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Proposed changes to the ASIC Derivative Transaction Reporting
On 15 February 2024 Consultation Paper 375 Proposed changes to the ASIC Derivative Transaction Rules (Reporting): Third consultation (CP 375) proposed that reporting entities would have revised derivative reporting obligations commencing on 21 October 2024. This consultation paper follows on from CP 334 and CP 361.
The current rules are ASIC Derivative Transaction Rules (Reporting) 2022. The new rules will be referred to as ASIC Derivative Transaction Rules (Reporting) 2024. The new rules will repeal and remake ASIC Derivative Transaction Rules (Reporting) 2022 with effect from 21 October 2024. CP 375 proposes changes to the ASIC Derivative Transaction Rules (Reporting) 2022 rules in advance of the 21 October commencement.
Key CP 375 Amendments Explained
The purpose of the CP375 amendments is to harmonise the derivative reporting regime in Australia to international standards and align the reportable data elements with those of other major jurisdictions.
CP 375 aims to simplify the exclusion of exchange-traded derivatives; simplify the scope of foreign entity reporting; remove any alternative reporting provisions; exclude FX securities conversion transactions; and add more allowable values for two data elements.
Excluding exchange-traded derivatives
As exchange-traded derivatives are generally highly standardised in series with the same underliers, expiration dates, contract or ‘lot’ sizes and/or ‘tick’ values ASIC proposes to permanently exclude them from the reporting regime through the introduction of a generic definition for ‘exchange-traded derivative’. The ASIC definition of ‘exchange-traded derivative is derived from the definition of the same term in the ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844. The nuanced difference between the two definitions is that under the ASIC definition for a derivative to be considered part of a ‘series’, the “amount or size of the derivative specified by the operator” of the financial market must also be the same as for every other derivative in the series.
Foreign entity reporting
In the ASIC Derivative Transaction Rules (Reporting) 2024 ASIC includes an obligation to report ‘Nexus Derivatives’. This includes reporting of OTC where executed through a financial market where one or more of the functions are or will be, performed in Australia. The foreign entity reporting changes are due to take effect from 1 April 2025.
Alternative reporting no longer carved out
The Alternative Reporting regime currently allows reporting entities to report reportable transactions to a prescribed list of repositories in a foreign jurisdiction. ASIC proposes withdrawing this regime. According to CP 375, this withdrawal of the Alternative Reporting regime aligns with equivalent limitations to alternative reporting in the EU, US, Singapore, Hong Kong and Japan.
Other changes
In addition to those changes detailed above, ASIC has proposed:
- A carve-out from reporting foreign exchange contracts for foreign currency securities settlement purposes.
- Use of ‘PEXH’ as an optional allowable value for cross-currency interest rate swaps.
- Addition of central counterparty’s valuation as an allowable value for the ‘Valuation method’ field.
Next steps
A final version of the amended 2024 Reporting Rules is expected in Q3 2024. Some obligations are deferred until April 2025 to allow impacted reporting entities to prepare for those changes.
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