1. Executive Summary

This paper seeks stakeholder views on a proposed approach for implementing the Australian Government’s G-20 commitments in relation to over-the-counter (OTC) derivatives.  This consultation is conducted specifically in relation to the requirements in section 901B(3) of the Corporations Act 2001 (Act) and related obligations under the Act, and the Legislative Instruments Act 2003.

The proposals are based on recommendations provided by the Australian Prudential Regulatory Authority (APRA), the Australian Securities and Investment Commission (ASIC) and the Reserve Bank of Australia (Reserve Bank) contained in the Report on the Australian OTC Derivatives Market (the Report), published in October 2012.1  It is recommended that these proposals be read in conjunction with the Report.

In summary the proposed approach contains the following.

  • For trade reporting it is proposed that a broad-ranging determination be made in the first quarter of 2013 that will require the reporting of all five derivative classes (that is interest rate, foreign exchange (FX), credit, equity and commodity) to a licensed trade repository where one is available.
    • It is expected that the trade reporting regime will be in place by mid-2013.
    • The trade reporting obligation would be phased in over two years with the obligation commencing by the end of 2013 for major financial institutions following the establishment of a licensed trade repository.
    • In line with the Government’s earlier commitments, no decision on any mandate relating to electricity derivatives will be taken until after the completion of the reviews of the sector currently underway.
  • For central clearing it is proposed that no decision be taken on any mandatory clearing obligation until the regulators have conducted further review or otherwise provided further advice.
    • However, should substantial industry progress towards central not be evident in the near future, the regulators would revisit this recommendation.
  • For trade execution it is also proposed that no decision be taken on any mandatory trade execution requirements until subsequent reviews by the regulators.  Future recommendations for trade execution will be developed separately from recommendations in relation to central clearing.

The Australian Government seeks feedback on these proposals and, following assessment of stakeholder views, the approach may be modified.

Following this consultation, and subject to stakeholder feedback, the Minister will make an initial determination identifying classes of derivatives that will be subject to the reporting mandate.  The Minister will also expose for comment draft regulations limiting the scope of ASIC rule making under the framework as appropriate.

ASIC will separately consult on draft rules and requirements for trade repository licensing in the first half of 2013.

Footnotes

  1. Available at: http://www.rba.gov.au/payments-system/clearing-settlement/otc-derivatives/201210-otc-der-mkt-rep-au/index.html.