Transcript of Question & Answer Session Panel participation at Australian Securitisation Forum Virtual Conference 2021 on ‘Transition to risk free rates – the future of BBSW'

Good afternoon and welcome to today's session on the future of BBSW and the transition to risk free rates. My name is Anne-Marie Neagle, I'm a partner at King & Wood Mallesons. I have the pleasure of being joined for today's discussion by Andrea Brischetto, who is the Deputy Head of Domestic Markets at the RBA, Kristye van de Geer, a Senior Manager in Interest Rate Products at ASX, Alex Orgaz-Barnier, a Senior Manager in Market Infrastructure at ASIC and David Zeigler, the Division Director for the IBOR Transition Programme at Macquarie Group. A warm welcome to our expert panel. Ever since the now infamous 2017 speech by Andrew Bailey of the FCA, which foreshadowed that after 2021, the FCA would no longer use its power to compel panel banks to submit rate information used to determine LIBOR, global markets have been digesting and implementing significant rate reform. Throughout this process, our focus has sharpened on the issues that may flow from using benchmarks, from the suitability and robustness of credit linked benchmarks, to the risk of floating rate contracts, reverting to a fixed rate, perhaps to a zombie rate, or if there's something worse than zombies, becoming frustrated.

As we close 2021, we are at least in a strict LIBOR sense now at the pointy end of these discussions, but where are we here in Australia? And how will these developments play out for BBSW? Well, that's what our panel today is here to clarify. Andrea, could you get us started with some macro comments to refresh our understanding of the status of BBSW in the Australian market? And can you comment on what the RBA role is in this space?

Look, thanks Anne-Marie, I think the key thing to note here is that BBSW as Australia's credit based benchmark does remain robust. There's an active market underlying the benchmark, and a lot of work has gone into strengthening the calculation methodology and the supporting infrastructure and market practises. And this has allowed Australia to take a multiple rate approach for our local reference rates. So unlike for LIBOR in Australia, the regulatory authorities aren't advocating a wholesale shift to referencing the risk free rate, which in our case is the cash rate also known as AONIA. But instead we expect market participants to choose a robust reference rate that makes most sense for their particular product and situation, taking into account their own and their clients' needs or hedging strategies.

So in some cases referencing the risk free rate (the cash rate) will make most sense, and possible examples here are floating rate notes issued by governments, non-financial corporations and securitisation trusts. But in other cases, a credit based benchmark like BBSW will continue to make most sense, for example, for floating rate notes and corporate loans issued by banks. But it's worth noting that not all BBSW tenors are as robust as others. In particular the one month BBSW is already largely a buyback market, and so it's less liquid than other tenors. So as the Reserve Bank has been saying for a number of years now, users of one month BSSW really should be considering using alternative benchmarks, given the lower liquidity in this market. And the other thing I'd note on benchmark choice is that for some products, approaches adopted widely by market participants offshore will matter for the reference rates we're likely to end up using here. So regardless of the robustness of BBSW, we can still expect to see a shift towards referencing risk free rates for some products.

And I think just one final point, regardless of the reference rate chosen, we expect contracts to have robust fallbacks as a routine part of prudent risk management. And this is so you're not faced with contract frustration and potentially financial market disruptions in the event that the reference rate in the contract becomes unavailable. So these messages of choosing an appropriate, robust reference rate and having fall backs are ones the RBA has been highlighting for some time now, and this is because appropriate use of benchmarks is important in underpinning the healthy functioning of financial markets. So I might leave it there.

Thanks, Andrea. Kristye, I think we've just heard from Andrea that one month BBSW does remain in focus. This is a key rate for securitisation markets. Can you update us on what the ASX as the administrator of BBSW has been doing to support the robustness of this benchmark?

Yes, certainly. And good afternoon, everyone and thank you for the opportunity to join the panel today. ASX has been the administrator for BBSW since 2017, and since that time we've done a lot of work to really reform the methodology and make it a much more robust reference rate or benchmark. We did initially introduce a transaction layer to the BBSW calculation methodology – that was in 2018 – and that enabled us to use not just interbank transactions, but also investor to bank transactions in the calculation of BBSW. In December of last year, we actually made some further enhancements to the methodology, and that was to widen the maturity pool for the transactions that we captured and included in the calculation so that we could form a transaction-based rate much more frequently.

And we're pleased to see that, that's resulted in an increase in tenor formation across all of our BBSW tenors. BBSW is a key benchmark for the Australian market, and so we continue to invest time and resources into ensuring the ongoing robustness of that rate and we actively monitor the health of the market and the performance of the rate, both with our external facing advisory committee, as well as through our internal oversight group.

Thanks, Kristye, I imagine we can get some insights on how one month BBSW is tracking, through understanding which layers or levels of the ASX's benchmark calculation waterfall have been engaged in forming one month BBSW. Is that something you could comment on? And have you seen any change following the recent methodology adjustments you mentioned?

Yes, I can certainly provide some insights into what we have seen. I think firstly it's worth just quickly touching on what that BBSW calculation waterfall is. So the top layer, as I said, we've added transactions, that's our top layer of the calculation. That's then followed by NBBO or National Best Bid Best Offer, so that's using live, executable bank prices in the calculation of the rate. And then below that we've got four other levels that ensure that we can calculate and publish BBSW on a daily basis. I think it's important to note that for all of our tenors, including one month, we've only ever used either the transaction layer or the bid offer layer for the calculation and publication of BBSW. We've never had to fall further down the waterfall for any of our tenors.

To your question on the one month tenor, which of course is very important for this industry, I think there are a couple of observations that are important to make. With the introduction of the enhanced methodology, so where we widen that maturity pool, we have seen an increase in tenor formation using transactions across all of our tenors, but certainly in the one month. So if I look six months prior to when we made that methodology change in December, one month BBSW was being published about 18 per cent of the time using the transaction layer. Since we've introduced that methodology, we've seen that increase to about 30, 33 per cent on average. And in fact, over the last couple of months, that's been about 40 to 50 per cent of the time we've published the one month using the transaction layer.

The other change that we've seen in the one month is the increase in investor buying activity that's being used to form the rate.

Now, I think this is due in part to that wider maturity pool, particularly with it being a minus 5, plus 10 business days, so we are capturing more of that longer dated buying of one month paper. But I think there are other factors at play here as well. We've seen a really flat yield curve environment, and so we have seen investors gravitating towards those shorter dated tenors at this particular point in time, versus some of those longer dated tenors. So there are periods where we do see investors more actively buying one month, but as Andrea highlighted previously, we do see periods of time where it is much more of a sell back market, particularly in a normal yield curve environment.

I think it's also really important to highlight, the bank bills continue to be an important funding tool for the banks, and it's also an important investment product for the portfolio managers. And certainly, in our discussions with both the issuers and the investors, we don't see that changing today or in the near term, so BBSW remains an important and robust reference rate. But with that being said, and as we've seen from global experience, we don't know what it's going to be like in 5 years' time, 10 years' time or even longer, and that's why the adoption of fall-back language is so important for the industry.

Thanks, Kristye. That's really helpful. Alex, we've heard from the ASX and from the RBA. What about ASIC's role in regulating BBSW? And how is ASIC engaging in the developments that we've just discussed?

Yes, our role in regulating BBSW is connected to our role as regulators of the benchmark administrator, which is in this case, the ASX. BBSW has been declared by ASIC to be a significant financial benchmark. And as a result, the ASX as its administrator is subject to a number of obligations to ensure that the availability and the integrity of the benchmark is not disrupted. A key obligation of the administrator is to maintain the quality, integrity, availability, and credibility of the benchmark. And the work of ASX on the conventions and methodology of BBSW that Kristye has just described goes to complying with that obligation. There are other obligations that ASX benchmark is subject to around governance, conflicts, resources, transparency, and a number of others that also contribute to this key obligation of generating the benchmark in an appropriate way. The role of ASIC is to supervise ASX to ensure that it continues to meet these obligations.

And in our day to day, this means engaging with ASX regularly, often in conjunction with the RBA. And in the course of those engagements, we deal with a number of different topics like the state of BBSW markets updates, similar to what Kristye had just provided, any operational issues that may have arisen and the remediation issues with the approved trading venues that facilitates the sort of pricing for the benchmark, and of course, any enhancements to calculation methodologies that ASX undertakes, including how the enhancement methodologies are performing, as in, in this area that Kristye referred to – the transaction based and information being a key one. So ASX has taken a consultative approach to the enhancement of BBSW calculation methodology. And that consultative approach has included us as well, the regulator. We've followed closely the developments and we also attend BBSW advisory committee meetings on a regular basis. So generally, we're satisfied that those enhancements to the methodology have strengthened the robustness of the benchmark and that ASX continues to monitor its performance adequately and also, they're transparent to the market about the performance of the benchmark.

Thanks, Alex. That's really helpful. Kristye, before we move on from this section, we've just had a question from the audience that I might take the opportunity to put to you. You provided some really great colour before in relation to formation through the methodology and the layers. The audience has asked whether you can comment knowing that the banks were largely out of term funding markets during the TFF period we've just experienced. Was there a drop off in the issuance of bills in such a way that the BBSW calculation was affected?

Yeah, that's a really good question. We did see a slight reduction in Prime Bank issuance outstanding, but that has subsequently come back. We didn't see a decline to the extent that it compromised the BBSW is what I would certainly say. As I highlighted before we did see some changes in the tenors that the investors were participating in and which tenors they were wanting to buy throughout that period. But the Prime Banks were facilitating the investor demand for Prime Bank paper throughout the whole period. We didn't see the impact of the TFF really having an impact on the Prime Bank issuance and activity to the extent that it was of detriment to the BBSW rate calculation. I think from the Prime Banks' perspective, as I mentioned before, it continues to be an important funding market and maintaining that investor relationship is also an important aspect for the banks.

Thanks, Kristye, that's really helpful. Andrea, we might move back to the RBA now. In September this year, as our audience will be aware, the RBA released new eligibility criteria for securities to be accepted as collateral in the Reserve Bank's market operations. These changes will require that robust fall-back provisions be included in all repo eligible asset-backed securities issued on or after 1 December, 2022. That in effect puts a long stop date on the work needed in the securitisation industry to finalise our fall-back recommendations. Can you please tell us a bit more about these upcoming changes?

Sure. So look, these new requirements are being introduced in support of global reforms to strengthen financial benchmarks and ensure they're being used appropriately in the financial system. So as we've already discussed, BBSW does remain robust, but nonetheless, fall-backs provide important insurance when using any benchmark, and this includes BBSW. Now, before I step through the requirements themselves, I do want to acknowledge the contribution from industry in this process. So, I do want to say thank you to all of you, who've engaged with the RBA and provided us feedback as we've developed the requirements, because this really has helped us make sure they're fit for purpose and it's much appreciated. So, thank you.

Now, turning to the requirements themselves, they are that from the 1st of December, 2022, all new securities referencing BBSW must include robust fall-back provisions to be eligible for use in Reserve Bank operations. So this covers any marketed asset-backed securities (ABS) or floating rate notes (FRNs) issued on or after the 1st of December next year. Now marketed ABS and FRNs issued before that date won't be subject to the requirement, but nonetheless, as a matter of prudent risk management, issuers should strongly consider including robust fall-backs. And this is particularly the case for securities with lengthy maturities.

And the other thing to note is that all self-securitisations, regardless of the date of issue, will be required to have robust fall-backs to be eligible for repo with the RBA. Now we'll engage directly with issuers to determine implementation timing in each case and we will be giving at least 12 months' notice before the requirement comes into effect, so that'll be a bilateral process with issuers. Now, that's the application. But in terms of the requirements themselves, rather than defining specific required fall-back language, we've taken a principles-based approach. So what we require is at least one robust, reasonable, and fair fall-back for BBSW in the event that it permanently ceases to exist.

So this means the fall-back needs to have a clearly defined method for calculating interest and a clear and unambiguous trigger event. Now, to be robust, the fall-back can't involve discretion or dealer quotes, and to be fair, it needs to reasonably mitigate the impact on the economic value of the security. So a fixed rate fall-back, for example, wouldn't satisfy this requirement. Now, we also require a robust fall-back is included for the case of a temporary cessation. So this is where BBSW isn't available temporarily say because of an operational outage. And again, here, the fall-back will need to specify a clear calculation method and trigger. So, I think that's probably a high-level summary of them.

Thanks, Andrea. We've got a question in from the audience that I might touch on if you have a moment. The audience would like to understand whether or not the RBA would be willing to lead the market by directing what the replacement benchmark should be and whether or not the RBA has a perspective on that, or whether that's something that the RBA would want to do.

Right. No, look, as I said, we're very consciously taking a principles-based approach. And the reason here is it really is industry that's best placed to work out what reference rate makes most sense for their particular situation and their particular needs. We're really not the expert in this area and we're not even the regulator, so that's why we have taken this approach. And I think this is mirrored in our whole … and I think for Australian regulators in general, the approach to benchmark reform, which is this multiple rate approach. We're not dictating like they have in other markets, this wholesale sort of shift to risk free rates. Now that's been a necessity in LIBOR jurisdictions because of the imminent end of LIBOR. But because we're not in that situation, that hasn't been a necessity here. So, it really just comes back to the industry being experts in this, not us.

Thanks, Andrea. That's really helpful. I'm going to jump into the next part of the session in light of time. So, Dave, I might flick to you now if that's okay. There's been a few questions, trying to understand where we're at with these processes. The ASF has been working with the RBA, ASIC and the ASX including the participants on the panel today in connection with BBSW fall-backs for some time now. As the chair of the ASF's working group in this space, could you provide us with a really quick update on the work the ASF has been doing?

Yeah, no problem and hello everyone. Good afternoon. Before I start, I am going to mention that I'm proudly sporting a Mo for November. So you'll have to put up with that, for the next 20 minutes. Yes, there has been a lot of ongoing work that the ASF's been doing and that has actually been going for several years now. And because BBSW is continuing as has been mentioned, a couple of times, we have had the benefit of sitting back and watching how these other LIBOR markets have dealt with real issues around benchmark cessation. So, new territory is being covered through the cessation of LIBOR and there are learnings coming out of that. So, being able to sit back and wait for that to play out has been really helpful from our point of view.

So we have conducted a couple of consultations over the last couple of years and what members and other market participants have sort of fed back to us is they really want a simple and a pragmatic approach to mitigating BBSW cessation risk, which is I guess, a very Australian way to do things. So over the last couple of years, as I said, we have been observing what's been happening in international markets. And the issues that have been dealt with have been very complex. So we've looked at, and we've talked about the evolution of fall-backs, we've talked about or observed, I guess, an array of calculation conventions. We've seen markets grapple with issues around the robustness of new alternative rates, such as the term risk free rates and credit sensitive rates. And we've also watched, I guess a range of regulatory and legislative solutions that have needed to be implemented to deal with certain parts of the market, the so-called tough legacy contracts.

So as these issues have panned out in international markets, as the panellists here know, we've been discussing these issues and working through what they mean in an Australian regulatory and securitisation market context, and really looking at what were the practical outcomes and how were these issues dealt with and how are we going to deal with that in Australia? So not withstanding that a lot of this effort has happened in the private sort of domain, I guess, and amongst the panellists here, it does feel like we've really made great progress towards understanding and mitigating these BBSW cessation risks.

Thanks, Dave. When I think about fall-backs, I tend to split the drafting into two key parts. So firstly, I think about the triggers that will engage the fallbacks. And then secondly, I think about the waterfall that will apply if the fallback's engaged. I want to start with the triggers. Developing triggers in the Australian market, raises some different issues to those we've seen in the currently transitioning LIBOR markets. For example, Australia may experience a tenor cessation perhaps in one month BBSW rather than an entire rate cessation. Australia's current regulatory powers in the benchmark space are also quite different to those in other jurisdictions, such as in the EU, under the benchmark regulation and as a multiple rate jurisdiction as Andrea called it before, Australia has not yet fully processed things like tough legacy that could arise if a BBSW or a tenor of BBSW were to cease. Kristye, could I get you to quickly comment on whether or not the ASX has developed any plans for how a BBSW rate or tenor cessation would actually play out if it were to occur? And how would the market know if this became live?

Yeah, thank you. Anne-Marie. So certainly, through our engagement with industry bodies, such as ASF, we've heard that there's a real need for greater clarity on how a cessation event would play out, particularly when a rate might become non-representative. So this year we've been working really closely with ASIC on developing that benchmark cessation process, really focusing on pre-cessation and cessation, and of course, how we would engage with the regulators in the industry. Should we see evidence that a BBSW tenor is no longer representative of the underlying asset it's there to measure, and that we couldn't see that representativeness being restored. So the way that we're approaching it is that there'll be multiple points of engagement with the market. And that's firstly, to understand what's driving the change in market activity in bank bills, is it structural? Or is it more for sort of transitory factors that are driving that?

In the event that we did determine a BBSW tenor was no longer representative, and that we felt that that could not be restored, we would consult more formally with the market and with users of BBSW on the cessation of this rate. And that's really to assess the impact of cessation and what that would have on the market in terms of understanding the size of the legacy contracts in the market and what timeframes the market would need to be operationally ready to switch to fall-back rates. All of these would factor into our timelines for determining a cessation date.

Thanks very much Kristye. I imagine there's been a lot of work going on between ASIC and the ASX in this space, Alex, I wonder if you could provide some colour on where ASIC is considering these issues around transition.

Yeah. Again, our role as regulators primarily is to ensure that ASX meets its obligations as a benchmark administrator and one obligation that is explicit for them is to have adequate arrangements for ensuring an orderly cessation from the financial benchmark. And we think that those arrangements that they must have for an orderly cessation need to include appropriate communication, and Kristye has kind of referred to that. Of course, this includes providing reasonable notice to ASIC, which is in the rules so that we have time to consider the impact of cessation and to consult with other regulators, such as the RBA. But also, I think it's very important that the cessation arrangements include appropriate notification to the market because those notifications from the administrator, depending on the fall-back language, drafted into the contracts may constitute the trigger for fall-back provisions to kick in. And that's where, ASIC, we are considering the types of announcements to the market, that we, as the regulator will be issuing to confirm and support the communications of ASX that may constitute pre-cessation and cessation events and trigger contractual fall-backs. To be clear, the concepts of pre-cessation and representativeness are not explicitly referenced in the benchmarks regulatory framework in Australia, but we understand that those may be useful milestones for an orderly transition.

So we envisage that our role will be to provide additional confirmation and clarity to the market in the event of a cessation process, coordinating with ASX so that there's no uncertainty around triggers and cessation events. This is why we are currently in the process of reviewing the section in Regulatory Guide 268 that deals with cessation to reflect our intention, to make these supportive announcements to the market. And we intend to publish an updated version of this guide in the next few months.

Thanks very much, Alex. That's helpful. I think let's now move quickly to the waterfall. I've got my eye on the clock here. So, Dave, I wonder if you could comment on how the waterfall might apply in the eyes of the ASF at the moment, compounding AONIA seems to be an obvious candidate given developments in other markets, but there may be other options, perhaps another tenor of BBSW or even term AONIA, if it develops. Can you give us a quick overview of our current thinking at the ASF in terms of the recommended waterfall?

Yeah, no worries, and I will keep it super, super brief. So as I mentioned earlier, the international markets have provided us with some really great insights on dealing with benchmark cessation. But importantly, from my perspective, they also provide a perspective on the likely preferences of offshore investors and banks who participate in the Aussie dollar securitisation market. We've watched closely, I guess, the developments in the UK in particular, as they've transitioned to SONIA and the US as that market's transitioning in quite a bit more of a challenging way into SOFR. And as you know, we've also been looking closely at the work that ISDA has done. They've done a significant amount of consultation with the industry on fall-backs and have landed in effect on a compounding in arrears replacement methodology, including for BBSW given the importance of swaps to securitisation transactions.

This has been an important reference point for us as well. So all in all, the ASF recommendations in their current draft are heading towards monthly AONIA compounding in arrears as the sort of top of the waterfall, if you like, which I would say is more aligned to what we've seen so far in the UK, but that's certainly not to rule out term AONIA, alternative BBSW tenors or any other rates. Andrea already touched on this, but just to reiterate from the ASF's perspective, we're not seeking to dictate fall-backs issues to the broader market. What we are doing is trying to thoughtfully work through the issues and the industry views which are numerous to develop recommendations and considerations for market participants, but ultimately it'll be the market that actually reaches consensus on these issues.

Thanks, Dave, that's some good colour. Andrea, as we move along with this, what would you need to see in the drafting for it to be acceptable to the RBA under its repo criteria?

Right. What we'd be looking for, and again, just to reiterate, we're not going to dictate the specific rate or the waterfall itself, but what we are looking for is a clearly defined method for calculating interest that's robust, reasonable and fair and whether there's a clear and unambiguous trigger event. Now the ASF work in this area is obviously being done in the context of our requirements and we will be providing the ASF with confirmation on whether specific fall-back language complies with our eligibility criteria. Indeed, I think it's worth saying, we'll be happy to assess any fall-back language that's provided to us by others as to its compliance with the requirements.

But just a couple of things to note in terms of how the requirements will be applied in the context of Dave's comments about the ASF work. An example of a fall-back rate that would meet the test is indeed some form of AONIA plus a fixed spread say, but it could also be some other fall-back rate that would meet the requirements. A clear example that wouldn't meet the test is where the fall-back rate involves discretion or dealer quotes, because this would be open to dispute, leading you back to the disruption non-contract frustration situation.

Now, importantly, that's not to say you couldn't have these fall-backs relying on discretion further down the fall-back waterfall, but they're just not considered appropriate as a first level robust fall-back provision. In terms of what else might be acceptable in the waterfall, again, keying off Dave's comments, the first level of the waterfall could be a preferred reference rate that might exist in the future. Forward looking term AONIA say, but subject to it being declared a significant financial benchmark by ASIC at the time the fall-back is triggered. Because if it's not a significant benchmark at that point, this raises that it actually isn't robust and in that case, it would be skipped and you'd fall back to the next level of the waterfall. Importantly, we also haven't ruled out using other BBSW tenors as first level fall-backs if that is indeed preferred. But in both these cases, I would say to meet the requirements there must be an existing, robust non-BBSW fall-back in the waterfall as well.

Thanks, Andrea. That's helpful colour to get our drafting going. Dave, we know that the discussion we've just had has really been centred around the RBA criteria but they only have direct application for repo eligible securities. I wonder if you could comment really quickly on how you see the language being developed by the ASF to address the repo eligibility criteria being relevant for warehouses and other transactions that may not be seeking repo eligibility.

Yeah, thanks. Obviously managing benchmark cessation risk is not unique to repo eligible securities, it basically applies to all users of BBSW in any type of transaction. So, I guess the recommendations that the ASF is planning to publish should be considered in respect of all securitisation, whether repo eligible or not, whether in the public domain or the private domain. As these things pan out you would expect to see strong alignment between repo eligible and non-repo eligible, BBSW fall-backs.

Now, obviously the parties to non-repo eligible securities and transactions, will have some additional flexibility not needing to meet specifically the RBA waterfall principles, if you like, and they will have I guess, a little bit more flexibility to amend terms over time as opposed to the long dated public issuances where we know the consent solicitation process is going to be more challenging if we don't get it right up front.

Thanks, Dave. I wonder if as well you could give us a little bit more colour in terms of where we're going from here with the ASF's program for developing BBSW fall-backs. We've had a number of questions coming through in relation to the future direction and where we can expect to see some guidance. Could you give us a bit of colour of what we need from the audience to help us get there as well?

Yeah, no problem. Probably the million dollar question given several years of work here, but it definitely feels like we're getting a lot closer to finalising this work. We've seen the dust settling in the international markets, I think we've learned everything we're going to learn from them. We've worked really closely with our fellow panellists over the last 12 months behind the scenes to really get to the bottom of what we've seen in international markets and develop these mitigants for the local market.

On behalf of the ASF working group, I'd really like to thank the organisations that are represented here by the panellists. As you said earlier, I think in terms of timing, the RBA repo eligibility changes coming in from the 1st of December, really put a back date to our work but as you know, we are really trying to get out well ahead of that and as Andrea has already mentioned, prudent fall-backs should already be worked into transactions from this time. But the phase we're at at the moment I guess, is we have through the working group, got an in-principle approach to all of this stuff and now we have enough clarity from international markets and locally through the work of the ASX and ASIC, in particular, for the lawyers to actually put the final polish to the fall-back recommendations and bring that precision of language that hopefully will stand the test of time.

So, BBSW is around for the foreseeable future, as you've heard, there is a degree of inertia and potentially kicking the can down the road on this but for us on the panel here, now is when we are actively trying to deal with these issues and embed if you like, hopefully some robust solutions. So as the polished final wording comes out from the law firms and begins circulating in the market, we would really appreciate people's sort of interest and input into that process now and then there'll be potentially less work for us to do further down the road, if, you know, things do evolve.

Thanks, Dave. Before we move away from you Dave, I've just got a quick question from the audience that gets into that precision that you were just foreshadowing there. And in particular, they're curious about how the compounding is likely to work and whether or not the ASF is preferring a two-day look back or a five-day look back.

Yeah, I think, we have been thinking about these issues and there's pros and cons and different ideas, about the precision with which the ASF defines these things. So we feel on the one hand you want to give the market a little bit of flexibility to think through the issues and make its own determinations on details here, on the other hand, the more specific we are, the more instructive it does become for the market. But we're very cautious about dictating terms, I would say though, I think the UK approach with the five-day look back has actually worked quite well in that market. We have seen one benchmark AONIA transaction in this market, through the Medallion trade a couple years back that again has worked through at a real practical level, dealing with these issues. So I suspect if we are to go specific on these things, it'll be towards the UK approach.

Thanks, Dave. I think that that's all the questions I can see from the audience at this time. I might move to close our session and I hope that everyone on the call can join me in a big virtual thank you to our panellists for this informative and engaging discussion, on the future of BBSW. In particular, I'd like to thank ASIC, ASX and the RBA for their constructive approach and for their willingness to share their thoughts with us today.

I think that we can take away from this panel as Dave suggested, some comfort that benchmarks in Australia are and are expected to remain robust but this doesn't mean that work isn't needed in the industry to better understand and implement benchmark transition infrastructure. We still have some time to work with to be ready for the implementation of the RBA's new repo rules in December next year. But there's plenty of detail like the detail that Dave was just suggesting around look backs to get through, to get this right.

Remember that the fall-backs based on what Andrea has said to us, once implemented will need to be objective and prescriptive, so the specifics are going to matter. To get these fall-backs finalised, they need to be informed by all of our industry stakeholder groups. So I encourage you to get involved in the ongoing discussions on BBSW reform. Thank you, and enjoy the rest of this afternoon's conference sessions.