New derivatives transaction reporting rules are now in force – is your data in order? 

What you need to know

• The ASIC Derivative Transaction Rules (Reporting) 2024 (2024 Rules) came into effect on 21 October 2024, following rounds of industry consultation and a long lead time to enable industry to come into compliance with the significant changes under the 2024 Rules.
• ASIC has stated that it will take a measured approach to compliance until March 2025 for reporting entities that make reasonable efforts to comply with the 2024 Rules.  However, this statement should not be seen as a "grace period" for entities that are not yet, for the most part, in compliance.
• Further changes are coming into effect in October 2025 which will affect, in particular, foreign reporting entities.

What you need to do

• Make a legal and technical assessment as to your organisation's compliance with the 2024 Rules, particularly having regard to data mapping, extraction, profiling, completeness and accuracy.  Ensure that the data that needs to be reported is accurate, adequate and complete.
• Although the scope of application of the 2024 Rules have not changed from the previous rules, a reporting entity should nevertheless take the opportunity to conduct a review of its transactions to ensure that it is correctly capturing and reporting those that are reportable. 
• If your organisation is not yet in full compliance, consider how it could demonstrate to ASIC that it is making all reasonable endeavours to come into compliance.
• Look ahead to consider how the October 2025 may impact your organisation. 

Recap of key changes 

The 2024 Rules substantially amended the derivatives transaction reporting regime in Australia with a number of key changes including to: 

• reflect internally adopted technical standards for reporting under ISO 20022, standards for other identifiers and other data elements; 
• remove the safe-harbour for delegated reporting;
• extending the reporting deadline to generally T+2 (previously T+1);
• to require "lifecycle" reporting for all product types (previously only applied to equities derivatives, CFDs and margin FX); and
• introduce new small-scall buy-side exemption to provide relief from certain reporting requirements.

We have previously discussed these key changes in the 21 December 2022 edition of the Financial Services Update when the 2024 Rules were first made. 

XML and ISO 20022 reporting

The 2024 Rules are intended to reflect the harmonised international standards for legal entity identifiers (LEIs), unique transaction identifiers (UTIs), unique product identifiers (UPIs) and other important data elements.  

Schedule 1 of the 2024 Rules contain a table which prescribes the relevant data fields, the information to be reported and the format in which it must be reported.  Not necessarily all of the data fields will be applicable to a particular transaction, and a reporting entity is required to report the information "to the extent that information is relevant to the Reportable Transaction".  

A reporting entity should therefore ensure that its systems and processes are able to capture and report all relevant information. This includes ensuring all data needing to be reported are:

• captured in the organisation;
• accurate and adequate; and
• mapped from the point of consumption to the point of capture to demonstrate traceability 

Reporting entities and reportable transactions

The 2024 Rules did not change the scope of reporting entities or the transactions that are reportable.  An entity is a reporting entity if it is an authorised deposit-taking institution, a clearing and settlement facility licensee, holds an Australian financial services licence (AFSL) to deal in derivatives, or (in the case of a foreign entity only) relies on a licensing exemption to deal in derivatives with wholesale clients. 

OTC derivatives which are reportable are only those in the following prescribed classes: interest rate, FX, credit, equity and commodity.  

Electricity derivatives remain carved-out from the reporting regime, although ASIC has clarified its guidance in Regulatory Guide 251 Derivative transaction reporting (RG 251) as to what it considers to be an "electricity derivative".  This is particularly helpful when considering whether a derivative over certain environmental products (such as large-scale generation certificates) could be an "electricity derivative".  ASIC has now made clear that the "something else" which varies the consideration or the value of the arrangement must be an attribute relating to the physical electricity such as price or volume of electricity.  Many entities in the energy sector hold an AFSL for the purpose of entering into derivatives over electricity and environmental products.  The organisation's approach should be considered in light of ASIC's revised guidance. 

More generally, the definition of a derivative under the Corporations Act is very wide, and the explanatory memorandum explained that "the definition focuses on the functions or commercial nature of derivatives, rather than trying to identify each product that will be regarded as a derivative".  There are also a number of carve-outs for when an arrangement would not be a derivative.  Therefore care should particularly be given to bespoke transactions and arrangements to assess whether they could be considered as a derivative at all. 

Although the scope of application of the 2024 Rules have not changed from the previous rules, a reporting entity should nevertheless take the opportunity to conduct a review of its transactions to ensure that it is correctly capturing and reporting those that are reportable.  

Foreign reporting entities

A foreign entity is also only a reporting entity if it is registered under Division 2 of Part 5B.2 of the Corporations Act.  Presently, a foreign reporting entity must report all transactions entered into with an Australian retail client, booked to the profit or loss account of a branch in Australia, or that were "entered into" in Australia.  Instead of considering whether a transaction was "entered into" in Australia (which requires application of Australian contractual law principles on a transaction basis), a foreign reporting entity could opt-in to rely on an alternative test – whether the derivative is a "nexus derivative" – under ASIC Derivative Transaction Rules (Nexus Derivatives) Instrument 2024/603. 

From 20 October 2025, the nexus derivative test will become the default position under the 2024 Rules. In effect, the test for determining whether an OTC derivative is a nexus derivative is based on the functions performed by the persons involved in executing the relevant derivative transaction.  It considers whether Australian-located staff of a foreign entity are involved in one or more functions of pricing, seeking or providing quotes, structuring, offer and/or acceptance or managing its financial risks and a reporting entity is a counterparty.

From 20 October 2025, a foreign reporting entity can also no longer report a reportable transaction under a substantially equivalent regime (which is currently available and known as alternative reporting).  A foreign reporting entity must therefore ensure that it is able to report under the 2024 Rules to a trade repository licensed in Australia going forward. 

Breach reporting

Section 901E of the Corporations Act imposes a positive obligation on a person to comply with the 2024 Rules.  This is a civil penalty provision.  However, a breach of the 2024 Rules is not a deemed significant breach because of reg 7.6.02A(2)(ii) of the Corporations Regulations, which exempts a breach of section 901E from being deemed a significant breach.  Therefore, whether a reportable situation has arisen will fall back on the general assessment of significance under section 912D(5), by taking into consideration:

• the number or frequency of similar breaches; 
• the impact of the breach on the financial services licensee's ability to provide financial services covered by the licence; and
• the extent to which the breach indicates that the financial services licensee’s arrangements to ensure compliance with those obligations are inadequate.

ASIC has stated that even though it will take a "measured approach to compliance" until March 2025, it will take regulatory action if ASIC identifies deliberate or systemic breaches, or a failure to make all reasonable endeavours to come into compliance.