This article was written by Patricia Tsang and Sophie Gerber (Director, TRAction Fintech Pty Ltd which provides services to report on behalf of OTC derivatives issuers).
Under the ASIC Derivative Transaction Rules (Reporting) 2013 as amended (the Reporting Rules), 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 4 December, 2015 their reportable transactions, and from 6 June, 2016 their reportable positions.
What Information or Data Needs to Be Reported?
Under Reporting Rule 2.2.1, a reporting entity must report specified information, including information about:
- each of its reportable transactions; and
- each of its reportable positions.
For Phase 3 entities (essentially those with less than A$5 billion gross notional outstanding positions as at 30 June, 2014), reporting of information for each reportable transaction as set out in Part S2.1 of Schedule 2 to a relevant repository is required, and reporting of information for each reportable position as set out in Part S2.2 of Schedule 2 to a relevant repository is required.
Part S2.1 of Schedule 2 essentially requires data items for each reportable transaction as listed in the tables there.
The requirements in Part S2.1 of Schedule 2 are divided into two categories: common data and data specific to each asset class. Reporting entities are required to report on the following specific asset classes:
- credit derivatives;
- commodity derivatives (other than electricity derivatives);
- interest rate derivatives;
- foreign Exchange derivatives; and
- equity derivatives.
The lists contained in Schedule 2 of the Rules are exhaustive and broadly require the following information to be reported for all derivative transactions:
- the economic terms of the transaction;
- the product, transaction and entity identifiers;
- information on whether the transaction is centrally cleared; and
- valuation (mark-to-market, mark-to-model or other valuation) and collateral information.
There is an exemption for Phase 3 reporting entities until the day before 4 July, 2016 in respect of items 30-32 (mark-to-market, mark-to-model, or other valuation), items 40-44 (collateral) and items 51-52 (barrier type and value) in Table S2.1(1) in Part S2.1 - under ASIC Instrument 14/0633 as amended by ASIC Corporations (Derivative Transaction Reporting) Amendment Instrument 2015/0925.
Similarly, Part S2.2 of Schedule 2 essentially requires data items for each reportable position as listed in the tables there.
Part S2.2 of the Rules outlines a common set of data fields and specific fields relating to each asset class. The information to be reported broadly covers:
- the economic terms of the position;
- the product and entity identifiers;
- information on whether the position is centrally cleared; and
- valuation (mark-to-market, mark-to-model or other valuation) and collateral information.
There are a large number of data items listed/required.
Reporting entities will also need to report any changes to this information which has previously been provided to the trade repository.
Provision of Information or Data - What Is a Legal Entity Identifier?
The common data that is required to be reported in relation to reportable transactions and reportable positions includes Legal Entity Identifiers (LEIs) or interim LEIs (if available) for:
- counterparties;
- beneficiaries (if different to the counterparty);
- the person making the report (if not the reporting counterparty);
- the broker that executed the transaction - if any;
- the clearing member that cleared the transaction - if any.
An LEI is a 20 character code that uniquely identifies entities who participate on the financial markets.
Provision of Information or Data - Single-sided and Snapshot Reporting
Single-sided reporting relief may operate to augment some of the reporting requirements. Please see our previous article “Final Regulations on Single-Sided Reporting for OTC Derivatives” for details.
Further, Reporting Rule 2.2.8(b) allows snapshot reporting as an alternative to lifecycle reporting in certain cases, as set out in our previous article "Australia - October 12 reporting deadline looming – Are you worried about providing sensitive data?"
Delegated Reporting
Reporting entities may wish to rely on the delegate reporting safe harbour.
As set out in our previous article “Australia – October 12 Reporting Deadline Looming -The Safe Harbour Benefits of Delegated Reporting,” the Reporting Rules allow a reporting entity to appoint one or more persons (each a delegate) to report on its behalf in accordance with Reporting Rules 2.2.1–2.2.5 and 2.2.8. A reporting entity that appoints a delegate is taken to have complied with their reporting Obligations (under Reporting Rules 2.2.1–2.2.5 and 2.2.8) in relation to each reportable transaction and reportable position for which the delegate has been appointed to report.
However, this is only available if:
(a) the terms of the delegate’s appointment and any related agreements or arrangements are documented in writing; and
(b) the reporting entity makes regular enquiries reasonably designed to determine whether the delegate is discharging its obligations under the terms of its appointment.
Further, a reporting entity that appoints another person to report on its behalf remains responsible for taking all reasonable steps to ensure the completeness, accuracy and currency of the information reported.
Review Reporting Obligations and IT Capabilities
Reporting entities should review their obligations and their IT capabilities to ensure that all required data is able to be collated and reported by 4 December, 2015. Compliance with the Reporting Rules will rely on systematic collation of information and timely and accurate reporting. Reporting entities may also wish to rely on the delegated reporting safe harbour.
For more information on this area, please see previous published articles by the authors:
23 August, 2015 – “Australia – Will Single-Sided Reporting Relief Help OTC Derivative Issuers?”
6 September, 2015 – “Australia – To Whom Should Australian OTC Derivative Issuers Report?”
10 September, 2015 – “Australia - October 12 Reporting Deadline Looming - Who Needs to Report under Intermediary Authorisation or Authorised Representative Arrangements in Relation to OTC Derivatives?”
20 September, 2015 – “Final Regulations on Single-Sided Reporting for OTC Derivatives”
24 September, 2015 – “Australia – October 12 Reporting Deadline Looming -The Safe Harbour Benefits of Delegated Reporting”
30 September, 2015 - "Australia - October 12 Reporting Deadline Looming - What Are the Penalties for Not Reporting?"
2 October, 2015 - "Australia - October 12 Reporting Deadline Looming – Are You Worried about Providing Sensitive Data?"
7 October, 2015 - “Australia - October 12 Reporting Deadline Looming – Are You Ready?”
8 October, 2015 - “Australia – Deadline for Phase 3B OTC Derivatives Issuers Moved to 4 December, 2014”
