Corporations Legislation Amendment (Derivative Transactions) Bill 2012 close to passing

Yet another piece of corporate regulation is ready to see the light of day as the Corporations Legislation Amendment (Derivative Transactions) Bill 2012 has passed through all its parliamentary stages and is awaiting assent.

The legislation will enact measures that implement commitments made by the Australian Government and other G20 nations regarding the regulation of what are known as over-the-counter derivatives ('OTC?') for which there is a very substantial global market. for example at the end-2011 the Bank for International Settlements reported that total notional amount outstanding for OTC derivatives worldwide was $648 trillion. The global financial crisis highlighted structural deficiencies in the OTC derivatives market and the systemic risks that those deficiencies can pose for wider financial markets and the real economy.

In many countries, these structural deficiencies contributed to the build-up of large, insufficiently risk-managed, counterparty exposures between some market participants in advance of the global financial crisis; and a lack of transparency about those exposures for market participants and regulators. At the 2009 G20 summit, the Australian Government joined other nations in committing to substantial reforms to practices in the trading of the OTC derivatives market.

The three key G20 commitments the Government says this legislation addresses are the:

• reporting of OTC derivatives to trade repositories;


• clearing of standardised OTC derivatives through central counterparties; and


• execution of standardised OTC derivatives on exchanges or electronic trading platforms, where appropriate.

The effect of acting the commitments are according to the Government the:

• increased transparency in the OTC derivatives market for regulators, market participants and the public; and


• a reduction in counterparty credit risks and operational risks associated with OTC derivatives.

The Bill proposes to amend various financial laws including 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 establish a legislative framework to implement the regulation of OTC derivatives reforms.

Once the Bill is assented it is intended to take effect on the 28th day after the Act receives Royal Assent. It should however be noted that while the amendments commence 28 days after assent, ASIC’s derivative transaction rule making power will not be enlivened unless and until the has Minister prescribes a derivative class in respect of one or more of the trade reporting, clearing or execution mandates.

In the second reading speech the minister also indicates that while trade repository licensing applications may be lodged from the date of commencement, subject to prescription or approval of the relevant form, ASIC would be unable to satisfy itself of the criteria for granting a licence until derivative trade repository rules setting out the operational requirements of a licensee are finalised. Prohibitions on the other hand will apply from the date of commencement on a person holding themselves out to be a licensed or prescribed facility for the purpose of any of the three mandates, when they are not a licensed or prescribed facility. Prohibitions on operating an unlicensed trade repository will only come into effect once regulations are made providing that specified classes of trade repository must be licensed.

Uniform Anti-discrimination is not a Free Speech Issue

At last some attempt at the Federal level is to be made to create effective and cohesive anti-discrimination laws. Much discussed in the last two years, the Attorney General has this week released draft legislation consolidating the five separate pieces of Federal anti-discrimination legislation into a single Act to be called Human Rights and Anti-Discrimination Act.

Although the law is yet to be introduced into Parliament, consultation closed earlier this year and the draft bill will cover issues and problems like:

1. Defining the levels of protections to the highest current standard, to resolve gaps and inconsistencies without diminishing protections.


2. Clearer and more efficient laws provide greater flexibility in their operation, with no substantial change in practical outcome.


3. Enhancing protections where the benefits outweigh any regulatory impact.


4. Voluntary measures that business can take to assist their understanding of obligations and reduce occurrences of discrimination.


5. A streamlined complaints process, to make it more efficient to resolve disputes that do arise.

This new legislation is aimed at a unified response to discrimination across Australia.

Already debate from some of the more predictable quarters has attacked the proposed law as an example of the Labor government attacking free speech. These glib critics refer to the Bolt Case and continue to argue that someone who attacks a persons race in forums where the people he attacks have no equal chance to respond or reply is exercising free speech. And they might be right if you equate "unfettered speech" and "free speech" but they are not the same. Free speech is a democratic right that comes with the responsibility not to have it abused unlike unfettered speech which has no rules and creates a jungle of abuse and innuendo without redress or defense.