Chris Donohoe

A new consultation paper by the Australian Securities and Investments Commission (ASIC) will facilitate increased global regulatory harmony for Australian derivative transaction reporting through the adoption of international best practice, said APIR Systems chief executive, Chris Donohoe.

“APIR has been a long-standing supporter of legislation that aligns Australia with international best practice and facilitates global regulatory harmony,” Mr Donohoe said.

“ASIC’s proposed regulations enshrine the LEI as the only acceptable identifier to be used by Australian legal entities in OTC reporting, mirroring the trend witnessed in many offshore jurisdictions.”

The Legal Entity Identifier (LEI) is a 20-character alphanumeric code that connects an entity to key reference data, including information about the entity’s ownership structure. As part of the consultation, known as CP 361: Proposed changes to simplify the ASIC Derivative Transaction Rules (Reporting): Second consultation, ASIC has clarified that LEIs must be renewed annually in order to ensure the currency of the reported transaction data.

Mr Donohoe said the LEI lapse rate in Australia – or the rate in which entities fail to renew – is close to 45 per cent, compared with 35 per cent globally.

“The proposed changes would help bring Australia in line with global benchmarks.

“Many Australian transaction reporting entities captured under ASICs Derivative Transaction Rules (Reporting) are a subsidiary of an international brand, therefore being brought into the global alignment is a win for the domestic financial services industry,” he said.

LEIs were created in the wake of the 2008/09 global financial crisis, to deliver strong organisation identity for counter-parties, and to protect investors during market crises by providing understanding of dependencies and risk exposure.

The consultation period closes 8 July 2022, with proposed legislation slated to be effective from 1 October 2023.

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