ASIC releases a new consultation paper about changes to its derivative transaction rules

The Australian Securities and Investment Commission (ASIC) has released its second consultation paper for proposed changes to simplify the ASIC Derivative Transaction Rules.

The consultation process in the second paper is designed to help ASIC develop its policy for over-the-counter derivative transaction reporting requirements. It sets out further proposals to amend the ASIC Derivative Transaction Rules (Reporting) 2013 made under s901A of the Corporations Act 2001, following the first round of consultation, released in November 2020.

The current reporting requirements for derivatives transactions in Australia are designed to provide transparency, helping regulators identify financial system vulnerabilities and monitor market metrics. Although the requirements have proven helpful in the past, several overseas regulators have updated their existing rules to keep up with the ever-evolving world and implement new standards.

There are now international standards for entity identifiers, transaction identifiers, product identifiers, and critical data elements for transaction terms, valuation, and collateral information for use in derivative transaction reporting.

The rules change proposals are principally focused on implementing the harmonized international standards for transaction, product, and party identifiers and transaction data elements. Which includes:

• CPMI IOSCO Technical Guidance Harmonisation of the Unique Transaction Identifier (UTI)
• CPMI IOSCO Technical Guidance Harmonisation of the Unique Product Identifier (UPI)
• Regulatory Oversight Committee (ROC) Harmonisation of critical OTC derivatives data elements (other than UTI and UPI) (CDE) — the use of Legal Entity Identifier (LEI) and natural person identifiers.

In its second consultation paper, released on 16 May 2022, the ASIC looks to understand and assess the financial implications of the proposals and any alternative approaches for stakeholders.

We’re now waiting for stakeholders’ comments to indicate the likely compliance costs and the possible effect on competition the proposals would have when implemented, which should be reported by 8 July 2022.

The consultation round two will be followed by round three, and the remade rules are estimated to commence on 1 October 2023.