DRAFT Not to be quoted without permission of the authors

In the wake of the global financial crisis, member jurisdictions of the G-20 have embarked upon an ambitious program of reforms to the structure and operation of financial markets. One key element of the reform program is to improve the management of counterparty risk and reduce interconnectedness in over-the-counter (OTC) derivative markets by encouraging greater use of centralised financial market infrastructure (Duffie, Li and Lubke 2010) and increasing the collateralisation of counterparty credit exposure. In accordance with the G-20 commitments, new legislation was passed in Australia in December 2012, giving the Government the power to impose mandatory central clearing, trade reporting or platform-based execution requirements, if it is deemed necessary.