EXOTICS, CALLABLE OR OTHER AUD SWAPS

2012-13 – – – – – – – –

2013-14 – – – – – – – –

2014-15 201 668 5,673 276 0 0 1,340 8,159


AUD FRA

2012-13 1,445,226 1,069,249 728,068 57,669 2,477 0 152,859 3,455,548

2013-14 599,621 889,481 550,962 74,237 700 1,055 96,694 2,212,749

2014-15 672,274 849,451 1,311,055 75,267 2,960 250 126,371 3,037,627

% change 12.1 (4.5) 138.0 1.4 322.9 (76.3) 30.7 37.3

USD FRA (IN AUD)

2012-13 149,259 325,964 62,744 7,383 0 56 403,645 949,052

2013-14 19,262 81,240 67,542 8,929 0 0 205,186 382,161

2014-15 5,823 325,049 87,385 13,539 0 0 898,129 1,329,926

% change (69.8) 300.1 29.4 51.6 na na 337.7 248.0

NZD FRA (IN AUD)

2012-13 125,427 112,817 1,079,307 17,555 0 0 38,200 1,373,306

2013-14 28,454 130,056 1,038,034 13,020 343 0 28,513 1,238,421

2014-15 31,385 179,448 1,866,456 19,369 0 0 75,873 2,172,531

% change 10.3 38.0 79.8 48.8 (100.0) na 166.1 75.4

OTHER FRA (IN AUD)

2012-13 21,078 76,618 3,548 0 0 0 57,979 159,224

2013-14 54 1,356 740 0 0 0 41,724 43,875

2014-15 381 14,456 2,188 1 0 0 7,101 24,127

% change 599.8 965.9 195.7 na na na (83.0) (45.0)

BOND OPTIONS - AUD

2012-13 0 0 1,800 4,430 900 50 2 7,182

2013-14 0 0 0 1,580 1,850 0 845 4,275

2014-15 0 0 0 4,045 1,070 0 3,346 8,460

% change na na na 156.0 (42.2) na 295.9 97.9

SWAPTIONS - AUD

2012-13 62,410 75,789 39,870 123,659 1,140 100 47,360 350,329

2013-14 82,429 114,609 70,162 126,740 70 0 104,724 498,734

2014-15 44,841 166,096 9,004 104,202 0 0 59,597 383,740

% change (45.6) 44.9 (87.2) (17.8) (100.0) na (43.1) (23.1)

CAPS AND FLOORS - AUD

2012-13 5,226 25,678 1,836 2,972 0 0 17,521 53,233

2013-14 4,165 8,814 9,791 10,212 0 0 28,733 61,716

2014-15 4,683 18,409 4,523 3,918 0 0 13,795 45,328

% change 12.4 108.9 (53.8) (61.6) na na (52.0) (26.6)

cont...


Interest Rate Derivatives Annual Turnover by Product (AUD million) cont....

Survey YearSurvey




EXOTIC AND OTHER INTEREST RATE OPTIONS - AUD

2012-13 – – – – – – – –

2013-14 – – – – – – – –

2014-15 5,910 87 75 0 0 0 350 6,422


TOTAL

2012-13 6,388,320 5,881,920 7,377,230 3,169,387 52,736 8,426 2,858,880 25,736,898

2013-14 4,207,415 5,529,707 6,670,486 1,919,350 46,225 30,334 3,696,546 22,100,063

2014-15 5,772,079 6,709,792 8,617,778 3,822,294 47,554 22,322 4,964,696 29,956,515

% change 37.2 21.3 29.2 99.1 2.9 (26.4) 34.3 35.5



Interest Rate Derivative Reversed or Terminated by Product Category (AUD million)

Survey YearSurvey




INTEREST RATE SWAPS - INCLUDING TENOR BASIS SWAPS

2012-13 77,229 54,996 134,269 304,475 2,326 1,551 126,531 701,377

2013-14 400,406 598,428 518,674 450,367 9,043 4,307 560,951 2,542,175

2014-15 417,576 663,576 611,532 351,731 6,610 1,643 297,036 2,349,703

% change 4.3 10.9 17.9 (21.9) (26.9) (61.9) (47.0) (7.6)

INFLATION-LINKED SWAPS

2012-13 206 204 2,049 1,480 0 0 132 4,072

2013-14 4,327 3,242 402 2,408 124 0 2,670 13,173

2014-15 70 922 75 1,169 48 0 13 2,297

% change (98.4) (71.6) (81.3) (51.4) (61.2) na (99.5) (82.6)

CROSS-CURRENCY SWAPS

2012-13 18,536 15,164 251,132 236,610 579 31 30,431 552,484

2013-14 24,415 35,845 4,782 44,675 50 0 11,296 121,062

2014-15 81,931 96,638 59,892 54,990 0 0 22,274 315,726

% change 235.6 169.6 1152.6 23.1 (100.0) na 97.2 160.8

OIS - INCLUDING BOBS

2012-13 96,789 98,978 202,886 701,166 2,333 0 161,594 1,263,747

2013-14 590,379 1,366,969 195,336 616,870 8,625 0 149,097 2,927,277

2014-15 697,987 819,718 381,039 1,729,599 0 0 227,835 3,856,178

% change 18.2 (40.0) 95.1 180.4 (100.0) na 52.8 31.7

FRAS

2012-13 – – – – – – – –

2013-14 – – – – – – – –

2014-15 263,033 440,808 180,728 47,059 0 0 2,522 934,150



2012-13 – – – – – – – –

2013-14 – – – – – – – –

2014-15 9,571 79,738 3,481 61,054 0 650 21,912 176,406


TOTAL

2012-13 192,761 169,343 590,337 1,243,731 5,238 1,582 318,689 2,521,680

2013-14 1,019,527 2,004,484 719,193 1,114,320 17,841 4,307 724,014 5,603,686

2014-15 1,470,167 2,101,401 1,236,747 2,245,601 6,658 2,293 571,593 7,634,459

% change 44.2 4.8 72.0 101.5 (62.7) (46.8) (21.1) 36.2



1 30.7 30.7

2 21.7 52.3

3 12.9 65.3

4 9.1 74.4

5 8.2 82.6

6 7.2 89.8

7 6.9 96.7

8 1.9 98.6a Market share data excludes in-house transactions..


2012-13 85.8

2013-14 96.9


Interest Rate, Tenor Basis Cross-Currency and Inflation-Linked Swaps Trading Concentration


1 20.8 20.8

2 19.8 40.5

3 17.1 57.6

4 13.2 70.8

5 12.6 83.4

6 7.2 90.7

7 5.5 96.1



2012-13

2013-14 97.2


Interest Rate Derivatives Trading Concentration


1 32.1 32.1

2 23.3 55.4

3 11.8 67.1

4 9.7 76.8

5 6.9 83.7

6 6.7 90.4

7 6.6 97.0



2012-13

2013-14 97.5


Interest Rate and Tenor Basis Swaps Trading Concentration




1 34.7 34.7

2 26.0 60.7

3 22.6 83.3

4 10.0 93.4

5 4.7 98.0



2012-13

2013-14 100.0


Inflation-Linked Swaps Trading Concentration


1 21.3 21.3

2 20.7 42.0

3 17.4 59.4

4 10.8 70.2

5 10.5 80.7

6 8.5 89.2

7 5.4 94.6



2012-13

2013-14 96.7


Cross-Currency Swaps Trading Concentration


1 33.0 33.0

2 31.8 64.8

3 10.3 75.1

4 6.8 81.8

5 6.7 88.5

6 5.6 94.1

7 3.3 97.4



2012-13 87.3

2013-14 99.6


OIS Including BOBs Trading Concentration



1 31.7 31.7

2 22.5 54.2

3 21.0 75.2

4 10.7 85.9

5 7.0 92.9

6 4.3 97.3

7 2.1 99.4



2012-13 92.3

2013-14 100.0


Forward Rate Agreements Trading Concentration


1 27.0 27.0

2 22.8 49.8

3 22.0 71.8

4 16.5 88.3

5 11.5 99.9

6 0.1 100.0



2012-13 100.0

2013-14 100.0


OIS Including BOBs Trading Concentration



Foreign Exchange and Currency Options

A NUMBER OF THEMES have led to a rise in market volatility in foreign exchange markets during 2014-15. These include divergence in global monetary policies, governments that have had limited fiscal capacity and regulatory reviews and reforms.

More specifically, the revitalisation of the USD on the policy divergence between the US, Japan and Europe, where the US Federal Reserve prepares to hike interest rates, while the Bank of Japan and the European Central Bank both began quantitative easing (QE), has driven a broader USD rally.

The year also largely resolved the debate on whether the ramping up of QE in Japan and Europe, and the resulting increase in global liquidity, could be enough to offset the withdrawal of liquidity that will arise as the Federal Reserve begins to hike rates. The scale of USD liquidity in the world, relative to that of either the euro or the yen, and the degree to which USD leverage rose through the past few years, settled in favour of the USD.

The year was also punctuated with rolling volatility in the emerging markets as the shifting liquidity environment laid some stories that had previously been washed over bare. In particular we saw Brazil embroiled in a corruption scandal, while Malaysia suffered a similar fate. Turkey’s politics drove a rise in caution there, while Russia’s more aggressive stance also had an impact on currencies.

Part of the deterioration in the emerging markets was driven by falling commodity prices, which tested fiscal balances in many of these nations. The declines came as the rising USD coincided with a ramp-up in production volumes (most notably in oil and iron ore). This meant that we also saw large-scale underperformance among currencies in the commodity complex, with CAD and AUD particularly notable.

This underperformance was exacerbated as the falling terms of trade, together with lower global inflation, meant that central banks shifted back to an easing track once again. Australia, Canada and Norway lead the way, followed by New Zealand. All up there were 31 separate central bank actions since the beginning of 2015.

Not all stories were negative. Election outcomes in Indonesia and India helped their respective currencies outperform, while the NZD also had a very strong run until the terms of trade decline caught up with the economy.

Liquidity was not good as transaction volumes remained smaller and leverage in the FX market remained low. This exacerbated volatility, which we expect will continue to rise. Underlying sources of volatility (policy uncertainty, volatility of macroeconomic outcomes and expensive valuations across assets) are all beginning to stir and will likely continue to provide a headwind to risk and carry currencies in the foreseeable future, just as it did through the past year.

Aggregate FX volumes globally rose during 2014-15 to a new record 5.5 trillion daily turnover, although they fell approximately 11% in Australia, with swaps volumes contributing to the decline.

The global increase was driven by a resurgence in volumes across the US and UK markets in EUR–USD and USD–JPY spot volumes primarily. n


10

20

30

40

50

60

70

80

90

100

AU

D tr

illio

n

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15


AUD Spot10%

Non-AUDSpot21%

AUD Forward5%

Non-AUD Forward2%

AUD Swap35%

Non-AUD Swap27%

Figure 3: Currency Options Turnover by Currency Pair

AUD/USD20%

AUD/JPY1%

AUD/GBP1%

AUD/NZD2%

AUD/EUR 1%

AUD Other23%

USD/JPY7%

USD/GBP1%

USD/NZD5%

USD/EURO12%

USD Other27%


62.00

64.00

66.00

68.00

70.00

72.00

74.00

0.7500

0.8000

0.8500

0.9000

0.9500

1.0000

AUD–USD (lhs) AUD TWI (rhs)

01-J

ul-2

014

01-A

ug-2

014

01-S

ep-2

014

01-O

ct-2

014

01-N

ov-2

014

01-D

ec-2

014

01-J

an-2

015

01-F

eb-2

015

01-M

ar-2

015

01-A

pr-2

015

01-M

ay-2

015

01-J

un-2

015

Foreign Exchange Annual Turnover Summary (AUD billion)

Survey Year With local financial institutions With overseas financial institutions With non-financial institutions Total

AUD SPOT

2012-13 774 2,687 851 4,312

2013-14 828 2,907 463 4,198

2014-15 557 2,655 497 3,709

% change (32.6) (8.7) 7.3 (11.6)

NON-AUD SPOT

2012-13 853 5,715 192 6,759

2013-14 944 5,787 179 6,910

2014-15 670 7,137 273 8,080

% change (29.0) 23.3 52.6 16.9

AUD FORWARD

2012-13 605 468 509 1,581

2013-14 841 548 503 1,892

2014-15 1,011 480 619 2,111

% change 20.2 (12.4) 23.1 11.5

NON-AUD FORWARD

2012-13 171 635 127 932

2013-14 173 566 126 865

2014-15 180 630 124 934

% change 4.1 11.2 (1.5) 8.0

AUD SWAP

2012-13 3,418 10,611 728 14,757

2013-14 4,690 10,849 402 15,941

2014-15 4,186 9,086 360 13,632

% change (10.7) (16.3) (10.4) (14.5)

cont..

Australian Dollar Exchange Rate

FOREIGN EXCHANGE AND CURRENCY OPTIONS


Currency Options Annual Turnover Summary (AUD million)

Survey YearSurvey




CURRENCY OPTIONS (AUD LEG)

2012-13 68,547 301,978 321,284 41,280 119 0 289,584 1,022,792

2013-14 48,673 225,411 259,364 39,456 172 0 253,805 826,881

2014-15 19,171 171,270 79,183 57,750 8 1,088 111,034 439,505

% change (60.6) (24.0) (69.5) 46.4 (95.1) na (56.3) (46.8)

CURRENCY OPTIONS (NO AUD LEG)a

2012-13 17,116 100,178 80,984 9,602 0 2,202 41,349 251,431

2013-14 15,562 102,409 77,966 13,494 0 0 46,643 256,075

2014-15 18,453 186,963 116,725 46,163 4 2,160 103,491 473,958

% change 18.6 82.6 49.7 242.1 na na 121.9 85.1

TOTAL

2012-13 85,663 402,156 402,268 50,882 119 2,202 330,933 1,274,223

2013-14 64,235 327,820 337,330 52,950 172 0 300,448 1,082,955

2014-15 37,624 358,232 195,908 103,913 12 3,248 214,525 913,462

% change (41.4) 9.3 (41.9) 96.2 (93.0) na (28.6) (15.7)

a Turnover for currency with no AUD leg was converted to AUD using the RBA daily average exchange rate for the financial period 2014-15.


Foreign Exchange Annual Turnover Summary (AUD billion) cont....

Survey Year With local financial institutions With overseas financial institutions With non-financial institutions Total

NON-AUD SWAP

2012-13 1,599 11,607 855 14,061

2013-14 1,787 11,847 406 14,040

2014-15 1,495 8,918 224 10,637

% change (16.3) (24.7) (44.9) (24.2)

TOTAL

2012-13 7,419 31,721 3,262 42,403

2013-14 9,262 32,505 2,079 43,847

2014-15 8,099 28,907 2,097 39,103

% change (12.6) (11.1) 0.9 (10.8)

Note: FX data is supplied by the RBA.


AUD Leg Currency Option Annual Turnover by Currency (AUD million)

Survey YearSurvey




AUD/USD

2012-13 56,598 241,085 286,141 32,263 8 0 226,675 842,770

2013-14 41,007 173,474 217,964 29,515 32 0 200,819 662,811

2014-15 10,685 79,238 17,687 16,717 4 250 58,506 183,088

% change (73.9) (54.3) (91.9) (43.4) (86.3) na (70.9) (72.4)

AUD/JPY

2012-13 3,673 26,239 13,685 2,450 0 0 33,411 79,458

2013-14 2,332 20,448 17,747 2,410 0 0 28,303 71,241

2014-15 250 2,897 106 301 0 0 619 4,173

% change (89.3) (85.8) (99.4) (87.5) na na (97.8) (94.1)

AUD/GBP

2012-13 903 2,873 1,552 926 0 0 2,178 8,432

2013-14 696 4,067 2,859 699 0 0 2,184 10,505

2014-15 266 3,290 951 534 0 0 1,241 6,283

% change (61.7) (19.1) (66.7) (23.6) na na (43.1) (40.2)

AUD/NZD

2012-13 3,721 13,350 13,360 3,048 110 0 13,671 47,260

2013-14 2,781 15,424 13,892 4,524 139 0 11,491 48,251

2014-15 866 10,542 4,540 2,510 0 0 3,578 22,035

% change (68.9) (31.7) (67.3) (44.5) (100.0) na (68.9) (54.3)

AUD/EUR

2012-13 2,215 11,604 3,265 1,219 0 0 6,236 24,539

2013-14 1,043 7,471 3,596 1,273 0 0 4,913 18,296

2014-15 616 5,147 2,311 2,160 0 0 2,734 12,969

% change (40.9) (31.1) (35.7) 69.7 na na (44.4) (29.1)

AUD/RMBa

2012-13 0 0 0 0 0 0 0 0

2013-14 0 0 0 0 0 0 0 0

2014-15 0 176 0 0 0 0 178 353


AUD/OTHER

2012-13 1,438 6,827 3,281 1,375 0 0 7,412 20,333

2013-14 815 4,526 3,305 1,034 0 0 6,096 15,776

2014-15 6,487 69,981 53,589 35,527 4 838 44,178 210,604

% change 695.6 1446.2 1521.4 3335.9 na na 624.7 1234.9

TOTAL

2012-13 68,547 301,978 321,284 41,280 119 0 289,584 1,022,792

2013-14 48,673 225,411 259,364 39,456 172 0 253,805 826,881

2014-15 19,171 171,270 79,183 57,750 8 1,088 111,034 439,505

% change (60.6) (24.0) (69.5) 46.4 (95.1) na (56.3) (46.8)

a AUD/RMB first sampled in 2014-15



Non-AUD Leg Currency Option Annual Turnover by Currency (AUD million)

Survey YearSurvey




USD/JPY

2012-13 4,609 30,327 40,351 3,724 0 0 11,815 90,826

2013-14 3,529 31,066 49,349 9,575 0 0 16,368 109,887

2014-15 1,956 42,187 10,880 3,829 0 109 6,432 65,393

% change (44.6) 35.8 (78.0) (60.0) na na (60.7) (40.5)

USD/GBP

2012-13 778 10,986 2,809 288 0 59 2,150 17,070

2013-14 604 4,440 510 0 0 0 816 6,370

2014-15 121 4,878 2,089 325 0 116 1,375 8,903

% change (80.0) 9.9 309.6 na na na 68.5 39.8

USD/NZD

2012-13 6,465 17,587 29,102 4,468 0 0 17,531 75,153

2013-14 7,155 24,421 25,164 3,788 0 0 20,886 81,414

2014-15 1,537 18,575 3,746 5,878 0 234 10,791 40,762

% change (78.5) (23.9) (85.1) 55.2 na na (48.3) (49.9)

USD/EURO

2012-13 4,782 35,298 7,687 313 0 2,143 7,507 57,730

2013-14 3,934 38,383 1,887 131 0 0 6,428 50,763

2014-15 2,912 32,807 47,847 1,693 0 597 24,379 110,235

% change (26.0) (14.5) 2435.4 1194.4 na na 279.3 117.2

USD OTHER

2012-13 482 5,980 1,035 103 0 0 2,346 9,946

2013-14 340 4,100 1,056 0 0 0 2,145 7,641

2014-15 11,927 88,516 52,163 34,438 4 1,104 60,513 248,665

% change 3408.5 2058.7 4840.4 na na na 2721.5 3154.4

TOTAL

2012-13 17,116 100,178 80,984 9,602 0 2,202 41,349 251,431

2013-14 15,562 102,409 77,966 13,494 0 0 46,643 256,075

2014-15 18,453 186,963 116,725 46,163 4 2,160 103,491 473,958

% change 18.6 82.6 49.7 242.1 na na 121.9 85.1

Note: Turnover for currency with no AUD leg was converted to AUD using the RBA daily average exchange rate for the financial period 2014-15.


1 49.5 49.5

2 21.2 70.7

3 18.1 88.9



2012-13 100.0

2013-14 100.0


Currency Options Trading Concentration


THE REPEAL OF THE CARBON TAX was the dominant issue for the electricity market. Retrospective repeal of the Clean Energy Act impacted significantly on trading volumes in contracts using the carbon addendum. Consequently, turnover in over the counter derivatives was down across all states.

Prices fell due to the repeal of the carbon legislation with Queensland experiencing reasonable variability in forward prices driven by volatility in spot outcomes.

For carbon inclusive contracts, turnover has most likely increased following the carbon tax repeal. Outstanding positions may have decreased as a result of further vertical integration in the industry.

For environmental products, continued political risk and disruption to environmental schemes were the main themes for the year, in particular in the Large Scale Renewable Energy Certificates and Victorian Energy Efficiency Certificates. There was large variability in line with overall increases in prices in all schemes. Turnover has increased slightly over the year after a large drop the previous year.

Political uncertainty is likely to remain an issue for environmental products in the year ahead. n

Electricity


03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15 0

100

200

300

400

500

600

700

800

900

1,000

Mill

ion

meg

awat

t hou

rs

Total - Electricity ASX

Figure 2: State Annual Turnover

NSW VIC SA QLD

0

20

40

60

80

100

120

140

160

180

200

Mill

ion

meg

awat

t hou

rs

05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15 04-05 03-04

Energy Products


Swaps79%

Caps16%

Swaptions2%

Collars / Asian and Other Options3%

Figure 4: ASX Electricity Traded Volumes (megawatt hours)

0

100000000

200000000

300000000

400000000

500000000

600000000

Exchange Traded Futures (inc Caps) Exchange Traded Options

10-11 11-12 12-13 13-14 2014-15


Environmental Products

Figure 1: Total RECS Annual Turnover

0

10

20

30

40

50

60

70

80

90

Mill

ion

cert

i�ca

tes

03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 2014-15

Figure 2: Total RECS Turnover by Instrument

Current Year68%

t+1 Years21%

t+2 Years9%

t+3 Years1%

t+4 Years1%

Figure 3: Large Scale Generation Certificate Turnover by Instrument

Current Year40%

t+1 Years30%

t+2 Years 24%

t+3 Years4%

t+4 Years2%

Figure 4: Small Scale Technology Certificate Turnover by Instrument

Current Year84%

t+1 Years16%


Electricity Annual Turnover Summary (megawatt hours)Survey Year Generators Retailers Intermediaries Other Total ≤ 12 months (%) > 12 months (%)

SWAPS

2012-13 106,386,757 98,303,627 24,004,474 205,230 228,900,087 61.3 38.7

2013-14 73,734,278 61,595,315 52,016,882 7,960,988 195,307,462 73.2 26.8

2014-15 31,104,579 10,942,470 16,250,394 10,636,587 68,934,029 94.8 5.2

% change (57.8) (82.2) (68.8) 33.6 (64.7)

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 53.0 47.0

2014-15 8,368,530 2,194,520 229,194 3,545,712 14,337,956 97.5 2.5

% change (29.9) (74.4) (78.7) (69.6) (56.8)

SWAPTIONS

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 61.1 38.9

2014-15 1,136,397 148,500 0 0 1,284,897 100.0 0.0

% change (80.3) (95.9) (100.0) (100.0) (90.7)

COLLARS, ASIAN AND OTHER OPTIONS

2012-13 13,815,600 11,585,145 1,025,955 0 26,426,700 16.4 83.6

2013-14 4,159,440 2,346,525 1,681,500 300,000 8,487,465 97.5 2.5

2014-15 1,598,160 523,797 205,365 624,600 2,951,922 100.0 0.0

% change (61.6) (77.7) (87.8) 108.2 (65.2)

TOTAL

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 71.5 28.5

2014-15 42,207,666 13,809,287 16,684,953 14,806,899 87,508,804 95.4 4.6

% change (55.8) (81.9) (70.0) (37.0) (65.1)

ELECTRICITY

ASX Energy, ASX Electricity Traded Volumes (megawatt hours)Survey Year Exchange-Traded Futures (inc. Caps) Exchange-Traded Options Total

2012-13 240,736,233 100,959,000 341,695,233

2013-14 242,927,496 143,771,232 386,698,728

2014-15 316,400,895 129,780,984 446,181,879

% change 30.2 (9.7) 15.4

Data is supplied by ASX EnergyAverage Rate Options first listed in 2013

Electricity Liquidity Ratio (megawatt hours)

Survey Year NEM System Demanda Turnover Ratio

2012-13 183,727,278 632,874,355 3.5

2013-14 178,648,297 637,458,894 3.6

2014-15 179,026,780 533,690,683 3.0a NEM System Demand data is supplied by ASX

ENERGY PRODUCTS


Market Rank % Market Share % Cumulative Share

1 38.1 38.1

2 21.9 60.0

3 10.7 70.7

4 9.1 79.8

5 8.8 88.5

6 5.4 93.9

7 3.0 96.9

8 2.9 99.8

Top 8 Respondents % Market Share

2012-13 92.0

2013-14 95.8

2014-15 99.8

Electricity Trading Concentration

Market Rank % Market Share % Cumulative Share

1 40.0 40.0

2 27.9 67.8

3 13.8 81.6

4 6.3 87.9

5 5.4 93.3

6 3.6 96.9

7 3.1 100.0

Top 4 Respondents % Market Share

2012-13 86.3

2013-14 90.0

2014-15 87.9

Environmental Products Trading Concentration

Total Renewable Energy Certificates Annual Turnover Summary (certificates)Survey Year Eligible Producer Liable Party Intermediaries Total

2012-13 20,668,565 26,718,857 30,356,781 83,654,244

2013-14 9,726,734 2,410,794 6,499,796 18,637,324

2014-15 10,407,980 2,401,731 10,172,390 22,982,101

% change 7.0 (0.4) 56.5 23.3


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 Cap

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

2014-15 38,917 14,214 14,813 574 327 920 6,583 1,353 0 77,702 4.8

% change 40.7 84.6 (19.5) na 55.5 (21.8) 43.3 3.8 na 27.3* Includes privatisations and prospectusesData may not add properly due to rounding

Companies Listed on ASX at 30 June 2015

Survey YearNo. of Companies with

Quoted SecuritiesMarket Capitalisation of all

Listed EquitiesDomestic Companies with

Quoted EquitiesMarket Capitalisation with Listed Domestic Equities

Market Value of Average Domestic Company

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

2014-15 2,016 1,698,709 1,906 1,611,911 846

% change 1.3 4.0 0.8 3.9 3

SECONDARY MARKET ACTIVITY

Equity Trading on ASX

Survey YearNumber of Shares

(million)Annual Value (AUD million) Trades (‘000)

Average Daily Trades

Average Daily Value (AUD million)

2012-13 415,095 1,045,952 174,750 693,454 4,151

2013-14 397,902 1,008,897 181,861 718,817 3,988

2014-15 408,215 1,112,449 190,647 750,578 4,380

% change 2.6 10.3 4.8 4.4 10

Equity Trading on Chi-X

Survey YearNumber of Shares Per Annum

(million)Annual Value (AUD million) Trades Per Annum ('000)

Average Daily Trades

Average Daily Value (AUD million)

2012-13 25,409 105,097 31,389 124,560 417

2013-14 70,986 178,818 42,857 169,394 707

2014-15 75,909 215,617 48,748 210,122 929

% change 6.9 20.6 13.7 24.0 31

Turnover as % of Average Market Cap (AUD billion)Survey Year Equity Turnover Average Domestic Market Cap % Liquidity

2012-13 1,151 1,341 78.0

2013-14 1,188 1,517 66.5

2014-15 1,328 1,632 68.1

% change 11.8 7.6 2.4

Exchange-Traded Market Data


EQUITY DERIVATIVES

Equity Derivatives Contract Volume (‘000)Survey Year Call Tradesa Put Tradesa Total Contractsa SPI 200® Futures SPI 200® Options

2012-13 90,937 66,356 157,293 10,259 477

2013-14 72,031 52,561 124,592 9,715 349

2014-15 64,564 55,940 120,504 10,301 473

% change (10.4) 6.4 (3.3) 6.0 35.6a Includes Stock Options, Cash Index Options and LEPOs

Equity Derivatives Turnover by Notional Value (AUD billion)Survey Year Stock Options Cash Index Optionsa LEPOs SPI 200® Futures SPI 200® Options

2012-13 313 539 11 1,169 40

2013-14 274 410 14 1,280 62

2014-15 268 591 6 1,425 62

% change (2.1) 44.1 (54.3) 11.3 0.0a Includes Cash Index LEPOs

WarrantsSurvey Year Number of Issues Trades ('000) Contract Value (AUD million)

2012-13 5,140 319 3,758

2013-14 3,564 360 3,900

2014-15 3,050 318 2,651

% change (14.4) (11.7) (32.0)

Data from previous years has been reviewed and some figures have been adjusted.

SPI 200® Futures to Cash Equity Turnover

Cash Equity Turnover SPI 200® Futures Turnover Futures to Cash Ratio

50

60

70

80

90

100

110

120

130

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2010-11 2011-12 2012-13 2013-14 2014-15

SPI 2

00®

Futu

res

to C

ash

ratio

Not

iona

l val

ue (A

UD

bill

ion)

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 10 Year Bonds Electricity Grain Othera Total Exchangeb

FUTURES VOLUME (‘000 CONTRACTS)

2012-13 4,780 25,866 47,499 21,211 161 353 10,270 110,141

2013-14 3,517 25,903 47,886 25,520 157 181 9,719 112,883

2014-15 3,678 28,706 49,717 29,498 211 135 10,389 122,330

% change 4.6 10.8 3.8 15.6 34.5 (25.7) 6.9 8.4

OPTIONS VOLUME (‘000 CONTRACTS)

2012-13 0 7 3,882 20 12 7 349 4,276

2013-14 0 4 3,466 25 20 2 473 3,990

2014-15 0 0 2,067 25 27 7 454 2,581

% change na (100.0) (40.4) (2.8) 36.3 370.8 (3.9) (35.3)

FUTURES & OPTIONS VOLUME (‘000 CONTRACTS)

2012-13 4,780 25,873 51,381 21,231 173 360 10,619 114,417

2013-14 3,517 25,907 51,352 25,545 177 183 10,192 116,873

2014-15 3,678 28,706 51,785 29,523 238 142 10,844 124,911

% change 4.6 10.8 0.8 15.6 34.7 (22.5) 6.4 6.9

Data does not include NZ-dominated contracts.a Other includes Futures and Options for SPI 200 and other indices, wool contracts.b Where the exchange is that operated by Australian Securities Exchange Ltd.

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

2012-13 14,340 25,877 4,750 2,121 18 2 1,201 48,309

2013-14 10,551 25,904 4,789 2,552 16 1 1,280 45,092

2014-15 11,035 28,706 4,972 2,950 19 1 1,428 49,111

% change 4.6 10.8 3.8 15.6 24.3 (24.8) 11.5 8.9

OPTIONS VOLUME

2012-13 0 7 388 2 6 0 40 443

2013-14 0 4 347 3 6 0 62 421

2014-15 0 0 207 2 4 0 62 275

% change na na (40.4) (2.8) (35.7) na 0.0 (34.6)

TOTAL

2012-13 14,340 25,884 5,138 2,123 23 2 1,241 48,750

2013-14 10,551 25,908 5,135 2,555 22 1 1,342 45,513

2014-15 11,035 28,706 5,178 2,952 23 1 1,490 49,386

% change 4.6 10.8 0.8 15.6 7.6 (21.6) 11.0 8.5a ASX Grain Futures & Options market was migrated to ASX 24 on 24 October 2011. The data listed is not included in the ‘Total Exchange’ data.b Other includes Futures and Options for SPI 200® and other indices, wool contracts.c Where the exchange is that operated by Australian Securities Exchange Ltd. Data from previous years has been reviewed and some figures have been adjusted.



Futures and Options Open Interest at 30 June 2015

Survey Year 30 Day IB 90 Day Bills IR 3 Year Bonds YT 10 Year Bonds XT Electricity Graina Otherb Total Exchangec

2012-13 224,404 895,481 497,426 436,194 45,117 29,832 313,374 2,441,828

2013-14 170,400 935,972 731,156 598,736 55,729 19,418 314,841 2,826,252

2014-15 176,989 840,466 600,793 652,186 56,666 11,337 319,103 2,657,540

% change 3.9 (10.2) (17.8) 8.9 1.7 (41.6) 1.4 (6.0)a ASX Grain Futures & Options market was migrated to ASX 24 on 24 October 2011. The data listed is not included in the ‘Total Exchange’ data.b Other includes Futures and Options for SPI 200 and other indices, wool contracts.c Where the exchange is that operated by Australian Securities Exchange Ltd.Data from previous years has been reviewed and some figures have been adjusted.

BONDS AND HYBRIDSSurvey Year Number Market Cap (A$b) Value (A$m) Volume Total trades (#)

AUSTRALIAN GOVERNMENT BONDS (AGBS)

2012-13 23 278 4 39,988 148

2013-14 26 348 54 481,172 1,173

2014-15 28 404 66 602,533 1,335

% change 7.7 16.1 22.4 25.2 13.8

CORPORATE BONDS – FIXED RATE

2012-13 4 0 56 524,915 2,595

2013-14 4 0 40 382,501 1,612

2014-15 2 0 46 431,926 1,264

% change (50.0) 34.2 15.2 12.9 (21.6)

CORPORATE BONDS – FLOATING RATE (FRNS)

2012-13 24 13 3,173 32,424,382 145,631

2013-14 24 15 3,020 30,478,678 114,246

2014-15 23 15 2,820 28,212,016 111,440

% change (4.2) (0.7) (6.6) (7.4) (2.5)

PREFERENCE SHARES

2012-13 33 22 4,879 44,784,403 245,594

2013-14 34 26 5,264 52,175,470 209,994

2014-15 38 29 6,629 61,342,954 249,701

% change 11.8 8.6 25.9 17.6 18.9

CONVERTIBLE NOTES

2012-13 17 2 357 14,109,567 20,837

2013-14 14 2 377 43,865,423 16,535

2014-15 14 1 313 19,574,732 12,905

% change 0.0 (28.9) (17.1) (55.4) (22.0)

Number and Market Cap are as at 30 June. Value, volume and number of trades are the totals for the financial year.


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 ChecksBefore 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

– comparative variations in trends of participant data consistency in aggregated data for individual markets through to summary results

– consistency with other data sources.

Data SourcesThe 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.

Twenty-four participants submitted 72 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) – Equities and futures – Foreign exchange

– Respondent surveys – Australian Securities Exchange – Australian Securities and Investments Commission

– Reserve Bank of Australia

Survey Respondents and CoverageThe 2015 survey covers the period 1 July 2014 to 30 June 2015.

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.

First, the survey reports transactions:

– dealt, risk managed and settled by offices in Australia (Australian booking entity)

– 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:

– 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

Methodology

Maroon Analytics is a management consultancy specialising in

financial analytics, compliance and training. We provide funds,

banks and treasuries with the skills and support necessary to

develop and implement their business strategy for quantitative

finance, derivatives and structured products. Our clients include

global, regional and local banks, regulators, sovereign wealth

funds, fund managers, industry associations, leading audit

firms and family offices. The firm’s unique combination of skills

and experience enables us to bridge the gaps that often occur

between front-office, risk, quants, technology and compliance.

We are also FINCAD’s Channel Partner for Southeast Asia,

providing consultancy, sales and technical support to their

clients across the region.

To find out how Maroon Analytics is able to help your

organisation, please contact:

Ben Watson at [email protected]

or visit our website at www.maroonanalytics.com

APPENDIX A


Resp

onde

nts

(15)

Gov

ernm

ent

Deb

t

Secu

ritie

s

(10)

Non

-Gov

. Deb

t

Secu

ritie

s

(8)

Neg

otia

ble

&

Tran

sfer

able

Inst

rum

ents

(10)

Rep

urch

ase

Agre

emen

ts

(9)

Inte

rest

Rat

e

Der

ivat

ives

(9)

Cred

it

Der

ivat

ives

(6)

Curr

ency

Opt

ions

(4)

AN

Z Ba

nkin

g G

roup

Lim

ited

üü

üü

üü

ü

Bank

of Q

ueen

slan

d Li

mite

dü

BNP

Parib

asü

üü

üü

Citi

üü

üü

ü

Com

mon

wea

lth B

ank

of A

ustr

alia

üü

üü

üü

ü

Deu

tsch

e Ba

nk A

Gü

üü

ü

HSB

C Ba

nk A

ustr

alia

Lim

ited

üü

üü

ING

Ban

k (A

ustr

alia

) Lim

ited

ü

JP M

orga

n Ch

ase

Bank

, N.A

.ü

ü

Nat

iona

l Aus

tral

ia B

ank

Lim

ited

üü

üü

üü

ü

Rabo

bank

ü

Roya

l Ban

k of

Can

ada

ü

Sunc

orp

Met

way

Ltd

ü

UBS

AG

Aus

tral

ia B

ranc

hü

üü

Wes

tpac

Ban

king

Cor

pora

tion

üü

üü

üü

ü

Survey Respondents

Over-the-Counter Markets

APPENDIX B APPENDIX B


Energy Markets

Respondents

(9)

Electricity

(9)

Environmental Products

(7)

AGL Energy Limited ü ü

Alinta ü ü

Energy Australia ü ü

Ergon Energy Corporation Limited ü

ERM Power ü ü

Intergen (Australia) Pty Ltd ü

Origin Energy ü ü

Snowy Hydro ü ü

Westpac Banking Corporation ü ü

APPENDIX BAPPENDIX B


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 – Traditional Life offices, other insurance companies, superannuation funds and other nominee and trust structures.

Funds Managers – Hedge Funds/CTAs Hedge Funds and Commodity Trading Advisors.

Government Commonwealth and Ssate 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.

Survey Design

APPENDIX C


Definitions of Instruments

Instrument Definition


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.

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 deposit-taking institution (Australian-owned banks, foreign aubsidiary 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.


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 (FRAs) types include: AUD (in AUD), USD (in USD), JPY (in JPY), GBP (in GBP), Euro (in EUR), NZ (in NZD) and other (in USD).

APPENDIX CAPPENDIX C


Instrument Definition


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.

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

APPENDIX C


THE AUSTRALIAN FINANCIAL MARKETS ASSOCIATION (AFMA) is 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 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 7900Email: [email protected] Box 3655 Sydney NSW 2001

Web www.afma.com.au

About AFMA

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 2015. 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.

GPO Box 3655 Sydney NSW 2001Telephone: + 61 2 9776 7900 Email: [email protected]

Australian Financial Markets Association

ISSN 1444 7215

www.afma.com.au

2015 Australian Financial Markets Report - AFMA AFMR.pdf · FINANCIAL MARKETS ARE AN ESSENTIAL link...

Documents

Transcript of 2015 Australian Financial Markets Report - AFMA AFMR.pdf · FINANCIAL MARKETS ARE AN ESSENTIAL link...