The Australian Securities and Investments Commission (ASIC) has published its market integrity report for the July to December 2018 period, where it reminded firms that they need to be ready for the upcoming reporting changes for several derivative products.
In the report, the regulator has outlined its steps to execute its vision of a “fair, strong and efficient financial system.” One of the ways the Aussie regulator plans to do this is to change the reporting standard for contracts for difference (CFDs), margin foreign exchange (forex) and equity over-the-counter (OTC) derivatives transactions.
Specifically, ASIC will require these transactions to be reported to derivative trade repositories using a ‘life cycle’ method instead of an end-of-day ‘snapshot’ method. This new reporting standard will come into effect from the 1st of July 2019.
At the moment, firms only need to report these transactions using the ‘snapshot’ method, that is, they only need to report the positions which are open at the end of the business day.
However, as highlighted by Quinn Perrott, co-CEO Traction Fintech: “Lifecycle reporting requires you to report the entry into, exit of, as well as any modification of an OTC derivative which occurred during the preceding business day. This is often referred to as ‘intraday reporting.'”
Although current derivative transaction rules allow reporting entities to choose either the snapshot or life cycle reporting method, ASIC has the power to determine certain derivatives to be “Excluded Derivatives” for using snapshot reporting, which it has done so in this case.
Changing the Face of AML with Self Service AnalyticsGo to article >>
However, the Aussie regulator can only make this change if the determination will either promote financial stability, support the detection and prevention of market abuse, or enhance the transparency of information available to relevant authorities.
“ASIC considers these changes will be useful for monitoring market misconduct and the prevention of market abuse in these products,” Perrott added.
ASIC is Focusing on Firm Behaviour and Culture
ASIC also outlined in the report that it has enhanced its supervision on the top players in the financial markets so that it can get a better understanding of their behaviors, culture, and business models.
“Achieving behavioural change is an important part of our work. By changing behaviour, we may be able to avoid future instances of risky conduct and breaches, and prevent investor losses before they occur,” the report said.
Over the past few months, rumors have been mounting at the Aussie regulator might follow in the footsteps of the European Securities and Markets Authority (ESMA) and implement product intervention measures.
The poor culture of brokers in the European Union (EU) is largely thought as one of the main reasons ESMA implemented its restrictions, in an attempt to regulate a market that was riddled with bad practices. In the report, ASIC highlights that analyzing the culture and behavior of firms is one of its top priorities.
In April of this year, ASIC took one step closer to this potential route, when the Australian parliament passed a product intervention law which gives the regulator the same powers as ESMA, however, the amendment is pending a so-called Royal Assent procedure.