These primarily “buy-side” entities were going to have to start reporting derivatives from 1 October this year. Now, if they meet certain conditions, this deadline has been pushed back, potentially for another year. Although this breathing space should be well-received by Australian market participants, much of the time is likely to be needed to prepare for the reporting obligations when they start.
Phasing in and phasing out
ASIC has divided the Phase 3 Reporting Entities into two groups, unsurprisingly named “Phase 3A” and “Phase 3B”. A Phase 3A Reporting Entity is a Phase 3 Reporting Entity which held $5 billion or more total gross notional outstanding in reportable OTC positions as at 30 June 2014. This threshold applies on a per fund or trust basis if the Phase 3 Reporting Entity is a responsible entity of a managed investment scheme or trustee of a trust. Other Phase 3 Reporting Entities whose positions are below that threshold will be “Phase 3B Reporting Entities”.
There is a different extension of time for the two groups. The timeframes depend on when the first trade repository (TR) licence is granted by ASIC. These are summarised for transactional trade reporting in the diagram below.
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Phase 3 Reporting Entities can start reporting earlier if they want to, after 1 October 2014, by lodging a prescribed notice with ASIC. This “opting-in” can be done separately for different funds or trusts.
The date for reporting information about Reportable Positions is 6 calendar months after the revised date for reporting transactional data.
The fine print
There are some rules that must be followed if an entity wishes to take the benefit of the relief:
- If ASIC has granted a TR licence by the time a Phase 3 Reporting Entity is required to start reporting, the entity must report to the licensed TR.
- If there are no licensed TRs by the time a Phase 3 Reporting Entity is required to start reporting, the entity must report to a prescribed TR.
- If a Phase 3 Reporting Entity is reporting to a prescribed TR, the entity must ‘tag’ its trade reports as being under the Australian regime.
Further, there are additional rules that apply to Phase 3A Reporting Entities:
- Phase 3A Reporting Entities must take steps to obtain consents from, or give notices to, counterparties authorising the disclosure of identifying information in respect of that counterparty, if they are under a legal obligation to do so in order to be in a position to do trade reporting in accordance with the Rules.
- Phase 3A Reporting Entities must keep records detailing compliance with the conditions of relief for at least five years and provide these to ASIC on request.
Is this it?
ASIC’s class order does not make any reference to the relief which the Australian Treasury proposed earlier this year in its Proposals Paper entitled “Implementation of Australia’s G-20 over-the-counter derivatives commitments : G4-IRD central clearing mandate” (a link can be found here and a link to our Alert on this can be found here). This proposed relief relates to taking into account the extent of an AFSL holder’s derivatives authorisation in the application of the reporting regime to these types of Reporting Entities.
And if you are looking for a short refresher…
The Australian trade reporting obligations apply to any derivative activity that meets the definition of “Reportable Transaction” by any person that meets the definition of “Reporting Entity”.
If you are a Reporting Entity that does Reportable Transactions, the next question is when you are required to start complying with the trade reporting obligations under the Rules. There is a separate regime that applies to determining your start date (and separate relief instruments may also apply). The starting point for the regime is found in Schedule 1 of the Rules, and provides the dates on which trade reporting is to start for 3 groups of Reporting Entities (which are referred to as “Phase 1”, “Phase 2” and “Phase 3” Reporting Entities). Under the Rules, Phase 3 Reporting Entities are required to commence trade reporting in respect of certain Reportable Transactions from 1 October 2014.