Corporations Amendment Regulations 2002 (No. 7) 2002 No. 182
EXPLANATORY STATEMENT
Statutory Rules 2002 No. 182
Issued by the Parliamentary Secretary to the Treasurer
Corporations Act 2001
Corporations Amendment Regulations 2002 (No. 7)
Section 1364 of the Corporations Act 2001 (the Act) provides that the Governor-General may make regulations prescribing matters required or permitted by the Act to be prescribed by regulations or necessary or convenient to be prescribed by such regulations for carrying out or giving effect to the Act. Section 1368, among other things, provides that the regulations may, subject to any prescribed terms and conditions, provide that specified provisions of Chapter 7 (which relates to financial services and markets) do not have effect in relation to a specified class of transactions entered into by a specified person.
The purpose of the Regulations is to exempt specified operations of CLS Bank International (CLS) from the provisions of the Act that regulate clearing and settlement facilities on the basis that regulation under these provisions is inappropriate. It is inappropriate because the proposed operations of CLS that are exempted are in the nature of a payment system, rather than a clearing and settlement facility. An example of a typical clearing and settlement facility is a facility that assists in the transfer of cash and securities to settle securities transactions entered into on a stock exchange.
Regulations have also been made declaring CLS's proposed system for the settlement of payment instructions arising from foreign exchange transactions to be a netting market for the purposes of Part 5 of the Payment Systems and Netting Act 1998.
CLS will provide continuous linked settlement service that simultaneously settles both payments under a foreign exchange transaction - for example, A and B may have agreed to exchange A$50 million for US$25 million. The service will eliminate the risk that can occur when each leg of a foreign exchange transaction is settled separately - that is, one payment could be made and the corresponding payment not received.
CLS will be regulated by the United States Federal Reserve System, in consultation with a number of international central banks, including the Reserve Bank of Australia. It is proposed that initially CLS will settle payment instructions in the following currencies: Australian Dollar, Canadian Dollar, Euro, Japanese Yen, Swiss Franc, UK Pound Sterling and US Dollar.
Subregulation 9.12.02(1) will exempt certain operations of CLS from:
• Part 7.3 of the Act which requires that clearing and settlement facilities be licensed; and
• section 794E of the Act, which empowers ASIC to give directions to a clearing and settlement facility which provides services to a licensed market where there is disorderly trading.
The operations exempted are those currently proposed - the settlement of non-cash payments in various currencies. The operations proposed are therefore in the nature of a payments system, and distinct from those of a typical clearing house connected with a stock or futures exchange.
Any other operations of CLS will not be exempted from these provisions.
The exemption is subject to the conditions specified in subregulation