No. Due to an anomaly in the legislation, brokers with retail clients or clients that are not Reporting Entities don’t have to report how much collateral was posted by the client. Brokers only have to report the collateral that they post for trades, i.e. hedging trades. Again, single-sided relief may apply to your hedging trades meaning the collateral you have posted with your hedging counterparty doesn’t get reported to any trade repository.

There isn’t one. We suggest you choose an end of day that aligns with the end of day on your servers and your current reporting processes and stick to it (subject to daylight savings which shifts the end of day for many brokers twice a year by one hour).

1. No, as most brokers will benefit from single sided relief, therefore not having to report all or some of their hedging trades (trades done with another reporting entity), there would be no possible way to extract or calculate the ‘risk model’ of the broker from the data provided to TRAction.

In cases that the client is an individual, the ASIC reporting rules require a unique ID and the client’s legal name. No phone numbers, emails or addresses are required in the reports.

Single-sided reporting is where only one party is required to report under the ASIC Derivative Transaction Rules (Reporting) (Reporting Rules). Without single-sided reporting relief, the Reporting Rules require both parties to report.

To obtain the benefit of the relief, the other party to the OTC derivative must be:

(a)        a reporting entity required to report information about the trade under the Reporting Rules and not relieved from that requirement under the single-sided relief;
(b)        a reporting entity who otherwise reports information about the trade under the Reporting Rules; or
(c)        a foreign entity reporting under a ‘substantially equivalent’ foreign regime to an offshore prescribed repository and designates or tags the information reported as reported under the Reporting Rules.

The relief requirements are similar for transaction reporting and position reporting.

This means that no relief is available where the other party does not satisfy the above (eg end customer not a reporting entity).

This also means that, where an OTC derivative transaction is between two parties potentially entitled to the single-sided reporting relief, the parties will need to agree which of them will report the transaction.

The single-sided reporting relief will apply to:

(a)        authorised deposit-taking institutions (ADIs);
(b)        Australian financial services licensees (AFSLs);
(c)        clearing and settlement facility licensees; and
(d)        exempt foreign licensees,

with total gross notional outstanding positions across all OTC derivatives of less than A$5 billion at the end of each of two consecutive calendar quarters.

This is particularly relevant to the “Phase 3B entities” (with less than A$5 billion gross notional outstanding OTC derivative positions as at 30 June 2014), who became subject to the Reporting Rules for the first time on 4 December 2015.

For more information, please see our dedicated page on ASIC’s Single-Sided Reporting relief.

1. OTC derivative issuers as reporting entities – to whom should they report under Australian law?

   The answer generally depends on how the OTC derivative issuer is set up – whether it is

   (1) an Australian entity;

   (2) a foreign subsidiary of an Australian entity where the Australian entity is an authorised deposit-taking institution (ADI) or an Australian financial services (AFS) licensee;

   (3) a foreign ADI that has a branch located in Australia or

   (4) a foreign company that is required to be registered under Div 2 of Pt 5B.2 of the Corporations Act.

   (1) Australian entity (i.e. entity, including a corporation, partnership, managed investment scheme or trust, incorporated or formed in Australia)

   An Australian entity must report information about all the derivatives to which it is counterparty (subject to the proposed single-sided reporting relief for certain transactions/positions for certain entities – see our separate article “Single-sided trade reporting – how will this help?”).

   An Australian entity must report to a trade repository that is licensed by ASIC under the Corporations Act. There is currently only one trade repository that is licensed by ASIC under the Corporations Act – DTCC Data Repository (Singapore) Pte Ltd (in respect of commodity, credit, equity, foreign exchange and interest rate derivatives).

   (2) Foreign subsidiary of an Australian entity, where the Australian entity is an ADI or an AFS licensee

   A foreign subsidiary of an Australian entity, where the Australian entity is an ADI or an AFS licensee, must report information about all derivative transactions to which it is a counterparty (subject to the proposed single-sided reporting relief for certain transactions/positions for certain entities – see our separate article “Single-sided trade reporting – how will this help?”).

   Such a reporting entity can report to a licensed trade repository or a prescribed trade repository on an ongoing basis (subject to certain conditions being met) – see below.

   (3) Foreign ADI that has a branch located in Australia

   A foreign ADI that has a branch located in Australia must report information about all derivative transactions booked to the profit and loss account of the foreign ADI, or entered into by the foreign ADI, in Australia (subject to the proposed single-sided reporting relief for certain transactions/positions for certain entities – see our separate article “Single-sided trade reporting – how will this help?”).

   Such a reporting entity can report to a licensed trade repository or a prescribed trade repository on an ongoing basis (subject to certain conditions being met) – see below.

   (4) Foreign company that is required to be registered under Div 2 of Pt 5B.2 of the Corporations Act

   A foreign company required to be registered under the Corporations Act must report information about all derivative transactions booked to the profit and loss account of the foreign company, or entered into by the foreign company, in Australia (subject to the proposed single-sided reporting relief for certain transactions/positions for certain entities – see our separate article “Single-sided trade reporting – how will this help?”).

   Such a reporting entity can report to a licensed trade repository or a prescribed trade repository on an ongoing basis (subject to certain conditions being met) – see below.

   For a reporting entity referred to in (2), (3) or (4) above, such entity may (instead of reporting to a trade repository licensed by ASIC) report to a prescribed trade repository on an ongoing basis by reporting information under the requirements of a foreign jurisdiction, where those requirements are substantially equivalent to the requirements that would otherwise apply to the reporting entity.

   As at Feb 2015, the jurisdictions that ASIC considers to have implemented reporting obligations that are substantially equivalent to the derivative transaction rules (reporting) are:

   • Canada;
   • the European Union;
   • Hong Kong;
   • Japan;
   • Singapore; and
   • the United States.

   On 25 June 2015, ASIC made a determination prescribing several overseas trade repositories. These are:

   • DTCC Data Repository (U.S.) LLC
   • Derivatives Repository Ltd
   • DTCC Data Repository (Japan) KK
   • DTCC Data Repository (Singapore) Pte Ltd
   • UnaVista Limited, and
   • the Monetary Authority appointed under section 5A of the Exchange Fund Ordinance of Hong Kong.

A Trade Repository is an entity that centrally collects and maintains the records of over-the-counter (OTC) derivatives. These electronic platforms, acting as authoritative registries of key information regarding open OTC derivatives trades, provide an effective tool for mitigating the inherent opacity of OTC derivatives markets.

ASIC noted in the Report 482 that many Australian Financial Services Licensees incorrectly use an intermediary authorisation licensing exemption under s911A (2)(b) of Corporations Act 2001 to facilitate the issuing of retail OTC derivative products by their authorised representatives (ARs) when this is not permitted.

An AFSL holder can only appoint an AR to provide a financial service on the broker’s behalf as an agent, and not provide a financial service on its own behalf. This means the AR is not allowed to run a trading platform where they will be acting as an issuer or market maker in derivatives.

A legal arrangement we see sometimes is where an AFSL holder operates a trading platform using branding (and a registered “trading name”) similar to the AR’s company name. In this arrangement, the AFSL holder must remain as the issuer and market maker of derivatives, and therefore the counterparty to the customers. The broker therefore has the obligation to report relevant transactions to an Australian Derivatives Trade Repository (ADTR).

Where a broker has an Australian Financial Services Licence with appropriate authorisations to enter into an OTC derivative transaction with a customer (generally including issuer and market maker in derivatives), they will be counterparty to derivative transactions with its customers. The AFSL holder will then be Reporting Entity who has reporting obligations under the ASIC Derivative Transaction Rules (Reporting) 2013.