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To keep our Option traders informed, you may or may not have noticed on your monthly statements that interest on cash margin on deposit with ASX Clear has moved from interest received to interest paid.

Traditionally, ASX Clear applies a 45-basis point (0.45%) interest haircut on Exchange Traded Option (ETO) accounts. With the RBA rate cut in March 2020 to 0.25%, ASX Clear temporarily waived 0.20% of the haircut to allow the effective rate not to fall below zero. This waiver remained in place until 30th September 2020 to allow Clearing Participants and Vendors ensure systems can manage a negative interest rate environment.

From 1st October 2020, the temporary haircut waiver was removed. From the ASX: “In the current rate environment, and with the removal of the waiver, the application of the 45bps haircut will result in a negative rate. For example, assuming the ASX Treasury Earnings rate is consistent with the OCR (Overnight Cash Rate) at 13bps, applying a 45bps haircut will result in a rate of -32bps applied to cash balances.”

Sources:

https://www.asxonline.com/content/asxonline/public/notices/2020/mar/0228.20.03.html

https://asxonline.com/public/notices/2020/aug/0958.20.08.html