OTC derivatives - Frequently asked questions

These FAQs do not constitute legal advice. You should seek your own professional advice to find out how the ASIC Derivative Transaction Rules (Reporting) 2013, ASIC Derivative Transaction Rules (Clearing) 2015, and ASIC Derivative Trade Repository Rules 2013 and other applicable laws apply to you, because it is your responsibility to determine your obligations.

A range of issues relating to derivative transaction reporting (including FAQs previously published on this page) are now covered in Regulatory Guide 249 Derivative trade repositories and Regulatory Guide 251 Derivative transaction reporting.

1. What is an 'over-the-counter (OTC) derivative' under the derivative transaction rules (reporting)?

The derivative transaction rules (reporting) impose obligations on reporting entities to report information about their transactions and positions in OTC derivatives to a licensed or prescribed trade repository (the reporting obligations): Rule 1.2.5 of the derivative transaction rules (reporting) (Rule 1.2.5 (Reporting)) and RG 251.10.

As described at RG 251.12, Rule 1.2.4 (Reporting) defines an OTC derivative as a derivative (within the meaning of section 761D of the Corporations Act 2001 (Corporations Act)) that is prescribed by the Minister under section 901B (the Ministerial determination) that is not traded:

  • on a financial market that is:
    • subject to ASIC supervision under Part 7.2A of the Corporations Act (e.g. ASX 24)
    • registered by the US Commodity Futures Trading Commission (CFTC) as a ‘designated contract market’ under s5h of the Commodity Exchange Act 1936 (US), or
    • a ‘regulated market’ as defined in Article 4(1)(21) of the Markets in Financial Instruments Directive 2014/65/EU, or
  • on certain foreign markets (regulated foreign markets) that ASIC has determined under Rule 1.2.4(3) (Reporting) are subject to sufficiently equivalent requirements and supervision, in terms of market transparency and integrity, to those applying to markets supervised under Part 7.2A, ‘designated contract markets’ or ‘regulated markets’ (see the ASIC Regulated Foreign Markets Determination [OTC DET 13/1145]).

Unless an exemption applies, derivatives (within a class determined by the Minister) traded on facilities that do not fall within the definition of a regulated foreign market, such as swap execution facilities and multilateral trading facilities, are OTC derivatives for the purposes of the derivative transaction rules (reporting) and therefore subject to reporting obligations.

An exemption has been provided to reporting entities in the form of time-limited transitional relief so that derivatives traded on certain additional relevant financial markets (as defined in the relevant exemptions) are also excluded from the definition of ‘OTC derivative’ for the purposes of the derivative transaction rules (reporting) up to (and including) 30 September 2018: see ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844.

These time-limited exemptions will apply while ASIC considers whether the financial markets specified in the exemptions are suitable to be regulated foreign markets.

(Updated 23 May 2018)

3. Can a licensed trade repository use or publish derivative trade information?

Licensed derivative trade repositories are subject to the Corporations Act and the derivative trade repository rules which restrict the use or disclosure of derivative trade data reported to the derivative trade repository: section 904B of the Corporations Act and Part 2.3 of the derivative trade repository rules (Part 2.3 (Trade Repository)).

The operator of a licensed derivative trade repository must create and disclose certain statistical data based on derivative trade information that is retained by the trade repository and was reported to the trade repository under the derivative trade repository rules: Rule 2.3.5 (Trade Repository).

The operator of a licensed derivative trade repository must, for each seven day calendar period commencing from the day the operator first accepts a report of relevant derivative trade information, create certain statistical data from the relevant derivative trade information. The statistical data required to be created is set out in Rule 2.3.5(2) (Trade Repository).

The operator of a licensed derivative trade repository must disclose such statistical data (including certain breakdowns set out in Rule 2.3.5(3) (Trade Repository)) by making the statistical data available at no charge and through a publicly accessible website: Rule 2.3.5(5) (Trade Repository).

The statistical data published by the operator of a licensed derivative trade repository under the derivative trade repository rules must not include derivative trade information which is capable of identifying any counterparty to a derivative transaction: Rule 2.3.5(6) (Trade Repository).

(Updated 19 June 2014)

5. When do I need to report information about a reportable transaction or a reportable position?

A reporting entity must report information about its reportable transactions and reportable positions, and changes to that information, to a licensed or prescribed repository in accordance with Rule 2.2.3 (Reporting) generally no later than the end of the next business day after the requirement to report arises: see RG 251.55–251.56.

(Published 19 June 2014)

6. What information do I need to report to identify a non-reporting counterparty and other entities?

Information required to be reported under Rule 2.2.1 (Reporting) to identify a non-reporting counterparty and other entities (Relevant Entities) includes the:

  • standard identifier (refer below) of both the reporting counterparty and the non-reporting counterparty (items 5 and 7 in Table S2.1(1) and items 4 and 6 in Table S2.2(1) in Schedule 2 (Reporting))
  • name of both the reporting counterparty and the non-reporting counterparty (items 6 and 8 in Table S2.1(1) and items 5 and 7 in Table S2.2(1) in Schedule 2 (Reporting))
  • standard identifier and name of certain other entities, such as beneficiary, broker, and clearing member.

Under Part S2.1A (Reporting), the reporting counterparty means, in relation to a report of information about a reportable transaction or reportable position:

  • where a reporting entity makes the report on its own behalf, that reporting entity, or
  • where another person makes a report on behalf of a reporting entity, the reporting entity on behalf of which the report is made.

The non-reporting counterparty means the counterparty to the OTC derivative that is not the counterparty making the report.

Where the reporting or non-reporting counterparty is an entity (corporation, partnership, managed investment scheme or trust, but not an individual), the following standard identifiers must be reported:

  • Legal Entity Identifier (LEI) or interim entity identifier (see RG 251.60–251.62)
  • if no LEI or interim entity identifier is available for the entity, an international business entity identifier issued by Avox Limited (AVID), or
  • if no AVID is available, a Business Identifier Code (BIC). 

From 1 October 2015 to ‘the Exemption Date’ (refer below) the ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844 provides relief for reporting of one of the standard identifiers for non-reporting counterparties and other entities on the condition that an internal client code is reported by the reporting counterparty. This relief is conditional on the reporting counterparty taking best efforts to obtain one of the standard identifiers as soon as reasonably practicable, including by maintaining and following documented procedures for one or both of the following:

(a)     requesting that non-reporting counterparties (and other entities as necessary) obtain one of the standard identifiers and provide it to the Reporting Entity;

(b)     obtaining one of the standard identifiers on behalf of non-reporting counterparties (and other entities as necessary).

The final day of relief (or ‘Exemption Date’) is:

- 30 September 2019 for non-reporting counterparties that are:

(i)      incorporated or formed in this jurisdiction; or

(ii)     a non-reporting counterparty to the OTC Derivative to which the Reportable Transaction or Reportable Position relates as the result of a transaction entered into by a branch of the non-reporting counterparty that is located in this jurisdiction;

- otherwise, to 31 March 2020.

LEIs can be obtained either from a domestic or an overseas entity that is accredited or endorsed to issue LEIs, or the local registration agent of such a firm. More information is available on the Global LEI Foundation’s website.

Where the non-reporting counterparty or other entity is an individual, the identifier is a client code assigned by the reporting counterparty: Table S2.1(1) and Table S2.2(1) (Reporting).

Some reporting counterparties have raised concerns with ASIC that one licensed trade repository is unable to populate name information from a standard identifier unless the relevant entity has 'on-boarded' with the licensed trade repository. Accordingly, from 1 October 2015 to 30 September 2020 (inclusive) ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844 provides relief from the need to report name information where one of the three standard identifiers above is reported.

(Updated 13 March 2019)

8. Can an Australian regulator access the derivative trade information held by a licensed trade repository?

Yes. An operator of a licensed trade repository must provide to each of ASIC, the Reserve Bank of Australia and the Australian Prudential Regulatory Authority (each being an Australian regulator) continuous, direct and immediate electronic access (at no charge) to, among other things, derivative trade information retained in the trade repository and reported in accordance with the derivative trade repository rules, if requested by that Australian regulator: Rule 2.3.4(5) (Trade Repository).

The operator of a licensed trade repository is excused from complying with a request from an Australian regulator unless the request is for derivative trade information that is required by the Australian regulator in connection with the performance of its functions or exercise of its powers: Rule 2.3.4(6) (Trade Repository).

(Published 19 June 2014)

9. Who do I report to in order to satisfy the reporting requirements of the derivative transaction rules (reporting)?

From 4 December 2015, all Australian reporting entities (i.e. reporting entities incorporated or formed in Australia) must report to a licensed trade repository. On 15 September 2014, ASIC granted an Australian derivative trade repository (ADTR) licence to DTCC Data Repository (Singapore) Pte Ltd (DDRS). On 23 October 2015 ASIC granted an ADTR licence to Chicago Mercantile Exchange Inc. (CME).

On 25 June 2015, ASIC made a determination (ASIC Prescribed Trade Repositories Determination [15-0591]) prescribing several overseas trade repositories to facilitate the various forms of reporting that allow the use of prescribed repositories.

(Updated 5 January 2016)

10. Do end users have to comply with the derivative transaction rules (reporting)?

An end user is a person who is not:

  • an Australian authorised deposit-taking institution (ADI) (as defined in Rule 1.2.3 (Reporting))
  • a clearing and settlement facility licensee (as defined in Rule 1.2.3 (Reporting))
  • an Australian financial services licensee (as defined in Rule 1.2.3 (Reporting)), or
  • a person:
    • who provides a financial service, relating to derivatives, only to wholesale clients, and
    • whose activities, relating to derivatives, are regulated by an overseas regulatory authority.

Under the Corporations Act and the Corporations Regulations, end users do not have to comply with the reporting requirements.

This is as a result of section 901D of the Corporations Act, which permits the Corporations Regulations to provide that the derivative transaction rules (reporting) cannot impose requirements on certain classes of persons. Regulation 7.5A.50 of the Corporations Regulations provides that:

  • the class of persons on whom the derivative transaction rules (reporting) cannot impose requirements includes end users (the end-user exemption), and
  • the derivative transaction rules (reporting) cannot impose requirements relating to a class of derivatives on Australian financial services (AFS) licensees, who are taken not to be end users only because they are AFS licensees and whose AFS licences do not authorise them to provide financial services in relation to that class of derivatives.

(Updated 5 January 2015)

12. How should names of counterparties, beneficiaries and other persons be reported under the derivative transaction rules (reporting) where a single field is used for the reporting of a name and an identifier?

Certain items of derivative transaction information and derivative position information in the tables in Parts S2.1 and S2.2 of the derivative transaction rules (reporting) require reporting of the names of counterparties, beneficiaries and certain other persons to the reportable transaction or reportable position. The relevant table references and item numbers are as follows: 

  • Table S2.1(1), items 8, 11, 16 and 20
  • Table S2.1(3), items 2, 4 and 6
  • Table S2.1(5), items 7, 9 and 11
  • Table S2.2(1), items 7, 9 and 16
  • Table S2.2(3), items 2, 4 and 6, and
  • Table S2.2(5), items 6, 8 and 10.

There are also associated requirements to report identifiers for these persons. The relevant table references and item numbers for the identifier information are as follows:

  • Table S2.1(1), items 7, 10, 15 and 19
  • Table S2.1(3), items 1, 3 and 5
  • Table S2.1(5), items 6, 8 and 10
  • Table S2.2(1), items 6, 8 and 15
  • Table S2.2(3), items 1, 3 and 5,and
  • Table S2.2(5), items 5, 7 and 9.

From 1 October 2015 to 30 September 2018 (inclusive) ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2015/844 provides reporting entities with relief from the requirement to report the entity identifiers listed above if these entity identifiers are not available for the relevant entity. A reporting entity that relies on the relief must instead report the internal entity identifier used by the reporting entity: see FAQ 6. Where a single field is used for reporting of an identifier and a name, the names of the counterparty, beneficiary or other person should be concatenated together with the identifier, using the following format:

[identifier][delimiter character][name of counterparty or beneficiary]

A reporting entity may utilise one of five special characters ( , ) ( ; ) ( : ) ( - ) ( | ) as a delimiter. ASIC's preference is that reporting entities use a dash (-) as the delimiter character. No spaces should be added on either side of the delimiter.

For example, where a reporting entity has a reportable transaction or reportable position with a counterparty AB Company Pty Ltd (with an internal reference number for the counterparty of 123456 that is able to be utilised by the reporting entity for reporting purposes) the string to be reported by the reporting entity is: 123456-AB Company Pty Ltd.

(Published 1 July 2015)

13. How do I report collateralisation?

Q: Information that is required to be reported under Rule 2.2.1 (Reporting) includes requirements to report a notation to indicate:

  • whether the reportable transaction is collateralised by one or both counterparties to the reportable transaction under item 40 in Table S2.1(1) in Schedule 2 (Reporting), and
  • whether the reportable position is collateralised by one or both counterparties to the reportable transaction under item 27 in Table S2.2(1) in Schedule 2 (Reporting).

Differences exist between what is required in the equivalent collateralisation field for entities that are required to report in accordance with European Union Regulation No 148/2013 (EMIR) and associated Level 1 Validation Rules published by European Securities and Markets Authority (jointly ESMA OTC reporting regime) and entities that are required to report in accordance with Part 43 of the Commodity Exchange Act 1936 (US) (CFTC OTC reporting regime).

Is it acceptable to report values in the collateralisation fields that are in accordance with the ESMA OTC reporting regime or the CFTC OTC reporting regime?

A: The derivative transaction rules (reporting) do not specify in detail what needs to be reported in the collateralisation field. Consequently, ASIC will accept values in the collateralisation field that are either in accordance with the ESMA OTC reporting regime or the CFTC OTC reporting regime.

(Published 23 November 2015)

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16. How should I report a forward starting cross currency basis swap?

Certain items of derivative transaction and position information in Parts S2.1 and S2.2 of the derivative transaction rules (reporting) require reporting of the notional amount for leg 2 of an OTC derivative transaction that is an interest rate derivative. The relevant table references and item numbers are: 

  • Table S2.1(5), item 2
  • Table S2.2(5), item 2

Where an OTC derivative transaction for a derivative that is a forward starting cross currency basis swap, it is common for the notional amount of leg 2 to be agreed at a future time, being the actual start date of the cross currency basis swap.

Until that time, it will not be possible for the notional amount for leg 2 to be reported for derivative transaction or position information. In this situation, it is permissible not to report a notional amount for leg 2 until the time the notional amount for leg 2 has been agreed.

(Published 22 November 2016)

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Superseded FAQs

The FAQs below have been superseded and are provided here for information purposes only.

 

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Last updated: 13/02/2015 12:00