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Completing the Overhaul: A Guide to the Final Stage of ASIC’s 2024 Reporting Rules
The Nexus Test and the End of Alternative Reporting
ASIC’s overhaul of its derivative reporting regime is entering its final, critical stage.
From 20 October 2025, foreign entities that once had flexibility in their reporting will face a mandatory, two-part change that fundamentally alters their obligations. This final amendment will not only repeal the long-standing ‘alternative reporting’ mechanism, but also introduce a new, function-based ‘Nexus Derivative’ test replacing the previous “entered into in this jurisdiction” criterion to definitively determine what constitutes a reportable transaction.
Crucially for international firms, the prior rules incorporated an “exception for foreign entities” (found in Rule 2.2.1(3) of the 2024 Rules, which was carried over from earlier versions before its impending removal). This exception allowed foreign entities to be exempt from certain ASIC reporting requirements if they were already subject to “substantially equivalent” reporting obligations in one or more foreign jurisdictions.
However, that era is coming to a definitive end. The ASIC Derivative Transaction Rules (Reporting) 2024, which commenced in October 2024, included a critical, delayed-action amendment that takes effect on 20 October 2025. This change is actually a two-part shift, with the removal of alternative reporting working in tandem with a new, definitive “Nexus Derivative” test. The Nexus Test will have a profound impact on every firm that previously relied on alternative reporting, fundamentally changing how a reportable transaction is defined for foreign entities.
The Removal of Alternative Reporting and The New Nexus Test
The October 2025 rule change is the second and final stage in the two-stage rewrite that works together to define and enforce the new reporting standard. The changes that commenced in October 2024 were already substantial, and ASIC publicly acknowledged that the reforms represented a “significant overhaul” of the prior rules. To mitigate the impact on firms, ASIC deferred two key and interconnected changes to a later date: the removal of the alternative reporting provisions and the introduction of the new Nexus Test.
These two changes are being implemented through the ASIC Derivative Transaction Rules (Reporting and Clearing) Amendment Instrument 2024/416. As a result, the “alternative reporting” mechanism will be repealed by removing the foreign entity exception, and the list of foreign repositories that could be used for this purpose (RG 251.19) will also be de-prescribed.
The removal of this exemption is ASIC’s most significant step yet to broaden its extraterritorial reach and ensure comprehensive data capture for all derivatives transactions involving Australian participants or booked in Australia. This indicates a clear policy shift towards greater domestic control and oversight, even at the cost of increased compliance burden for foreign entities.
Prior to this change, the provision for alternative reporting was contained in Rule 2.2.1(3) of the ASIC Derivative Transaction Rules (Reporting) 2022 and carried over from earlier versions. This allowed a firm with Australian reporting obligations to, for example, report a trade to a U.S.-based repository under CFTC rules, and satisfy its ASIC obligation by simply “tagging” that trade with a specific identifier. This process, known as substituted compliance, eliminated the need for a separate reporting flow to an Australian-licensed TR.
As of 20 October 2025, there will be no legal mechanism to satisfy an Australian reporting obligation by reporting to a foreign TR. All reportable transactions and positions must be submitted directly to an ASIC-licensed TR.
Simultaneously, the ambiguous test of whether a derivative was “entered into in this jurisdiction” (RG 251.64) is being replaced with a clearer, function-based “Nexus Derivative” test. This new test now definitively clarifies which of a foreign entity’s transactions fall under the new, mandatory reporting requirement.
Understanding the Nexus Test
The Nexus Test focuses on the location of the personnel performing key functions related to the derivative, such as:
A critical point of clarification is that the Nexus Test is not cumulative. The rules state that if one or more of these functions are performed by a person in Australia, the transaction is in scope for reporting. This means that if a key function is carried out by an Australian-based person, the transaction is reportable, regardless of where other functions like pricing or execution are performed.
How the Nexus Test Captures Offshore Entities
The Nexus Test is designed to look beyond the legal entity’s registration and focus on where the business’s key functions are actually performed. This is a crucial detail for many CFD brokers and other foreign entities who might have entities in jurisdictions such as Vanuatu, Seychelles, or Mauritius.
A foreign entity in Vanuatu (or a similar jurisdiction) enters into a transaction with a wholesale client. The client is “papered” to this offshore entity.
However, the broker’s trading team, or a risk management desk responsible for hedging and managing the financial risk of these transactions, is based in Sydney.
Under the new rule, because the risk management function is performed by Australian-based staff, the transaction is considered a “Nexus Derivative” and must be reported directly to an ASIC-licensed Trade Repository determining the price or economic terms of the transaction.
The fact that the client’s account is papered to an offshore entity is no longer the sole determining factor. The Nexus Test ensures that any transaction with a meaningful functional connection to Australia is captured, creating a new and undeniable reporting obligation for these firms. This includes firms that do not have an Australian Financial Services License (AFSL). The new rules apply to any entity that is a “Reporting Entity” as defined in the rules, regardless of whether it holds an AFSL, so long as it is a counterparty to a “Nexus Derivative.”
ASIC’s Accelerating Trend for Oversight
The historical progression from the 2013, to 2022, and now to the 2024 Rules, coupled with the strategic removal of the safe harbour provision and the “substantially equivalent” exemption, clearly signals a deliberate and accelerating trend by ASIC. This trend is characterized by an increasing demand for enhanced oversight, a push for significantly higher data quality, and, critically, the imposition of greater direct responsibility on reporting entities.
The shift from T+1 to T+2 for open positions, while seemingly a relaxation, is understood as a practical adjustment to accommodate the vastly increased data granularity and processing required by the new technical standards. This implies a strategic trade-off: more time for reporting, but much more detailed, structured, and accurate data is expected, with the ultimate responsibility firmly on the reporting entity.
This heightened accountability applies irrespective of whether reporting functions are delegated or whether the entity operates across international borders. This is not merely a series of updates but a fundamental tightening of the regulatory net, requiring a more proactive and robust approach to compliance.
Review your Foreign Entities
The era of relying on alternative reporting is over. The October 2025 deadline, coupled with the new Nexus Test, places a clear and immediate onus on all foreign entities with a connection to the Australian market.
At Resolve DTR, we specialize in helping firms navigate complex regulatory transitions like this. Our service, built on the KOR Financial platform, provides a transparent, defensible, and efficient solution that is purpose-built to handle multi-jurisdictional reporting from a single, auditable source. This ensures your reporting is not just compliant, but robust and audit-ready.
The Nexus Test demands a detailed review of your operational footprint. Our next article will provide a practical, targeted guide for FX CFD brokers to navigate this new test and ensure a defensible compliance position.
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