Trade reporting represents the first of the G20 commitments on OTC derivatives to be implemented in Australia, although the Australian Government recently released a proposals paper for the mandatory central clearing of interest rate derivatives in USD, EUR, JPY and GBP in February 2014. Our alert on the proposals paper is available here.
From today, phase 2 reporting entities, with total gross notional outstanding positions of Australian $50 billion or more as of 31 December 2013, will be required to report credit and interest rate OTC derivatives contracts, with all other asset classes to follow on 1 October 2014.
These phase 2 reporting entities include:
- Australian Authorised Deposit-taking Institutions (ADIs);
- Australian financial services licensees (see ‘Proposals Paper’ below);
- clearing and settlement facility licensees;
- foreign ADIs; and
- Exempt Foreign Licensees (as defined in the Derivative Transaction Rules).
The phase 2 reporting commencement date represents a significant step for Australia’s implementation of the G20 commitments on OTC derivatives. The 5 Australian banks which are registered as Swap Dealers with the US Commodity Futures Trading Commission have been required to report OTC derivatives contracts under the Australian Derivatives Transaction Rules since 1 October 2013. However, these banks had already been subject to derivatives trade reporting requirements in the US under the Dodd-Frank Act. Today marks the first time Australian market participants not subject to overseas reporting requirements have undertaken the reporting of OTC derivatives in accordance with the Australian Derivatives Transaction Rules.
Countdown to 1 October
Phase 3 reporting entities, being entities of the same type as those listed above as phase 2 reporting entities, but whose total gross notional outstanding positions are less than Australian $50 billion as of 31 December 2013, will be required to commence reporting of credit and interest rate OTC derivatives contracts from 1 October 2014.
The first of October also marks the end of the transitional reporting period. From this date, reporting entities that do not fall within another exemption under the rules will be required to undertake two-sided reporting in accordance with the data fields in the Australian Derivatives Transaction Rules.
Although ‘Australian entities’ are listed in the Derivatives Transaction Rules as ‘reporting entities’, not all Australian entities are currently subject to a reporting commencement date under the Derivatives Transaction Rules. The Australian Government’s February 2014 proposals paper makes two proposals in relation to Australia’s trade reporting regime:
- that the exemption for end-users from having to report transactions be made permanent; and
- that the application of the regime to holders of an Australian financial services licence take into account the extent of the derivatives authorisation in that licence.
The closing date for submissions on the proposals paper is 10 April.