Indonesia will launch a central counterparty clearing house (CCP) next week for foreign exchange and money market transactions, its central bank said on Tuesday, as it aims to deepen the capital markets of Southeast Asia’s largest economy.
The CCP should help integrate Indonesia’s currently fragmented and segmented money and foreign exchange markets, facilitating liquidity for banks by reducing default and other market risks, Bank Indonesia (BI) said.
“With CCP, transactions in (the) money market will be more efficient and transaction volumes will be higher,” Donny Hutabarat, head of the central bank’s Financial Market Development Department, told a media briefing.
He said the current setting of market prices was not efficient because big banks tend to make transactions with other big banks.
Domestic non-deliverable forwards (DNDF) will be among the first instruments facilitated by the CCP and over the next five years, starting in 2025, the clearing house will also begin transactions for repo, interest rate swaps and overnight indexed swaps, Hutabarat said.
Non-banks are expected to participate starting in 2026.
BI did not provide details on a target for the volume of DNDF transactions after the clearing house launch.
The CCP’s shareholders are Indonesia Stock Market Clearing House, BI and eight banks: Bank Central Asia, Bank Rakyat Indonesia, Bank Mandiri, Bank Negara Indonesia, Permata Bank, Bank Danamon, CIMB Niaga and Maybank.
Each shareholder will pay four types of guarantee funds to the CCP that could prevent CCP from default, Hutabarat said.
Despite holding shares, BI will only act as regulator and as one of the supervisors alongside Indonesia’s financial services authority.
BI issued rules on CCPs in 2019 in response to a G20 resolution to control derivative risks after the 2008 global financial crisis. BI modelled its CCP on clearing houses in Japan and the UK.