ASX will delay the implementation of reduced tick increments for the 3 and 10 Year Bond Futures outright futures and calendar spread market during the week of the Roll. Our previous market notice 0168.20.02 advised that these tick size changes were to be implemented during the June 2020 roll period. Instead, these changes will now be implemented in time for the September 2020 roll period, subject to regulatory clearance.
The COVID-19 pandemic has generated a period of substantial market uncertainty, resulting in heightened volatility and reduced liquidity; and most customers are now working under BCP arrangements. ASX believes that it is prudent to delay this change to futures market structure, allowing our customers extended time for implementation.
Specifically, three important issues have driven this decision to delay implementation:
Market participants working under BCP arrangements, with reduced capacity to support market changes. Most of ASX’s market participants are currently working under some form of BCP arrangement, potentially for an extended period of time, while dealing with current market conditions. Feedback from customers is that their capacity and/or risk appetite for change has been significantly impacted. ASX acknowledges and respects this challenge.
Significant market uncertainty and volatility during March. The Bond Futures markets continued to operate effectively, however, there was significant volatility in most exchange traded and OTC interest rate markets during this period.
Impact of RBA policy changes. On 19 March 2020, the RBA announced a package of policy changes. We anticipate that the package of monetary policy changes will have an impact on trading patterns in a number of futures contracts, and it will be helpful to allow additional time for the markets to adjust to these new measures before introducing further market structure change.
In light of all of these circumstances it is prudent not to introduce further change that will challenge our participants’ change agendas in a BCP state; or deliver further changes to liquidity and market dynamics in a time of significant uncertainty.
As such, ASX will delay the current changes until the September 2020 roll period.
ASX thanks customers for their understanding and support.
No action is required.
Kristye van de Geer
Senior Manager, Interest Rate Products