ASIC is stepping closer to its final version of reform to its reporting requirements for derivative transactions.
Further details of their proposals have been outlined in ASIC’s second Consultation Paper CP 361 Proposed Changes to simplify the ASIC Derivative Transaction Rules (Reporting) 2013, incorporating further changes after its first round of consultation released in November 2020. A number of industry groups and market segments have been approached by ASIC for input in this phase. ASIC has noted that they anticipate there being one more consultation paper issued prior to finalisation of the updated regime.
What are the key changes?
Apart from the proposed rules in the first consultation paper, here are the key proposals to take note of in CP361:
| Key points | Stages | Comments |
| Introducing conditional ‘bilateral agreement’ as a method to determine UTI generation entity for cross-jurisdictional transactions | Stage 1 | ASIC has proposed a UTI waterfall generation with the flexibility of utilising bilateral agreement and allowing reporting entities to bypass challenges of determining hierarchies between cross-jurisdiction entities. |
| Entity identifier of Australian entities and ASIC reporting entities to be valid and renewed LEIs | Stage 1 | In order to tighten rules for counterparties without LEIs, foreign counterparties that are ASIC reporting entities require LEIs to be valid and renewed. This rule is not as strict as MiFIR’s ‘No LEI No Trade’ Rule. |
| Other than equity derivatives, small-scale buy-side entities may report transactions on a snapshot basis | Stage 1 | In almost all cases, transactions are required to be reported on a lifecycle basis. An exception is made for small-scale buy-side entities such as a non-bank body regulated by APRA, non-AFS licensee and a non-exempt foreign licensee. |
| Removing the ‘safe harbour’ provision from delegated reporting | Stage 1 | ASIC has proposed to remove an existing provision that provides safe harbour where reporting data has been provided to a delegate. This will mean that entities who delegate their reporting will retain responsibility for the quality of reporting. |
| ASIC recognises transaction-to-position conversion reporting practices for CFD transactions | Stage 1 | ASIC’s latest comments show willingness to further align with ESMA methodology in their treatment of position reporting for CFD brokers and third-party vendors. |
| ASIC introduces additional data elements which will be implemented at the second stage | Stage 2 | The Common Data Elements (CDE) proposed in the first consultation paper are largely to be implemented in Stage 1, although there are several data elements removed, with new data elements to be introduced in Stage 2. |
| Reporting entities are required to conform to the technical standard of ISO 20022 XML messages | Stage 2 | Reporting entities will have to generate reports in XML file format instead of csv. This will give rise to many challenges for firms as creating reports in XML format is far from simple. |
| Transactions prior to the commencement of the amended ASIC Rules will have to be re-reported to update the data elements to the new specifications | Stage 2 | This is only applicable to open transactions which have been reported before 31 March 2024 and which have: an expiration date later than 31 March 2025; anda termination date on or before 30 September 2024 |
When will the updates be implemented?
As the current ASIC Rules cease on 1 October 2023, ASIC has proposed a two-stage process to update the rules where;
Stage 1: On 1 October 2023, a new legislative instrument would implement the UTI, LEI requirements and other changes mentioned below. ASIC refers to these rules as the ‘draft remade ASIC Rules’.
Stage 2: Commencing on 1 April 2024, an amendment to the ASIC Derivative Transaction Rules (Reporting) 2022 would implement the ISO 20022 XML message, UPI and additional data elements. ASIC refers to these rules as the ‘draft amended ASIC Rules’.
How can TRAction help?
With our commitment to ‘Trade Reporting Simplified’, TRAction will take care of all XML changes for clients. TRAction will also continue to accept data from its clients and provide confirmations in csv format to facilitate the process of reviewing your reporting delegate.
Please don’t hesitate to contact us to discuss if you would like to know more.
