The Australian Treasury has delivered to the derivatives market some holiday reading – a consultation paper on the derivatives reforms to commence next year. 

Fortunately for the market, there does not seem to be that many surprises in the paper. However, every step in the reform process is important and this paper should not be overlooked.

The paper reiterates the position the Australian financial regulators reached this year in respect of implementing regulation and rules under the Corporations Amendment (Derivative Transactions) Act 2012, which became law earlier this month. The paper also commences consultation following the recommendations proffered by the regulators in their October report (see this link to our alert).

As expected, the paper states (and seeks comment on) the Australian regulators’ recommendations to phase in trade reporting requirements for OTC derivatives in the new year whilst holding off on the clearing or execution requirements at this stage. For this, the Government proposes the following timetable for implementing trade reporting:

Click here to view table.

The paper also requests comment on a new regulation which requires ASIC to seek the views of the Australian Energy Market Commission prior to making rules which relate to electricity derivatives or matters connected with the Australian Energy Market Commission's function. This follows the results of the Parliamentary inquiry into the recently passed derivatives legislation.

It is worth noting that the “Australian approach” to OTC derivatives regulation is unchanged, namely:

“In light of the uncertainty around the international framework for regulation of OTC derivatives, the Australian legislation does not pre-empt international developments; it instead allows for mandates to be determined based on regular consideration of domestic market developments and in coordination with other economies.”

With the many urgent things taking place at the end of the year this paper might go unheeded by many. However, it should not be forgotten. The paper presents the first opportunity to be involved in the process for creating Australia’s new derivatives laws – who could wish for a more wonderful Christmas present. Happy holidays all.

A copy of the consultation paper can be found here. Responses are due by 15 February 2013.