Australia: Derivatives reform bill - no surprises for Australia's derivatives industry

Last Updated: 1 August 2012
Article by Louise McCoach and Graeme Dennis

Most Read Contributor in Australia, November 2017

On Wednesday 25 July 2012, the Australian Government released an exposure draft of the Corporations Legislation Amendment (Derivatives Transactions) Bill 2012, which will establish a framework for the introduction of substantial reforms to Australia's over-the-counter (OTC) derivatives industry.

The Bill follows the Government's April consultation paper outlining its proposed framework to meet Australia's G20 commitments on derivatives regulation (see our article explaining the elements of the proposed framework).

The purpose of the Bill is to create a legislative framework to allow the following mandatory obligations to be imposed on derivatives transactions:

  • reporting of derivatives through trade repositories;
  • clearing of derivatives through central counterparties; and
  • executing derivatives on exchanges or electronic trading platforms.

The Bill raises a number of issues for the Australian derivatives industry to consider.


The legislative framework will be enacted via amendments to the Corporations Act 2001 (Cth). The Bill itself will not impose any obligations on market participants. Rather, it will give the Minister for Financial Services and Superannuation and the Australian Securities and Investments Commission (ASIC) the power to make rules and enact future regulations relating to the reporting, clearing and trading of particular types of derivatives.

In keeping with the framework proposed in April, the mandatory obligations under the Bill will not be enlivened until the following has occurred:

  • certain classes of OTC derivatives have been prescribed by the Minister in relation to one or more of the mandatory obligations; and
  • ASIC has made derivatives transaction rules (DTRs) that impose reporting, clearing and/or execution requirements (and matters incidental to those requirements) for participants transacting in the prescribed class of OTC derivatives. ASIC may also make DTRs specifying the particular trade repositories, clearing counterparties and trading platforms that market participants must deal with to comply with the rules.

When exercising its rule-making power, ASIC must consult with the public and other regulatory bodies. In addition, all DTRs must be approved by the Minister.

The Minister may pass regulations to limit the classes of persons and transactions to which the DTRs apply. It is expected that the Minister will pass regulations for a particular class of OTC derivatives at the time those derivatives are prescribed. When exercising the regulation-making power, the Minister must have regard to the likely impact on the Australian economy and financial system, the likely regulatory impact and any other relevant matter. The Minister must also consult with ASIC, the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia (RBA).

Failure to comply with the DTRs triggers the civil penalty provisions in the Corporations Act. However, failure to comply with a DTR does not invalidate the relevant derivative transactions themselves.

The appropriate exercise of rule and regulation-making powers

The new framework is built on a very broad legislative setting that relies heavily on the appropriate exercise of rule and regulation-making powers to ensure that the framework does not overreach its policy objectives.

For example, the range of "derivative transactions" that could be subject to the framework is by definition very broad, being defined as:

  • the entry into of an arrangement that is a derivative;
  • the modification or termination of such an arrangement; or
  • any other transaction relating to a derivative.

The policy consideration behind the broadness of this definition is to give the Government and ASIC sufficient flexibility to address anti-avoidance behaviour and allow for greater harmonisation with equivalent overseas regimes as these develop.

The April consultation paper contemplates that the rule and regulation-making powers will be exercised in a way which ensures that the scope of the mandatory obligations is appropriate. This is reinforced by the Bill through its inclusion of specific criteria that the Minister and ASIC must have regard to when exercising their respective regulation and rule-making powers (see above).

However, at this stage, the potential footprint of the mandatory obligations is still uncertain and no further guidance is given in the explanatory document accompanying the Bill beyond what was canvassed in the April consultation paper.


Although the April consultation paper stated that mandatory trade reporting may be introduced as early as this year, the Bill does not provide any further indication as to when the Government plans to impose the mandatory obligations.

ASIC's rule-making capacity

The framework is unusual in that ASIC not only has a supervisory role but it also has significant rule-making power through its role in issuing the DTRs. In fact, submissions in response to the April consultation paper expressed concern about the degree of rule-making power conferred upon ASIC under the legislative framework.

Notwithstanding this, the Government has made it clear that the flexibility inherent in ASIC's rule-making is paramount, and that the constraints in the Bill, including the requirement for Ministerial approval of DTRs, are intended to provide protection in this regard.

Jurisdictional reach

The Bill is silent on the jurisdictional reach of the mandatory obligations. The April consultation paper contemplated that the jurisdictional reach of the framework would be clarified by the regulations, with potential for further refinement in the DTRs.

The consultation paper also indicated that the jurisdictional reach may be considered separately for reporting, clearing and execution obligations. Market participants can expect further consultation on this crucial aspect of the new regime.

Licensing regime for trade repositories

The draft legislation provides for the creation of a licensing regime for derivative trade repositories. This is modelled on the current licensing regimes for Australian market and clearing and settlement facility licence holders under Parts 7.2 and 7.3 of the Corporations Act, respectively. Regulations and DTRs will flesh out the details of the regime.

The Government has adopted a framework approach for licensees to ensure that the rules, when made, are sufficiently equivalent to major overseas jurisdictions to facilitate mutual recognition of licensed trade repositories by overseas regulators. ASIC will supervise both domestic and overseas licensees, but will be able to take into account the regulation of the overseas licensees in their home jurisdictions.

Subject to limited exceptions that will be prescribed by regulation, trade repositories will be required to disclose trade data to ASIC, APRA, the RBA or another trade repository licensee upon request. The regulations may also require licensees to provide statistical information to certain persons specified in the regulations.

The Bill seeks to provide some level of protection for trade data confidentiality by prohibiting licensees from disclosing trade data, including trade data provided by other licensees, except as required or permitted by law or as necessary for the provision of the trade repository services.

What next?

Interested parties are invited to comment on the draft legislation. Submissions are due by 20 August 2012.

You might also be interested in...

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions