ASIC FX and CFDs reporting issues

13 January,, Lagos – Apparently, some FX and CFD brokers operating in the Australian region intentionally circumvent reporting to the Australia Derivative Trade Repository (ADTR). Many of such brokers justify their actions by pointing to the fact that FX and CFDs is not particularly listed in the products covered in ASIC Regulatory Guide under the table headed ‘Products that must be reported’ in the Derivative Transacting Reporting.

Such firms dwell on this fact, and decide to operate with the notion that margin FX and CFDs are not covered in the OTC Trade Reporting Rules, therefore meaning that they do not need to report to an Australia Derivative Trade Repository (ADTR).

Table for foreign exchange derivatives

The table for foreign exchange derivatives lists products like Forwards, Swaps, non-deliverable forwards, non deliverable options and so on. While the table for equity derivatives includes Equity index swaps, Equity swaps, Equity options and so on. Under these lists, there is no specific mention of margin FX and CFDs trading. However, ASIC has clarified that FX and CFDs are covered by the more general clauses in other parts of the overall legislation.

All in all, ASIC expects margin FX and CFDs operations to be reported. Hence, they will use their enforcement powers if necessary to ensure that such firms adhere.

ASIC new derivatives rules

Late last year, ASIC released new derivatives rules, which is meant to further complement regulations made in September 2015 that set high-level parameters for the mandatory clearing regime.

The newly released rules called “ASIC Derivative Transaction Rules (Clearing) 2015 (derivative transaction rules (clearing)) and explanatory statement.” It involves a process whereby there will be a clear clarification of which entities and derivative contracts are covered by the clearing mandate, the eligible central counter-parties that may be used, alternative clearing (allowing entities to comply with certain overseas clearing requirements) and certain exemptions from the clearing mandate. However, these rules are not expected to take full effect, until April 2016.

The key role of the mandatory central clearing regime is to ensure reduction in systemic risk in OTC derivatives markets. And intended to create a better atmosphere for investment for institutions and investors alike.

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