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Over-the-Counter Derivatives Transaction Reporting Regime – Regulation Impact Statement – Australian Securities and Investments Commission

On 11 July 2013 the Australian Securities and Investments Commission (ASIC) released final rules which set out the over-the-counter (OTC) derivatives trade reporting obligations of financial institutions and the regulation of derivative trade repositories. The reporting rules follow a Ministerial determination made by the Treasurer that established the classes of derivatives for which ASIC could make reporting rules. These derivative classes are: interest rate; foreign exchange; credit; equity; and all commodities other than electricity (for further information, refer to the Regulation Impact Statement (RIS) prepared by the Treasury).  The reporting rules introduced by ASIC establish:

  • which entities will need to report to trade repositories;
  • what information they will need to report; and
  • when the reporting obligation will start for different classes of reporting entities and different instrument types.

ASIC also introduced new regulation for trade repositories. Trade repositories are data warehouses which maintain electronic databases of records of derivative transactions. The rules for these entities cover issues such as application requirements and conditions, the manner in which they must provide their services, and ASIC's approach to regulation of overseas-based repositories. ASIC expects that requiring reporting of OTC derivative trades will provide more transparency to the market and regulators. The RIS argues that a lack of transparency contributed to problems which emerged in the OTC derivative market during the global financial crises. The RIS notes that the rules are aligned to similar rules in other jurisdictions, which is likely to reduce compliance costs for Australian entities trading in overseas markets. The RIS also notes that costs to industry from the introduction of the rules will primarily be comprised of compliance costs. The RIS considers that some these costs may be immediately identifiable, in terms of investment in additional IT and staffing requirements; while others will take the form of additional management or supervisory resources. These costs are likely to vary according to business practices and how well advanced are entities in complying with existing international obligations. A RIS was prepared by ASIC and assessed as adequate by the Office of Best Practice Regulation.