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ASIC Seeks 5 Year Extension of Retail OTC Brokers’ Financial Requirements

The Australian Securities and Investments Commission (ASIC) issued a consultation paper on Thursday that deals with the financial requirements of retail over-the-counter (OTC) derivatives providers.

The regulator is proposing a five-year extension of the class order for another five years, which is scheduled to expire on 1 October 2022. It is now seeking industry feedback on the proposal.

Under the current rules, retail OTC derivatives issuers need to follow strict financial requirements to operate in the Australian market. It includes the requirement of a minimum net tangible asset of AU$1 million or 5 percent of the average revenue. Half of it should be held in cash or a cash equivalent and the rest in liquid assets.

Further, every quarter the derivative issuers need to prepare projections of cash flows over a 12-month period that is based on revenue and expense projections. Moreover, there is a mandatory requirement for an annual audit report.

A Big Market for Retail OTC Derivatives Trading

Australia is a major market for  retail trading  , especially with counterparty contracts of  forex  and other asset classes. According to the regulator, there are approximately 84 retail OTC derivative issuers who must comply with these financial requirements.

“To preserve its effect beyond the sunset date of 1 October 2022, we propose to continue the relief currently given by [CO 12/752] in a new legislative instrument that reflects current drafting practice, without any significant changes,” the consultation paper stated.

“We have proposed to make the instrument for a period of five years, so that it expires on 1 October 2027. We consider that this period will provide sufficient certainty for industry and, if required, allow progress to be made in amending the primary law or regulations.”

Meanwhile, the Aussie regulator brought in another consultation paper proposing a ban on binary options till October 2031.

The Australian Securities and Investments Commission (ASIC) issued a consultation paper on Thursday that deals with the financial requirements of retail over-the-counter (OTC) derivatives providers.

The regulator is proposing a five-year extension of the class order for another five years, which is scheduled to expire on 1 October 2022. It is now seeking industry feedback on the proposal.

Under the current rules, retail OTC derivatives issuers need to follow strict financial requirements to operate in the Australian market. It includes the requirement of a minimum net tangible asset of AU$1 million or 5 percent of the average revenue. Half of it should be held in cash or a cash equivalent and the rest in liquid assets.

Further, every quarter the derivative issuers need to prepare projections of cash flows over a 12-month period that is based on revenue and expense projections. Moreover, there is a mandatory requirement for an annual audit report.

A Big Market for Retail OTC Derivatives Trading

Australia is a major market for  retail trading  , especially with counterparty contracts of  forex  and other asset classes. According to the regulator, there are approximately 84 retail OTC derivative issuers who must comply with these financial requirements.

“To preserve its effect beyond the sunset date of 1 October 2022, we propose to continue the relief currently given by [CO 12/752] in a new legislative instrument that reflects current drafting practice, without any significant changes,” the consultation paper stated.

“We have proposed to make the instrument for a period of five years, so that it expires on 1 October 2027. We consider that this period will provide sufficient certainty for industry and, if required, allow progress to be made in amending the primary law or regulations.”

Meanwhile, the Aussie regulator brought in another consultation paper proposing a ban on binary options till October 2031.

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