No alternative – derivatives transaction reporting changes for foreign entities and implications for single-sided reporting exemption 

What you need to know

• From 20 October 2025, foreign reporting entities can no longer rely on alternative reporting arrangements in order to discharge their obligation under the ASIC Derivative Transaction Rules (Reporting) 2024 (ASIC rules) by reporting under a foreign regime. Those foreign entities must report the relevant reportable transactions under the ASIC rules going forward. Relatedly, offshore trade repositories are being de-prescribed so that transactions may only be reported to a licensed repository in Australia.
• The criteria for transactions that are reportable by a foreign reporting entity will also change, so that foreign reporting entities must report transactions which are 1) entered into with retail clients; 2) booked to the profit and loss account of the Australian branch; or 3) "nexus derivatives" (i.e. transactions which have had involvement of salespersons or traders in Australia). The application of the nexus derivatives test has broadened as this previously applied on an opt-in basis.
• As alternative reporting will no longer be available, this has implications for any reporting entity which has been relying on the single-sided reporting exemption on the basis that its foreign counterparty reports their transactions under alternative reporting.

What you need to do

• Foreign reporting entities must consider their systems and processes to ensure that they are comprehensively and accurately identifying all reportable transactions, including in respect of nexus derivatives (as defined in the rules).
• Foreign reporting entities must ensure that they are ready to submit required information to a licensed repository which complies with the ASIC rules and data requirements.
• Entities currently relying on the single-sided reporting exemption should engage with their reporting foreign counterparties regarding the rule changes, and obtain new representations regarding the information the foreign counterparty will be reporting, in order to continue reliance on the exemption.
• The reporting rules are highly technical – please feel free to get in touch if you require specific advice.

Reportable transactions for a foreign reporting entity

A foreign entity is a reporting entity under the ASIC rules if it is registered under Division 2 of Part 5B.2 of the Corporations Act, and is a foreign authorised deposit-taking institution, AFSL holder, or foreign financial services provider (whose wholesale derivative activities are regulated in a foreign jurisdiction). Presently, a foreign reporting entity must report all transactions entered into with an Australian retail client, booked to the profit or loss account of a branch in Australia, or that were "entered into" in Australia. Instead of considering whether a transaction was "entered into" in Australia (which requires application of Australian contractual law principles on a transaction-by-transaction basis), a foreign reporting entity could opt-in to rely on an alternative test – being whether the derivative is a "nexus derivative" under ASIC Derivative Transaction Rules (Nexus Derivatives) Instrument 2024/603.

From 20 October 2025, the nexus derivative test will become the default position under the ASIC rules. In effect, the test for determining whether an OTC derivative is a nexus derivative will be based on the functions performed by the persons involved in executing the relevant derivative transaction. It considers whether Australian-located staff of a foreign entity are involved in one or more of the functions of pricing, seeking or providing quotes, structuring, offer and/or acceptance or managing its financial risks and a reporting entity is a counterparty.

A foreign reporting entity should therefore ensure that its systems and processes can appropriately capture information regarding the involvement of persons in Australia which could give rise to a nexus derivative.

Removing alternative reporting

From 20 October 2025, a foreign reporting entity can also no longer report a reportable transaction under a substantially equivalent regime (which is currently available and known as alternative reporting). A foreign reporting entity must therefore ensure that it is able to report under the ASIC rules. These rules were substantially amended in October 2024, to reflect internally adopted technical standards for reporting under ISO 20022, standards for other identifiers and other data elements. Therefore, while there should be general consistency and alignment between the ASIC rules and foreign reporting regimes which the foreign reporting entity may be subject to, the reporting entity must still comprehensively assess its systems and processes which capture trade data to ensure that it is able to accurately report all reportable transactions and its information.

The reports must also be made to a trade repository licensed in Australia going forward – namely, to DTCC Data Repository (Singapore) Pte Ltd or KOR Reporting Inc. There would no longer be any prescribed repositories.

Transactions previously reported under alternative reporting

Ordinarily, any modification, termination, or assignment of the transaction, or any change to reported information, must be reported. However given the removal of alternative reporting, the ASIC rules provide an exemption that such information does not need to be reported if it relates to information about an OTC derivative which had been reported to a prescribed repository before 20 October 2025. Therefore, live trades which had been reported under alternative reporting are not subject to the reporting requirements under the ASIC rules (and presumably would continue to be subject to reporting and changes under the relevant foreign reporting regimes under which the original transaction was reported).

Single-sided reporting exemption

Under the ASIC rules, both parties to a reportable transaction are required to separately report the transaction. However, certain reporting entities may rely on the single-sided reporting exemption under regs 7.5A.70–7.5A.74 of the Corporations Regulations 2001 (Cth) (Corporations Regulations), which effectively allows for one side of the transaction to make the report, subject to certain conditions (Exemption).

The Exemption is available to a reporting entity who has a total gross notional outstanding position of less than A$5 billion in the relevant capacity (e.g. as principal, or acting as trustee for a particular fund or trust), as assessed at the end of each quarter, for two consecutive quarters (exempt entity). In effect, if the Exemption applies, the Exempt Entity does not have a reporting obligation in respect of the relevant transaction at all. This is different to delegated reporting, where the reporting obligation is discharged by a reporting delegate.

A condition of the Exemption (among others) is that the exempt entity obtains certain representations from the reporting counterparty, and the specific representation required depends upon the nature of the reporting counterparty. For example, the Exemption contemplates that a foreign reporting counterparty would represent that it is subject to reporting requirements in one or more foreign jurisdictions that are substantially equivalent to requirements under the ASIC rules, and such information will be reported to a prescribed trade repository. After 20 October 2025, this representation would no longer be able to be made by a foreign reporting counterparty.

Presently, no specific amendments have been proposed to the drafting of the Exemption under the Corporations Regulations to take into account the changes to the ASIC rules. We understand that ASIC has put on Treasury's agenda the need to update and revise the single-sided reporting exemption framework on a wholesale basis. However, the timeline of any such amendment is currently unclear, and therefore legacy provisions regarding alternative reporting to prescribed repositories would continue to exist but without any practical effect.

We expect that there would be many exempt entities who have obtained representations from a foreign reporting counterparty for the purpose of relying on the Exemption. It would be prudent to engage early with any such foreign reporting counterparty to better understand the scope of transactions that they would report under the ASIC rules (particularly in light of the nexus derivatives test). New representations would need to be obtained to the effect that the foreign reporting counterparty would be reporting under the ASIC rules to a licensed repository. This also impact upon the use of the ISDA single-sided representation letter which has generally been used in the industry to obtain the relevant representations.

Other Author: Caitlin Murphy, Lawyer.