Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2010-2011-2012
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
CORPORATIONS LEGISLATION AMENDMENT (DERIVATIVE
TRANSACTIONS) BILL 2012
SUPLLEMENTARY EXPLANATORY MEMORANDUM
Amendments to be Moved on Behalf of the Government
(Circulated by the authority of the
Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary .................................................................................................. 1
General outline and financial impact ....................................................... 3
Chapter 1 Explanation of Amendments .......................................... 5
Chapter 2 Statement of Compatibility with Human Rights .............. 7
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
AEMC Australian Electricity Market Commission
ASIC Australian Securities and Investments
Commission
Corporations Act Corporations Act 2001
DTR Derivative Transaction Rules
G-20 Group of Twenty (G-20) forum of
19 countries and the European Union
NEM National Electricity Market
OBPR Office of Best Practice Regulation
OTC derivatives Over-the-counter derivatives
RIS Regulation Impact Statement
1
General outline and financial impact
Outline
The Bill amends the Australian Prudential Regulation Authority Act 1998,
Australian Securities and Investments Commission Act 2001, the
Corporations Act 2001, the Mutual Assistance in Business Regulation Act
1992, and the Reserve Bank Act 1959 to provide a legislative framework
to implement Australia's G-20 commitments in relation to
over-the-counter (OTC) derivatives reforms.
The amendments to the Bill introduce a requirement that both the Minister
and the Australian Securities and Investments Commission (ASIC) have
regard to the effect on the underlying physical market prior to making a
determination mandating a commodity derivative or making a Derivative
Transaction Rule (DTR).
Date of effect: The amendments take effect on the 28th day after the Act
receives Royal Assent.
Proposal announced: The reforms in the Bill were announced in a joint
Media Release of the Deputy Prime Minister and Treasurer, the Minister
for Financial Services and Superannuation and the Parliamentary
Secretary to the Treasurer on 18 April 2012.
Financial impact: Nil.
Human rights implications: These amendments do not raise any human
rights issues. See Statement of Compatibility with Human Rights --
Chapter 2.
Compliance cost impact: The compliance cost impact of the Bill is low.
These amendments are considered to have no impact on business or the
not-for-profit sector.
Summary of regulation impact statement
Regulation impact on business
Impact: The Office of Best Practice Regulation (OBPR) has advised that
a Regulation Impact Statement (RIS) is not required for this Bill.
3
Chapter 1
Explanation of Amendments
Outline of chapter
1.1 The Bill amends the Australian Prudential Regulation Authority
Act 1998, Australian Securities and Investments Commission Act 2001,
the Corporations Act 2001 (`the Corporations Act'), the Mutual
Assistance in Business Regulation Act 1992, and the Reserve Bank Act
1959 to provide a legislative framework to implement Australia's G-20
commitments in relation to OTC derivatives reforms.
1.2 The amendments to the Bill introduce a requirement that both
the Minister and ASIC have regard to the effect on the underlying
physical market prior to making a determination mandating a commodity
derivative or making a DTR.
Context of amendments
1.3 This Bill provides for the implementation of graduated measures
to respond proportionally in managing risks in Australian OTC derivatives
markets. In outline, the framework will operate as follows:
· The responsible Minister will be empowered by the
Corporations Act to prescribe a certain class of derivatives
(in relation to a mandatory obligation).
· A DTR may in turn be issued by ASIC to establish one or
more mandatory obligations (reporting, clearing or
execution) for participants transacting in this prescribed class
of derivatives.
· Any rule must be consented to by the Minister before taking
effect. The scope of rules and other technical features of the
scheme may be further limited by regulation.
· A new licensing regime will be introduced for a new kind of
financial infrastructure entity - trade repositories.
5
Amendments to the Corporations Legislation Amendment (Derivative Transactions) Bill 2012
Summary of new law
1.4 The amendments to the Bill introduce a requirement that both
the Minister and ASIC have regard to the effect on the underlying
physical market prior to making a determination mandating a commodity
derivative or making a DTR.
1.5 This proposal addresses a concern expressed by stakeholders
that limitations on use of OTC derivatives may affect the effective
operation of the underlying physical market.
1.6 For instance, energy market participants have requested that the
effective operation of the National Electricity Market (NEM) be
considered prior to the introduction of any prescriptions related to
electricity derivatives.
Detailed explanation of new law
1.7 Schedule 1, item 32 of the Bill is amended so that paragraph
901B(3)(a) of the Corporations Act will include a requirement that prior
to making a determination mandating a commodity derivative the Minister
must consider `the likely impact, on the market or markets that underlie
those commodity derivatives, of allowing the derivative transaction rules
to impose requirements of that kind in relation to those commodity
derivatives'.
1.8 As part of the process of fulfilling this requirement the Minister
would be expected to seek the written agreement of relevant ministers
with portfolio responsibility for the underlying market, for example in the
case of electricity derivatives, this would include the Commonwealth
Minister with responsibility for Energy; currently the Minister for
Resources, Energy and Tourism.
1.9 Schedule 1, item 32 of the Bill is amended so that paragraph
901H(a) of the Corporations Act will include a requirement that prior to
making DTRs in relation to commodity derivatives ASIC must consider
`the likely impact of the proposed rule on the market or markets that
underlie those commodity derivatives'.
1.10 As part of the process of fulfilling this requirement ASIC would
be expected to seek the views of equivalent regulatory agencies and
bodies with responsibility for the underlying market; for example in the
case of electricity derivatives this would include the Australian Energy
Market Commission (AEMC).
6
Chapter 2
Statement of Compatibility with Human
Rights
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
Amendments to the Corporations Legislation Amendment (Derivative
Transactions) Bill 2012
2.1 These amendments to the Bill are compatible with the human
rights and freedoms recognised or declared in the international
instruments listed in section 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Overview
2.1 The Bill amends the Australian Prudential Regulation Authority
Act 1998, Australian Securities and Investments Commission Act 2001,
the Corporations Act 2001, the Mutual Assistance in Business Regulation
Act 1992, and the Reserve Bank Act 1959.
2.2 The Bill introduces new restrictions on the trading of
over-the-counter derivatives (OTC derivatives). The Bill will allow the
Minister for Financial Services to prescribe classes of derivatives in
relation to certain mandatory obligations. Subject to a class of derivatives
being prescribed for one or more mandatory obligations (trade reporting,
central clearing or on platform execution), ASIC may make related
derivatives transaction rules, with the Minister's consent. The Bill also
introduces a licensing regime for trade repositories, a new type of
financial market infrastructure.
2.3 The amendments to the Bill require that both the Minister and
the ASIC have regard to the effect on the underlying physical market prior
to making a determination mandating a commodity derivative or making a
DTR.
Human rights implications
2.4 These amendments do not engage any of the applicable rights or
freedoms.
7
[Click here and insert the name of the Bill]
Conclusion
2.5 These amendments are compatible with human rights as they do
not raise any human rights issues.
Deputy Prime Minister and Treasurer, the Hon Wayne Swan
MP
8
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