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ASIC’s Reporting Blackspots: Understanding the Common Pitfalls Undermining Defensibility
Building on our previous discussion about the critical importance of robust governance and proactive self-checking in derivative trade reporting (as explored in “The Governance Gap: Why Businesses Must Strengthen Derivative Reporting Assurance”), this article dives into the specific areas where businesses are encountering challenges.
While a strong governance framework is the essential foundation, understanding the tangible issues – the “Blackspots” – that undermine reporting defensibility is equally crucial.
This article will highlight these common pitfalls identified by ASIC, explaining what they are and why they are a concern for both businesses and the regulator.
ASIC’s Blackspots:
Where Reporting Defensibility is Undermined
According to a presentation given by ASIC Senior Analyst, Craig McBurnie, at an industry event on 1 April 2025, titled ‘ASIC OTCD trade reporting Hotspots and Blackspots’. These “Blackspots” highlight areas where the industry is consistently struggling, often through governance gaps:
A. Data Quality and Identifier Challenges
Pitfall 1: Issues with Entity Identifiers
ASIC observed non-compliance with Reporting Entity – Counterparty 1 combinations (affecting 23.9% of Buy-side entities and 24.15% of their records) and significant issues with non-LEI Counterparty 2 information (impacting 44.3% of Retail OTCD entities and 3.58% of their records for ID Type, and even higher for ID Format and Name).
This means that the unique codes used to identify the parties involved in a derivative trade, particularly Legal Entity Identifiers (LEIs) for the reporting business itself and its counterparties, are often incorrect, missing, or not in the required format.
Why it undermines defensibility
Incorrect or missing identifiers make it difficult for ASIC to accurately link trades and counterparties across the market, hindering effective oversight and the ability to audit reporting chains.
(Refer to Rule S1.3.1(2) and Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for identifier requirements)
Pitfall 2: Mismatch in Product Identifiers
There is a mismatch between UPI Asset Class/Instrument Type and ASIC Asset Class/Contract Type (affecting significant percentages of entities and records across Sell-side, Buy-side, and Retail OTCD businesses).
This occurs when the classification of a derivative product using the global Unique Product Identifier (UPI) does not align with how ASIC requires that product’s asset class or contract type to be reported under the Australian rules.
Why it undermines defensibility
Inconsistent product classification leads to inaccurate data aggregation and analysis by regulators, raising questions about the reliability and comparability of reported data.
(Refer to Item 3 and 4 in Table S1.1(1) of Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for product identifier requirements)
B. Transaction Terms and Reconciliation Issues
Pitfall 1: Limited Extent of ‘Observable’ UTI Pairing
ASIC noted a limited extent of observable UTI pairing, even for post-go-live executions. This means that for a significant number of trades, ASIC is unable to match the reports from both counterparties using the same Unique Transaction Identifier (UTI).
This can occur for several reasons, including the counterparty not being a Reporting Entity, or due to issues with UTI generation and sharing, or consistent reporting by Reporting Entities.
Why it undermines defensibility
Lack of proper UTI pairing prevents regulators (and businesses) from accurately linking both sides of a trade, impacting market transparency and the ability to reconcile data effectively.
(Refer to Rule 2.2.9 and Item 1 in Table S1.1(1) of Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for UTI requirements)
Pitfall 2: Reporting of Abnormally Large Notionals or Incorrect Notional Calculations
Issues were observed with abnormally large notionals across all asset classes and incorrect notional calculations (Notional ≠ Price x Quantity) particularly for Equities and Commodities (affecting significant percentages of entities and records).
This means the reported size or value of a derivative contract is either unrealistically large or is incorrectly calculated based on the price and quantity of the underlying asset.
Why it undermines defensibility
Inaccurate notional values distort market size and risk assessments, raising red flags for regulators and undermining the credibility of the reported data.
(Refer to Items 26-31 in Table S1.1(1) of Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for notional requirements)
Pitfall 3: Non-compliance with Direction of BYER/SLLR vs MAKE/TAKE
Non-compliance was noted across various contract types (SWAP, FORW, CFDS, OPTN) and entity types. This pitfall relates to incorrectly reporting which counterparty is the “buyer” or “seller” (BYER/SLLR) or the “payer” or “receiver” (MAKE/TAKE) in the derivative transaction, depending on the type of derivative.
Why it undermines defensibility
Incorrect direction reporting impacts the regulator’s understanding of market positioning and exposure, hindering their ability to monitor market activity accurately.
(Refer to Items 14-16 in Table S1.1(1) of Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for direction requirements)
Pitfall 4: Issues with Reporting Underliers (Item 83)
A significant percentage of reports requiring an ASIC underlier (‘Item 83 Underlier ID (Other)’) were not reported, particularly for Commodities (36.3% of reports).
This means that for certain derivative products, the required identifier for the underlying asset (like a specific commodity, equity, or index) is either missing or incorrectly reported.
Why it undermines defensibility
Missing or incorrect underlier information makes it impossible for regulators to understand the risk exposure associated with the derivative, creating blind spots in market oversight.
(Refer to Item 83 in Table S1.1(1) of Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for underlier requirements)
C. Post-Trade Information Challenges
Pitfall 1: Stale or Missing Valuations
ASIC observed a high percentage of stale or no valuations (affecting 73.4% of Sell-side and Retail OTCD entities, and 24.5% of Buy-side entities).
This refers to the failure to report the current market value of outstanding derivative positions, or reporting values that are not up-to-date according to the required frequency.
Why it undermines defensibility
Inaccurate or outdated valuations prevent regulators from assessing current market risk and a business’s exposure in a timely manner, undermining the value of post-trade reporting.
(Refer to Items 6-9 in Table S1.1(2) of Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for valuation requirements)
Pitfall 2: Issues with Collateral Information
ASIC’s presentation highlighted significant percentages of entities with issues here: 74.5% of Sell-side, 53.2% of Buy-side, and 57.9% of Retail OTCD entities reported that the Collateralisation category was not established. Furthermore, 40.4% of Sell-side, 17.7% of Buy-side, and 58.6% of Retail OTCD entities reported that Collateral amounts were not reported (if established).
This means businesses are failing to report whether a derivative is collateralised and the amounts of initial or variation margin posted or collected, as required.
Why it undermines defensibility
Missing collateral data hinders regulators’ ability to understand counterparty credit risk and potential systemic risk within the market.
(Refer to Items 7-21 in Table S1.1(3) of Schedule 1 of the ASIC Derivative Transaction Rules (Reporting) 2024 for collateral requirements)
Recognising the Pitfalls Within Your Own Business
ASIC’s observations provide a clear picture of the common challenges in derivative trade reporting.
It’s crucial to consider whether these pitfalls are present within your own business’s reporting processes. Do you have full confidence in the accuracy of your entity and product identifiers? Are your systems and processes effectively handling UTI pairing and complex notional calculations? Are valuations and collateral information consistently reported accurately and on time?
Aligning with ASIC Senior Analyst Craig McBurnie’s presentation point, identifying these potential Blackspots through businesses’ own compliance arrangements before reports are sent to ASIC is the crucial first step towards strengthening your reporting framework and ensuring defensibility.
Navigating these complex pitfalls and ensuring accurate, defensible reporting doesn’t have to be a burden.
Resolve DTR specialises in providing managed operations for derivative trade reporting, leveraging the powerful, ASIC-authorised Trade Repository platform of our partner KOR Financial. Our solution is designed to help businesses like yours proactively address these Blackspots, streamlining data processing, enhancing validation, to meet these challenges before they are submitted.
Ultimately giving you the transparency needed to build and maintain a robust reporting framework.
What’s Next? Strategies for Plugging the Blackspots
Identifying the pitfalls is essential, but the next step is implementing effective strategies to address them and build truly defensible reporting. The following article in this series will provide high-level strategies for tackling these Blackspots along with a link to download an actionable, step-by-step guide on how to implement these strategies within your business.
