Australia, Japan drive Asia swaps reforms

Australia and Japan have emerged as Asia's leading reformers, outlining details of further large-scale regulations governing OTC derivatives markets in line with global reforms.

Australia and Japan have outlined further changes to regulations governing their OTC derivatives markets in line with global reforms.

Market watchdog the Australian Securities and Investments Commission (ASIC) last week published consultation papers on rules for the establishment and operation of derivatives trade repositories, and the responsibilities of market participants to report trades.

The draft rules set out the proposed approach to granting Australian derivative trade repository licences and call for repositories to maintain electronic databases recording derivatives contracts. The reporting rules state that major financial institutions – which it defines as those with A$50 billion of notional outstanding positions in OTC derivatives on 30 September 2013 – will commence from 31 December, while those for other participants will commence on 30 July.

For trade repository rules, comment is open until 12 April, and for reporting rules, market participants have until 1 May to make a submission.

Australia is well advanced with its swaps market reforms and in December passed a bill amending legislation for derivatives transactions, which will form the country's framework to meet its G-20 commitments on reducing systemic risk in the oTC derivatives markets.

Last week, domestic clearing house the Japan Securities Clearing Corporation (JSCC) announced it would begin client clearing for interest rate swaps next year, in addition to adding both yen and non-yen-denominated products to its range of cleared instruments.

To fulfil the G-20 agenda, Japan's Financial Services Agency has mandated that market participants report OTC derivatives transactions directly to regulators or to a third-party trade repository from 1 April. To help meet this, earlier this month the national regulator approved a data repository operated by the Depository Trade and Clearing Corporation (DTCC). It will be the first trade repository to offer OTC derivatives reporting services in Asia.

Other Asian economies progressing with swaps reforms include Singapore. Singapore Exchange (SGX) aims to bolster its clearing unit, SGX AsiaClear, to become a global swaps clearing hub. SGX has sought formal recognition from the US Commodity Futures Trading Commission for both its derivatives exchange and its derivatives clearing arm.

In Korea, the government this month approved new laws that pave the way for central counterparties (CCPs) to clear OTC derivatives transactions, starting with interest rate swaps. The legislation lets CCPs seek approval to clear swaps, and authorisation will be granted depending the types of financial products they seek to clear.

Hong Kong has also made inroads to reform its clearing and reporting practices in line with G-20 reforms to OTC derivatives, with the Hong Kong Monetary Authority announcing in 2010 it would establish a trade repository (HKTR) established under the HKMA's Central Moneymarkets Unit.

 

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