ASIC Corporations (Derivative Clearing Exemption) Instrument 2018/209

Overview

The ASIC Corporations (Derivative Clearing Exemption) Instrument 2018/209 was enacted to provide certain exemptions related to derivative clearing for entities regulated under the Corporations Act 2001. This legislative instrument was created under the authority of the Australian Securities and Investments Commission (ASIC) and aims to address specific gaps in the regulatory framework concerning derivative transactions. The primary objective is to provide relief to Clearing Entities from certain compliance requirements under the ASIC Derivative Transaction Rules (Clearing) 2015 for Forward Rate Agreements (FRAs) that are denominated in Australian dollars and entered into before a specified date. This exemption is intended to facilitate smoother operations for entities dealing in these types of financial instruments within the Australian market.

Scope and Application

The ASIC Corporations (Derivative Clearing Exemption) Instrument 2018/209 applies to entities involved in derivative transactions within Australia. Specifically, it grants an exemption from certain compliance requirements under the ASIC Derivative Transaction Rules (Clearing) 2015 for clearing entities, particularly concerning Forward Rate Agreements (FRA) denominated in Australian dollars. This exemption is applicable to FRAs entered into before 2 April 2024, provided that both the notional principal amount and the payments under these agreements are denominated in Australian dollars. The exemption is limited to the scope specified and does not extend to other types of derivative transactions or agreements denominated in foreign currencies. The instrument is made under the authority of the Corporations Act 2001, and any amendments to its provisions are detailed in the amendment history. The exemption is effective as of 31 March 2022, with previous amendments in 2019, 2020, and 2022.

Key Provisions

The ASIC Corporations (Derivative Clearing Exemption) Instrument 2018/209, compiled as of 31 March 2022, provides exemptions from certain requirements under the Corporations Act 2001, specifically targeting derivative transactions. Section 5 of the instrument grants a significant exemption for Clearing Entities concerning the compliance with Rule 2.1.1 of the ASIC Derivative Transaction Rules (Clearing) 2015. This exemption applies to Forward Rate Agreements (FRAs) entered into before 2 April 2024, provided that both the notional principal amount and payments under the FRA are denominated in Australian dollars. This means that Clearing Entities are not obligated to comply with the specified rule for these particular FRAs, as long as the currency involved is Australian dollars. The obligations imposed by this instrument are primarily on Clearing Entities, requiring them to understand and apply the exemption as detailed in section 5. Clearing Entities must ensure that any FRAs denominated in Australian dollars and entered into before the specified date are not subject to the compliance requirements of Rule 2.1.1. This involves careful record-keeping and verification of the terms of the FRAs to ascertain whether they meet the criteria for exemption. Additionally, Clearing Entities must be aware of the definitions and scope of the terms used within the instrument, as outlined in section 4, to correctly identify applicable FRAs. There are no explicit offences, penalties, or consequences for breach outlined within the instrument itself. However, non-compliance with the Corporations Act 2001 or the ASIC Derivative Transaction Rules (Clearing) 2015 may lead to broader regulatory consequences, as governed by the overarching legislation. Clearing Entities must ensure they adhere to the requirements of the Act and the Rules outside of the specific exemption provided, to avoid any potential civil or criminal liabilities that may arise from general non-compliance. The focus of this instrument is to provide clarity and relief to Clearing Entities regarding the specified FRAs, rather than to impose additional penalties for breach of the exemption itself.