AUSTRALIA: ASIC Consults on Central Clearing Obligations for OTC Derivatives

Thursday May 28 2015

ASIC today proposed draft rules to implement mandatory central clearing requirements (clearing requirements) for certain over-the-counter (OTC) derivatives. The proposals are the next stage in Australia meeting its Group of Twenty (G20) commitments to reform OTC derivatives markets following the global financial crisis (GFC).

The Government is consulting on a draft determination and regulations to implement a central clearing mandate in Australia. ASIC`s draft rules would implement the Government`s proposed central clearing mandate, which would cover trades between internationally-active dealers.

Under ASIC`s proposals:

• Australian and foreign clearing entities (financial entities with $100 billion or more gross notional outstanding in OTC derivatives measured on a rolling basis) will be subject to mandatory central clearing, for trades with each other and with foreign-internationally active dealers (swap dealers regulated by the CFTC or SEC).
• Only certain OTC interest rate derivatives, namely fixed-to-floating swaps, basis swaps, overnight index swaps and forward rate agreements, will be required to be cleared.
• The clearing requirements will start in January 2016, but there will be no obligation to backload open positions as at that date, subject to requirements applying to trades that are extended.

Click on the link above for further details.