The ASIC Derivative Transaction Rules (Reporting) 2024 (2024 Rules) came into force on 21 October 2024, replacing the ASIC Derivative Transaction Rules (Reporting) 2022. The 2024 Rules introduced several changes to the reporting requirements, including changes regarding the manner, content and format of reporting, to better align and harmonise with other trade reporting regimes.
ASIC has publicly recognised that:
- these 2024 Rules represent a significant overhaul compared to the prior ASIC reporting rules requirements;
- there are ongoing international developments and dependencies; and
- other regimes also revising their reporting requirements around the same time.
Given these matters, ASIC indicated that it would take a measured approach to compliance until 1 March 2025 for Reporting Entities that make reasonable efforts to comply with the 2024 Rules. However, ASIC also noted that it will take regulatory action if ASIC identifies deliberate or systemic breaches, or a failure to make all reasonable endeavours to come into compliance.
Now that this period has passed, we take a quick look back across the first few months of implementation of the new regime and some key takeaways, as well as looking forward to what is coming next.
Trade reporting can be complex, difficult and requires expertise
The 2024 Rules require compliance with technical standard ISO 20022 regarding the format of reporting. Additionally, amongst other technical requirements, certain fields are required to be reported in compliance with the requirements of certain other ISOs. A new requirement also requires obtaining and utilising an applicable Unique Product Identifier (UPI) for each product available from a particular repository, instead of reporting based on the previous ISDA taxonomy, and a detailed waterfall of requirements applies in relation to generating a Unique Transaction Identifier (UTI) for each trade. Certain fields are also only required for certain product types, and reports may be rejected if the information provided for any particular data field does not match the validation expectations of the relevant trade repository.
As a result, derivatives trade reporting requires expertise and understanding not only of the format requirements for reporting, but a deep understanding of each product which is subject to reporting requirements to ensure that the correct fields are inputted with the correct information, in the correct manner, and submitted within the correct timeframes.
Trade reporting requires input from many different stakeholders
Compliance with derivatives trade reporting rules, both in Australia and internationally, requires a mix of both legal and compliance, and operational and technological, capabilities. As noted above, the 2024 Rules are detailed and complex and therefore require input from all areas of the business including trading, middle and back offices, legal and compliance to ensure that the correct information is obtained and submitted about each firm’s reportable OTC derivatives to the relevant derivatives trade repository in the correct timeframe. Breaches of reporting rules can be serious and substantial penalties could apply. ASIC has repeatedly emphasised that one of the aims of amending the rules is to ensure improved data quality for Australian regulators.
Differences across jurisdictions persist
Despite the 2024 Rules aiming to better align and harmonise with other trade reporting regimes internationally, differences between all of them still exist. It is important for firms to consider each regime independently and not to take a one-size fits-all approach. Additionally, offshore regimes are also continuing to make changes to their reporting rules, meaning that for those entities operating offshore and subject to other reporting regimes, further work and projects are required to implement those other changes.
There will be changes to the scope of reporting for foreign entities
Currently, the 2024 Rules provide that the in-scope reportable transactions for foreign Reporting Entities include all OTC Derivatives:
- entered into with a Retail Client located in this jurisdiction;
- booked to the profit or loss account of a branch of the Reporting Entity located in this jurisdiction; or
- entered into by the Reporting Entity in this jurisdiction.
Alternatively, foreign entities can opt-in to rely on the ASIC Derivative Transaction Rules (Nexus Derivatives) Instrument 2024/603 (Nexus Instrument) to determine certain of their in-scope reportable transactions.
This will be changed on 20 October 2025 to require that foreign Reporting Entities report “All OTC Derivatives … that are a Nexus Derivative” instead of OTC Derivatives “entered into by the Reporting Entity in this jurisdiction”.
ASIC’s proposed Nexus Derivative definition will adapt paragraph 8(a) of the Nexus Instrument. The other limbs of the in-scope reportable transactions will remain unchanged.
Foreign Reporting Entities should engage with these changes to ensure that they understand the scope of the “Nexus Derivative” definition (including any changes from the current definition set out in the Nexus Instrument) and implement any required systems, compliance and/or operational changes by 20 October 2025.
Alternative reporting will be removed
Further changes to the 2024 Rules will also be implemented on 20 October 2025 to remove the ‘alternative reporting’ provisions contained in the 2024 Rules (and previous reporting rules). Currently, foreign Reporting Entities may be able to satisfy their reporting requirements under the 2024 Rules where they report under a foreign jurisdiction’s substantially equivalent reporting requirements to a prescribed repository and ‘tag’ the information as having been reported under the ASIC rules. From 20 October 2025, the alternative reporting mechanism will be removed from the 2024 Rules by removing the foreign entity exception and de-prescribing the currently prescribed repositories. These amendments will therefore require foreign Reporting Entities to commence reporting to a licensed trade repository in accordance with the 2024 Rules.
What about single-sided reporting?
Certain Reporting Entities may be able to rely on single-sided reporting relief set out in Corporations Regulations 7.5A.71 – 74 in respect of particular transactions which means that they do not need to report information about those transactions under the 2024 Rules. This requires obtaining representations from each derivatives counterparty in particular forms regarding the nature of the reporting counterparty or of the reporting that the counterparty will be performing itself, and checking or confirming the relevant reports have been made or the accuracy of the representation (depending on the representation that has been given). Some of the representations which may currently be given relate to compliance with the alternative reporting provisions of the 2024 Rules. It is unclear at this stage how the removal of the alternative reporting provisions will interact with this part of the single-sided reporting relief contained in the Corporations Regulations and whether changes will be made to it.
As a result, entities relying on the single-sided relief should consider the relevant representations obtained from their derivatives counterparties and whether they will be able to continue to rely on them after 20 October 2025, or whether alternative representations are required to be obtained. Similarly, entities who have provided their counterparties with representations which relate to alternative reporting should consider whether those representations will be able to be given after this date.
If you would like some help considering the implications of these changes for your business or the trade reporting rules more generally, please reach out to us. We have been advising on these rules since the start and are here to help.
