Australian financial market infrastructures, sometimes called FMIs, support trading in the country’s capital markets. These entities are the main “players” and have high systemic importance, often influencing everything from individual daily transactions to overall financial stability. They’re also governed by regulatory frameworks that help promote competition, control risk and improve the efficiency of the capital markets system.

Here’s what to know about FMIs, regulations, reforms and more.

What are Financial Market Infrastructures?

Financial market infrastructures are entities that facilitate Australian trading. FMIs include:

  • Benchmark administrators.
  • Clearing and settlement facilities (CS facilities).
  • Derivative trade repositories.

As key players in capital markets and the overall financial system, FMI entities are responsible for critical services and connections between other players. They help coordinate the actions, obligations and activities that lay successful foundations for all market participants, supporting everything from trading liquidity and risk management to operational and financial efficiency.

Depending on the type of FMI, these organisations answer to two main financial regulators: the Australian Securities and Investments Commission (ASIC) and/or the Reserve Bank of Australia (RBA).

  • The RBA sets standards ensuring FMI entities promote stability in the Australian financial system. It also assesses compliance with Corporations Act obligations, including the duty to reduce systemic risk, and performs assessments proportionate to each FMI’s degree of systemic importance.
  • ASIC assesses compliance with other obligations, including the need to provide fair and effective services, and can impose mandatory requirements as advised by the RBA and the Australian Prudential Regulation Authority (APRA). It also has sole responsibility for licensing and supervising trade repositories.

ASIC and the RBA follow a Memorandum of Understanding to prevent redundancies and clarify regulatory responsibilities. Policy matters often go to the Council of Financial Regulators (CFR). Overall, FMIs follow regulatory frameworks aligned with the internationally recognised Principles for Financial Market Infrastructures.

Financial Market Infrastructure Reforms

In 2020, the CFR drafted “Financial Market Infrastructure Regulatory Reforms: Advice to Government from the Council of Financial Regulators.” This document acknowledged that FMIs were increasingly important to the financial system and that their business models, risk exposure and systematic interconnectedness had all changed in recent years. It also noted that these shifts complicate financial regulators’ responsibilities to promote sustainable, stable and fair markets.

For example, the document highlighted three main weaknesses in the existing regime:

  • Regulators didn’t have crisis management powers.
  • Regulators didn’t have sufficient supervisory or enforcement powers.
  • Power distribution, especially between ASIC and the RBA, didn’t correspond to regulators’ legislative mandates.

The CFR introduced 16 recommended reforms to address each of these issues, including:

  • Licensing and related powers held by the Minister (and currently delegated to ASIC) should be transferred to the Regulators.
  • ASIC may make rules for clearing and settlement facility licensees to promote the fair and effective provision of clearing and settlement facility services.
  • The RBA should be able to give directions on specific matters where the RBA reasonably considers action is required to support financial stability

In 2022, the Australian Government announced an FMI reform package to implement these recommendations, including power reallocation and enhanced enforcement capabilities for regulators:

  • Power reallocation: The reforms seek to put power with the regulators best suited to perform certain functions.
  • Enhanced enforcement: Regulators are getting new options and opportunities — for example, ASIC’s ability to make rules for clearing and settlement facility licensees.

 

Reform Case Study: ASIC’s expanded role

In 2024, the Australian Government passed a bill that would introduce a crisis management and resolution regime; streamline regulator roles; and allow ASIC to monitor FMIs, identify emerging risks and take timely corrective action.

According to ASIC, the laws provide “new powers essential to ensuring a stable and efficient Australian financial system.” The outcome is what ASIC’s commissioner calls a “fit-for-purpose regulatory regime for critical financial market infrastructure,” including an enhanced regulatory toolkit that will help ensure FMIs are resilient, efficient and stable.

As new regulations roll out, ASIC says it’s reviewing its FMI approach to make efficient use of its new and expanded authority. It says it will update its website with guidance to help FMIs comply with the enhanced regulatory framework.

Why Financial Market Infrastructures Matter

Depending on their role, financial market participants have varying perspectives on FMIs and related regulatory frameworks and reforms. Here are a few reasons why these entities matter to different players:

Licensing

If your organisation is considered an FMI entity, you will need a specific ASIC licence to operate in the Australian financial market. You will have certain obligations depending on what licence tier applies to you.

For example, both Tier 1 and Tier 2 licence holders must:

  • Operate the market venue in a fair, orderly and transparent manner.
  • Have adequate arrangements for handling conflicts.
  • Monitor and enforce compliance with operating rules.
  • Have sufficient resources to operate the market venue properly.

All licensees must comply with these and other obligations “in the context of the nature, scale and complexity of the market venue,” including the products and services an organisation offers, its diversity and structure, its number of employees and more. ASIC also takes these factors into account during supervision.

Compliance

It’s important to note that some of ASIC’s current documentation doesn’t reflect the latest regulatory reforms. ASIC notes that it will update its content “in due course.” Therefore, compliance with FMI obligations is largely in flux — which, in turn, means it’s crucial to stay on top of regulator updates and ensure your policies reflect even the slightest shift.

Meanwhile, if your organisation works with or relies upon an FMI, you must approach compliance from a different angle. Depending on the nature of your relationship, you may have certain obligations to manage risks and help support market integrity.

Market Support

Keep in mind that FMIs play a significant role in laying the foundation for other financial market participants. This means that, even if your organisation doesn’t directly interact with these entities, you’re likely impacted by their behaviours and obligations. It’s important to understand how other players may influence your experiences and responsibilities — for example, how ASIC’s expanded FMI authority may influence its other enforcement priorities in 2025 and beyond.

Get Help With Compliance and Regulatory Change Management

The new FMI reforms are just one example of how regulatory change can reshape, redefine and redirect the market. Whether you’re directly impacted by these shifts or are wondering how you may feel them indirectly, it’s wise to have expertise on your side.

At MIntegrity, we’re always prepared to navigate regulatory change no matter its size and reach. Turn to us for regulatory risk and compliance services including Market Participant applications, due diligence reviews, Independent Expert support and more.

Ready to find help tailored to fit your organisation’s needs? Contact us today to get started.

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