A lot of information (and misinformation) has been circulating lately regarding pending legislation in Australia, which will require both large and small financial institutions to report all derivatives trades – reporting which will also cover most of the retail forex brokers in the country.
The implementation of the Australia OTC derivatives reform act has been moved back to December 4 from today (October 12) to give more brokers the opportunity to get their systems fully ready for what amounts to Australia’s version of the EU’s EMIR.
So what it really required of Australia’s retail forex brokers? And is this a good thing for the industry and for consumers?
We are pleased to present a special guest post by Goran Drapac, Chairman and CEO of AxiTrader’s parent company AxiCorp Financial Services. ASIC-regulated AxiTrader is the leading Australia-based retail forex broker.
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Next week was the expected implementation of ASIC’s OTC derivatives reform act for FX Brokers based in Australia. This has been pushed back to December 4th.
In a nutshell, following 2009’s second G20 summit, the Australian Government joined other countries in committing to reform surrounding OTC (Over the Counter) derivative markets, specifically as it applies to transaction reporting, clearing and trade execution. The overreaching objectives of the OTC reforms, as stated by the Australian Securities and Investments Commission (ASIC), are to:
- Enhance the transparency of transaction information available to relevant authorities and the public
- Promote financial stability, and
- Support the detection and prevention of market abuse.
We wholeheartedly support these changes.
During the GFC (global financial crisis), financial industries were hit hard on their balance sheets. Post-GFC and recovering well, our industries are still haunted by those ghosts, not through numbers but through the eyes of the average person on the street. We’re not going to forget the damage caused by mismanagement, financial imprudence and lack of accountability, nor should we be – even those of us who weren’t directly responsible.
No one can afford a catastrophe like the GFC again, so any measures that take us towards greater trust, transparency and stability should be welcomed.
From an AxiTrader perspective we’ve seen this type of reform before, in Europe. Through our UK business, we were required to undertake industry-wide compliance reform via the European Market Infrastructure Regulation (EMIR) changes which were rolled out from 2013. Similar in nature to the OTC derivative reform act, we know what to expect regarding transaction reporting and have planned accordingly, not just for October but the subsequent date of April 2016 – as, no doubt, other brokers with a global presence will have.
It may, though, be different for smaller players who have been operating with more of a loose hand and who mightn’t be so comfortable in the grip of tighter reform. There will be costs to swallow, too. A broker of our size has the infrastructure and personnel to support the new implementations with minimal interruption. Other operators may not see it as such a relatively insignificant undertaking, whether that’s with regards to finance, infrastructure, personnel, disclosure or reporting. On that, it will be interesting to observe what regulators do with the pools of new data.
The equivalent EMIR reform for AxiTrader’s UK business was seamless and uninterrupted for our clients so we see no reason the same won’t apply here. There will no doubt be additional individual benefits to be found from this reform – including the ability to report single sided transactions to ASIC for our institutional Clients through AxiPrime, and for our white label partners by removing the reporting requirement for them – but of more importance is the greater trust and transparency our growing industry can earn.
About AxiTrader
AxiTrader is Australia’s largest home-grown margin FX company. Based in Sydney with offices in London, Dubai and Chisinau, AxiTrader employs more than 70 staff speaking ten different languages for a truly global reach. Utilising the world’s most popular trading platform, MetaTrader 4 and our institutional offerings, AxiTrader offers clients the ability to trade Forex, CFDs and commodities in a secure and highly regulated environment.
For more information, visit https://www.axitrader.com
AxiTrader is a registered business name of AxiCorp Financial Services Pty Ltd (AxiCorp). AxiCorp (ACN 127 606 348) is authorised and regulated by the Australian Securities & Investments Commission (ASIC) AFSL number 318232.