ASIC recently published a set of changes to its transaction reporting rules, scheduled to go live on 21 October 2024. Firms which self-report and those who delegate reported are impacted and will be required to make changes to reporting models. To support firms in assessing the new requirements, we have outlined what we see as key changes and the immediate steps to take.
A fundamental change
In December 2022 the Australian Securities and Investments Commission (ASIC) adopted the ASIC Derivative Transaction Rules (Reporting) 2024 (ASIC Rewrite). These constitute a fundamental change to transaction reporting in Australia, effectively remaking the ASIC Derivative Transaction Rules 2022 (2022 Rules) and creating a wide range of new requirements. Firms must now understand the impact of these changes on their current reporting framework and make changes ahead of the go live date on 21 October 2024.
Greater alignment to other global derivative transaction reporting regimes, EMIR and CFTC for example, through harmonising international standards for various identifiers such as legal entity identifier (LEIs), unique transaction identifiers (UTIs), unique product identifiers (UPIs) and critical data elements (CDEs).
Removal of the previous safe-harbour provisions for delegated reporting, meaning firms which delegate reporting must ensure they have a comprehensive and robust oversight framework in place to monitor submissions being made on their behalf.
Extension of reporting deadline to generally T+2 instead of the previous T+1, as a response to adopting the harmonised international standards on reporting.
Requirement that all product types are subject to “lifecycle” reporting, expanding the original product set of CFDs, margin FXs and equity derivatives.
Exemptions for small-scale buy-side firms to provide relief from some reporting requirements, in particular the reporting certain types of information, including collateral amounts, delta and next floating rate reset dates
Removal of outdated transitional provisions and consolidation of associated exemptions, resulting in a back reporting exercise for firms.
What are the immediate next steps?
As part of this impact assessment and gap analysis, a comprehensive project plan should be developed. We see three major immediate areas of focus for firms:
New data feeds will be required based on new and altered data fields. Firms must consider whether such data can be obtained internally or externally, and in the latter case, contact data owners as soon as possible. Often firms underestimate the level of effort involved to report new data fields and so analysis and requirements gathering must start immediately to provide technology teams enough time to perform any development work. The back reporting exercise should also be considered as soon as possible to ensure that data is available for all in scope products.
New lifecycle event reporting for all products will require a review of a firm’s trading and booking model to understand where these events occur. This will require analysis of the regulation as well as the development of enhanced reporting logic to ensure that they are correctly mapped to reporting messages. In some scenarios, additional data will be required to be consumed by the reporting solution. Controls will be required on an ongoing basis to ensure that new products/lifecycle events are also accounted for.
For entities previously relying upon the 2022 safe harbour provision, any delegated reporting arrangement must be reviewed with urgency. There is significantly increased burden upon reporting entities to ensure their delegates are reporting obligations in a timely, accurate and complete manner at all times. Any failure by these delegates can expose reporting entities to breaches of the ASIC Rewrite. Entities which delegate must implement enhanced reconciliation processes (ideally through a technological tool rather than relying on manual processes), robust control frameworks as well as creating a repeatable process for issue resolution with reporting counterparties.
Lastly, the extension of reporting deadline from T+1 to T+2 should not be interpreted as a relaxation of reporting requirements. Rather, the extended timeframe was implemented in view of the possible issues when harmonising to international standards, such as in generating and reporting identifiers and changing to the ISO 20022 XML format. Firms are using this as an opportunity to implement pre-submission checks, identifying and resolving errors prior to submission and thereby reducing breaches and associated remediation work.
It is important to be aware that ASIC has stated that it intends to provide further regulatory guidance in terms of:
Criteria and expectations to be met for reporting entities that outsource transaction reporting; and
How significant breaches and transaction reporting errors will be approached.
When this is available, we will provide further updates to the market.
Novatus Advisory can help
Novatus Advisory is already working with Australian firms to determine the impact of these changes and next steps. Our team of experts can guide you through the regulation and what is needed, combining this advice with our market leading technology to provide full end-to-end support on. You can trust us to ensure you meet your ASIC Rewrite requirements.
If you would like to find out more, please reach out to Matthew Ranson.