13-066MR ASIC consults on trade reporting obligations for OTC derivatives
Thursday 28 March 2013
ASIC today proposed draft rules addressing the mandatory trade reporting obligations for over-the-counter (OTC) derivatives such as interest rate swaps.
The proposals are the next step in Australia meeting its G20 commitments to OTC derivatives reform, and follows ASIC consulting on proposals for the licensing and regulation of derivative trade repositories (refer: 13-051MR).
Consultation Paper 205 Derivative transaction reporting (CP 205) proposes rules governing the reporting of OTC derivative transactions to derivative trade repositories. CP 205 covers issues such as which institutions will need to report to trade repositories, what information will need to be reported, and when the reporting obligation will start for different classes of reporting entities.
The rules aim to comply with internationally-agreed standards on transaction reporting developed by the International Organization of Securities Commissions (IOSCO) and the Committee on Payment and Settlement Systems (CPSS).
ASIC has also considered the transaction reporting regimes being implemented in other parts of the world including the EU, US, Singapore, Hong Kong and Canada, aiming to ensure consistency by identifying and trying to mitigate any conflicting or overlapping rules across jurisdictions.
Under ASIC’s proposals:
major financial institutions (being those with at least $50 billion of notional outstanding positions in OTC derivatives on 30 September 2013) would be subject to a reporting obligation in some asset classes from 31 December 2013; and
other smaller financial institutions would be subject to a reporting obligation in some asset classes from 30 June 2014.
CP 205 also proposes a reporting obligation on entities that do not hold an Australian financial services (AFS) licence using OTC derivatives from the end of 2014, but further public consultation and an ASIC rule change will be needed before this obligation could take effect, as set out in the accompanying draft rules.
ASIC Deputy Chairman Belinda Gibson said: ‘This is an important step in Australia’s implementation of the G20 OTC derivatives commitments. The proposed regime will improve the integrity and stability of Australia’s OTC derivative markets, while taking into account the interests of participants in Australia’s OTC derivative markets and the Australian economy more broadly.
‘These reforms will enhance the transparency of OTC derivative markets, both to regulators and the public, and lead to an increased capacity for the oversight and monitoring of systemic risk,’ Ms Gibson said.
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 derivative 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 (REP 309) on the Australian OTC derivatives market.
In December 2012, legislation was passed giving ASIC new rule-writing powers over licensed trade repositories and with regard to reporting of derivative transactions.
On 15 March 2013, ASIC released CP 201 Derivative trade repositories (CP 201), which 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.