Australia's decision to take a mandated approach to the clearing of over-the-counter derivatives has positioned the jurisdiction well under the new global regulatory framework for these instruments, according to central bank officials. Senior industry figures told a conference in Sydney this week that there were many paths to achieve the same "harmonised" regulatory objectives. They said that Australia's approach was a good example of harmonisation in action.Jenny Hancock, senior manager for payments system stability at the Reserve Bank of Australia, said that financial institutions in Australia had reacted well to the local regulatory approach to OTC derivatives. She said it was a fundamental precept of the global regulatory agenda that individual jurisdictions should be free to take an approach that takes into account local circumstances but still achieves a harmonised outcome.Hancock said it was clear that Australian regulators were supportive of the benefits of central clearing and of the Commodity Futures Trading Commission's work in this area. They recognised, however, that a "one size fits all model" was not desirable given the complexity of the global regulatory framework. She said that in Australia it was agreed that the mandatory model would work better than a purely incentives-based approach."We have taken a slightly different approach and that's because there are different ways you could achieve the same objective. In terms of what we've been doing lately, and our decision to recommend mandatory clearing of the G4 interest rate swaps, we looked at the benefits and costs to the Australian financial system. [This was] both in terms of what's happening domestically and also the international consistency benefits," she said."Our recommendation is consistent with encouraging central clearing because of the financial stability benefits. But it's a slightly different approach to a pure incentives-based approach. We do believe, however, that incentives are driving trades to central clearing."Heidi Gaussen, director of OTC reform compliance at ANZ Bank, said the reforms would prove beneficial for clients in Australia. It is well understood that the global and Australian markets are concentrated in a few major currencies. The majority of global outstanding contracts are denominated in US dollars, euros, Japanese yen and British pounds (the so-called "G4 currencies"), which reflects the large size of these economies and their financial markets."The best liquidity now is coming from the cleared swap market in these G4 currencies and even the Aussie rates market. So, absolutely, we source those best prices so that we can get the cheapest liquidity for our customers," Gaussen said.This article was first published by the Compliance Complete Service of Thomson Reuters Accelus