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The Cash MarketAl Hing, Gerard Kelly and David Olivan*The cash market is the market for unsecured, overnight loans between banks. The weightedaverage of interest rates on these loans is the cash rate, the Reserve Bank’s operational targetfor monetary policy and an important financial benchmark. Over the past decade or so therehave been a number of regulatory and payment system developments that have affected thecash market, coinciding with a decline in aggregate market turnover. This article examinesthese developments using newly available data on payment system activity.IntroductionBanks borrow and lend the balances they hold intheir Reserve Bank Exchange Settlement Accounts(ESAs) in the cash market.1 These transactionsare undertaken between banks on an unsecuredbasis for a term of one business day. ESAs, whichmust be in credit at all times, are used to settleobligations arising from interbank payments withinthe Reserve Bank Information and Transfer System(RITS), Australia’s high-value payments system.Each business day, banks that hold more exchangesettlement (ES) balances than they need (i.e. tosettle their net payment obligations) can lend thesurplus in the cash market to banks with a shortfall.The (annualised) weighted-average interest rate onthese unsecured interbank loans is the overnight‘cash rate’, which is the Reserve Bank’s operationaltarget for the implementation of monetary policy.The cash rate is an important benchmark inAustralian financial markets, used as the referencerate for Australian dollar overnight indexed swapsand the Australian Securities Exchange’s 30-day* The authors are from the Domestic Markets Department. We thankAnthony Brassil for his assistance in preparing the data for this article.1 Balances in ESAs are liabilities of the Reserve Bank and assets of thebanks that hold them. Although they exist only as an accountingentry, exchange settlement balances are referred to as ‘cash’ as theyare equivalent to physical currency for the purposes of settlingpayment obligations between ESA holders. They represent the mostliquid form of monetary asset and comprise the ‘money base’ alongwith banknotes and coins (for which they can be exchanged).interbank cash rate futures contract. The cashrate also underpins other wholesale and retailmarket interest rates in the economy. It, therefore,influences the behaviour of borrowers and lenders,economic activity and ultimately the rate of inflation.While the Reserve Bank does not directly participatein the cash market, it is able to control theaggregate amount of ES balances that are availablefor market participants to borrow and lend.2 It doesthis by supplying enough ES balances through itsopen market operations, such that the demand forES balances is satisfied at, or close to, the cash ratetarget. In recent years, deviations of the cash ratefrom the target determined by the Reserve BankBoard have been small and infrequent (Graph 1).The stability of this key policy rate relative to itstarget is one of the distinguishing features of theAustralian financial system.3Before May 2016, the Reserve Bank conducted adaily survey of banks to determine the amountand weighted-average interest rate at which theytransacted in the cash market. From May 2016,however, the Reserve Bank has required banks tospecify which of their transactions in RITS relateto cash market transactions. This has allowed the2 For details on the liquidity operations used by the Reserve Bank tomanage the supply of ES balances, see Baker and Jacobs (2010).3 A cross-country comparison of monetary policy regimes in interbankovernight markets is given in Bech and Monnet (2013).B U L L E TIN D E C E M B E R Q UA R T E R 2 0 1 6EC Bulletin.indb 333313/12/2016 10:29 am

T H E CA S H M A RKE TGraph 1Interbank Overnight Cash Rate%%Target664422bpsbpsDeviation from BAReserve Bank to use RITS transaction data to directlyobserve individual cash market transactions andcalculate the cash rate. This article uses the new RITScash market transaction data, along with longer-runtransaction-level estimates dating back to 2005from the research of Brassil, Hughson and McManus(2016), to explore the evolving characteristics ofthe cash market, including the effects of recentregulatory and payment system reforms. Box Adetails the Reserve Bank’s new methodology forcalculating the cash rate.Cash Market ArrangementsMore than 50 banks currently hold ESAs at theReserve Bank, including Australian banks anddomestic branches of foreign banks. Not all ESAholders are regular participants in the cash market.Between 25 and 30 of these banks transact in thecash market on a typical day.The Reserve Bank operates standing facilities toassist banks in managing their ESAs. While theseaccounts are not permitted to be in overdraft at anytime, banks are able to borrow intraday from theReserve Bank using repurchase agreements (repos),which do not incur an interest charge.4 In addition,4 A repo is economically, but not legally, equivalent to a secured loan.Counterparties provide eligible securities in exchange for cash onthe agreement that these securities will later be ‘repurchased’ at anagreed price. The implied interest rate is the repo rate. Repos are theprimary instrument used in Reserve Bank open market operations.34some banks are also required to hold higherovernight balances in their ESAs to cover potentialpayment obligations that arise after the close of thecash market.5 These banks borrow a pre-determinedamount of ES balances under ‘open’ RBA repos,which are contracted at the cash rate target andhave no fixed maturity date.6Towards the end of each day, banks may borrowin the cash market to obtain the funds necessaryto cover the day’s outgoing payment obligationsand unwind any intraday repos contracted with theReserve Bank. Banks with open RBA repo positionsare also required by the end of the day to hold anamount of ES balances (adjusted for some after-hourspayments) at least equal to their contracted openrepo position. In the event that these requirementsare not met, banks are effectively deemed to haveborrowed these funds overnight from the ReserveBank at an interest rate that is 25 basis points abovethe cash rate target.7 This occurs very infrequently.Conversely, banks with ‘surplus’ ES balances (in excessof their open repo positions) at the end of the dayare paid an overnight interest rate on these surplusbalances equal to 25 basis points below the targetcash rate.8 These remuneration arrangements on5 These arrangements have been in place since the introduction ofsame day settlement of direct entry payments in November 2013.Direct entry is a means of making electronic payments, such as ‘payanyone’ transactions using internet banking. Since 25 November2013, these payments settle as part of multilaterally netted batches at10.45 am, 1.45 pm, 4.45 pm, 7.15 pm and 9.15 pm each day. Before this,settlement occurred in one batch at 9.00 am the morning followingthe payment date. For more information, see Fraser and Gatty (2014).6 The size of these required balances takes into account each bank’shistorical after-hours payment patterns. The open RBA repos usedto fund the ESAs involve no net cost for banks, as the interest ratecharged on open repo is equal to the rate that the Reserve Bankremunerates banks on ES balances up to the amount of their openrepo position; both rates are equal to the cash rate target. For moreinformation, see Debelle (2013).7 In the case of open RBA repo shortfalls, the Reserve Bank paysovernight interest on these shortfall balances at a rate 25 basispoints below the cash rate target. This imposes a cost equivalent toborrowing at 25 basis points above the cash rate target.8 Before the introduction of same-day direct entry settlement andopen RBA repo in 2013, all ES balances held overnight were effectively‘surplus’ ES balances. The introduction of open repo did not affectthe amount of funds available in the cash market, as banks are nowrequired to hold ES balances equal to their open RBA repo positionin order to avoid borrowing overnight from the Reserve Bank.R ES ERV E B A N K O F AUS T RA L I AEC Bulletin.indb 3413/12/2016 10:29 am

TH E CASH MAR K E Tsurplus ES balances are set by the Reserve Bank toprovide an incentive for banks to transact in thecash market within a 50 basis point ‘corridor’ centredon the cash rate target.While most bank customers can initiate transactionselectronically on a 24/7 basis, the settlement ofinterbank obligations arising from these transactionsis carefully managed. The cash market operateseach day that RITS is open for interbank settlement,from 7.30 am (when RITS opens) until 6.30 pmAustralian Eastern Standard Time (AEST) or 8.30 pmAustralian Eastern Daylight Time (AEDT; Figure 1).The closing time of the cash market is determinedby Continuous Linked Settlement (CLS) foreignexchange-related payment flows, which occur in theEuropean morning. There are a few weeks of eachyear where the cash market closes at 7.30 pm.9Within the trading day there is a ‘Day Session’ until4.30 pm, during which most interbank loans fromthe previous day are repaid. In the ‘Close Session’(4.30 pm to 5.15 pm) banks’ existing customertransactions can be settled but new customertransactions cannot be initiated in RITS. As a result,banks can use this period to trade in the cashmarket with greater certainty over their end-of-daypositions. A large share of daily cash market turnoveroccurs during the Close Session. There is also an‘Evening Session’, which commences after 5.20 pmwhen around 20 ‘Evening Agreed’ banks contractand settle any interbank transactions that may berequired. Australian CLS members are required toparticipate in the Evening Session. All banks havethe option of being an ‘Evening Agreed’ bank.Figure 1: Cash Market Session TimesDay SessionClose SessionEvening SessionAESTAEDT7:3016:3018:3017:2020:30Source: RBA9 This is due to mismatches in the timing of the changeover to or fromdaylight savings time in Australia and Europe (RBA 2015).Trends in Cash Market ActivityThis section describes some trends in the cashmarket. Prior to May 2016, the data are basedon cash market transactions in RITS that wereidentified based on an algorithm developed byBrassil et al (2016). The algorithm matches loansand repayments between the same counterparties,where the second transaction goes in the reversedirection to the first and is equal to the loanprincipal plus a plausible amount of interest. Thealgorithm is also able to identify loans in which alender and borrower agree to extend a loan by onebusiness day (a ‘rolled’ loan). From May 2016, thedata are based on the cash market transactionsobserved by the Reserve Bank.Aggregate trendsCash market turnover currently averages around 4 billion each day, with an average of around30 transactions (Graph 2, top and middle panels).During the global financial crisis, average dailyturnover was around 10 billion; however, this hassince more than halved and is now around levelsobserved prior to the crisis. The average numberof daily transactions has also declined over thisperiod, and is now lower than during the pre-crisisperiod. Although the median transaction size hasincreased since 2005 (from 50 to 70 million),the distribution in transaction sizes has been littlechanged over time. The majority of interbank cashloans have consistently been for amounts of lessthan 100 million, with loan sizes more frequentlyclustered in multiples of 50 million (Graph 3).The positive correlation between cash marketactivity and the level of surplus ES balances (alsoknown as ‘system cash’) has changed more recently.During the financial crisis, system cash increasedsignificantly alongside rising cash market turnover(Graph 2, bottom panel). System cash returned tomore normal levels in the years following the crisis,but began rising in 2014, initially associated witha small increase in cash market turnover. Since2015, this correlation has reversed, with turnoverB U L L E TIN D E C E M B E R Q UA R T E R 2 0 1 6EC Bulletin.indb 353513/12/2016 10:29 am

T H E CA S H M A RKE TGraph 2Cash Market Activity and System CashDaily* b 02525 b15 b15System cash**1212996633020062008201020122014*Smoothed lines are 90-day centred moving averages**Aggregate surplus ES balances as at the close of businessSource:20160RBAGraph 3Cash Market Transaction SizesShare of loans, 2005–16%%2200490–500 Transaction size; 10 million intervalsSource:RBAdeclining alongside a rise in system cash. Thismainly relates to the introduction of the liquiditycoverage ratio (LCR) in January 2015, which requiresbanks to hold enough high-quality liquid assets(HQLA) to cover projected net cash outflows in a36stressful situation over a 30-day period. In orderto meet the requirements of the LCR, a few bankshave preferred to hold ES balances as HQLA,making them less willing to lend these funds in thecash market. In some cases, the LCR treatment ofthe repayment leg of cash market loans can alsoincrease net cash outflows, reducing the LCR andmaking unsecured lending less attractive comparedto secured lending.10 To accommodate this shiftin preferences, the Reserve Bank has used openmarket operations to increase system cash.There has also been a significant reduction inloans that are rolled forward over the past fewyears (Graph 4; Brassil et al 2016). These increasedduring the crisis from 2007 to 2009, coinciding withthe increase in the aggregate supply of systemcash made available by the Reserve Bank to meetbanks’ demand for liquid, risk-free assets. Borrowerswere likely to have found it to be convenient toroll existing loans to keep their ES balances at acertain target level until uncertainty diminished.The increase in ES balances during this periodalso meant that there was less chance that therolled funds would be required to meet paymentobligations. The decline in rolled lending since thefinancial crisis is likely to reflect less precautionaryborrowing in the cash market, as well as a morecautious approach by lenders toward counterpartyexposure.11 Rolled loans have now fallen to zero,as counterparties are now required to repay allfirst-leg loans in full the following business day, tobe consistent with the new cash rate methodologythat was introduced in May 2016.More conservative management of bank balancesheets since the financial crisis has also led to areduction in ‘wash’ trades, which occur when one10 A 75 per cent cap on cash inflows relative to cash outflows isapplied as part of the calculation of the LCR. If this cap is binding,it means that a bank lending in the cash market could not countthe repayment of the overnight loan as an offsetting cash inflow.Secured borrowing and lending does not affect a bank’s LCR, asES balances are exchanged for securities that are equivalent HQLA.11 Non-rolled loans require borrowers to repay the loan beforeborrowing again. Rolling loans does not require the borrowing entityto demonstrate that it would have been able to repay the loan if ithad not been rolled (Brassil et al 2016).R ES ERV E B A N K O F AUS T RA L I AEC Bulletin.indb 3613/12/2016 10:29 am

TH E CASH MAR K E TGraph 5Graph 4Banks Lending and Borrowing CashCash Market TransactionsDaily; 90-day centred moving average bDaily; share of institutions that both lent and borrowed* b%6660604440402202000%Non-rolled loansRolled loans202006Source:20082010201220142016RBA2006*In line with the decline in turnover, the numberof ESA holders that participate in the cash markethas declined since the crisis. This trend is similar towhat has occurred more broadly in the bankingsystem, influenced by mergers and acquisitionsas well as the withdrawal of some foreign banksfrom the Australian market. The downward trendin average turnover, transaction numbers andparticipation since 2005 suggest that the cashmarket has become increasingly concentrated(Graph 6). The Herfindahl-Hirschman Index (HHI) is a2010201220142016RBAGraph 6Cash Market ConcentrationDaily*noMarket participantsHerfindahl-Hirschman Index**index502 000401 600301 2002080010200620112016 20062011*Smoothed line is a 90-day centred moving average**Calculated using participant shares of gross transaction volumesSource:2016400RBA12 Lower overall credit limits have reduced banks’ willingness toparticipate in wash trades. Participating in a wash trade alsoincreases net cash outflows of the intermediating bank withoutan associated net increase in HQLA, which would decrease its LCR(other things being equal).commonly used measure of market concentration;it is an index that measures the size of firms inrelation to the market. The HHI for gross transactionvolumes has been broadly steady over most of theperiod, although it has risen more recently. An HHIof around 1 000 or below indicates a low level ofmarket concentration.1413 There are other reasons why a bank may be both a borrower anda lender on the same day (for example, it may borrow to fundpayments that do not eventuate and then lend out its excessbalances). However, most banks wait until they are reasonablycertain of their liquidity position (and whether they will bea borrower or lender) before transacting in the cash market.This means that a reasonable proportion of instances where aninstitution is a borrower and a lender is likely to reflect wash trades.14 The HHI is calculated by squaring the market share of each firmcompeting in the market and then summing the resulting numbers.A higher score indicates that a market is more concentrated.The US Department of Justice generally considers markets inwhich the HHI is between 1 500 and 2 500 points to be moderatelyconcentrated, with a score over 2 500 reflecting high concentration.For more information, see US DoJ (2010).B U L L E TIN D E C E M B E R Q UA R T E R 2 0 1 6EC Bulletin.indb 370Smoothed line is a 90-day centred moving averageSource:bank intermediates a transaction between two otherbanks that are unable to trade directly (for example,because the ultimate borrower had exhausted itsunsecured credit limit with the initial lender).12 Whiledifficult to identify precisely, a proxy measure forwash trades is the number of institutions that areboth borrowers and lenders on a given day, whichhas declined since 2015 (Graph 5).1320083713/12/2016 10:29 am

T H E CA S H M A RKE TGraph 8Market composition and timingThe share of gross turnover accounted for by thefour largest Australian (major) banks has increasedin recent years, with these banks currentlyaccounting for over 40 per cent of turnover in themarket (Graph 7). Other Evening Agreed banks alsoaccount for around 40 per cent of turnover, whilenon-Evening Agreed banks now account for a smallshare of gross turnover in the market. Despite theirlarge share of overall turnover, the major banks onlyaccount for around one-quarter of the number oftransactions in the market, as these banks typicallytransact in volumes of a larger size.Graph 7Cash Market SharesDaily; borrowing plus lending; 90-day centred moving average%%Gross volumesGross transaction numbersEvening Agreed*50Cash Market TurnoverDaily; 90-day centred moving average b4422Non-Evening Agreed b44030302020Non-EveningAgreed102006*2011Major banks2016 20062011201610Excluding the major banksSource:RBAWhile an individual bank can be either a lender orborrower on any given day, some banks are morelikely to be lenders or borrowers on average. Priorto the financial crisis, the major banks lent morefunds in the cash market than they borrowed, onaverage (Graph 8). However, since the financialcrisis, these banks have reduced their lending inthe cash market significantly and are now netborrowers of cash. The reverse trend has occurredfor non-Evening Agreed banks, with the substantialincrease in borrowing observed during the crisis bythese banks having unwound.In more recent times, there has been a slightreduction in lending by non-Evening Agreed384Evening Agreed*22Major banks b bNet g the major banksSource:40 bLending-450 bBorrowingRBAinstitutions. This may be related to some of thesebanks holding ES balances as HQLA (discussedearlier), and therefore being less willing to lendthese balances in the cash market.The reduction in activity by non-Evening Agreedbanks since the financial crisis appears to be relatedto the exit of some foreign banks from the Australianmarket. These banks had represented a sizeable shareof market activity prior to and during the financialcrisis, and were the main institutions that utilisedrolled borrowing during this period (Graph 9, toppanel). The decline in rolled borrowing also coincidedwith a fall in the share of cash market transactionscontracted (or agreed) earlier in the trading day(Graph 9, bottom panel).15 Rolled loans were typicallycontracted earlier in the day, around the same timeas loan repayments, as the decision to roll a loanwould need to be agreed in advance of repayment(Brassil et al 2016). In addition, non-Evening Agreedbanks usually have greater certainty about their15 Data showing when all loans (rolled and non-rolled) were contractedwere obtained from the (now superseded) Interbank Overnight CashRate Survey. In contrast, RITS transaction data only indicates whennon-rolled loans settled.R ES ERV E B A N K O F AUS T RA L I A04 The Interbank Overnight Cash Market.indd 3813/12/2016 11:07 am

TH E CASH MAR K E TGraph 9Graph 10Cash Market ActivityCash Market Settlement Times*Daily; 90-day centred moving average b bRolled borrowingNon-Evening Agreed22Evening Agreed*1Major Excluding the major banks**Percentage of loans that were contracted in each session; data arefrom the now superseded Interbank Overnight Cash Market surveySource:0RBAend-of-day positions at an earlier stage, and aretherefore more willing to undertake cash markettransactions in the Day session.While the cash market transaction data fromRITS do not contain information on when loanswere contracted, they show that non-rolled loanstypically settle relatively late in the day (Graph 10).As noted earlier, this reflects the reluctance of mostbanks to lend cash until they are relatively certain oftheir daily liquidity requirements, and to avoid theneed to borrow large amounts in the cash marketlate in the day to meet late unforeseen payments.Liquidity managers may also be concerned thatvery large net outflows are logistically more difficultto fund in the overnight unsecured market and thatany failure to raise sufficient funds could requirethe use of the Reserve Bank’s overnight repo facility(incurring a rate of 25 basis points above the cashrate target).16The New Payments Platform (NPP) is scheduled tobe implemented in late 2017. This will include aFast Settlement Service (FSS), which will facilitatesettlement of each individual payment in the NPP16 Although the financial cost associated with surplus or shortfallES balances at the end of the day is symmetric (plus or minus25 basis points to the cash rate target), banks have demonstrated apreference for accepting the costs associated with surplus balancesrather than those associated with :3015:3017:3019:300First leg, non-rolled transactionsSource:RBAon a 24/7 basis. The impact of the FSS on activity inthe cash market is uncertain, as it will depend onthe volume of payments that migrate to the newsystem. Payments made in the Evening Sessionthrough the FSS will be treated in the same way asother payments settled when the cash market isclosed, which means that they will be offset againstopen RBA repo positions and will not need to befunded in the cash market.ConclusionThe cash market facilitates the settlement ofinterbank obligations across the payments system,and transmits the monetary policy decisions ofthe Reserve Bank to the wider economy. Over thepast decade or so there have been a number ofdevelopments affecting this market. These includea fall in turnover, the introduction of open repoarrangements, a reduction in rolled loans andwash trades, and changes in market participation.The cash rate has remained consistently at or near itstarget level throughout this period. From May 2016,new transaction reporting requirements for the cashmarket within RITS have allowed the Reserve Bankto observe cash market activity directly, and use thetransaction data as inputs in order to calculate thecash rate. The Reserve Bank continues to monitorconditions in the cash market closely. RB U L L E TIN D E C E M B E R Q UA R T E R 2 0 1 6EC Bulletin.indb 39%20Evening0Close Session20%Day60401Average loan share per 15-minute intervals, 2005–16%3913/12/2016 10:29 am

T H E CA S H M A RKE TBox ACalculation of the Interbank Overnight Cash RateIn May 2016, the Reserve Bank implemented a newmethodology to calculate the cash rate. The newprocess involves the Reserve Bank accessing aconsiderably more detailed dataset, which includesthe individual amounts and interest rates at whichESA holders transact in the cash market. Calculatingthe cash rate from individual transaction dataaligns the benchmark closely with internationalbest practice standards for financial benchmarks.These standards are set out in the InternationalOrganization of Securities Commissions’ Principles forFinancial Benchmarks, which comprise four elements:governance; quality of the benchmark; quality of themethodology; and accountability (IOSCO 2013).The cash rate is derived from transaction datasourced from RITS, which now captures all relevanttransactions in the market. These data, which includethe individual amounts and interest rates at whichbanks transact in the cash market, allow the ReserveBank to calculate the cash rate as the volumeweighted average interest rate at which cash markettransactions are settled in RITS. The Reserve Bankuses cash market transactions between banks thatsettle any payments across their own ESAs.Before May 2016, the Reserve Bank conducted a dailysurvey of the amount and weighted-average interestrate at which banks transacted in the cash market.All banks that settled payments across their own ESAparticipated in the survey, with the published cashrate equal to the average interest rate reported bysurveyed banks, weighted by value. A shortcoming ofthis methodology was that there were discrepanciesbetween aggregate borrowing and lending, due toreporting errors by institutions. While this did notaffect the published cash rate, since it happened tohave been reported to have traded at the cash ratetarget each day, it meant that the published volume40of cash market activity was the average of the totalfunds borrowed and lent in the market. The newmethodology for calculating the cash rate has alsoreduced the reporting burden of banks, since they nolonger need to make daily survey submissions.The introduction of the new methodology requiredsome minor adjustments to the way some banksparticipated in the cash market. One importantchange was that rolled cash market loans were nolonger permitted under the Australian FinancialMarkets Association Cash Conventions. All cashmarket transactions now require the full exchangeof principal. In addition, all cash market transactionsmust now be settled as cash transfers in RITS (AFMA2016); previously, a small percentage of loans weresettled as cash transfers in the Austraclear system.The Reserve Bank has also started publishing a CashRate Total Return Index (TRI), which members of thepublic can use as a benchmark with a (near) risk-freerate of return. The TRI measures the performance ofan investment earning the cash rate, where interestis reinvested: CashRatet d d TRIt TRIt d 1 365 100 TRI Cash Rate Total Return Indext a business day (a day that the cash marketis open)d the number of days since the previousbusiness dayThe formula indicates that interest earnings areonly paid and reinvested on business days. Onnon-business days, interest accrues at the cash rateof the preceding business day, but is not paid andreinvested until the next business day.Further information on the calculation of the cashrate can be found in the Reserve Bank’s Cash RateProcedures Manual (RBA 2016). RR ES ERV E B A N K O F AUS T RA L I AEC Bulletin.indb 4013/12/2016 10:29 am

TH E CASH MAR K E TReferencesAFMA (The Australian Financial Markets Association)(2016), Cash Conventions. Available at s/Cash%20Conventions.pdf .Baker A and D Jacobs (2010), ‘Domestic MarketOperations and Liquidity Forecasting’, RBA Bulletin,December, pp 37–43.Brassil A, H Hughson and M McManus (2016),‘Identifying Interbank Loans From Payments Data’,RBA Research Discussion Paper 2016-11.Bech M and C Monnet (2013), ‘The Impact ofUnconventional Monetary Policy on the OvernightInterbank Market’, in A Heath, M Lilley and M Manning(eds), Liquidity and Funding Markets, Proceedings of aConference, Reserve Bank of Australia, Sydney, pp 147–177.Debelle G (2013), ‘The Impact of Payments System andPrudential Reforms on the RBA’s Provision of Liquidity’,Address to the Australian Financial Markets Associationand Reserve Bank of Australia Briefing, Sydney, 16 August.Fraser S and A Gatty (2014), ‘The Introduction of Sameday Settlement of Direct Entry Obligations in Australia’, RBABulletin, June, pp 55–64.International Organization of Securities Commissions(IOSCO) (2013), ‘Principles for Financial Benchmarks: FinalReport’, July. Available at 15.pdf .RBA (Reserve Bank of Australia) (2015), ContinuousLinked Settlement: RITS Session Times and OperationalArrangements Version 8. Available at -operational-arrangements .RBA (

average of interest rates on these loans is the cash rate, the Reserve Bank's operational target for monetary policy and an important financial benchmark. Over the past decade or so there have been a number of regulatory and payment system developments that have affected the cash market, coinciding with a decline in aggregate market turnover.