A letter published 8 November 2011 from Duncan Fairweather, executive director of the Australian Financial Markets Association, makes a number of points in regard to the Bank Bill Swap Rate rate-setting process discussed below. This article should be read in conjunction with that letter. The Sydney Futures Exchange announced on Tuesday that it has reduced from five to four the number of banks whose bank-endorsed bills will be eligible for settlement against interest rate futures contracts.The SFE cut BNP Paribas, leaving only the four major banks as producers of qualifying bank paper. The SFE said that BNP's bank bills on issue fell under the mandated minimum of A$10 billion over the past six months.Triple T Consulting's Sean Keane wrote in his daily Credit Suisse circular that the decision "means that all BBSW [bank bill swap] fixing rates are now entirely set by the local banks"."The BBSW fixing has been volatile and uncertain for many years… The fixing is far more volatile than Libor or Euribor, and is prone to economically and mathematically inexplicable changes from day to day."Often the fixing rate will reverse course on consecutive days for no observable economic reason."Keane went to observe: "One of the reasons that both the Australian and the New Zealand OIS contracts have become so phenomenally successful is that, wherever possible, non-local risk takers will seek to express their views via the OIS product, rather than run the risk of the frequently hurtful BBSW and BKBM [NZ bank bill mid rate] fixings. "The narrowing of the Australian panel banks down to the four local names is likely to increase the demand for OIS contracts, and to further accelerate the move to do all interest rate swap trades out of a forward starting date. Offshore participants in AUD derivatives will increasingly seek to avoid fixing risk."