Federal Register of Legislation - Australian Government

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Determinations/Other as made
This determination allows central clearing requirements to be imposed with respect to over-the-counter interest rate derivatives denominated in Australian dollars and four global currencies.
Administered by: Treasury
Registered 02 Sep 2015
Tabling HistoryDate
Tabled HR07-Sep-2015
Tabled Senate07-Sep-2015
Date of repeal 04 Sep 2015
Repealed by Division 1 of Part 5A of the Legislative Instruments Act 2003

EXPLANATORY STATEMENT

 

Issued by authority of the Assistant Treasurer

Corporations Act 2001

Corporations (Derivatives) Amendment Determination 2015 (No. 1)

Subsection 901B(2) of the Corporations Act 2001 (Act) provides that the Minister may determine one or more classes of derivatives in relation to which certain requirements including central clearing requirements may be imposed.

The purpose of the Corporations (Derivatives) Amendment Determination 2015 (No. 1) (Determination) is to allow central clearing requirements to be imposed with respect to over-the-counter (OTC) interest rate derivatives denominated in Australian dollars and four global currencies (being US dollars, euros, British pounds and Japanese yen).

The Australian Government is implementing reforms, including central clearing, to the regulation of over-the-counter (OTC) derivatives markets. These reforms form part of a coordinated effort by G20 jurisdictions to improve transparency and risk management in these important markets.

Central clearing improves risk management in OTC derivatives markets by interposing specialised entities known as central counterparties (CCPs) into each transaction. The CCP guarantees completion of the transaction at maturity, thereby assuming and managing the risk that one of the counterparties to the transaction could default before or at maturity.

Extensive public consultation occurred in 2014 through two Australian Government proposals papers for a central clearing mandate for OTC interest rate derivatives denominated in Australian dollars and four global currencies (US dollars, euros, British pounds and Japanese yen), limited to transactions between internationally active dealers.

There was general support for the proposed mandate. There was some disagreement on the appropriate definition of ‘internationally active dealer’. Further targeted consultation was held to develop an improved definition.

In December 2014 the Government announced that it would proceed with implementing the central clearing mandate, largely as proposed during the consultation process.

A draft of the Determination was provided for final public consultation in May 2015. Submissions provided strong support for the proposed mandate, including the proposed classes of derivatives covered by the mandate. There were no changes proposed to the draft Determination, and the final version of the Determination is consequently unchanged.

The Determination is supported by a set of amendments in the Corporations Amendments (Central Clearing and Single-Sided Reporting) Regulation 2015 which set out a number of important elements of the central clearing mandate, including the definition of internationally active dealers that are subject to the mandate.

Based on the Determination the Australian Securities and Investments Commission (ASIC) will make derivative transaction rules (DTRs) setting out the detailed manner in which the central clearing mandate will be implemented. ASIC is going through a separate process for making the central clearing DTRs, including public consultation. Formal approval by the Minister will be required before the DTRs can be made.

The DTRs will cover a number of matters, including the detailed types of products within the OTC derivatives classes listed in the Determination that will be subject to the clearing mandate. The timing of the commencement of the central clearing mandate will also be specified in the DTRs.


 

Details of the Corporations (Derivatives) Amendment Determination 2015 (No. 1)

Section 1 – Name

This section provides that the title of the Determination is the Corporations (Derivatives) Amendment Determination 2015 (No. 1) (Determination).

Section 2 – Commencement

This section provides that the Determination commences on the day after it is registered.

Section 3 – Authority

This section provides that the Determination is made under the Corporations Act 2001 (Corporations Act).

Section 4 – Schedules

This section provides that each instrument that is specified in a Schedule to the proposed Determination is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.

Amendments

Schedule 1 – Amendments

Item [1]

Item 1 adds a new section 5 to the Corporations (Derivatives) Determination 2013 which contains the Ministerial determination made in May 2013 allowing the Australian Securities and Investments Commission (ASIC) to make derivative transaction rules (DTRs) imposing reporting requirements on prescribed classes of derivatives.

This new section provides that the Minister, under the power provided in subsection 901B(2) of the Corporations Act, has made a determination allowing ASIC to make DTRs imposing central clearing requirements on interest rate derivatives denominated in Australian dollars, US dollars, euros, British pounds and Japanese yen.

 

 


 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Corporations (Derivatives) Amendment Determination 2015 (No. 1)

This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Legislative Instrument

The Corporations (Derivatives) Amendment Determination 2015 (No. 1) allows the Australian Securities and Investments Commission to make legislative instruments imposing central clearing requirements in relation to over-the-counter interest rate derivatives transactions denominated in Australian dollars and four global currencies (being US dollars, euros, British pounds and Japanese yen).

The determination does not directly impose any requirements in relation to such derivatives.

Human rights implications

This Legislative Instrument does not engage any of the applicable rights or freedoms.

Conclusion

This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.