October Reporting Deadline Looming

Australia – Will Single-Sided Reporting Relief Help OTC Derivative Issuers?

It is indicated that the relief will commence in October 2015, prior to the 12 October deadline.

This guest article was written by Patricia Tsang and Sophie Gerber.

Australian issuers of OTC derivatives (with less than A$5 billion gross notional outstanding positions as at 30 June 2014) will need to report for the first time from 12 October 2015.

Draft regulations in relation to single-sided reporting relief have been published which will assist those issuers – but only to a limited extent in relation to some transactions/ positions.

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Therefore, issuers will still need to understand the extent of the relief, in relevant cases negotiate with counterparties, and ready themselves for reporting in view of the October deadline.

What is single-sided reporting?

Single-sided reporting is where only one party is required to report under the ASIC Derivative Transaction Rules (Reporting) (Reporting Rules). Without single-sided reporting relief, the Reporting Rules require both parties to report.

Who does the single-sided reporting relief apply to?

The single-sided reporting relief will apply to:

(a)          authorised deposit-taking institutions (ADIs);

(b)         Australian financial services licensees (AFSLs);

(c)          clearing and settlement facility licensees; and

(d)         exempt foreign licensees,

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with total gross notional outstanding positions across all OTC derivatives of less than A$5 billion at the end of each of two consecutive calendar quarters.

This is particularly relevant to the “Phase 3B entities” (with less than A$5 billion gross notional outstanding OTC derivative positions as at 30 June 2014), who become subject to the Reporting Rules for the first time on 12 October 2015.

When does the single-sided reporting relief apply?

To obtain the benefit of the relief, the other party to the OTC derivative must be:

(a)          a reporting entity required to report information about the trade under the Reporting Rules and not relieved from that requirement under the single-sided relief;

(b)         a reporting entity who otherwise reports information about the trade under the Reporting Rules; or

(c)          a foreign entity reporting under a ‘substantially equivalent’ foreign regime to an offshore prescribed repository and designates or tags the information reported as reported under the Reporting Rules.

The relief requirements are similar for transaction reporting and position reporting.

This means that no relief is available where the other party does not satisfy the above (eg end customer not a reporting entity).

This also means that, where an OTC derivative transaction is between two parties potentially entitled to the single-sided reporting relief, the parties will need to agree which of them will report the transaction.

When is the relief effective?

Currently the relief is in draft form. Treasury consultation closed on 26 June, and there is some mention in a briefing by ASIC/ Treasury of possible final regulations in August.  It is indicated that the relief will commence in October 2015, prior to the 12 October deadline.

Sophie Gerber is the co-CEO of TRAction Fintech, a regulatory technology firm providing compliance solutions for brokers, including Best Execution and Derivative Trade Reporting and principal of legal firm, Sophie Grace which provides legal and compliance advice to financial service firms including FX and CFD brokers.

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