AUSTRALIA: ASIC Implements Clearing Regime in Australia for OTC Derivatives

Monday December 14 2015

On 14th December 2015, ASIC released rules implementing Australia`s mandatory central clearing regime for over-the-counter (OTC) derivatives of financial institutions – the ASIC Derivative Transaction Rules (Clearing) 2015.

The mandatory central clearing regime will assist to reduce systemic risk in OTC derivatives markets and applies to transactions in OTC interest rate derivatives denominated in Australian dollars (AUD interest rate derivatives), and in US dollars, euros, British pounds and Japanese yen (G4 interest rate derivatives) between OTC derivatives dealers.

In line with overseas mandatory clearing requirements, the regime also provides the basis for substituted compliance or sufficient equivalence determinations by foreign regulators. This will help to achieve substantial cost savings for Australian participants and facilitate access to global markets by Australian participants and infrastructures.

The final derivative transaction rules (clearing) follow a Ministerial determination issued in August 2015 that imposed a clearing mandate on AUD and G4 interest rate derivatives, and regulations made in September 2015 that set high-level parameters for the mandatory clearing regime.

The derivative transaction rules (clearing) set out which entities and derivative contracts are covered by the clearing mandate, the eligible central counterparties that may be used, alternative clearing (allowing entities to comply with certain overseas clearing requirements) and certain exemptions from the clearing mandate. The clearing obligations will commence in April 2016.

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