Transactions
      Back to home
      1. Knowledge Base
      2. Repository - ASIC
      3. Transactions

      What does ASIC consider to be an OTC Derivative?

      From https://www.legislation.gov.au/Details/F2022L01705

      1. Subject to subrule (2), in these Rules a Derivative is an OTC Derivative if the Derivative is in a Prescribed Class.

      2. In these Rules a Derivative is not an OTC Derivative if:

        1. the Derivative is able to be traded (within the meaning of section 761A of the Act) on a Part 7.2A Market or a Regulated Foreign Market; and

        2. in the case of a Part 7.2A Market, the entry into of the arrangement that is the Derivative:

          1. takes place on the Part 7.2A Market in accordance with the Operating Rules of the Part 7.2A Market; or

          2.  is reported to the operator of the Part 7.2A Market in its capacity as operator of the Part 7.2A Market, in accordance with the Operating Rules of the Part 7.2A Market; or

        3. in the case of a Regulated Foreign Market, the entry into of the arrangement that is the Derivative takes place on the Regulated Foreign Market.
      3. For the purposes of subrule (2), Regulated Foreign Market means any financial market:
        1.  that is registered by the United States Commodity Futures Trading Commission as a "Designated Contract Market" under section 5h of Commodity Exchange Act 1936 (US);
        2. that is a "Regulated market" as defined in Article 4(1)(21) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments (in this Rule, the Directive); or(a)     
        3. that is a financial market, or is in a class of financial markets, that has been determined by ASIC as a Regulated Foreign Market under subrule (3).
      4. ASIC may determine from time to time that a financial market, or a financial market in a class of financial markets, in a foreign jurisdiction is a Regulated Foreign Market for the purposes of subrule (2), where, in the opinion of ASIC, the operation of the financial market in the foreign jurisdiction is subject to requirements and supervision that are sufficiently equivalent, in relation to market integrity and market transparency, to the requirements and supervision to which:      
        1. a facility referred to in paragraph (2A)(a) is subject in the United States;
        2. a facility referred to in paragraph (2A)(b) is subject in the European Union; or
        3. a Part 7.2A Market is subject in this jurisdiction.
      5. A determination by ASIC for the purposes of subrule (3):
        1. will be published on ASIC’s website; and
        2. takes effect on the day specified in the determination.
      6. (5) A determination by ASIC for the purposes of subrule (3):
        1. may be withdrawn by ASIC, from a date specified in a notice of withdrawal that is not less than 1 calendar month after the date the notice is  registered under the Legislative Instruments Act 2003; and
        2. once withdrawn ceases to have effect. 

        Note 1: A Derivative is an OTC Derivative under this Rule regardless of whether it is cleared through a Licensed CS Facility.
        Note 2: Determinations and notices of withdrawal under this Rule will be registered by ASIC on the Federal Register of Legislative Instruments (FRLI) and take effect under the Legislative Instruments Act 2003.

       

      (6) In these Rules a Derivative is not an OTC Derivative if:

      (a)        it is a foreign exchange contract between counterparties solely to facilitate the settlement of a transaction between the counterparties, or by one of the counterparties, for the purchase and sale of a foreign currency denominated security, or a portfolio of foreign currency denominated securities; and

      (b)       under which consideration is provided to settle the transaction not more than 7 Business Days after the day on which the transaction is entered into.

      (7) In these Rules a Derivative is not an OTC Derivative if:

      (a)        under an arrangement a party has an obligation to buy, and another party has an obligation to sell, intangible property at a price and within a period of no longer than the shortest period determined by the usual market practice for delivery of the property;

      (b)       the arrangement does not permit the seller’s obligations to be wholly settled by cash, or by set‑off between the counterparties, rather than by delivery of the property; and

      (c)        it is not a foreign exchange contract or an option;

      but only to the extent that the arrangement deals with that purchase and sale.