Preparing for ASIC OTC Derivative Reporting Regulation Changes of October 2024
At S&P Global Market Intelligence Cappitech, we’ve been covering in-depth the upcoming EMIR REFIT changes. But, as presented in our End of the Year Regulation Webinar (link), EMIR is only one of many derivative reporting regulations getting updated in 2024. Along with changes coming in Japan (read more), the Australian Securities & Investments Commission (ASIC) and Monetary Authority of Singapore (MAS) are introducing updates next year.
After initially proposing a staggered implementation format, at the end of 2022 ASIC published their final reporting changes for OTC Derivative Reporting Regulation that goes live on October 21st 2024. Similar to EMIR, as we get closer to the ASIC go-live date, Cappitech will be publishing posts focusing on individual topics related to the new regulation format. Today we take a look at some of key changes taking place.
Global Harmonization and Adaption of Scope
ISO 20022 XML format – Harmonizing with standards introduced under EMIR and CFTC reporting, the new ASIC regulation will require firms to submit reports to trade repositories (TR) in the ISO 20022 XML format. This replaces current availability by firms to report the TR in CSV or fPML format that the DTCC TR (currently the only licensed TR for ASIC reporting) supports.
T+2 Reporting – ASIC is extending the deadline to report from the end of the first business day (T+1) after a transaction takes place to the second day (T+2). This change aligns the regulation deadlines with that of MAS reporting. It also has ramifications with the global UTI initiative where one of the waterfall characteristics of designating the UTI generator is based on the entity with the earliest reporting obligation.
Expanded Reporting Fields – One of the goals of ASIC’s update is the harmonization of information to data collected by global regulators and to the derivative industry proposed critical date elements (CDE). The new transaction reporting regulation will cover 143 fields, 104 related to transaction information, 15 covering valuation data and 24 for collateral details.
Unique Trade Identifier (UTI) Waterfall – The requirement of a UTI has existed since derivative reporting went live in Australia. Being added for the update is a set standard of UTI waterfall logic for determining the generator responsible for creating and sharing the UTI.
Unique Product Identifier (UPI) – One of the new harmonized fields above being introduced is the UPI. Managed by ANNA DSB, the UPI is more granular than a CFI Code and provides more detailed information on the type of derivative product being traded.
Obligation to use Legal Entity Identifier (LEI) – Part of the harmonization to global standards includes the requirement for firms to use an LEI when reporting counterparty details for non-natural persons. (ASIC does allow for temporary use of a Designated Business Identifier in cases where the entity has applied for an LEI within two business days of the transaction) This is a change from the current format where various alternative business identifiers can be used.
Lifecycle Reporting – When introduced, ASIC OTC Derivative Reporting regulation included the ability for certain products and reporting entities to report on a ‘Snapshot Position’ versus ‘Lifecycle’ format. Snapshot reporting allowed firms to submit an end of day report of open and netted positions, while Lifecycle includes information on all transactions open and closed through the day that led to end of day positions. Through various updates, ASIC has limited the exemptions for products and companies allowed to use the Snapshot approach. This continues as other than for ‘Small-scale Buy-Side entities’ (more on them below), all firms will be required in 2024 to report using the full lifecycle format.
Small-scale Buy-Side reporting entities – Firms that meet certain licensee criteria as well as holding less than $AUD 12 billion in total gross notional outstanding Non-centrally Cleared Derivatives in consecutive quarters are deemed Small-scale Buy-Side entities and entitled to certain exemptions. They include the ability to continue to report using the end of day Snapshot Reporting format (see above) for non-equity derivatives and exemptions in reporting of certain collateral/margin details.
Reporting Requirements of Foreign Entities with Retail Customers – ASIC included a big change to reporting scope as part of the update. The regulator deems foreign entities that transact OTC derivatives with retail customers based in Australia to fall under scope. The biggest impact will be to non-ASIC licensed CFD retail brokers with Australian clients to be required to report under ASIC regulation in the future.
Removal of Safe Harbour Provision – As of the 2024 go-live, ASIC is removing the current safe-harbour provision of delegated reporting that currently exists. As a result, firms can continue to delegate their reporting to another party, but are responsible to ensure that submissions are made on their behalf in the correct format on a continued basis. In addition, the current requirement to be responsible for accuracy of their reports continues with the ASIC update.
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