Derivatives: Global discord extends to Asia

October 2013
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Derivatives: Global discord extends to Asia

At a glance

A third wave of derivatives regulations, now from Asia, is about to impact global entities working to navigate Dodd-Frank and EMIR.

Global entities struggling to navigate Dodd-Frank's and EMIR's derivative regulatory requirements are being hit by a third wave of regulations. This month certain regulators in the Asia Pacific ("Asia-Pac") are beginning to enforce trade reporting requirements, and additional requirements related to central clearing and electronic execution are not far behind. The jurisdictional differences in these reporting requirements are notable, and although substituted compliance is an option in some jurisdictions, its scope is limited and is not yet fully defined.

In Asia-Pac, the four major jurisdictions are Australia, Singapore, Hong Kong, and Japan. Although regulatory efforts in Japan were finalized in 2012, reporting regulations in other jurisdictions are just beginning to take effect (i.e., in Australia on October 1st), remain in the proposal phase but are set to soon begin taking effect (i.e., in Singapore on October 31st), or await further regulatory clarification (i.e., in Hong Kong with limited obligations commencing on December 9th). As a result, within the region, derivatives reform has varied in breadth and depth and has a staggered phase-in timeline for conformance, which extends in some cases into 2015.

Similar to the CFTC's substituted compliance regime, some Asia-Pac jurisdictions (e.g., Singapore and Australia) offer limited exceptions for foreign entities that comply with substantially similar reporting obligations in their home jurisdiction. However, overall differences in scope, applicability, and reporting requirements in various jurisdictions preclude a one-size-fits-all strategy. Compliance with even the most flexible or aggressive single regulatory regime in the region will not cover a firm's entire product or customer data reporting obligations in Asia-Pac. This necessitates a flexible approach to compliance planning and requires improvements in data infrastructure and governance.

This Financial Services Regulatory Brief analyzes the key regulatory requirements and expected developments in three major Asia-Pac jurisdictions (Australia, Singapore, and Hong Kong), and suggests a strategic framework for meeting regulatory demands that includes elevating enterprise data strategy.

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