Extension-of-exemptions

Another extension for existing exemptions

ASIC registered an extension to its existing instruments to extend its previous relief. Some elements were continued, whilst others were removed. We take a look at what exemptions are still available from the ASIC Derivative Transaction Reporting Rules.

The timing of this was tight as the instrument was registered on 30 September 2020 itself, rather than well in advance to allow those impacted to plan the necessary operational and compliance changes accordingly.

Continuing Exemptions

Just as a recap these exemptions are:

Exemption 1

“Exchange traded derivatives” exemption means that any Derivative which takes place on a foreign financial market does not need to be reported to a trade repository, subject to a number of conditions.  From 1 October 2022, these will need to be reported.

Exemption 2

“Entity Information” exemption removes the need to report the Entity Information fields if the Reporting Entity reports the corresponding entity’s internal entity identifier and certain criteria are satisfied.  A summary can be found on our website (refer to Relief 3).  Industry considered that continuance of this exemption was imperative whilst ASIC decides whether to implement the IOSCO Critical Data Elements.

Exemption 2A – This is an exemption from reporting reference entity information in relation to credit default swaps and total return swaps, or where the “RED code” issued by IHS Markit is used.

Exemption 2B – Where there are joint counterparties, an internal entity identifier can be used for reporting purposes, subject to a number of conditions such as maintaining the information internally and providing it to ASIC upon implement request.

Exemption 3

This is a “Name Information” exemption from reporting required name information where an LEI, AVID (Avox) or BIC code is used.

Exemption 7

Until 30 September 2022, Universal Transaction Identifiers (UTIs) are not required to be used in transaction reporting, subject to a number of conditions for specific types of transactions.  This is a subject which we expect to see some movement on over the life of this exemption as it is a focus of a number of regulators.

Exemption 9

“FX Securities Conversion Transactions” continues relief from reporting FX forwards with a tenor of less than or equal to 7 days that are entered into to facilitate settlement of a foreign currency-denominated security trade. Some industry participants consider this should be a permanent change to the rules to establish alignment with other major jurisdictions.

Record Keeping

Where exemption 1, 2B or 7 are relied upon, ASIC expects that entities will maintain records that demonstrate compliance with the conditions.

Discontinued Exemptions

Exemption 4

An exemption relating to consent for historical counterparties (for transactions entered into prior to 31 May 2014) was expired by ASIC in the latest instrument given it did not appear that it was being relied on.

Exemption 5

An exemption in relation to reporting identifying information has been removed despite feedback from industry that there is a continuing need for the exemption.  An example was given in AFMA’s submission that if the exemption did not continue, Reporting Entities would be placed in a position of conflict of laws between jurisdictions because it wouldn’t be possible for them to mask information of Chinese entities to comply with foreign privacy restrictions.  ISDA has also previously submitted to ASIC information about how this exemption provided practical relief for its members.

Exemption 6

This exemption required firms to submit a notice to ASIC that it had entered into a transaction with a government entity but had not obtained its consent to be identified in the transaction reporting.  Amongst other conditions, firms were required to use all reasonable endeavours to obtain the consent from the government entity.

Exemption 8

Collateral information exemptions have been removed.  ASIC has an FAQ available on its website which talks about collateral reporting requirements, outlining that they will accept values in the collateralisation field that are either in accordance with the ESMA OTC reporting regime or the CFTC OTC reporting regime.

A consolidated version of the exemption instrument can be found here: ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844.

It incorporates all of the changes in the most recent instrument from ASIC: ASIC Corporations (Amendment) Instrument 2020

Foreign Markets Updated

ASIC also updated the list of Registered Foreign Markets which apply to the rules and the exemption instrument – this means that any derivative transaction which takes place on one of the markets listed in the new order will be eligible for exemption from the reporting requirements under Rule 1.2.4 and the exemption instrument.

The latest version of the instrument is available here.

Sophie Gerber

Sophie works in our Sydney office. She is co-CEO and founder of TRAction and focuses on assisting clients in Australia, Europe and Asia to meet their regulatory requirements with trade and transaction reporting solutions as well as development of the best execution platform. She has extensive experience in providing compliance and legal services to Australia’s financial services and credit participants. Her vast experience coupled with in-depth knowledge of business practicalities, regulatory compliance and financial services laws allow her to effectively and efficiently engage with clients.