ASIC today proposed draft rules and regulatory guidance to establish a trade repository regime – the next step in implementing Australia’s international commitments regarding over-the-counter (OTC) derivatives such as credit default swaps.
Consultation Paper 201 Derivative trade repositories (CP 201) sets out proposals for the licensing of, and rules governing, derivative trade repositories, or data warehouses, which maintain an electronic database of records of derivative transactions.
The proposed regime is consistent with international principles for financial market infrastructures as developed by the Committee on Payment and Settlement Systems and International Organization of Securities Commissions, and with Australia’s existing regulatory regime for market operators and clearing and settlement facilities. ASIC has also considered regimes for trade repositories in other parts of the world including the EU, US, Singapore and Canada.
ASIC Deputy Chairman Belinda Gibson said establishing an efficient and effective regime for trade repositories was key to increasing the integrity and stability of OTC derivatives markets and the financial system more broadly, including enhanced market transparency and an increased capacity for the oversight and monitoring of systemic risk indicators.
‘We also want to facilitate local and foreign trade repositories to provide their services in Australia, supporting the global and domestic trading activity of our market participants,’ Ms Gibson said.
The guidance sets out the proposed approach to granting Australian derivative trade repository licences and how to apply for them. It also includes draft rules relating to the operation of trade repositories in Australia.
Global commitment to OTC derivatives reform arose out of the global financial crisis, and involves increasing market transparency, financial stability and market integrity of OTC derivatives markets. Australia signed up to these commitments in September 2009 at the Pittsburgh G20 Leaders’ summit.
In October 2012 ASIC, APRA and the RBA published a report on the Australian OTC derivatives market (refer: REP 309).
In December 2012, legislation was passed giving ASIC new rule-writing powers over licensed trade repositories and with regards to reporting of derivative transactions.
A separate consultation is planned to be launched late March/early April which will address the trade reporting obligations imposed by any derivative transaction rules. This consultation will be held on the basis that Government will impose a broad-ranging transaction reporting obligation in line with the December 2012 Treasury proposals paper entitled Implementation of Australia’s G20 over-the-counter derivatives commitments.