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Foreign Exchange Market Regulation - Australia
Post FSR Regulatory EnvironmentThe text below has been supplied by the RBA as at May 2003."The RBA no longer authorises foreign exchange dealers. In terms of the Financial Services Reform Act 2001 (FSR Act), which commenced on 11 March 2002, the licensing of all financial service providers (including foreign exchange dealers), when required by the Corporations Act 2001, is the responsibility of the Australian Securities & Investments Commission (ASIC). The Financial Services Reform (Consequential Provisions) Act 2001 provides a transitional period of up to two years for dealers to obtain a new Australian financial services (AFS) licence from ASIC. This means that a foreign exchange dealer authorised by the RBA prior to commencement of the FSR Act may continue dealing in foreign exchange under such authority until the dealer obtains an AFS licence from ASIC or 11 March , whichever occurs first. A list of foreign exchange dealers still operating in terms of authorities granted by the RBA is available from the RBA website. Details on the FSR Act, ASIC's licensing policy and procedures, and a register of AFS licensees, are available through the Financial Services homepage on ASIC's website." Pre FSR RegulationThe information below relates to the regulatory environment prior to the implementation of Financial Service Reform ...At the moment the foreign exchange operates in a primarily self regulated market. The relevant bodies that have a regulatory impact are the RBA which issues foreign exchange licenses and secondly industry bodies such as AFMA and ACI Australia. The foreign exchange market is an OTC (over the counter) market which means it is not governed by the rules of a centralised exchange. The official regulation of the foreign exchange market dates back to the Reserve Bank Act in 1959 which gave the RBA the power to grant foreign exchange licenses and regulate the banking community. However once the licenses are gained the licensee operates in accordance with market convention and the Corporations law. The self regulation is undertaken by ACI Australia and AFMA. These industry bodies representing the combined interests of the industry participants and operate without the backing of legislation. The text below has been supplied by the RBA as at January 2001. BANKING (FOREIGN EXCHANGE) REGULATIONSThe Banking (Foreign Exchange) Regulations provide the legislative framework for the Australian foreign exchange market. In terms of the Regulations, financial institutions dealing in foreign exchange require authorisation from the Reserve Bank. Apart from some limited one‑way transactions (see 4. Limited transactions below), other bodies (eg. corporates and individuals) wishing to buy or sell foreign currency in Australia must do so with an authorised foreign exchange dealer, or with an agent of an authorised dealer. Essentially there are four "groups" of foreign exchange operators in Australia:1. AuthorisedUnder the Regulations, and in accordance with Government policy, the Bank may grant foreign exchange dealing authorities to banks and non‑bank financial institutions. These institutions make up the largest "group" of operators and account for the bulk of all market transactions.The two main criteria for authorisation are: i. that dealers be prepared to have at least $A10 million of shareholders' funds at all times (this requirement does not apply to branches of foreign banks); and ii. that they demonstrate expertise in foreign exchange dealing, including suitably experienced dealing staff and adequate systems and controls to manage foreign exchange risk. The process of authorisation involves detailed examination of factors bearing on these criteria. Authorised dealers agree to provide statistical returns and other information required by the Bank, and comply with any directives and guidelines issued by the Bank in relation to their foreign exchange business. Authorities are variable or revocable by the Bank at any time. 2. Restricted dealersRestricted authorities were issued many years ago to Thomas Cook Ltd and American Express International Inc. which allow them to undertake travel‑related foreign exchange business.3. Agents of authorised dealersIt is open to authorised dealers to appoint agents to conduct foreign exchange business. The Bank does not impose any restrictions on agents of authorised dealers. The terms and conditions applying to the agent, including the range of transactions which the agent may undertake, are matters for negotiation between the agent and the authorised dealer. However, the authorised dealer is responsible to the Bank for the foreign exchange operations of any agent it may appoint.4. Limited transactionsTo assist people arriving in Australia without Australian currency, some limited foreign exchange transactions may be undertaken without authority from the Reserve Bank or an agency arrangement with an authorised dealer. Exemptions to the Regulations allow:
Also, persons in Australia who undertake these transactions would not be entitled to represent themselves, or be represented, as authorised foreign exchange dealers in any sense, or to imply any standing in relation to the Government or the Reserve Bank beyond that of any private citizen or commercial enterprise. International Department RESERVE BANK OF AUSTRALIA
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IMPORTANT: This information has been prepared for distribution over the internet
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Regulated in Australia by ASIC (AFS Licence number 226 484) |
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