The Australian Treasury has delivered an early Christmas present to end users and 3B Reporting Entities by permanently extending the end user exemption and allowing 3B Reporting Entities to undertake single-sided reporting where certain conditions are met.  The Australian Treasury also announced mandatory central clearing for major banks of over-the-counter (OTC) Australian denominated interest rate derivatives (IRD), as well as IRD in four other global currencies.

End users

The extension of the end-user exemption, which was previously scheduled to expire on 31 December 2014, means that Reporting Entities (as defined under the ASIC Derivative Transaction Rules (Reporting) 2013) (Rules) that qualify as ‘end users’ under the Corporations Regulations 2001 (Cth) (Regulations) will not be subject to reporting requirements under the Rules.  This follows the Australian Government’s consultation process in relation to end users which began in 2013.

An entity will be an ‘end user’ for the purposes of the Regulations if that entity is not:

  1. an Australian authorised deposit-taking institution; or
  2. a clearing and settlement facility licensee; or
  3. a financial services licensee; or
  4. a person:
    1. who provides a financial service, relating to derivatives, only to wholesale clients; and
    2. whose activities, relating to derivatives, are regulated by an overseas regulatory authority.

3B Reporting Entities

The Australian Treasury announced that 3B Reporting Entities will be able to take the benefit of ‘single-sided’ reporting relief where they conclude their derivatives transactions with counterparties that are already required to report the trade. 

The exact details of how this is intended to operate will become more apparent when the regulations are released for public consultation early next year.  However, the Australian Treasury notes this will allow the trade reporting compliance burden to fall mainly on larger financial institutions. 

Our alert on what entities constitute a “3B Reporting Entity” is available here

Mandatory clearing for major banks

The Australian Treasury also announced mandatory central clearing for major domestic and foreign banks of Australian denominated OTC IRD, as well as OTC IRD in four other global currencies.  While the Australian Treasury’s announcement did not specify the four other global currencies to be mandated, these are likely to be US dollar, euro, yen and British pounds (the G4 currencies) based on the Australian Government’s consultation process on mandatory clearing during the course of this year.

A ministerial determination, regulations and related rules will be released for public consultation early next year.