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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
4 AFMA Annual Report 2016
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
6 AFMA Annual Report 2016
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.
8 AFMA Annual Report 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
10 AFMA Annual Report 2016
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.
12 AFMA Annual Report 2016
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.
14 AFMA Annual Report 2016
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.
16 AFMA Annual Report 2016
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
18 AFMA Annual Report 2016
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
20 AFMA Annual Report 2016
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
22 AFMA Annual Report 2016
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)
24 AFMA Annual Report 2016
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
26 AFMA Annual Report 2016
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