Under the new federal Treasury draft regulations for Phase 3B reporting entities, fund trustees will have to review their reporting practices when it comes to OTC derivatives.
Josephine Maiorana, BNP Paribas Securities Services product manager, fund services Australia, said: “The challenge now arises for fund trustees to meet and monitor their local and global counterparty reporting obligations.”
BNP Paribas indicated that when fund trustees trade with foreign counterparties, they must transact with a counterparty that is subject to reporting requirements that are equivalent to the Australian Securities & Investments Commission’s (ASIC’s) requirements.
The counterparty will also have to report the transaction to a prescribed repository and tag the trade as an ASIC trade, BNP Paribas stated.
“Due to the operational complexity, many funds are electing to report all transactions, both local and offshore on a dual-sided basis, to ensure they meet the new reporting obligations,” said Ms Maiorana.
BNP Paribas said the information that is now required to be reported is significantly broader.
“The key is determining who holds this information, and the ability to extract all relevant information on a timely basis to be reported through the trade repository,” Ms Maiorana said.
According to ASIC commissioner Cathie Armour: “ASIC expects that the cross-border scope of the rules will assist Australian entities to seek substituted compliance and equivalence for these transactions under foreign entities.”
The new requirements will come into effect on 12 October 2015. The requirements include OTC derivatives and forward foreign exchange and associated hedging and overlays.
Phase 3B entities are those with broadly exposure of less than $5 billion to OTC derivatives.
