A lot of uncertainty is still lingering around over-the-counter (OTC) derivatives and what it means for financial entities with less than $50 billion outstanding, a law firm partner believes.
Henry Davis York partner Lucinda McCann said these entities are still trying to argue that they should not be caught at all even though they trade in OTCs.
"They're sort of pushing back on being covered at all by the transaction reporting requirements," McCann said.
"Their point of view is, well, we're definitely not systemically significant. And if you look at some of the issuers of derivatives in the retail space in particular, for example the contracts for difference (CFD) providers, who are issuing CFD to individual retail investors, it's hard to see how those trades in OTC really need to be reported to the regulators."
McCann also said some sectors have not agreed on what derivatives should be covered, while the Australian Securities and Investments Commission's said all derivatives should be covered.
"If they are caught, how do they comply? Should they be looking to delegate their reporting obligations or do they need to sort of start thinking about what they need to do if they're going to report themselves?" she asked.
"We still don't even have a licensed trade repository in Australia. Again, people don't know or aren't in a position to even start negotiating on who they'd be reporting to."
ASIC sought industry feedback recently on proposed changes to the rules that required compulsory trade reporting of OTC derivatives after it revised the timetable for financial entities with less than $50 billion in OTC derivatives to start reporting to trade repositories.
The revision came after ASIC found many of the reporting rules inflicted more compliance costs on entities that outweighed regulatory benefits of getting relevant data.
