OTC derivatives reform - Frequently asked questions

ASIC has developed these frequently asked questions (FAQs) to assist reporting entities, clearing entities and trade repositories in preparing for implementation of the Australian transaction reporting, clearing and derivative trade repository regimes.

These FAQs do not constitute legal advice. You should seek your own professional advice to find out how the ASIC Derivative Transaction Rules (Reporting) 2013 (derivative transaction rules (reporting)), ASIC Derivative Transaction Rules (Clearing) 2015 (derivative transaction rules (clearing)), and ASIC Derivative Trade Repository Rules 2013 (derivative trade repository rules) and other applicable laws apply to you, because it is your responsibility to determine your obligations.

A range of issues relating to derivative transaction reporting (including FAQs previously published on this page) are now covered in Regulatory Guide 249 Derivative trade repositories (RG 249) and Regulatory Guide 251 Derivative transaction reporting (RG 251).

1. What is an 'over-the-counter (OTC) derivative' under the derivative transaction rules (reporting)?

The derivative transaction rules (reporting) impose obligations on reporting entities to report information about their transactions and positions in OTC derivatives to a licensed or prescribed trade repository (the reporting obligations): Rule 1.2.5 of the derivative transaction rules (reporting) (Rule 1.2.5 (Reporting)) and RG 251.10.

As described at RG 251.12, Rule 1.2.4 (Reporting) defines an OTC derivative as a derivative (within the meaning of section 761D of the Corporations Act 2001 (Corporations Act)) that is prescribed by the Minister under section 901B (the Ministerial determination) that is not traded:

  • on a financial market that is:
    • subject to ASIC supervision under Part 7.2A of the Corporations Act (e.g. ASX 24)
    • registered by the US Commodity Futures Trading Commission (CFTC) as a ‘designated contract market’ under s5h of the Commodity Exchange Act 1936 (US), or
    • a ‘regulated market’ as defined in Article 4(1)(21) of the Markets in Financial Instruments Directive 2014/65/EU, or
  • on certain foreign markets (regulated foreign markets) that ASIC has determined under Rule 1.2.4(3) (Reporting) are subject to sufficiently equivalent requirements and supervision, in terms of market transparency and integrity, to those applying to markets supervised under Part 7.2A, ‘designated contract markets’ or ‘regulated markets’.

Unless an exemption applies, derivatives (within a class determined by the Minister) traded on facilities that do not fall within the definition of a regulated foreign market, such as swap execution facilities and multilateral trading facilities, are OTC derivatives for the purposes of the derivative transaction rules (reporting) and therefore subject to reporting obligations.

An exemption has been provided to reporting entities in the form of time-limited transitional relief so that derivatives traded on certain additional relevant financial markets (as defined in the relevant exemptions) are also excluded from the definition of ‘OTC derivative’ for the purposes of the derivative transaction rules (reporting) up to (and including) 30 September 2018: see ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844.

These time-limited exemptions will apply while ASIC considers whether the financial markets specified in the exemptions are suitable to be regulated foreign markets.

(Updated 5 January 2016)

3. Can a licensed trade repository use or publish derivative trade information?

Licensed derivative trade repositories are subject to the Corporations Act and the derivative trade repository rules which restrict the use or disclosure of derivative trade data reported to the derivative trade repository: section 904B of the Corporations Act and Part 2.3 of the derivative trade repository rules (Part 2.3 (Trade Repository)).

The operator of a licensed derivative trade repository must create and disclose certain statistical data based on derivative trade information that is retained by the trade repository and was reported to the trade repository under the derivative trade repository rules: Rule 2.3.5 (Trade Repository).

The operator of a licensed derivative trade repository must, for each seven day calendar period commencing from the day the operator first accepts a report of relevant derivative trade information, create certain statistical data from the relevant derivative trade information. The statistical data required to be created is set out in Rule 2.3.5(2) (Trade Repository).

The operator of a licensed derivative trade repository must disclose such statistical data (including certain breakdowns set out in Rule 2.3.5(3) (Trade Repository)) by making the statistical data available at no charge and through a publicly accessible website: Rule 2.3.5(5) (Trade Repository).

The statistical data published by the operator of a licensed derivative trade repository under the derivative trade repository rules must not include derivative trade information which is capable of identifying any counterparty to a derivative transaction: Rule 2.3.5(6) (Trade Repository).

(Updated 19 June 2014)

5. When do I need to report information about a reportable transaction or a reportable position?

A reporting entity must report information about its reportable transactions and reportable positions, and changes to that information, to a licensed or prescribed repository in accordance with Rule 2.2.3 (Reporting) generally no later than the end of the next business day after the requirement to report arises: see RG 251.55–251.56.

(Published 19 June 2014)

6. How do I identify a counterparty when I report counterparty information?

Information that is required to be reported under Rule 2.2.1 (Reporting) includes:

  • the identifier of both the reporting counterparty and the non-reporting counterparty (items 5 and 7 in Table S2.1(1) and items 4 and 6 in Table S2.2(1) in Schedule 2 (Reporting))
  • the name of both the reporting counterparty and the non-reporting counterparty (items 6 and 8 in Table S2.1(1) and items 5 and 7 in Table S2.2(1) in Schedule 2 (Reporting)), and
  • the identifier and name of certain other entities, such as beneficiary, broker, and clearing member.

Under Part S2.1A (Reporting), the reporting counterparty is, in relation to a report of information about a reportable transaction or reportable position:

  • where a reporting entity makes the report on its own behalf, that reporting entity, or
  • where another person makes a report on behalf of a reporting entity, the reporting entity on behalf of which the report is made.

The non-reporting counterparty is the counterparty to the OTC derivative that is not the counterparty making the report.

Where the reporting or non-reporting counterparty is an entity (which includes a corporation, partnership, managed investment scheme or trust, but not an individual), the rules require the following entity identifiers to be reported:

  • a Legal Entity Identifier (LEI) or interim entity identifier (see RG 251.60–251.62)
  • if no LEI or interim entity identifier is available for the entity, an international business entity identifier issued by Avox Limited (AVID), or
  • if no AVID is available, a Business Identifier Code (BIC).

Where the reporting or non-reporting counterparty is an individual, the identifier is a client code assigned by the reporting counterparty: Table S2.1(1) and Table S2.2(1) (Reporting).

Some reporting entities have raised concerns with ASIC that one licensed trade repository is unable to populate name information from entity information unless the relevant entity has 'on-boarded' with the licensed trade repository.

Accordingly, from 1 October 2015 to 30 September 2018 (inclusive) ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844 provides reporting entities with relief from the requirement to report the entity identifiers listed above if these entity identifiers are not available for the relevant entity. A reporting entity that relies on the relief must instead report the internal entity identifier used by the reporting entity.

(Updated 5 January 2016)

8. Can an Australian regulator access the derivative trade information held by a licensed trade repository?

Yes. An operator of a licensed trade repository must provide to each of ASIC, the Reserve Bank of Australia and the Australian Prudential Regulatory Authority (each being an Australian regulator) continuous, direct and immediate electronic access (at no charge) to, among other things, derivative trade information retained in the trade repository and reported in accordance with the derivative trade repository rules, if requested by that Australian regulator: Rule 2.3.4(5) (Trade Repository).

The operator of a licensed trade repository is excused from complying with a request from an Australian regulator unless the request is for derivative trade information that is required by the Australian regulator in connection with the performance of its functions or exercise of its powers: Rule 2.3.4(6) (Trade Repository).

(Published 19 June 2014)

9. Who do I report to in order to satisfy the reporting requirements of the derivative transaction rules (reporting)?

From 4 December 2015, all Australian reporting entities (i.e. reporting entities incorporated or formed in Australia) must report to a licensed trade repository. On 15 September 2014, ASIC granted an Australian derivative trade repository (ADTR) licence to DTCC Data Repository (Singapore) Pte Ltd (DDRS). On 23 October 2015 ASIC granted an ADTR licence to Chicago Mercantile Exchange Inc. (CME).

On 25 June 2015, ASIC made a determination (ASIC Prescribed Trade Repositories Determination [15-0591]) prescribing several overseas trade repositories to facilitate the various forms of reporting that allow the use of prescribed repositories.

(Updated 5 January 2016)

10. Do end users have to comply with the derivative transaction rules (reporting)?

An end user is a person who is not:

  • an Australian authorised deposit-taking institution (ADI) (as defined in Rule 1.2.3 (Reporting))
  • a clearing and settlement facility licensee (as defined in Rule 1.2.3 (Reporting))
  • an Australian financial services licensee (as defined in Rule 1.2.3 (Reporting)), or
  • a person:
    • who provides a financial service, relating to derivatives, only to wholesale clients, and
    • whose activities, relating to derivatives, are regulated by an overseas regulatory authority.

Under the Corporations Act and the Corporations Regulations, end users do not have to comply with the reporting requirements.

This is as a result of section 901D of the Corporations Act, which permits the Corporations Regulations to provide that the derivative transaction rules (reporting) cannot impose requirements on certain classes of persons. Regulation 7.5A.50 of the Corporations Regulations provides that:

  • the class of persons on whom the derivative transaction rules (reporting) cannot impose requirements includes end users (the end-user exemption), and
  • the derivative transaction rules (reporting) cannot impose requirements relating to a class of derivatives on Australian financial services (AFS) licensees, who are taken not to be end users only because they are AFS licensees and whose AFS licences do not authorise them to provide financial services in relation to that class of derivatives.

(Update 5 January 2015)

12. How should names of counterparties, beneficiaries and other persons be reported under the derivative transaction rules (reporting) where a single field is used for the reporting of a name and an identifier?

Certain items of derivative transaction information and derivative position information in the tables in Parts S2.1 and S2.2 of the derivative transaction rules (reporting) require reporting of the names of counterparties, beneficiaries and certain other persons to the reportable transaction or reportable position. The relevant table references and item numbers are as follows: 

  • Table S2.1(1), items 8, 11, 16 and 20
  • Table S2.1(3), items 2, 4 and 6
  • Table S2.1(5), items 7, 9 and 11
  • Table S2.2(1), items 7, 9 and 16
  • Table S2.2(3), items 2, 4 and 6, and
  • Table S2.2(5), items 6, 8 and 10.

There are also associated requirements to report identifiers for these persons. The relevant table references and item numbers for the identifier information are as follows:

  • Table S2.1(1), items 7, 10, 15 and 19
  • Table S2.1(3), items 1, 3 and 5
  • Table S2.1(5), items 6, 8 and 10
  • Table S2.2(1), items 6, 8 and 15
  • Table S2.2(3), items 1, 3 and 5,and
  • Table S2.2(5), items 5, 7 and 9.

From 1 October 2015 to 30 September 2018 (inclusive) ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844 provides reporting entities with relief from the requirement to report the entity identifiers listed above if these entity identifiers are not available for the relevant entity. A reporting entity that relies on the relief must instead report the internal entity identifier used by the reporting entity: see FAQ 6. Where a single field is used for reporting of an identifier and a name, the names of the counterparty, beneficiary or other person should be concatenated together with the identifier, using the following format:

[identifier][delimiter character][name of counterparty or beneficiary]

A reporting entity may utilise one of five special characters ( , ) ( ; ) ( : ) ( - ) ( | ) as a delimiter. ASIC's preference is that reporting entities use a dash (-) as the delimiter character. No spaces should be added on either side of the delimiter.

For example, where a reporting entity has a reportable transaction or reportable position with a counterparty AB Company Pty Ltd (with an internal reference number for the counterparty of 123456 that is able to be utilised by the reporting entity for reporting purposes) the string to be reported by the reporting entity is: 123456-AB Company Pty Ltd.

(Published 1 July 2015)

13. How do I report collateralisation?

Q: Information that is required to be reported under Rule 2.2.1 (Reporting) includes requirements to report a notation to indicate:

  • whether the reportable transaction is collateralised by one or both counterparties to the reportable transaction under item 40 in Table S2.1(1) in Schedule 2 (Reporting), and
  • whether the reportable position is collateralised by one or both counterparties to the reportable transaction under item 27 in Table S2.2(1) in Schedule 2 (Reporting).

Differences exist between what is required in the equivalent collateralisation field for entities that are required to report in accordance with European Union Regulation No 148/2013 (EMIR) and associated Level 1 Validation Rules published by European Securities and Markets Authority (jointly ESMA OTC reporting regime) and entities that are required to report in accordance with Part 43 of the Commodity Exchange Act 1936 (US) (CFTC OTC reporting regime).

Is it acceptable to report values in the collateralisation fields that are in accordance with the ESMA OTC reporting regime or the CFTC OTC reporting regime?

A: The derivative transaction rules (reporting) do not specify in detail what needs to be reported in the collateralisation field. Consequently, ASIC will accept values in the collateralisation field that are either in accordance with the ESMA OTC reporting regime or the CFTC OTC reporting regime.

(Published 23 November 2015)

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14. What are the commencement dates for reporting certain information under the derivative transaction rules (reporting)?

On 27 June 2014, ASIC made Class Order [14/0633] Transitional exemptive relief for Phase 3 Reporting Entities from elements of the ASIC Derivative Transaction Rules (Reporting) 2013. This instrument commenced on 1 October 2014 and granted transitional exemptive relief for Phase 3 reporting entities by providing for a staggered and delayed start to Phase 3 of the OTC derivative transaction reporting obligations under the derivative transaction rules (reporting).

ASIC subsequently made ASIC Corporations (Derivative Transaction Reporting) Amendment Instrument 2015/0925 which amended [14/0633], with effect from 9 October 2015, by delaying the commencement of Phase 3B of the derivative transaction rules (reporting).

The effect of these instruments was to delay the commencement dates of certain reporting requirements for Phase 3 entities, as set out in the table below.

Reporting requirement

Asset classes

Phase 3A reporting entities

Phase 3B reporting entities

Reportable   Transaction

Interest rate and credit

13 April 2015

4 December 2015

Reportable   Transaction

Forex, equity and commodities

12 October 2015

4 December 2015

Reportable position

Interest rate and credit

19 October 2015

6 June 2016

Reportable position

Forex, equity and commodities

18 April 2016

6 June 2016

Reporting of valuation, barrier and collateral information*(field names)

Interest rate and credit

2 November 2015

4 July 2016

Reporting of valuation, barrier and collateral information*(field names)

Forex, equity and commodities

2 May 2016

4 July 2016

*Derivative transaction information in Table S2.1(1) of the derivative transaction rules (reporting) about a reportable transaction or outstanding position in an exempt derivative:

  • Items 30–32 (mark-to-market, mark-to-model, or other valuation)
  • Items 40–44 (collateral), and
  • Items 51–52 (barrier type and value).

Note: The relief provided does not prevent entities that are ready to report from commencing reporting at an earlier date. Entities may be required to commence reporting at an earlier date if they have provided ASIC with an opt-in notice.

(Published 1 April 2016)

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15. Upon commencement of the derivative transaction rules (clearing), how are they intended to apply to existing uncleared transactions?

Q: ASIC indicated that the derivative transaction rules (clearing) are not intended to include a ‘backloading’ requirement in Consultation Paper 231 Mandatory central clearing of OTC interest rate derivative transactions: see paragraphs 57–58. Rule 2.1.1(1) of the derivative transaction rules (clearing) imposes a clearing obligation on ‘clearing transactions’ which are defined with reference to the ‘entry’ into a clearing derivative by a clearing entity. Can entities imply that the derivative transaction rules (clearing) only apply at the point in time a clearing derivative is entered into?

A: The derivative transaction rules (clearing) apply to clearing transactions that are entered into following the commencement of the derivative transaction rules (clearing). It is correct that there is no backloading requirement to clear existing trades entered into before the commencement of the derivative transaction rules (clearing).

(Published 1 April 2016)

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16. How should I report a forward starting cross currency basis swap?

Certain items of derivative transaction and position information in Parts S2.1 and S2.2 of the derivative transaction rules (reporting) require reporting of the notional amount for leg 2 of an OTC derivative transaction that is an interest rate derivative. The relevant table references and item numbers are: 

  • Table S2.1(5), item 2
  • Table S2.2(5), item 2

Where an OTC derivative transaction for a derivative that is a forward starting cross currency basis swap, it is common for the notional amount of leg 2 to be agreed at a future time, being the actual start date of the cross currency basis swap.

Until that time, it will not be possible for the notional amount for leg 2 to be reported for derivative transaction or position information. In this situation, it is permissible not to report a notional amount for leg 2 until the time the notional amount for leg 2 has been agreed.

(Published 22 November 2016)

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Superseded FAQs

The FAQs below have been superseded and are provided here for information purposes only.

 

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Last updated: 13/02/2015 12:00