ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2016/0688

Overview

The ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2016/0688 was enacted to provide certain exemptions from the mandatory reporting requirements for derivative transactions under the Corporations Act 2001. This legislative instrument was made under the authority of paragraph 907D(2)(a) of the Corporations Act 2001, demonstrating the Australian Securities and Investments Commission's (ASIC) role in regulating financial markets and enhancing investor protection. The primary objective of this instrument is to alleviate the reporting burden on certain participants in over-the-counter (OTC) derivatives markets, thereby promoting efficiency and reducing unnecessary administrative costs while ensuring that critical oversight mechanisms remain intact. This exemption instrument specifically targets OTC participants, allowing them not to comply with certain reporting rules under the ASIC Derivative Transaction Rules (Reporting) 2022 in specific circumstances, such as when derivatives are entered into by affiliates or clients of the OTC participant, provided these derivatives are registered with ASX Clear (Futures). This approach aims to streamline compliance processes for certain derivative transactions, facilitating smoother market operations while maintaining the overall integrity and transparency of the financial markets.

Scope and Application

The ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2016/0688 applies to entities engaged in derivative transactions, specifically Over-The-Counter (OTC) Participants who are part of the ASX Clear (Futures) system. This instrument provides exemptions from certain reporting requirements under the ASIC Derivative Transaction Rules (Reporting) 2022 for specific derivatives entered into by OTC Participants. The exemptions apply to Affiliates and Clients of OTC Participants, exempting them from Rule 2.2.1 of the Reporting Rules under certain conditions, such as the derivative being registered with ASX Clear (Futures) and the application of the Client Protection Model Provisions. The instrument is made under the Corporations Act 2001 and is applicable nationally across Australia, although it specifically relates to transactions processed through ASX Clear (Futures). Any amendments or repeals to the instrument are detailed in the endnotes, with the most recent amendment coming into effect on 21 April 2023. This legislative instrument does not specify exclusions, but it is clear that the exemptions do not absolve the OTC Affiliates or Clients of their own reporting obligations.

Key Provisions

The ASIC Corporations (Derivative Transaction Reporting Exemption) Instrument 2016/0688 (the Instrument) provides certain exemptions from the ASIC Derivative Transaction Rules (Reporting) 2022 (Reporting Rules). The key sections of the Instrument are section 5, which exempts Over-The-Counter (OTC) Participants from certain reporting obligations in relation to derivative transactions involving their affiliates, and section 6, which provides similar exemptions for transactions involving clients (section 5(1), section 6(1)). These exemptions apply under specific conditions, such as when the derivative transaction is submitted for registration by the OTC Participant and accepted by ASX Clear (Futures) (section 5(2), section 6(2)). The Instrument imposes obligations on OTC Participants to ensure compliance with the specified conditions for the exemptions to apply. For example, an OTC Participant must ensure that the derivative transaction involving an affiliate or client is submitted for registration and accepted by ASX Clear (Futures) in accordance with the ASX Clear (Futures) Operating Rules (section 5(2)(b), section 6(2)(b)). Additionally, the exemptions do not relieve the affiliate or client of their respective obligations to comply with the Reporting Rules (section 5(3), section 6(3)). Failure to comply with the conditions for these exemptions may result in the OTC Participant being required to report the derivative transaction in accordance with the Reporting Rules, potentially leading to administrative and compliance costs. Moreover, persistent non-compliance could result in more severe penalties under the Corporations Act 2001, including fines and imprisonment, as the exemptions are subject to the broader legal framework provided by the Act (section 5(3), section 6(3)). The exact penalties for breaches of the Reporting Rules or the Act would be determined in accordance with the respective provisions of those laws.