Australian entities dealing in OTC derivatives are required to report transactions to an Australian Derivatives Trade Repository (“ADTR”) licensed by the Australian Securities and Investments Commission (“ASIC”).
Under ASIC’s Derivative Transaction Rules (Reporting) 2013 (“ASIC’s Rules”), Australian issuers of OTC derivatives need to report their reportable transactions.
ASIC’s Rules provide a framework for the regulation of OTC derivatives reporting, clearing and trade execution.
Essentially the requirements for an Australian Financial Services Licence (“AFSL”) derivatives issuer/broker are to carry out the following on a daily basis:
- Report all trades,
- Report end of day open positions, and
- Submit any modifications;
to a licensed Australian Derivatives Trade Repository (“ADTR”).
What needs to be reported?
Under ASIC’s Rules, a reporting entity must report the following:
- each of its reportable transactions; and/or
- each of its reportable positions.
Part S2.1 Schedule 2 of ASIC’s Rules requires data items for each reportable transaction.
The requirements are divided into two categories:
- common data; and
- data specific to each asset class.
Reporting entities are required to report on the following specific asset classes:
- credit derivatives;
- commodity derivatives (other than electricity derivatives);
- interest rate derivatives;
- foreign exchange derivatives; and
- equity derivatives.
Broadly, the following information is to be reported for all derivative transactions:
- the economic terms of the transaction;
- the product, transaction and entity identifiers;
- information on whether the transaction is centrally cleared;
- valuation (mark-to-market, mark-to-model or other valuation) and collateral; and
- Legal Entity Identifier (“LEI”) for all non-individual clients (effective from 1 April 2019). If you want to know more about whether a trust or trustee is required to comply with this requirement, visit our page Trust or Trustee: Which Should Obtain an LEI?
Most entities will report transactions through the Snapshot Reporting provisions in ASIC’s Rules.
A reportable transaction is an OTC derivative that “takes place on a day (“Relevant Day”)”. This is done by “reporting derivative transaction information in relation to the relevant OTC derivative on its terms as of the Relevant Day.”
A single transaction may be reported that reflects intraday modifications of an OTC derivative. If an OTC derivative transacted earlier in a day is no longer in place at the end of a day then that OTC derivative may not be reportable.
Part S2.2 of Schedule 2 of ASIC’s Rules requires data items for each reportable position.
ASIC’s Rules outline a common set of data fields and specific fields relating to each asset class. Broadly, the following information is to be reported for all reportable positions:
- the economic terms of the position;
- the product and entity identifiers;
- information on whether the position is centrally cleared; and
- valuation (mark-to-market, mark-to-model or other valuation) and collateral information.
Safe Harbour Benefits of Delegated Reporting
ASIC’s Rules allow a reporting entity to appoint one or more persons (each a delegate) to report on its behalf. A reporting entity that appoints a delegate pursuant to ASIC’s Rules is taken to have complied with their reporting obligations, subject to certain conditions, in relation to each reportable transaction and reportable position for which the delegate has been appointed to report. For further information, see our dedicated page on the safe harbour benefits of delegated trade reporting.
ASIC’s Rules require both parties to a derivative transaction to report to an ADTR. However, there is a relief from this principle where only one party is required to report if the reporting entity has less than A$5 billion total gross notional outstanding positions across all OTC derivatives for two consecutive quarters. View our page Single-Sided Reporting to find out whether this exemption applies to you.
Extra-territorial obligations: Additional regimes which may capture you
Australian brokers that deal in the Israeli Shekel derivative have reporting obligations to the Bank of Israel. All non-Israeli firms who hold a position above the threshold (USD15m in aggregate gross notional) are required to report all OTC derivatives on Shekel FX and rates.
For further information on your Shekel reporting obligations, visit our Israeli Shekel page.
European Reporting Requirements – MiFID II and MiFIR
The second Markets in Financial Instruments Directive (“MiFID II”) and its accompanying regulation (“MiFIR”) created new reporting requirements for financial transactions from 3 January 2018. Australian firms are brought into its ambit where a branch or subsidiary is incorporated in Europe, financial instruments are traded on a European trading venue or where the firm interacts in certain ways with EU entities.
See the following pages for more information about specific aspects of transaction reporting in Australia:
Delegated Reporting – How can we help you?
TRAction Fintech provides clients with delegated reporting solutions in accordance with the reporting requirements outlined above.
Find out more about how TRAction Fintech can assist you here. If you would like to get in touch, we would be happy to talk to you about your trade reporting obligations. Feel free to contact us for an obligation-free consultation with one of our experienced staff on +61 2 8960 7248.