ASX Third Party Clearing Flexibility

Changes to the rules of the Australian Stock Exchange (ASX) have been made to allow third party clearing (3PC) in ASX equities and derivatives markets from Monday, 3 May 1999. Third party clearing is designed to increase flexibility and choice by participants (brokers) in ASX markets. It provides brokers with the ability the avoid substantial fixed costs and balance sheet pressures involved in clearing their own trades. It also paves the way for some market participants to become specialised trade clearers. Brokers will now have the capacity to outsource their clearing and settlement commitments (including settlement risk) to another Participating Organisation. "We see the introduction of third party clearing in equities and derivatives markets as an important step with benefits for the securities industry, investors and ASX," said ASX Managing Director Richard Humphry. "It recognises the global trend towards specialisation and mirrors the development of specialised clearing arrangements in other markets." The changes have been introduced by ASX in response to the diversification of market participants and corresponding market demand for more choice and flexibility in the way brokers are able to structure their business. Market participants will now have the choice of operating as: Full service participant- offering comprehensive trading, clearing and settlement services to clients. Execution only participant- offering specialist trading services to clients which may include order execution, research and/or advice. Clearing only participant- offering specialist clearing and settlement services to execution-only participants and their clients.