the framework, the minister must seek the advice of the bank, as well as apra and asic. asic must also consult with both the bank and apra before issuing any derivative transaction rules. • an oversight function. in its role in overseeing clearing and settlement facilities operating in australia, the bank will, with asic, advise the minister on any licence applications from central counterparties seeking to provide otc derivatives clearing services in australia. and, once a licence has been granted, the bank will oversee any newly licensed central counterparty against the financial stability standards. bis central bankers ’ speeches in parallel with the passage of the legislation through parliament, the council agencies are monitoring developments in the australian otc derivatives market to establish whether economic incentives are already beginning to work. a comprehensive survey was circulated to market participants in july, and an analysis of the results is expected to be published towards the end of this month. the results of this assessment will be an important input into possible recommendations to the government around mandatory obligations. the australian agencies currently anticipate that additional assessments will be undertaken over the next year or so, in order to monitor the australian market ’ s progress in making the transition to central clearing, along with the other g - 20 commitments around otc derivatives reforms. even if these assessments conclude that the industry is making adequate progress, the australian agencies will also continue to examine whether the existence of mandatory obligations could deliver other benefits. for instance, there could potentially be a case to impose a mandatory obligation for central clearing if to do so would make it more likely that other relevant jurisdictions considered the australian regime to be sufficiently equivalent, and therefore reduced the compliance burden for domestic market participants when trading with overseas - based counterparties. the current assessment is likely to confirm the previous position that australian dollar interest rate swaps, cross - currency swaps and other foreign exchange derivatives are likely to be the priority asset classes for the purposes of meeting the g - 20 commitments. developments in these asset classes are likely to be monitored most closely in future assessments. in the near term, the priority for any recommendations around mandatory obligations is likely to be trade reporting. as noted elsewhere, the council agencies regard trade reporting to be not only good practice, but also a means of ensuring the availability of good data to monitor market developments in support of regulators ’ financial stability and market conduct objectives. however, given the time - frames required to consult on and pass the relevant legislation, it could be some months before a definite move towards mandatory

otc derivatives markets should be mandatory, and whether such clearing should be required to take place through a domestic central counterparty. consultation on these matters continued through the remainder of 2011 and the early part of this year. at the same time, arrangements in other international jurisdictions, most notably in the united states and europe, were becoming clearer and domestic financial institutions were beginning to examine and adapt to the third - country reach of the prospective new rules. also, in part reflecting strong views expressed by the australian authorities, the financial stability board developed the notion of ‘ four safeguards ’ for a resilient global framework for central counterparties. this work recognised that, in meeting the g - 20 commitments, market participants in some jurisdictions may be reliant on offshore - based central counterparties. authorities and market participants alike therefore needed to have confidence that such arrangements would protect their interests, both for domestic financial stability and for the effective functioning of markets. bis central bankers ’ speeches specifically, the four safeguards comprise : ensuring effective international cooperative oversight of global ccps ; fair and open access criteria ; appropriate liquidity arrangements in all relevant currencies ; and procedures for effective resolution. the principles for financial market infrastructures, released in april by the committee on payment and settlement systems and the international organization of securities commissions ( iosco ) this year, embed some elements of the four safeguards ; other elements are left to domestic authorities to implement in their own regulatory frameworks and approaches. having considered the views of stakeholders and assessed the implications of developments internationally, the council delivered a policy recommendation to the deputy prime minister and treasurer in march this year. the recommendation had three main elements : 1. don ’ t mandate immediately, but establish the power to do so the council agencies recommended that, where possible, industry - led solutions – in part reflecting appropriate regulatory incentives – should be relied upon to steer the market towards the desired outcome. nevertheless, they also recommended that the authorities should be granted a legislated power to mandate outcomes in the event that the incentives prove insufficient to drive the necessary change on an acceptable time frame. one concern would be if there were perceived to be an opportunity for regulatory arbitrage between the australian regime and those of other jurisdictions. another would be if, in assessing the sufficient equivalence of the australian regime, other jurisdictions took into account whether or not a regulatory mandate was in place. reliance in the first instance on market incentives is particularly relevant in the case of central clearing. premature regulatory intervention could