The Australian Securities & Investments Commission (ASIC) recently released Consultation Paper 205 Derivative transaction reporting (CP 205) seeking feedback on its proposals to implement a derivative transaction reporting regime under Part 7.5A of the Corporations Act 2001 (Cth).
To improve transparency, mitigate systemic risk and protect against market abuse, the G20 nations have agreed that all OTC derivative transactions should be reported to derivative trade repositories. Part 7.5A enables ASIC to issue rules for mandatory OTC derivative transactions reporting (Reporting Rules). The Reporting Rules will apply to all entities that trade in OTC derivatives, including financial institutions as well as end-users, and the prospective operators of trade repositories. The Reporting Rules for end-users will be subject to further public consultation later this year.
ASIC proposes that all reporting entities must report the details of OTC derivatives to a trade repository if the transaction is a reportable transaction. They must also report any subsequent modification, termination or assignment of the OTC derivative. A reporting entity may delegate reporting to a third person (such as a central clearing counterparty, trading platform, service provider, or other counterparty to the transaction) but they remain responsible for information reported.
ASIC proposes that reporting entities include Australian entities, foreign subsidiaries of Australian entities, foreign ADIs with branches in Australia, and foreign companies required to be registered in Australia.
ASIC proposes that, for Australian entities and foreign subsidiaries of Australian entities, all OTC derivatives are reportable transactions, regardless of where they are entered into. For other reporting entities, only OTC derivatives either executed by them in Australia or booked to the profit or loss account of an Australian branch of the entity are reportable transactions.
Derivative transactions required to be reported
ASIC proposes to limit the reporting obligation to OTC derivative transactions. This includes centrally cleared and non-centrally cleared OTC derivative transactions.
Deadline for reporting of reportable transactions
ASIC proposes that reporting entities must report the execution, amendment, termination or assignment of an OTC derivative transaction to a trade repository by no later than the business day following the day on which it occurs (T+1).
Reporting to overseas trade repositories
ASIC proposes to allow foreign ADIs, registered foreign companies and foreign subsidiaries of an Australian entity to meet reporting obligations by reporting to a trade repository outside Australia in accordance with an overseas regime, subject to certain conditions.
Information to be reported to trade repositories
The draft Reporting Rules specify the data fields to be reported to trade repositories. ASIC has sought to achieve international consistency, while reducing compliance costs for market participants.
Reporting of mark-to-market valuations and collateral information
ASIC proposes that reporting entities report up-to-date mark-to-market valuations (but they need not undertake valuations other than as required under other rules) and report on whether the transaction is collateralised and the value of collateral.
Timing of implementation
ASIC proposes a phased implementation as follows:
Opt-in: from I July 2013
Major financial institutions: 31 December 2013 for credit derivatives and interest rate derivatives and 30 June 2014 for other asset classes
Other financial institutions: 30 June 2014 for credit derivatives and interest rate derivatives and 31 December 2014 for other asset classes.
ASIC has issued draft Reporting Rules with CP 205 for comment by stakeholders. The closing date for comments 1 May 2013. Both CP 205 and the attached draft Reporting Rules are available here.
For more information
If you have any questions in relation to the above, or would like assistance with complying with the new guidance, please contact one of the lawyers listed to the left.
Diane Sylvester also contributed to this article.