The Australian watchdog ASIC has reminded Brokers that starting from July 2019, new margin FX reporting standards will need to be done using the "life cycle" method.
May 31, 2019, | AtoZ Markets - The Australian Securities and Investments Commission (ASIC) will implement new rules in July under which margin forex and equity OTC derivatives will be reported using the “life cycle” method now.
ASIC new margin FX reporting standards takes effect in July
The ASIC recently published its market integrity report for the period between July and December 2018. In the report, ASIC reminded the firms in the forex and CFD businesses that they will have to adhere to new margin FX reporting standards for several derivative products. In this report, the regulator has also outlined the steps that these firms will take to work according to the new guidelines.
The regulator focused on a “fair, strong and efficient financial system.” The regulator’s change in the reporting standard for contracts for difference (CFDs), margin foreign exchange (forex) and transactions related to equity-over-the-counter (OTC) derivatives. It would now require these transactions to be reported using the life cycle method to the derivatives trade repositories. Earlier, these firms used the end-of-day snapshot method. The new margin FX reporting standards will come into effect on July 1st, 2019.
What is life cycle reporting?
The snapshot method used earlier the firms report open positions at the end of the business day. Traction Fintech co-CEO Quinn Perrott noted that:
“Lifecycle reporting requires you to report the entry into, exit of, as well as any modification of an OTC derivative which occurred during the preceding business day. This is often referred to as ‘intraday reporting’.”
Although current rules related to derivative transactions will allow reporting entities to choose whether they wanted to use the life cycle method or the snapshot method of reporting. However, the ASIC has the power to determine if certain derivatives can be categorized as “excluded derivatives” for which they can mandate a certain reporting method. In this case, the regulator has used this power.
ASIC focuses on firm behavior and culture
It is worthy of note that the agency could only make this change if it promotes financial stability, support the detection and prevention of market abuse or help in improving the market’s transparency. Perrot quoted earlier agrees with the fact that the ASIC considers these changes to be helpful in monitoring market misconduct and abuse in certain derivatives products.
The Aussie regulator has also highlighted that it has enhanced its supervision on the market’s best players to understand their business models, culture and behaviors better. The report highlighted that achieving behavioral change in the industry is an important part of their work. Doing this will help prevent instances of risky conduct and prevent investor losses.
Yesterday, AtoZMarkets also reported on ASIC newly released ICO & crypto licensing guideline that specifies that firms dealing with them are required to hold an Australian financial services license. The report also urged the issuers of ICOs to ensure that the KYC (Know Your Client) and Anti-Money Laundering laws apply to crypto assets, as crypto scams in the country have been mounting at a rapid pace.
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