ANNUAL REPORT 2016 - AFMA€¦ · AFMA Annual Report 2016 ... Data Services ... framework for...

ANNUAL REPORT 2016Australian Financial Markets Association Ltd

2 AFMA Annual Report 2016

Australia’s financial markets are highly competitive and make a vital contribution to national income

and employment. AFMA’s core objectives are directed to the long-term development of financial

markets but current market conditions naturally influence the near-term focus of our activities.

The 2015-16 financial year saw a continuation of a low-inflation, low interest rate environment for the

world’s advanced economies, including Australia. Long-term interest rates posted new record lows

throughout the world, extending a downward trend that has persisted since the early 1980s.

www.afma.com.au 3

© 2016 Australian Financial Markets Association Ltd. This report is subject to copyright. No part of it should be reproduced without the written consent of the copyright owner.

CONTENTS

Chairman’s Report ........................................................................................................................ 4

Policy Initiatives .............................................................................................................................. 8

Market & Operations Committees ....................................................................................11

Data Services .................................................................................................................................14

Professionalism & Education ................................................................................................15

AFMA in the Community .......................................................................................................17

AFMA Staff .......................................................................................................................................18

Committees ....................................................................................................................................22

Governance ....................................................................................................................................23

2015/16 Submissions ...............................................................................................................24

Members ..........................................................................................................................................26

About AFMA ...................................................................................................................................27


AFMA – A Decade of Service to Members

The year 2016 is notable for the

Association, as it is now 10 years

since the then Australian Financial

Markets Association (AFMA) and the International Banks and Securities Association (IBSA) merged to form a new association that retained the

AFMA name. Shortly afterwards, AFMA

merged with the Australian Financial

Operations Association (AFOA).

These mergers created an effective

association that speaks with one voice

for the wholesale banking and financial

markets industry and covers the full

spectrum of its business activities.

Member firms have since enjoyed better

industry representation and association

services, which have been delivered at a

significantly lower cost for members.

This strengthening of industry

representation was very timely, as it

helped member firms and Australian

government to respond to the global

financial crisis (GFC) in a manner that

contained its disruptive effects on our

financial markets and the economy.

A range of challenges, including the

equities short-selling ban and the

government bank guarantee, were

dealt with expeditiously and to good

effect. Our financial markets remained

in good working order and our financial

institutions were counted among the

world’s strongest, despite the turmoil in

global markets.

Given the gravity of the GFC and

its implications for confidence in

financial systems, the long term global

policy response led by the G-20 was

an exceptional increase in financial

regulation. Important reforms, like the

Basel III capital and liquidity standards,

OTC derivatives trade reporting and

central clearing, benchmarks reform and

the regulatory focus on industry conduct

and culture have been fully reflected in

Australian regulation. In addition, major

domestic reforms, like competition

in equities trading infrastructure and

stronger retail financial advice laws,

have markedly altered the regulatory

framework for member firms. The

effect of these changes are pervasive,

affecting all who trade in and use the

financial markets. Important lessons

have been learnt but the job is not done

yet, with important reforms still in the

implementation stage.

Against this backdrop, AFMA’s role

as an industry advocate and standard

setter has become more important.

The reliance that member firms place

on AFMA to co-ordinate and manage

the industry’s response to the multiple

technical policy and regulatory

measures that impact the range of

financial market activities highlights the

need to ensure that the Association

maintains the capability to represent

members effectively and to deliver

against the key objectives set for it

by the Board. AFMA must continue

to evolve to maintain its strength

The year 2016 is notable for the Association, as it is now 10 years since the then Australian Financial Markets

Association (AFMA) and the International Banks and Securities Association (IBSA) merged to form a new

association that retained the AFMA name. Shortly afterwards, AFMA merged with the Australian Financial

Operations Association (AFOA).

Steve Harker

CHAIRMAN'S REPORT

www.afma.com.au 5

in representing members’ interests

in a constantly changing industry

environment.

My report on AFMA’s activities on

behalf of members in 2015-16 shows

that we are currently meeting this

objective1. Moreover, by improving the

effectiveness of our financial markets

in this way, we also enhance the

prospects for market participants and

the broader economy.

Market developments in 2016

Australia’s financial markets are

highly competitive and make a vital

contribution to national income and

employment. AFMA’s core objectives

are directed to the long-term

development of financial markets but

current market conditions naturally

influence the near-term focus of our

activities.

The 2015-16 financial year saw a

continuation of a low-inflation, low

interest rate environment for the

world’s advanced economies, including

Australia. Long-term interest rates

posted new record lows throughout the

world, extending a downward trend that

has persisted since the early 1980s.

Both short-term policy interest rates and

longer-term, market-determined interest

rates fell below zero in a number of

economies. Around a third of the bonds

in global government bond indices

posted negative yields, challenging

the traditional assumption that nominal

interest rates are necessarily bounded

at zero. At the same time, riskier asset

classes such as equities managed

to overcome concerns about global

economic growth prospects and

geopolitical issues to post gains over

the year, despite sharp sell-offs in

August 2015 and first months of 2016

after the Federal Reserve raised interest

rates in December 2015.

The positive attributes of Australia’s

capital market were highlighted in

August, when ASIC reported that the

Australian equities market exhibits a

high level of market cleanliness and

fares well by international comparison.

The outcome recorded by ASIC

reflects the ongoing commitment

of resources by market participants

to a fair and efficient market and a

thorough approach by ASIC to market

surveillance and enforcement that is

funded by industry participants.

Professionalism and Standards in Financial Markets

The Board has previously set a long

term strategic objective for AFMA to

provide leadership to the industry on

matters of industry reputation and trust.

AFMA has taken practical steps to

promote good conduct and fairness in

financial markets, including development

of a Code of Conduct for members that

is more relevant to present day markets

and reflects community expectations.

Our current focus is to drive professionalism in our financial markets. AFMA must continue to play a leadership role in shaping the industry response to recent events of public concern arising by recognising and responding to issues in relation to fairness and efficiency, and standards of behaviour and competency.

An important practical initiative in

this area is our work to promote

professionalism by building industry

support for accreditation of all

individuals in wholesale market roles,

which covers both competency and

ethical conduct. Development of

conventions and market practices that

are of the highest standard and support

well-functioning markets is another

cornerstone of AFMA’s professionalism

framework.

The focus on professionalism is global

and AFMA stays closely engaged with

international developments, not least

global standards for market conduct

that are beginning to emerge, most

notably in relation to foreign exchange

markets. Of particular relevance is

the newly established FICC Market

Standards Board that was an outcome

of the Fair and Effective Markets Review

in the UK. The Board has been given a

responsibility by industry participants

and the regulators in the UK for

developing high quality standards

for trading practices and promoting

adherence to them in the UK and

overseas.

In Australia, AFMA’s Market Governance

Committee (MGC) has provided a

framework for industry self-governance

of important aspects of the OTC

markets in Australia. This has enabled

the maintenance of high quality market

conventions and facilitated development

of guidance on a range of operational

matters. Thus, the organisational

structure put in place by AFMA a

decade ago has proved to be effective

and resilient, leaving Australia better

placed than many other locations.

However, increased domestic and

global regulatory focus on conduct and

culture in the financial sector highlights

the need to continually re-examine the

effectiveness of our processes and

seek opportunities to improve them. It

is a priority of the Board to ensure that

AFMA’s approach to professionalism

and standard setting remains robust

and builds on proper stakeholder

engagement. For example, the role of

MGC has been refreshed to sharpen

its focus on AFMA’s professional

development programs, including

accreditation, so that they support

enhanced industry education and

behaviour standards for FICC staff.

More generally, AFMA is developing

CHAIRMAN'S REPORT


an integrated framework for standard

setting and promoting professionalism

that covers behaviours in FICC and

other financial markets and we will

engage with members on this issue over

the coming year.

AFMA’s education offerings have been

enhanced with an eye to servicing

the professionalism objective. The

Secretariat is working to put in place

the other elements of a package that

will support professionalism in our

financial markets and we will involve all

member firms directly in this process, as

it progresses.

Government Engagement

The vital contribution of the

financial markets industry to the

economy and the community

must be recognised and

valued by government and

other stakeholders, if we are

to achieve the policy settings

that will promote the further

development of our industry.

AFMA places a high priority on

constructive engagement with the

federal and state governments and

on the maintenance of open and frank

dialogue with the industry’s regulators.

During the year, AFMA’s Board hosted

meetings with the Minister for Revenue

and Financial Services, the Hon Kelly

O’Dwyer MP; the NSW Treasurer and

Minister for Industrial Relations, the Hon

Gladys Berejiklian MP; and Shadow

Treasurer, the Hon Chris Bowen MP.

The Board also met with senior financial

regulators, including the now Deputy

Governor of the Reserve Bank, Guy

Debelle, and the Chair of APRA,

Wayne Byres.

This engagement was complimented

by numerous meetings at the executive

level, which are essential to building

the mutual understanding and sound

working relationships that enable the

policy and technical issues that member

firm encounter to be resolved in an

expedient and effective way.

AFMA has long recognised the benefit

of consistency and mutual reinforcement

of business representations to

government on important policy matters.

AFMA has a solid working relationship

with other industry bodies, including

as a member of the Finance Industry

Council of Australia.

The regulation of our industry is

increasingly global and international

standards setters have a greater

influence on the rules and obligations

our member firms must comply with.

AFMA is a board member of the

International Council of Securities

Associations, which is a global group of

trade associations working to improve

international policy and regulatory

standards.

Policy

AFMA representations on behalf

of members continue to have a

positive impact on decisions made by

government and regulators that affect

member firms’ businesses. Our policy

team is proactive in leading industry

thinking and in working with members to

develop industry policy positions.

AFMA has a substantial policy and

markets agenda dealing with a wide

range of matters, including exchange

traded markets; equity and debt capital

markets; OTC derivatives regulation;

bank prudential regulation; taxation;

and anti-money laundering law, among

other things. This area accounts for the

greater part of AFMA resources and

over the course of the year, AFMA made

over 40 submissions to governments,

regulators and industry providers both in

Australia and overseas. These important

matters are covered in a separate

dedicated section of the Annual Report.

Benchmarks and AFMAdata

It has been a momentous year for

financial benchmarks in Australia

and, in particular, the Bank Bill Swap

Rate (BBSW) that AFMA compiles

and publishes each day. The Council

of Financial Regulators (CFR) has

designated BBSW to be a significant

financial benchmark; one of six such

benchmarks in Australia.

Following a request by the Council,

AFMA finalised amendments to the

BBSW methodology in mid-2016.

AFMA agreed with the Council’s

assessment of the issues that have

caused reduced market liquidity in the

market for Prime Bank paper. We are

taking the steps required to implement

the Council’s recommendation to place

primary reliance on a volume weighted

average price (VWAP) calculation

methodology for BBSW. We continue

to progress this development in a

transparent way and appreciate the

support of member firms for this

process, including implementing

associated changes to trading practices

in Prime Bank paper for both banks and

investors.

In addition, the Government has

accepted the recommendation of

the Council to regulate benchmark

administration in Australia and will

introduce supporting legislation. This

mirrors similar developments overseas,

most notably in Europe. The Council

proposes that administrators of

significant benchmarks should have

to comply with obligations consistent

with the IOSCO Principles for Financial

Benchmarks. AFMA supports this

approach and was a leader amongst

CHAIRMAN'S REPORT

www.afma.com.au 7

the administrators of global interest rate

benchmarks when it commissioned an

external assurance review of its controls

to conform to the IOSCO Principles in

2014.

AFMA advised the market in May

2016 that it intends to externalise its

AFMAdata business and cease being

the benchmark administrator for BBSW.

This will enable the Association to

concentrate on the policy advocacy

and market development activities

that form the core of its mission. It will

also avoid any risk of compromise to

AFMA’s capacity to represent members’

interests to regulators in an environment

when benchmark administrators will be

regulated entities.

AFMA will transfer administrator

responsibilities to an entity that has the

capability to maintain the effectiveness

of BBSW and support the smooth,

timely implementation of the new

methodology. The externalisation

process was underway at the time that

this report was being prepared.

Education Services

AFMA’s mission includes the promotion

of professionalism in markets by

sponsoring education programs and

awarding AFMA Accreditation in

the financial markets. To help meet

this objective, AFMA is a Registered

Training Organisation regulated by the

Australia Skills Quality Authority and the

Education Services team took a number

of initiatives this year to improve our

capability in this area.

The Financial Markets Core module,

which is the key plank of our

accreditation program, was upgraded

to enable greater student engagement

and interactivity. This has resulted in

higher student satisfaction ratings and a

significant improvement in exam results.

In other words, it provides better trained

individuals for our industry.

AFMA launched a new Anti-money

laundering Graduate Program that will

give students from member firms a deep

understanding of money laundering

and terrorism financing risks and to

equip them with tools to strengthen

their organisations against abuse by

criminals.

In support of the new Code of Conduct,

AFMA with the assistance of member

firms developed a new Ethical Decision

Making in Financial Markets workshop,

specifically designed for individuals to

apply the Code’s ethical principles in

real-life situations.

The Secretariat is conducting a

strategic review of the education

services division to ensure its offerings

remain aligned with the professional

development requirements of the

industry and to improve its financial

performance.

Financial Position

AFMA is in a sound financial position

and has accumulated reserves that

provides a good buffer for unanticipated

events. The management conducts its

business with tight cost controls and

has streamlined its operations in recent

years. This approach has enabled

membership fees to be again kept

unchanged this year and they remain

below their level of five years ago.

The externalisation of the AFMAdata

business is a significant event for the

Association. The Board will plan the

future activities of AFMA in keeping

with members’ requirements and will

continue to conduct its affairs in the

prudent manner that has been adopted

to date.

AFMA members cover the full spectrum

of participants in wholesale banking and

financial markets. Membership numbers

are relatively stable and we continue to

receive good support from members.

In Appreciation

AFMA is fortunate to have a Board that

is comprised of senior industry leaders.

They each have busy schedules and I

am grateful to them for the commitment

they bring to the Association’s affairs.

I would particularly like to acknowledge

the ongoing contribution of Rob

Priestley, who is the sole remaining

Director from the foundation Board in

2006. Rob was Chairman of AFMA

during the difficult years of the global

financial crisis and his expertise and

unique knowledge of AFMA will be of

particular benefit to the Board over the

coming year.

As an industry body, AFMA’s

effectiveness depends on a significant

commitment of time and expertise by

member firms and their employees.

The demands placed on our policy and

markets committee members is very

significant at times but their willingness

to step up to the plate and work for

better outcomes for their firm and the

industry as a whole is commendable.

AFMA’s activities are managed and

supported by a Secretariat that takes on

responsibility for the effective operation

of the Association across its policy,

markets and education activities. Their

dedication to this task is central to

the success of AFMA in meeting its

objectives over the last year.

STEVE HARKERChair

CHAIRMAN'S REPORT

1 This report covers the financial year to the end of June 2016 and incorporates significant events between then and the end of September 2016.


Much of AFMA’s policy and advocacy

work revolves around ensuring that the

regulatory framework in which members

conduct their business is reasonable,

responsive, and flexible and does not

impose unwarranted costs or burdens

for inconsequential outcomes. With this

philosophy in mind, over the course of

the year AFMA has made submissions

to government, regulators and policy

makers with the aim of promoting

the refinement of existing regulation

and adoption of new regulation that

is cost effective, aligned with global

developments where appropriate, and

that takes account of industry needs

while producing the transparency,

investor protection and other outcomes

it is designed to achieve. OTC

derivatives reform and implementation

of prudential rules has continued

to be a major area of focus for the

association during the year, along with

issues related to the development

and evolution of financial market

infrastructure in both exchange traded

and OTC markets. Structural issues

around the performance and funding of

regulators is also a core area of focus.

Pleasingly, some very good outcomes

have been achieved for members in

relation to taxation issues.

OTC Derivatives Reform

The Financial System Legislation

Amendment (Resilience and Collateral

Protection) Act 2016 became law

in May. The Government gave this

legislation the highest priority to ensure

it was passed before Parliament was

dissolved for the June 2016 election.

The legislation was the result of close

work over 18 months between an

AFMA working group and Treasury

to identify the need for and content

of amendments. The legislation was

crucial to provide an environment of

legal certainty to prepare for mandatory

margining of non-cleared OTC

derivatives. The Act enables entities to

give and to enforce rights in respect of

margin provided by way of security in

connection with certain financial market

transactions, in a manner consistent

with global requirements. In addition, it

clarifies legislation to support globally

coordinated policy efforts and provides

certainty about the operation of

Australian law in relation to the exercise

of close-out rights under certain

financial market transactions.

AFMA continued to be closely engaged

with APRA in relation to the proposed

rules governing margining for non-

cleared derivatives, known as CPS

226 Margin Requirements for Non-

Centrally Cleared Derivatives. Much of

the practical discussion has centred on

the technical scope of the definitions

as to exactly which derivatives products

are captured and how the industry

will transition to the new rules on a

principles based approach.

The derivatives transaction reporting

regime continued to create

implementation challenges and needed

amelioration of its costly side effects.

AFMA succeeded in persuading the

Government to modify derivatives

transaction reporting laws to allow

for single-sided reporting for smaller

derivatives users (particularly buy-side

entities) to significantly reduce the

regulatory burden and cost to industry

of reporting. AFMA also obtained large

scale industry transitional relief on

nine items relating to derivatives trade

reporting, resulting in significant cost

and operational relief for the industry as

a whole.

Implementation of Basel III Prudential Rules

Before the 2008 crisis, the focus of

banking regulators was primarily on

capital. One outcome of the crisis was

the heightened emphasis on liquidity,

and the need for it to be addressed

in a comprehensive risk management

framework. The management of funding

and liquidity is now a core part of the

strategic planning framework and

proactive balance sheet management.

The Basel III liquidity rules introduced

specific global quantitative minimum

standards for liquidity. Locally, AFMA

responded to APRA’s consultation on

POLICY INITIATIVES

Much of AFMA’s policy and advocacy work revolves around ensuring that the regulatory framework in

which members conduct their business is reasonable, responsive, and flexible and does not impose

unwarranted costs or burdens for inconsequential outcomes.

www.afma.com.au 9

the net stable funding ratio (NSFR) and

foreign ADI liquidity. AFMA’s response

was primarily directed to the options

presented and the need for compatibility

with global liquidity frameworks.

Taxation

AFMA continued to engage with both

Treasury, the Australian Taxation Office

and other key stakeholders in relation

to taxation matters during the 2015/16

year. In this light, a number of key

outcomes were obtained for AFMA

members, including:

– A risk assessment on behalf of all

inbound members that they present

a low risk for the purposes of the

recently enacted Multinational Anti-

Avoidance Law, together with a risk

compliance guide that highlights

areas of risk for such members;

– A binding confirmation from the

ATO that, for capital protected

borrowings where interest

deductibility is capped, the

appropriate rate to use in applying

the capital protected borrowing

rules is the investor rate as opposed

to the owner occupier rate,

given that the RBA commenced

publication of two rates during the

year;

– Binding clarity on the GST-free

treatment of brokerage services

provided in respect of offshore

underlyings;

– Legislative amendments to the

application of GST to cross-

border transactions were enacted

in accordance with AFMA

submissions; and

– Confirmation from the ATO that

there would be recognition of

internal derivatives for all members

for the purposes of profit attribution.

AFMA successfully facilitated a

resolution of the source of foreign

exchange contract income issue,

relevant for Australian taxpayers

looking to claim Foreign Income Tax

Offsets (FITOs) in a way that preserved

competitive neutrality and allowed for

taxpayers and liquidity providers to

adopt commercial rules of thumb in

order to apply the tax rules.

AFMA also secured key amendments to

the offshore banking unit (OBU) regime

and commenced engagement with the

ATO to resolve the outstanding issues.

In terms of stakeholder engagement,

AFMA provided media with commentary

around the taxation disclosures issued

by the ATO on large taxpayers in

December 2015, providing context to

the disclosures and ultimately resulting

in favourable media coverage.

On legislative developments, AFMA

secured key changes to the third party

reporting regime, and the new CGT

withholding provisions in relation to on-

market transactions, securities lending

transactions and the definition of taxable

Australian real property.

AFMA participated in the Re:Think Tax

Discussion Paper process, the House

Revenue Committee on Scrutiny of the

ATO, the House Revenue Committee

hearing arguing against limitations on

interest deductibility to fund a corporate

tax cut, and the Tax Practitioners Board

financial forum about registration

requirements for providers of tax

(financial) advice services.

Financial Market Infrastructure

AFMA initiated a project in early 2015

to reduce the settlement cycle of

domestic fixed income products from

T+3 to T+2. The move was supported

at senior levels in the industry for

risk management and balance sheet

reduction reasons as well as aligning

the Australian market with international

standards. Shortening the cycle for

fixed income also complemented the

ASX’s introduction of T+2 settlement for

cash equities. In a co-ordinated effort

the fixed income and equities markets

of Australia and New Zealand went live

with T+2 settlement on 7 March 2016.

Equities and Futures Markets

AFMA engaged in discussions with

the Securities Exchanges Guarantee

Corporation (SEGC) about the need

to increase the minimum amount held

in the National Guarantee Fund and

the future of payments out of the FIDA

account.

AFMA facilitated discussion

between members in relation to

the implementation of new trading

platforms for the ASX derivatives and

equities markets. AFMA also facilitated

discussion with Chi-X in relation to the

introduction of new (non-ASX) products

to be traded on Chi-X’s market.

AFMA provided forums for discussion

with ASIC about HFT and trading

activity in the bond futures rolls,

and regulatory expectations around

facilitation trading by brokers.

Equities Market Competition

The Government accepted the

Council of Financial Regulators’

recommendations in relation to the

review of competition in cash equities

clearing. AFMA’s equities committees

developed a well-argued industry

position and the Council’s conclusions

closely followed advice provided in

our submission and discussions with

the Council.

POLICY INITIATIVES


Industry Funding of Regulators

AFMA engaged with the Government’s

consultation on the proposed industry

funding model for ASIC. AFMA

highlighted the additional burden

industry funding would impose on

the financial sector and the proposed

model’s incompatibility with the

Government’s policy objectives to lower

the corporate tax burden and promote

innovation in financial services. AFMA

challenged the basis for an earlier 1 July

2016 start date for the financial sector,

and the Government subsequently

announced a 1 July 2017 start date for

all sectors.

AFMA continued engagement

with Treasury and AUSTRAC

regarding the AUSTRAC

Industry Contribution, which

resulted in a marginally more

equitable model for FY16/17.

ASIC Capability Review

AFMA made representations to the

ASIC Capability Review Panel that

provided a well-defined industry view

on the matters being considered. The

Panel’s report to the Government

highlighted a significant gap between

the perceptions of external stakeholders

and ASIC’s leadership in relation to its

performance and capabilities. The report

will serve as a benchmark for evaluating

ASIC’s future performance.

Financial System Inquiry Consumer Outcomes

In April the Government announced an

accelerated law reform agenda flowing

from the Financial System Inquiry to

which AFMA has continued to respond,

particularly in relation to enhancement

of the retail corporate bond market,

the proposed product design and

distribution obligation for product

manufacturers, and the proposed ASIC

intervention power.

Professional Standards for Financial Advisers

AFMA participated in the Government

consultation process to develop a

statutory professional standards

framework for retail advisers,

including detailed commentary on

education matters.

Client Money

AFMA made comprehensive

submissions to the Government’s

Enhanced Protection of Client Money

policy paper and to the subsequent

Corporations Amendment (Client

Money) Bill 2016 and associated

draft Regulations and Explanatory

Memorandum. AFMA also highlighted

a number of other areas outside the

scope of the policy paper and the Bill

that should be considered for reform

to enhance client protection and

market efficiency.

Reform of the AML/CTF Regime

AFMA engaged with the Attorney

General’s Department and AUSTRAC

to highlight key reform issues as part of

the review of the AML/CTF framework,

and many of these were reflected in the

final report.

AUSTRAC finalised its “politically

exposed persons” guidance in a manner

consistent with AFMA submissions.

Following submissions from AFMA,

AUSTRAC aligned its rules in relation

to identification and verification of

customers to those of beneficial

owners.

AFMA, in conjunction with the

Australian Bankers Association, created

new AUSTRAC industry forums to allow

for industry issues to be escalated in a

more consultative way.

International Engagement

AFMA made successful joint

applications with ISDA for relief in

relation to the implementation of OTC

market reforms.

AFMA co-signed global industry

initiatives to promote consistency in

derivatives reporting rules and data

reporting formats.

AFMA also continued to be an active

participant in international forums

relating to financial market regulation

including the International Council

of Securities Associations, the Asian

Securities Forum and other regional

counterparts.

AFMA established a dialogue with the

UK FICC Markets Standards Board.

Diversity

AFMA continued to refine the AFMA

Education Grant, a key pillar in

bolstering the pipeline of female

participants in the banking and

finance industry.

POLICY INITIATIVES

2016 Australian Financial Markets Report

Building Australia's financial markets by promoting efficiency, integrity and professionalism

www.afma.com.au 11

AFMA initiated a project in early

2015 to reduce the settlement

cycle of domestic Fixed Income

products from T+3 to T+2. Led by

AFMA’s senior committees and

with the support and mandate

of the RBA, the industry assessed

the transition issues and costs

that might be associated with

the change.

The move was supported at

senior levels in the industry for risk

management and balance sheet

reduction reasons as well as aligning

the Australian market with international

standards and the introduction of best

practice in the industry.

Shortening the cycle for Fixed Income

securities also complemented the

ASX’s initiative to introduce T+2

settlement for the Australian equities

market and in a coordinated move with

the New Zealand Financial Markets

Association (NZFMA), the fixed income

and equities markets of both countries

all scheduled to “go live” with the

change on 7 March 2016.

Clear communication between AFMA’s

members was key to keep a clear sight

of the scope, impacts and timeframes

of the transition and many well attended

meetings were held over a fifteen

month period to discuss pertinent

issues, difficulties and concerns that

organisations may have had.

AFMA was cognisant that international

harmonisation was an important

consideration and ensured that our

offshore counterparts in other markets

associations and industry bodies were

kept abreast of developments and

notified when key milestones

were achieved.

After much diligent planning and

preparation, AFMA was confident

that the industry was ready for the

change and declared the go live on

the scheduled date. Over the course

of several weeks, AFMA consulted

with members, clearers and other

stakeholders and confirmed that

there had not been a single incident

involving a failed settlement or any other

issue related to the change to T+2

settlement. The RBA thanked AFMA

for leading the transition project and

congratulated the Association for the

success of T+2 settlement.

The Transition to T+2 Settlement for Australian Fixed Income Securities

The Market Governance Committee and Market Committees

AFMA’s Market Governance

Committee (MGC) is responsible for

the development and maintenance of

market protocols designed to promote

efficiencies in and facilitate orderly

operations within wholesale OTC

markets in Australia.

As part of its remit MGC regularly

reviews the performance of the cash,

securities, major interest rate and a

diverse range of derivatives markets,

drawing on market committee surveys

of the integrity of their industry, directing

these market committees as appropriate

to meet challenges, garner efficiencies

and consider issues on the horizon. As

part of this remit MGC promotes the

AFMA Code of Conduct and the ethical

principles for acceptable standards of

behaviour as embodied therein, and

advises the AFMA Board on material

matters and issues arising with regard

to market operations and conduct.

The MGC oversees 11 Market

Committees, all being elected biennially

with the next election scheduled for

November 2017. These Committees

are the primary means through which

MARKET & OPERATIONS COMMITTEES

Committees are the primary means through which AFMA undertakes its coordinating role in the industry’s

self-management of the OTC markets, and meet regularly to develop consensus in the market on technical

matters such as transaction documentation, standards, trading conventions, market guidelines and market

data; a necessary element for efficient OTC markets operation.


AFMA undertakes its coordinating role

in the industry’s self-management of

the OTC markets, and meet regularly

to develop consensus in the market on

technical matters such as transaction

documentation, standards, trading

conventions, market guidelines and

market data; a necessary element for

efficient OTC markets operation.

Over the course of a typical year the

committees address a wide range

of market-specific issues, leading

to clarifications and amendments

to general practices and Market

Conventions as deemed appropriate.

OTC Market Conventions and Industry Standards

AFMA maintains Australia’s OTC Market

Conventions as a core element of our

remit to promote market best practice

and conduct. Highlights include:

– Reflecting a Cash Committee

initiative and subsequent changes

proposed by the Reserve Bank

of Australia with regard to the

calculation of the interbank

overnight cash rate (IBOC), AFMA

amended the Cash Conventions,

thereby formalising the protocols

necessary to transition this rate from

a calculation methodology relying on

data submissions by banks to one

using data extracted from RITS.

– As a means of increasing

the application of electronic

confirmation of transactions the

Repo Conventions were upgraded

to promote this methodology and

the efficiencies in operational

processes afforded by it.

Debt Markets and Interest Rate Derivatives

Changes to the settlement cycles

for debt markets and interest rate

derivatives dominated deliberations

for the associated Market Committees

in early 2016. The change to T+2

settlement for Australia’s fixed income

markets and overnight index swaps saw

necessary conventions change across

Government Debt Securities, Credit

Products, Inflation Products and Interest

Rate Derivatives. The move to T+2 was

welcomed by market participants as the

change reflected a global markets trend

towards homogeneity.

Other issues to dominate these

committees this year included

refinement of Debt Primary Market

sounding guidelines, the margining

requirements for OTC non-cleared

derivatives, the development of a longer

term futures contract for fixed income

markets and the lengthening of the yield

curve with the successful issuance of

30 year Australian Government Bonds.

Regulatory Liaison on Issues Impacting Market Integrity

Repo and Cash market frictions

persist, primarily reflecting a market

dynamic under which the dispersion

of the available supply of funds held

in Exchange Settlement Accounts is

concentrated in the late day sessions,

whereas demand for these funds by

the repo desks is concentrated in the

early day session. With the repo market

growing considerably in recent years,

and with non-residents emerging as

prominent borrowers of cash in the

repo market, this liquidity friction has

grown relative to the ES funds pool

maintained by the RBA. AFMA and its

Cash and Repo Committees regularly

liaise with the RBA on this friction, the

equilibrium of which is resolved through

a liquidity premium, the result being a

significant elevation in secured repo

rates as compared to the unsecured

cash market.

Environmental Products

AFMA worked on a new version of the

Environmental Products Addendum and

associated confirmation documentation,

which will assist the markets to transact

in environmental product derivatives in a

standard format.

Discussions continued between AFMA

and members around the application of

derivatives trade reporting as it applies

to environmental product transactions.

Electricity and Gas

AFMA continued work on improvements

to the AFMA Carbon Addendum

following issues discovered during

the repeal of the carbon tax. AFMA

also continued work on improving

market standard documentation for the

reallocation of electricity transactions.

AFMA made submissions to AUSTRAC

with the intention of amending Chapter

22 of the AML/CTF Rules, to clarify

the application of exemptions around

electricity, environmental products and

gas derivatives. The draft amendments

that AUSTRAC is now considering

should be incorporated in the second

half of 2016.

MARKET & OPERATIONS COMMITTEES

www.afma.com.au 13

Operations Committees

The Operations Committee has

general oversight of AFMA’s network

of operations technical committees. In

conjunction with Market Committees,

the Operations Committees prepare

conventions that cover OTC

transactions from the time a deal is

done until it is settled.

The early part of the year was consumed

by the change to T+2 settlement for

fixed income markets. This proved to

be a large piece of work and was well

co-ordinated by the Committee via

the various steering committees, and

a successful transition ensued with no

market impact.

The Committee provided a forum for

dialogue with key technology vendors

and market operators about market

infrastructure developments. As the

market moves forward in the coming

years, the Committee will play a vital

role in assisting market participants in

the development of the replacement

for CHESS. This is a longer term

initiative however it remains a vital

piece of market infrastructure which

will potentially create significant

improvements in productivity and vital

operational efficiencies.

Once again, the Committee

continues to place a high degree

of focus on the accreditation

and standards of staff involved

in operational functions, and

is committed to the ongoing

development of operations as a

professional vocation where staff

are highly skilled and recognised

for their valuable contribution to

business outcomes.

The AFMA Operations Education

Committee had its name changed to

the Financial Markets Core Advisory

Committee during the year. The scope

of the committee expanded and now

covers advising and dealing issues

as well as the operational aspects it

has traditionally covered. This change

in scope is reflected in the name

change. The Committee looks forward

to progressing its new initiatives

in the years ahead with its new

responsibilities.

As the regulatory environment continues

to evolve in financial markets, new

developments require attention. This

is particularly the case with regards

to changes in the various margining

rules for both cleared and non-cleared

derivatives. The Committee believes that

this is a significant ongoing issue and

took the decision to revive the Collateral

Operations Committee in order for

members to remain informed of the

changes.

The Committee has also undertaken to

review and amend, where appropriate,

the current Operations conventions and

Standards. Feedback has been sought

by the Committee and a republication of

these should be completed by the end

of the year.


DATA SERVICES

Financial Benchmarks

BBSW is a key financial benchmark

in Australia, recognised by ASIC as

being of potential systemic importance

to the Australian financial markets. It is

currently administered by AFMA.

The Council of Financial Regulators, in

its Discussion Paper Evolution of the BBSW Methodology, asked AFMA

to finalise a set of amendments to the

BBSW methodology by end-June

2016. AFMA concluded this process by

mid-year and has settled the changes to

the future methodology.

The principal feature of the BBSW

methodology change is the

establishment of a sequentially staged

calculation waterfall that will support

production of the benchmark both

under normal market conditions and in a

stressed environment:

Stage 1 – Volume Weighted Average

Price (VWAP);

Stage 2 – National Best Bid and Offer

(the current methodology);

Stage 3 – Algorithmic calculation

(similar to that now in place).

The viability of the VWAP methodology

depends on Prime Bank Eligible

Securities being traded on an outright

price basis. AFMA is working with

the relevant stakeholders, including

institutional investors, the Prime

Banks, the Approved Trading Venues

and regulators, to transition trading

practices on the Prime Bank paper

market accordingly.

As an interim measure, AFMA

strengthened the benchmark’s resilience

by introducing an algorithmic fall-back

in August 2016, which will be modified

when the VWAP calculation goes live. It

is expected that the algorithmic fall-back

would be rarely used in practice.

AFMA advised the market in May

2016 that it intends to step away from

benchmark administration. While AFMA

is responsible for the design of the new

methodology and is working on the

detailed rules and procedures, the new

administrator will be take responsibility

for its implementation.

Complementary Benchmark Rate

Responding to the global and

local regulatory desire to develop

complementary benchmark rates,

AFMA undertook market research into

the feasibility of introducing a near-

credit-risk-free benchmark rate based

on the RBA’s unsecured overnight

cash rate. This research indicated

that a total return index held greater

attractiveness to market participants

and the most promise of being applied.

AFMA communicated the research

findings and draft conventions for

a complementary rate to the RBA.

The RBA subsequently commenced

publishing a Cash Rate Total Return

Index (TRI) on 9 May 2016, which

members of the public can use as a

benchmark with a risk-free rate of return.

Other Data

AFMA provides live BBSW rates

to the information vendors who

then deliver it to AFMA’s authorized

subscribers. Additionally, a number of

data distributors provide the BBSW

information to their clients on a 24

hour delayed basis within their secure

systems. AFMA makes BBSW available

on our website on a 24 hour delayed

basis and maintains a rolling 10 day

record for users’ convenience. AFMA

also offers subscriptions to end-of-

day Bank Accepted Bills/Negotiable

Certificates of Deposit.

Following consultation with subscribers

and a reasonable period of notice,

AFMA ceased publication of Interest

Rate Swaps price data on 31

December 2015. In September 2016,

AFMA discontinued the publication of

Renewal Energy Certificates (RECS)

price data.

Responding to the global and local regulatory desire to develop complementary benchmark rates, AFMA

undertook market research into the feasibility of introducing a near-credit-risk-free benchmark rate based

on the RBA’s unsecured overnight cash rate. This research indicated that a total return index held greater

attractiveness to market participants and the most promise of being applied.

www.afma.com.au 15

Professional standards

In late 2015, AFMA released the

revised and updated AFMA Code of

Conduct, which clearly articulates

the ethical principles for determining

acceptable behaviour in financial

markets and promotes responsible

decision making.

All AFMA member organisations

and the individuals who

represent them are expected to

operate with a certain level of

integrity, professionalism and

competence. This ensures that

the people using and relying

on Australia’s OTC markets have

complete confidence in the

market participants representing

them.

AFMA participated in the government

consultation process to develop a

statutory professional standards

framework for retail advisors, including

detailed commentary on educational

matters.

The AFMA Professionalism in

Markets framework was developed,

encompassing industry standards,

the role of senior AFMA Committees

in providing leadership to the

industry, education and competence

requirements and the Code of Conduct.

Education

The AFMA Accreditation Program

provides a recognised industry

benchmark for the knowledge and

skills required to work effectively and

professionally in financial markets. The

program has been designed to promote

professional standards in the industry

and is continually updated to reflect

changes in the industry, including in

the regulatory environment. Currently a

key focus of the upgrading of modules

in all programs is conduct and market

standards.

AFMA Accreditation continues to

consolidate its status as the benchmark

of professionalism in Australia’s financial

markets. As at mid-2016, there are

around 2,900 AFMA accredited

individuals from approximately 80

different AFMA members. This has

grown from around 2,000 at the end of

2011.

The new version of the Financial

Markets Core module of the Financial

Markets Program, launched in May

2015, has proven to be very effective

PROFESSIONALISM & EDUCATION

AFMA Accreditation continues to consolidate its status as the benchmark of professionalism in Australia’s

financial markets. As at mid-2016, there are around 2,900 AFMA accredited individuals from approximately

80 different AFMA members.


in assisting students with achieving core

financial markets competencies. The

structured blended learning program

incorporates online lessons, quizzes

and discussion forums, coupled with

an interactive ‘flipped classroom’ and

increased individual student support,

has increased student engagement and

greatly improved student performance

on assessment. At the same time,

through encouraging students to work

methodically through the Financial

Markets Core over a 12-week period,

the new version of the module has

significantly reduced the period of time

students take to complete the module.

This new blended learning model will be

integrated into all elective modules for

the Financial Markets Program, with the

Foreign Exchange version due to launch

at the end of 2016.

The increasing complexity and

sophistication of money launderers

and other financial criminals and the

rapidly evolving financial sector mean

that anti-money laundering and counter

terrorism financing skills continue to

be increasingly sought by member

organisations. In response to expected

increased demand from mid-career

professionals for advanced skills and

knowledge in this sector, AFMA has

developed the AML/CTF Graduate

Program, which consists of a dual

qualification in AML/CTF – locally

from AFMA (at graduate diploma level)

and globally from the International

Compliance Association (ICA).

AFMA Education sees engagement with

member firms as essential for developing

and maintaining the currency and

relevance of education offerings. In the

last year, AFMA introduced an initiative

to ensure ongoing member engagement

via the establishment of five education

advisory committees and working groups,

consisting primarily of representatives

of AFMA member firms. For example,

the AML Advisory Committee has had

significant input into the development of

learning materials for the new Graduate

Diploma of Anti-Money Laundering and

Counter Terrorism Financing.

The global focus on ethics, culture and

conduct in financial markets is placing

increasing pressure on the industry

to self-regulate the behaviour of both

organisations and individuals. AFMA

Education has responded by creating

a new continuing education course

“Ethical Decision-Making in Financial

Markets”. Designed specifically for

financial markets under the direction of

AFMA member firms, the course draws

on ethical theory and applies it to real-

world financial market situations. The

course features financial market case

studies, and focuses on teaching ethical

decision-making skills, awareness of

how situational and psychological factors

can cause individuals to act in unethical

ways, and how to act on personal values

in the workplace.

As a corollary to its role as a registered

training organisation delivering nationally

recognised vocational qualifications for

financial markets participants, AFMA

Education contributes to national

initiatives to identify occupational

skills needs of industry and develop

occupational skills standards.

In 2016, AFMA was appointed to the

Industry Reference Committee (IRC)

for Financial Services, which advises

government on industry trends and

industry skills needs in financial markets

and financial services.

Through its involvement on the IRC

AFMA was able to ensure that the

development of a business ethics and

conduct skill set will be a priority project

for the Financial Services Training

Package for FY17.

PROFESSIONALISM & EDUCATION

AML/CTF Graduate Program

www.afma.com.au 17

The Financial Markets for Children Foundation

AFMA provides administrative support for the Financial Markets Foundation for Children. To date, the Foundation has allocated $19.3 million to 237 projects focusing on the health and welfare of Australian children.

The Foundation has provided three $5 million gifts to the University of Sydney, the University of New South Wales and the University of Melbourne to fund perpetual chairs in Child Health.

Supporting academic research in financial markets

The Australian Financial Markets Association partnered with the University of Sydney Business School in the General Research and Industry Partnership Grants Scheme to fund a project titled Interpolating and Decomposing the BBSW Benchmark Rates: The Role of Interbank Liquidity and Counterparty Risk. The project, which is being carried out by Eliza Wu (University of Sydney Business School), Geoff Loudon (Macquarie University) and Lorenzo Casavecchia (Macquarie

University) examined alternative methodologies for interpolating the BBSW benchmark rate to inform AFMA’s submission to the Council of Financial Regulators consultation on The Evolution of the BBSW Methodology.

AFMA participated in the steering group for the Australian Centre for Financial Studies project, Funding Australia’s Future. AFMA staff were also active participants in academic conferences held by the University of Sydney Business School and the Centre for International Finance and Regulation.

AFMA IN THE COMMUNITY

AFMA provides administrative support for the Financial Markets Foundation for

Children. To date, the Foundation has allocated $19.3 million to 237 projects

focusing on the health and welfare of Australian children.

AFMA staff with the Financial Markets Foundation for Children Chairman, Glenn Stevens AC


Tracey Lyons: Head of Policy

Tracey has responsibility for oversight of

the policy and regulatory development

issues that arise for members across

all areas of their business. Tracey also

leads AFMA’s policy work on issues

affecting retail investors and retail

products. Most recently, this work

has centered on the development

and implementation of the Future

of Financial Advice regime and the

consumer outcomes of the Financial

System Inquiry. A current area of focus

is the improvement of professional

standards in the financial services

industry.

Tracey represents AFMA externally on

a number of working groups and

advisory panels.

Rob Colquhoun: Director – Policy

Rob focuses on AFMA’s taxation

issues, encompassing corporate tax,

international tax, indirect taxes (such

as GST) and the taxation of financial

products. He consults heavily with

both Treasury and the ATO and is a

member of the key Treasury consultation

group. Rob also has primary carriage of

AFMA’s AML/CTF Committee and its

relationship with AUSTRAC. In addition,

Rob acts as Secretariat for the AFMA

Diversity Committee, which focusses on

diversity issues for AFMA members.

Policy Team

AFMA STAFF

Management

David Lynch: Chief Executive Officer

Reporting to the Board, David is

responsible for the overall performance

of AFMA in representing the interests

of members in dealing with industry

policy issues (including market

operations) and in providing education,

data and documentation services to

members. David leads the Management

Committee and is the Association’s

primary spokesperson.

David Kennedy: Head of Markets

As Head of Markets, David has

responsibility for all matters relating to

exchange traded and OTC markets,

including operational activities. David

also has management oversight and

responsibility for AFMA’s general IT

operations including AFMAdata and

the maintenance of the systems

operating environment.

David Clarkson: Financial Controller and Company Secretary

David, also a member of the AFMA

Management Committee, is responsible

for managing financial transactions

and risks, providing business analysis

and planning, and overseeing the

accounting function and implementation

of internal controls.

L-R: David Clarkson, David Lynch & David Kennedy

www.afma.com.au 19

Stephen Kirchner: Economist

Stephen provides economic research

and analysis on issues affecting financial

markets for incorporation into AFMA’s

policy and advocacy work, including

regulation, competition and taxation

policy.

David Love: General Counsel and International Adviser

David manages AFMA’s legal and

compliance risk and deals with

developments in the regulatory

environment for the Association. This

role includes overseeing AFMA’s

documentation and market standards.

David plays a leading role in policy

development for financial market

infrastructure and OTC derivatives

market reforms, and setting the strategic

direction for the industry in Australia

and other jurisdictions. He plays a

key role in AFMA’s ongoing relations

with Treasury, ASIC, APRA and the

RBA. David also has responsibility

for AFMA’s international relationships

with counterpart associations and

international groups and authorities.

David is responsible for managing

AFMA’s compliance committees, the

Documentation Committee, the OTC

Derivatives Reform Group and the

Derivatives Trade Reporting Group.

Mark McCarthy: Director – Markets

Mark is responsible for managing

the operation of a number of various

Market Committees in debt products

and interest rate derivatives. This

role reinforces the protocols and

conventions for OTC markets and

addresses the regulatory and market

issues that arise in these sectors.

Over the past year he has also

been responsible for the successful

implementation of the shortened

settlement cycle for the Australian

Fixed Income market (T+2) and is

currently working with colleagues on

the implementation of the Council of

Financial Regulators’ evolution of the

BBSW methodology.

Murray Regan: Director – Markets and Rates

Murray has responsibility for the

management of a number of the

Markets Committees, including the

Cash Committee, Interest Rate Options

Committee, Negotiable / Transferable

Instruments Committee and the Repo

Committee. In this role he ensures that

AFMA’s market conventions, standards,

documentation and market practices all

promote market efficiency.

Murray is also responsible for the Risk

Management Committee, the Bank

Treasurers’ Forum and the Foreign ADI

Working Group. He plays a key role in

AFMA’s ongoing relations with APRA

and the RBA, and is directly involved in

the management of AFMA’s benchmark

and reference rate products.

Crystal Hamstead: Secretariat Manager

Crystal ensures the efficient operation

of AFMA committees and working

groups, including the Board of

Directors and other governance

committees. Crystal is also responsible

for the delivery of a range of projects

originating from the AFMA committees

and the Association’s affairs, including

AFMA’s annual Australian Financial

Markets Report, the Annual Report

and AGM.

AFMA STAFF

L-R: David Love, Rob Colquhoun, Tracey Lyons, Stephen Kirchner & Crystal Hamstead

L-R: Mark McCarthy, David Kennedy & Murry Regan


Michael Chadwick: Head of Education and Director - Markets

As Head of Education, Mike is

responsible for managing and

leading the strategic development

and maintenance of AFMA’s

accreditation, education and training

programs to meet the specific needs

of AFMA’s members in maintaining

high professional standards. Mike is

the Executive Officer of the AFMA

registered training organisation

(RTO). As Director – Markets, Mike is

responsible for managing the operation

of various Market Committees,

which set the trading protocols and

conventions that underpin the efficient

operation of the wholesale OTC

financial markets in Australia.

Karen Barrett: Director – Education Programs and Innovation Strategies

Karen manages the development and

maintenance of all AFMA education and

training.

Karen has responsibility for the learning

design of the Financial Markets

Program, the AML/CTF Graduate

Management Program, the Responsible

Managers Program and the NZFMA

Operations Accreditation Program.

Karen is responsible for several AFMA

professional development workshops,

including Ethical Decision Making

in Financial Markets and the OTC

Documentation and the Risk in Focus

series. Karen represents AFMA on the

Financial Services Industry Reference

Committee.

Lisa Aquino: Publishing Manager

Lisa manages all aspects of production

of learning materials for AFMA

education and training programs,

from desktop publishing duties, to

liaising with printers and approving

printers’ proofs. Lisa is also responsible

for developing and building online

publications, including online learning

and assessment tools. In addition,

Lisa develops and updates templates,

manages copyright clearances and

formats AFMA Member News for the

Policy Team.

Bosa Grbic: Education Development Manager – OTC Programs

Bosa has direct responsibility for

development and maintenance for

the Financial Markets Core, Debt

Markets, Foreign Exchange Markets and

Managed Investments modules in the

Financial Markets Program.

Bosa manages the NZFMA Financial

Markets Accreditation Program

modules. In addition, she is responsible

for several AFMA professional

development workshop series, including

Markets in Focus and the Financial

Mathematics Series.

AFMA STAFF

Education Team

L-R: Bosa Grbic, Karen Barrett, May Huele, Jason Sheil, Premi Sivanesan & Michael Chadwick

www.afma.com.au 21

May Huele: Learning Services and Events Manager

May has two primary areas of

responsibility — processing all

education and training registrations

and scheduling and managing the

accreditation and continuing education

workshops. In addition, May is

responsible for all logistical aspects of

workshop and event delivery.

Jason Sheil: Learning Services Manager

Jason is responsible for the student

engagement, sales and marketing

activities of the education team. The

key focus of this role is ensuring that

customers of AFMA education and

training products receive a high level of

support.

Premi Sivanesan: RTO Education and Accreditation Manager

Premi is responsible for managing

the operational functions of AFMA’s

registered training organisation

(RTO). Premi’s primary focus is on

the maintenance of appropriate

procedures for the compliant operation

of the RTO, with the associated record

keeping and processing of all student

academic achievements. In addition,

she manages accreditation and annual

re-accreditation for the Financial

Markets and Operations accreditation

programs. Premi also has responsibility

for responding to client enquiries,

specifically in relation to AFMA-issued

qualifications and the processing of

recognition of prior learning requests.

Jason Brown: Senior Information Systems Manager

Jason is directly responsible for day-

to-day monitoring and processing

of the AFMAdata (real-time dealing

and reference rates for OTC markets)

system as well as AFMAdata product

development and client liaison. Jason

also manages the technical aspects and

the development of the Exam Central

system.

Anne Collins: Office Manager – Accounts and Business Information

Anne is responsible for the day- to-

day office management and the

management of accounts payable

and receivable. In addition, Anne

manages the administration of business

information products and client

databases, and the grants process for

the Financial Markets Foundation for

Children. Anne supports the Financial

Controller by ensuring all AFMA

processes and procedures are

adhered to.

Melinda Cunningham: Business Information and Membership Officer

Melinda is responsible for the

administration of AFMA’s Membership

and Business Information functions.

Melinda’s responsibilities include

maintaining membership records and

coordinating the annual membership

renewal process. In addition, Melinda

manages the annual subscription

renewal process for AFMA’s business

information products and services.

Justin Gilfeather: Senior Information Technology Manager

Justin is responsible for all information

and communication technology within

AFMA, including the server- and

client-side. In addition, Justin manages

all of AFMA’s websites and provides

technical support for AFMA's Learning

Management System (LMS).

AFMA STAFF

Services Team

L-R: Jason Brown & Justin Gilfeather L-R: Melinda Cunningham & Anne Collins


COMMITTEES

Board of Directors

Secretariat

Audit & Risk Benchmarks

Chief Executive Officer

Market Committees

Cash

Credit Products

Debt Securities

Documentation

Electricity

Environmental Products

Inflation Products

Interest Rate Options

Negotiable & Transferrable Instruments

Repo

Swaps

Market Governance Committee

Education Advisory Committees

Financial Markets Core

AML/CTF

Debt

Energy

FX

Accreditation Board

Business Line Committees

Contracts for Difference

Equity Derivatives

Equities Steering

Futures Steering

Market Makers

Retail Products

Policy Committes

Anti‐Money Laundering

Bank Treasurers Forum

Capital Raising

Economists Forum

Energy Regulatory WG

Equities Compliance

Equity COO

Equity IT

FICC Market Compliance

Foreign ADI

Taxation

Futures Compliance

Gas WG

GST

Heads of Compliance

Retail Compliance

Risk Management

OTC Derivatives

Operations Committees

Debt Markets

Equity

Operations Committee

www.afma.com.au 23

Board of Directors

Chairperson Steve Harker, Morgan Stanley Australia Limited

Deputy Chairperson Kelly Bayer Rosmarin, Commonwealth Bank of Australia

James Gibson, BNP Paribas

Itay Tuchman, Citi

John Knox, Credit Suisse AG

Michael Ormaechea, Deutsche Bank AG

Simon Rothery, Goldman Sachs Australia Pty Ltd

Tony Cripps, HSBC Bank Australia Limited

Hugh Gallagher, ICAP Australia Pty Ltd

Robert Priestley, JP Morgan Chase Bank, N.A.

Mary Reemst, Macquarie Group Limited

Antony Cahill, National Australia Bank Limited

John Feeney, National Australia Bank Limited

Christopher Taylor, State Street Bank and Trust Company

William Whitford, Treasury Corporation of Victoria

Lyn Cobley, Westpac Banking Corporation

Market Governance Committee

Chairperson John Feeney, National Australia Bank Limited

Deputy ChairpersonTony Togher, Colonial First State Global Asset Management

Rakesh Jampala, ANZ Banking Group Limited

Hans Peter Urmoneit, Bendigo and Adelaide Bank Ltd

Charles Finkelstein, Citi

Pierre Katerdjian, Commonwealth Bank of Australia

Andrew Banbury, Deutsche Bank AG

Gavin Powell, HSBC Bank Australia Limited

Bradley Howell, Market Observer, ICAP Australia Pty Ltd

David Ioannidis, JP Morgan Chase Bank, N.A.

William Reeks, Macquarie Group Limited

Andrew Byron, Royal Bank of Canada

Justin Lofting, Treasury Corporation of Victoria

Duncan Haig, UBS AG, Australia Branch

Daniel Park, Westpac Banking Corporation

Operations Committee

Chairperson Steve Hackers, JP Morgan Chase Bank, N.A.

David Thomson, ANZ Banking Group Limited

Michael Mynett, Commonwealth Bank of Australia

Richard Watts, Commonwealth Bank of Australia

Matthew Gallagher, Credit Suisse AG

Louise Boreham, Deutsche Bank AG

Brett O'Farrell, HSBC Bank Australia Limited

Craig McGuire, Morgan Stanley Australia Limited

Kerry Fraser, National Australia Bank Limited

Peter Lotz, Nomura Australia Limited

Keppel Smith, State Street Bank and Trust Company

Keith Jones, Western Australian Treasury Corporation

Alex Murphy, Westpac Banking Corporation

Benchmarks Committee

Independent ChairpersonProf. Kevin Jameson, Macquarie University

Andrew Scott, AMP Limited

Tony Togher, Colonial First State Global Asset Management

Mark Hulme, Commonwealth Bank of Australia

Bradley Howell, Market Observer, ICAP Australia Pty Ltd

Keith Noyes, International Swaps and Derivatives Association Inc

Paul Szalajko, Heads of Compliance Committee Chair; Morgan Stanley Australia Limited

John Feeney, Market Governance Committee Chair; National Australia Bank Limited

David Olivan, Regulatory Observer, Reserve Bank of Australia

David Michell, Independent Member

GOVERNANCE (CURRENT MEMBERS)


Significant submissions include:

Indicative benefit legend:

Direct costs savings Better regulation Business opportunity

Submission Issue Policy Maker Indicative Benefit

Proposed changes to customer due diligence rules AUSTRAC

Implementing foreign investment reforms Treasury

Mandatory central clearing of OTC interest rate derivatives ASIC

Proposed Foreign Resident CGT Withholding Regime Treasury

Proposed Third Party Reporting Regime Treasury

Initial comments on the capability review of ASIC Treasury

Financial year 2015-16 industry contribution model AUSTRAC

ASIC Report 440 in relation to financial benchmarks ASIC

Updated guidance on Politically Exposed Persons (PEPs) AUSTRAC

Commentary on market issues in the BBSW rate set Council of Financial Regulators

Draft amendments to Chapter 22 of the AML/CTF Rules AUSTRAC

Industry funding of ASIC (multiple submissions) Treasury and Minister

Evolution of the BBSW methodology Council of Financial Regulators

Margining for non-cleared derivatives APRA

Professional standards for retail financial advisers Treasury

Extension of ASIC relief under Instrument 2015/8441 ASIC

Draft guidance on GST-free supplies of FX and payment related financial products ATO

Commissioner of Taxation remedial power Treasury

Submission to inquiry into interest deductibility Senate Standing Committee on Economics

Voluntary Tax Transparency Code discussion paper Board of Taxation

Draft Compliance Guidelines re determining source for Section 770-75 ATO

2016-17 Pre Budget Submission Treasury

Draft Compliance Guidelines re the use of internal derivatives by inbound

financial institutions

ATO

Resilience and collateral protection amendments Treasury

Enhanced protection of client money (policy paper) Treasury

Second draft report – Australia’s climate policy options Climate Change Authority

IOSCO survey on proposed further work on benchmarks IOSCO

Tax incentives for early stage investors Treasury

2015/16 SUBMISSIONS

www.afma.com.au 25

Submission Issue Policy Maker Indicative Benefit

External scrutiny of the ATO Standing Committee on Tax and Revenue

Relief from central clearing requirements for swaptions3 ASIC

Enhanced protection of client money (Bill and EM) Treasury

Multinational Anti Avoidance Law ATO

Derivatives transparency and entity based reporting3 Derivatives market regulators

Chi-X TraCRs and quoted managed funds Chi-X

ASX clearing participants liquidity risk management ASX

Financial benchmarks regulatory reform Council of Financial Regulators

Insolvency law and ipso facto clauses Treasury

Exchange traded options cancellation regime ASX

CPS226 discussion paper non centrally cleared derivatives APRA

Indicator lending rate ATO

Financial year 2016-17 industry contribution model AUSTRAC

Implementing a diverted profits tax Treasury

Client money provisions and margining requirements for wholesale OTC derivatives Treasury

1 With ISDA2 With ISDA3 With ISDA, AFME, SIFMA and others

SUBMISSIONS


ABN AMRO Clearing Sydney Pty Limited

AGL Energy Limited

Alinta Energy

AMP Limited

ANZ Banking Group Limited

Arab Bank Australia

Arcadia Energy Trading

Arrow Energy Trading Pty Ltd

Associated Foreign Exchange Australia Pty Ltd

ASX Limited

Aurora Energy Pty Ltd

Australian Office of Financial Management

AxiCorp Financial Services Pty Ltd

Bank of America Merrill Lynch Australia

Bank of China Limited

Bank of Communications Co. Ltd Sydney Branch

Bank of Queensland

Bank of Sydney Limited

Bank of Tokyo-Mitsubishi UFJ Ltd

Bendigo and Adelaide Bank Limited

BGC Partners (Australia) Pty Ltd

BNP Paribas

Brisbane City Council

Chi-X Australia Pty Ltd

China Construction Bank, Sydney Branch

Citi

CLSA Australia Pty Ltd

CMC Markets Asia Pacific

Colonial First State Global Asset Management

Commonwealth Bank of Australia

Credit Agricole CIB Australia Limited

Credit Suisse AG

Credit Union Australia Limited

CS Energy Limited

Cuscal Limited

DBS Bank Ltd

DDH Graham Limited

Delta Electricity

Deutsche Bank AG

Energy Developments

EnergyAustralia

ENGIE

Ergon Energy Queensland Pty Ltd

ERM Power Limited

FIIG Securities Limited

Financial and Energy Exchange Ltd

Goldman Sachs Australia Pty Ltd

Greater Bank Limited

HSBC Bank Australia Limited

Hydro Tasmania

ICAP Australia Pty Ltd

IG Markets Limited

IMC Pacific Pty Ltd

Industrial and Commercial Bank of China Limited

Infigen Energy

ING Bank (Australia) Limited

InterGen (Australia) Pty Ltd

Investec Australia Limited

JPMorgan Chase Bank, N.A.

LCH.Clearnet Ltd Sydney Branch

Macquarie Group Limited

Mizuho Bank Ltd

Morgan Stanley Australia Limited

National Australia Bank Limited

Natixis Australia Pty Ltd

Newcastle Permanent Building Society

Nikko AM Limited

Nomura Australia Limited

Northern Territory Treasury Corporation

NSW Treasury Corporation

OCBC Bank

OFX

Optiver Australia Pty ltd

Origin Energy

Propex Derivatives Pty Ltd

QIC

Queensland Treasury Corporation

Rabobank

Reserve Bank of Australia

Royal Bank of Canada

Snowy Hydro Limited

Societe Generale

South Australian Government Financing Authority

Standard Chartered Bank

Stanwell Corporation Limited

State Street Bank and Trust Company

Sumitomo Mitsui Banking Corporation, Sydney Branch

Suncorp Metway Ltd

Susquehanna Pacific Pty Ltd

Synergy

Tasmanian Public Finance Corporation

TD Securities

Teachers Mutual Bank Limited

Travelex Limited

Treasury Corporation of Victoria

Tullett Prebon (Australia) Pty Limited

UBS AG, Australia Branch

United Overseas Bank Limited

Vanguard Investments Australia Ltd

Western Australian Treasury Corporation

Western Union Business Solutions

Westpac Banking Corporation

Yieldbroker Pty Limited

MEMBERS

Allen & Overy Australia Pty Ltd

Ashurst Australia

Baker & McKenzie

Bloomberg L.P.

Clayton Utz

Corrs Chambers Westgarth

Ernst & Young

Gilbert + Tobin

Herbert Smith Freehills

Interactive Data (Australia) Pty Ltd

Johnson Winter & Slattery

K&L Gates

King & Wood Mallesons

KPMG

Minter Ellison

S&P Global

Thomson Reuters

TRAction Fintech Pty Ltd

Australian Centre for Financial Studies

Australian Energy Market Operator Ltd

Clean Energy Regulator

International Capital Market Association

Financial Market Members

Partner Members Affiliate Members

www.afma.com.au 27

Well-functioning financial markets are

critical to good economic performance.

AFMA pursues the policy and industry

conditions that best enable financial

markets to support a healthy economy

by:

– Advocating policies and regulation

that support development of

the financial markets and user

confidence in them;

– Encouraging responsible conduct

and efficient markets through

industry codes, conventions, guides

and preparing and maintaining

standard documentation; and

– Promoting high professional

standards through education and

accreditation programs.

AFMA covers industry issues affecting

the front, middle and back office

functions of members. This includes

matters concerning dealing, advising

and operations for both the over-the-

counter (OTC) and exchange markets

for securities and derivatives.

Policy advocacy and industry representation

AFMA seeks to promote efficient

regulation that inspires investor

confidence in our markets. Our

approach is built on constructive

engagement with politicians and

a credible approach to policy and

regulatory matters. The Government

and regulators regularly seek AFMA’s

views on public policy matters relevant

to the financial markets.

The financial regulators oversee the

day-to-day operation of banking and

financial markets by administering

government policy. AFMA has a unique

relationship with the regulators that can

handle a contest of ideas and views

when necessary and is founded in a

common interest in the efficient delivery

of regulatory objectives.

Promoting market efficiency and Integrity

AFMA underpins official regulation by

developing and promoting industry

standards and guidance that support

efficient and ethical practices across all

of our financial markets.

In addition, AFMA’s conventions and

standard documentation for the OTC

markets are widely accepted, covering

front office activities operational

aspects of financial transactions;

notably confirmation, settlement,

reconciliation and risk management

processes.

Promoting market professionalism

AFMA encourages high standards

of professional conduct in financial

markets by delivering professional

development and accreditation

programs to improve individual

expertise in OTC and exchange-traded

markets. AFMA accords accreditation,

which enjoys widespread industry

acceptance, to individuals who achieve

the required levels of competence.

Industry leadership

AFMA’s strategy is set by a Board

comprising industry leaders at

CEO level. The advocacy, industry

standards and conventions process

is supported by member firms though

our committees. They regularly assess

suitability of the policy and regulatory

settings for our financial markets and

the degree of professionalism exhibited

by market participants.

www.afma.com.au

The Australian Financial Markets Association (AFMA) is a member-driven and policy-

focused industry body that represents participants in Australia’s financial markets and

providers of wholesale banking services. AFMA’s membership reflects the spectrum

of industry participants including banks, stockbrokers, dealers, market makers, energy

companies, market infrastructure providers and treasury corporations.

ABOUT AFMA

www.afma.com.au

Australian Financial Markets Association Ltd ABN 69 793 968 987

Level 25, Angel Place, 123 Pitt Street Sydney NSW 2000 GPO Box 3655 Sydney NSW 2001 Telephone: + 61 2 9776 7900 Fascimile: + 61 2 9776 4488 Email: [email protected] Web: www.afma.com.au

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