ASIC Rewrite: Implications of Consultation Paper 375

ASIC Rewrite goes live on 21 October 2024.

The Rules have been finalised, however ASIC has one final consultation paper outstanding which proposes some further tweaks to the rules. 

CP375‘s proposals cover a range of areas which ASIC indicated in their previous publications would be subject to further consultation.  Most of these changes are proposed to go live in April 2025.

 

Consultation Paper 375, released in February 2024, is not a surprise for its content.

ASIC’s  previous consultations have earmarked these proposals, which are now outlined in further detail.  CP375 has come a little behind the schedule outlined by ASIC, however this is not a problem but rather a welcome relief.  Many firms are also dealing with regulatory reporting changes across their global operations through EMIR Refit (both EU and UK which start at separate times in 2024), in addition to the ASIC and MAS Rewrites which start in October 2024.  Some firms have also had CFTC changes in the past few months.

From TRAction’s perspective, there’s three main points in CP375 which will are particularly notable:

  • most of these changes will not commence until April 2025 (or possibly later, subject to feedback and final implementation)
  • the proposed changes to reporting by foreign firms on transactions with Australian clients

A concept of ‘nexus derivative’ which is wider than the current definitions used is being introduced.  This will align ASIC’s approach with that in other reporting regimes.

ASIC explicitly states in this consultation, as well as previous consultations, that they are seeking to capture transactions by foreign reporting entities with Australian retail clients.  Although ASIC notes that it expects “about seven” entities to widen their reporting with their expanded rule, TRAction anticipates this will end up being wider if properly implemented by firms who are captured as a “reporting entity” and accepting Australian retail clients.

We expect that this change will cause concern to many CFD firms who are either:

  • using Australian operations to support provision of services from related entities, or
  • have used the reverse solicitation approach to accept Australian retail clients. 

Accordingly, TRAction encourages all firms who have:

  • operations in Australia or
  • Australian clients

to review if they will be in scope for these proposed rules to ensure they are compliant.  

With the strong dialogue between regulators for data gathering, we expect that there will be monitoring of this obligation (and ultimately enforcement) taking place through those channels.  For example, ASIC could ask CySEC/CIMA/VFSA to ask its regulated population if they are trading with any Australian retail clients.  Once the information feeds back to ASIC, they will take action against firms who are not meeting the local reporting rules, and likewise encourage CySEC/CIMA/FSA to do the same.

 

  • the removal of what is referred to in the ASIC reporting regime as alternative reporting. 

Essentially the alternative reporting in the current rules has meant trades done by Australian firms with firms that are regulated in one of the other major jurisdictions (often hedging trades), don’t have to be reported (since the liquidity provider on the other end is doing the reporting to a ‘prescribed’ trade repository and the Australian firm is covered by single-sided relief).  

Now ASIC-regulated firms will have to report these trades with foreign firms regardless of the reporting requirements of the liquidity provider on the other end.  Removing the alternative reporting arrangements will help ASIC to get a better picture of the overall net exposures of firms.  

Notably, there is nothing preventing ASIC firms from starting this reporting now if they would like to get ahead of the regulatory changes.  

It is important to clarify that the ‘single-sided relief’ provisions remain available, however this is going to require reporting by the other counterparty to be done to one of the ASIC authorised derivative trade repositories in order to qualify for the relief.      

Other proposals covered in CP375 include:

  • clarification of the exchange traded derivatives exclusion
  • clarification of the exclusion of FX securities conversion transactions
  • adding additional allowable values that may be reported for some data elements most of 

 

 

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