Australian CFD brokers are bracing for significant changes to their reporting obligations as the Australian Securities and Investments Commission (ASIC) finalizes its "ASIC Rewrite" of OTC derivative reporting rules, set to commence today (Monday).

CFD Brokers Face New Reporting Requirements as ASIC Rewrite Looms

The new rules, which have been years in the making, will introduce sweeping changes to how CFD brokers report transactions and manage client data. Key updates include the requirement to report collected collateral, new unique identifier fields, and a shift to XML formatting.

What is changing for CFD brokers?

• Expanded collateral reporting: Brokers must now report margin received from clients, not just margin posted to hedging counterparties. This provides regulators with a more comprehensive view of collateral flows.
• Revised single-sided reporting rules: The framework for single-sided reporting relief has been updated, potentially affecting how some trades are reported.
• New identifier fields: The introduction of Unique Transaction Identifiers (UTIs) and Unique Product Identifiers (UPIs) aims to improve trade matching and product classification across the industry.
• Standardized data format: Reports must now be submitted in XML format, promoting consistency and easier data processing.

"The ASIC ASIC The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the Read this Term Rewrite will bring many major and minor reporting changes for CFDs brokers," said Sophie Gerber, co-CEO of TRAction Fintech. "Previously, reporting entities (such as CFD brokers) only had to report collateral that was ‘posted.’ Now, they will also have to report collateral received.”

Gerber highlighted that the implementation is staggered, with the bulk of changes coming into effect now, followed by additional requirements in October 2025:

• 21 October 2024 - UPI, UTI, XML format, and the country of counterparty 2.
• 20 October 2025 - Removing the “alternative reporting” framework, requiring ASIC-regulated firms to report trades with foreign firms, regardless of the foreign firm’s reporting obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term. Reporting must be submitted to ASIC-authorized repositories to qualify for compliance relief.

"CFD brokers should consider the changes, particularly the impact of the additional requirement to report collected collateral in relation to derivatives on behalf of their clients," Gerber advised. "Whether this will be strenuous on the business and require additional resourcing, along with the timing of the two implementation dates, should be carefully considered."

What are UTIs and UPIs?

The ASIC Rewrite introduces new concepts such as Unique Transaction Identifiers (UTIs) and Unique Product Identifiers (UPIs), aligning Australian reporting standards more closely with global practices.

UTIs

UTIs are like unique barcodes for individual derivatives transactions. They allow regulators and market participants to identify and track specific trades across different systems and institutions. UTIs help prevent double-counting of trades and make it easier to reconcile trade data. When a derivatives trade is executed, it is assigned a UTI - typically a long alphanumeric code. This UTI stays with the trade throughout its lifecycle, allowing it to be tracked even if it is modified or transferred between parties.

UPIs

UPIs are standardized codes that identify specific types of derivatives products. They provide a consistent way to classify and identify the particular product being traded, such as a certain type of interest rate swap or credit default swap.

UPIs are typically shorter codes that represent the key characteristics of a derivatives product. By using UPIs, regulators and market participants can more easily analyze market activity and risk across comparable products, even when those products are traded on different platforms or in different jurisdictions.

To Sum Up

UTIs identify specific trades, while UPIs identify what type of product was traded. Together, these identifiers help create a more organized and transparent derivatives market by providing consistent ways to label and track trades and products across different institutions and jurisdictions.

As the October 2024 deadline approached, ASIC provided further guidance to help firms transition to the new reporting regime.