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Super funds prevented from pledging collateral for derivatives clearing 

July 14, 2015

James Eyers, The Sydney Morning Herald

As global regulators push the clearing of over-the-counter derivatives through central counterparties, superannuation funds hedging against currency fluctuations face higher dealing costs unless the government changes the law to allow them to pledge their assets as collateral.

The Superannuation Industry Supervision (SIS) Act prevents super funds from providing security over fund assets, meaning they are unable to post collateral as security to get better derivative prices from dealers, said Oliver Harvey, the Australian Securities and Investments Commission's senior executive leader for financial market infrastructure. 

The push for OTC derivatives to be cleared centrally is part of the G20's plan to make markets safer and more transparent. Central clearing allows trades to be monitored so regulators can target the build-up of systemic risk. The US, Japan and the European Union have already mandated central clearing for OTC derivatives, which is being considered in Australia. 

Read More: The Sydney Morning Herald

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