ASIC applies OTC derivative clearing regime

The Australian Securities and Investments Commission (ASIC) has released rules that apply Australia's compulsory central clearing regime for over the counter (OTC) derivatives of financial institutions, which start in April 2016.

The ASIC Derivative Transaction Rules (Clearing) 2015 (derivative transaction rules clearing) and explanatory statement would help reduce systemic risk in OTC derivatives markets and is applicable to transactions in OTC interest rate derivatives denominated in Australian dollars (AUD interest rate derivatives), US dollars, euros, British pounds, and Japanese yen (G4 interest rate derivatives) between OTC derivatives dealers.

Australians participants and infrastructures will also have access to global markets through "substituted compliance or sufficient equivalence determinations by foreign regulators".

"The rules have been designed taking into account the mandatory clearing requirements in other jurisdictions in which Australian financial institutions operate," ASIC Commissioner Cathie Armour said.

"We will work with overseas regulators to determine whether or not equivalence or substituted compliance treatment is available as this will assist Australian financial institutions manage implementation of the regime."

The rules indicate which entities and derivative contracts are covered by the clearing mandate, the eligible central counterparties that may be used, alternative clearing that lets entities to comply with certain overseas clearing requirements, and certain exemptions from the clearing mandate.