ASIC consults on OTC derivatives reform
The Australian Securities and Investments Commission has launched a consultation on proposed changes to the trade reporting rules for OTC derivatives, in a move that suggests Australia is learning the lessons of OTC reforms in other countries.
Market reforms currently affecting the derivatives markets include the G20 agenda agreed in Pittsburgh in 2009, under which 20 countries agreed in principle to reduce systemic risk by improving transparency in the OTC derivatives market. The Dodd-Frank Act in the US and EMIR in Europe are attempts to implement that agenda. Both pieces of legislation essentially mandate the central clearing and reporting of the bulk of formerly OTC derivatives contracts, along with their standardisation and trading on exchange-like platforms wherever possible.
Under the proposals in Consultation Paper 221 OTC derivatives reform: Proposed amendments to the ASIC Derivative Transaction Rules (Reporting) 2013 the reporting requirements would be made “easier to comply with”, delegated reporting would be tweaked so that those who delegate would be protected from liability if certain conditions are met, and larger overseas subsidiaries of Australian financial institutions would be required to report their transactions.
ASIC says its proposed changes are aimed at ensuring a smooth transition to the reporting regime, which was recently revised to allow more time for smaller institutions to report OTC derivatives transactions to trade repositories. Smaller institutions were defined as financial entities holding less than $50 billion in OTC derivatives outstanding.
Earlier this month, ASIC granted a delay to these ‘Phase 3’ financial entities from their requirement to report. Under ASIC Instrument [14/0633], these entities will now need to start reporting no earlier than 13 April 2015, and there is further phasing by size of entity and asset class.
“ASIC is taking steps to reduce the regulatory burden, especially for small financial entities,” said Cathie Armour, ASIC Commissioner. “We have sought to do this while ensuring that the underlying goals of the G20 OTC derivatives commitments, to improve the integrity and stability of the OTC derivative markets, are met. These rule changes, and the delay to Phase 3 reporting we recently finalised, will result in a substantial overall deregulatory benefit for industry. We look forward to receiving stakeholders’ views on the proposed rule change.”
The Australian regulator has been busy in recent months. Late last year, ASIC set out a series of final rules on dark liquidity and high-frequency trading that it said would create a more stable market. Armour played a role in the development of those rules, which were also implemented following a period of consultation with market participants.
Submissions to the latest consultation paper CP221 are due by 29 August 2014.