Reporting Form ARF 722.0

ABS/RBA Derivatives

Instructions

These instructions assist completion of Reporting Form ARF 722.0 ABS/RBA Derivatives (ARF 722.0). ARF 722.0 collects information relating to the positions and transactions of authorised deposit-taking institutions (ADIs)’s SNA / BPM6 derivatives.

For the purposes of reporting under ARF 722.0, derivatives exclude employee stock options.[2]

Information reported in ARF 722.0 is required primarily for the purposes of the ABS. The information is required for various purposes, including the compilation of Australia’s National Accounts. The information may also be used by the RBA and APRA for prudential, policy and/or publication purposes.

Reporting level

ARF 722.0 must be completed for each ADI to which this Reporting Standard applies under paragraph 4.

Reporting basis and unit of measurement

These instructions specify the reporting basis and unit of measurement that applies to each item.

For reporting purposes, unless specified otherwise, data are to be entered as a positive number.

This form requests details of derivatives held by an ADI in accordance with the 2008 System of National Accounts and Balance of Payments Manual 6 concept of derivatives as a financial instrument. The reporting basis is not consistent with the Australian Accounting Standards.

Derivatives

Derivatives should be reported as gross positions i.e. derivatives contracts should not be offset against each other. Opening and closing positions on a gross basis are to be reported as being in either a positive or negative position by counterparty.

When reporting gross positions of derivatives with resident or non-resident counterparties, transactions represent the settlement of the mark to market positive or negative position. Specifically, transactions in derivatives represent the payment to initiate the contract less the payment to settle the contract within the quarter, and include associated cash flows such as interest payments, premiums and non-repayable variation margins (where they are treated as settling the derivative).

When reporting gross positions of derivatives with resident and non-resident counterparties, revaluations represents the holding gains and losses arising from changes in market values of the derivatives and other changes that are not accounted for in transactions during the quarter. Revaluations are used to reconcile opening and closing positions.

If there is a discrepancy remaining between opening and closing positions, this will be mainly due to derivatives that have changed from a gross positive mark to market value position to a gross negative mark to market value position during the quarter or vice versa (switching). Resolve this discrepancy by making the appropriate amendment to revaluations.

For non-resident derivatives, revaluations are to be reported split into market value changes, exchange rate variations and other changes.

Clearing houses and central counterparties

Reporting of net transactions and revaluations are to be reported on a net basis when the counterparty is a clearing house or a central counterparty.

Margining

If a derivative is margined it means the variation margin is netted against the derivative.

Derivatives can be partially margined due to timing differences and in situations where margin payments are only required when margin thresholds or specific criteria are met. If an agreement specifies that the variation margin is to be used as settlement, then the derivative is margined.

If the variation margin is collateralised or the derivative is not margined at all, this means the variation margin is not netted against the derivative. These derivatives should be reported as being not margined.

Futures

Reporting of net transactions and revaluations are to be reported on a net basis when the financial instrument is a future. Futures should be reported only in item 9.

Futures are exchange-traded forward contracts. They have the following unique features:

they have a value of zero for the opening and closing positions as they are fully margined (or settled) daily to square off any mark to market changes;
a reporting institution can have several contracts during a period with the exchange that are settled on a net basis.

Values

The valuation basis for all derivatives reported on the ARF 722.0 is the market value effective for the reporting period. Where denominated in foreign currency, market values in foreign currency should be converted to AUD at the spot rate effective as at the end of the reporting period. The value of the underlying financial instrument should not be included, except as it relates to the market value of the derivatives.

Report values on ARF 722.0 as whole dollars.

Standard Business Reporting (SBR)

The accounting type (i.e. credit or debit) is stated for all monetary items and represents the natural accounting balance of the item collected.

Specific instructions

Terms highlighted in bold italics are defined in ARS 701.0.

All derived fields in the form are shaded in grey and are explained in words as a mathematical expression in these instructions.

Examples included under ‘Include’ and ‘Exclude’ are examples and should not be taken as an exhaustive list of items to be included or excluded.

Section A: Derivatives with counterparties excluding clearing houses and central counterparties

1. Derivatives with gross positive mark to market values and resident counterparties excluding clearing houses and central counterparties

Item 1 collects information on the value of derivatives at the beginning and end of the reporting period with resident counterparties, excluding clearing houses and central counterparties. It also collects movements in the value of holdings of derivatives due to transactions and revaluations that occurred during the reporting period.

Futures should be excluded from this item, and reported only in item 9.

2. Derivatives with gross negative mark to market values with resident counterparties excluding clearing houses and central counterparties

Item 2 collects information on the value of derivatives at the beginning and end of the reporting period with resident counterparties, excluding clearing houses and central counterparties. It also collects movements in the value of holdings of derivatives due to transactions and revaluations that occurred during the reporting period.

Futures should be excluded from this item, and reported only in item 9.

3. Derivatives with gross positive mark to market values and non-resident counterparties excluding clearing houses and central counterparties

Item 3 collects information on the value of derivatives with a gross positive mark to market value at the beginning and end of the reporting period with non-resident counterparties, excluding clearing houses and central counterparties, by country.

Item 3 also collects movements in the value of holdings of derivatives with a gross positive mark to market value due to payments and receipts from, and due to transactions and market value changes, exchange rate variations and other changes that occurred during the reporting period.

Futures should be excluded from this item, and reported only in item 9.

4. Derivatives with gro­­­­ss negative mark to market values and non-resident counterparties excluding clearing houses and central counterparties

Item 4 collects information on the value of derivatives with a gross negative mark to market value at the beginning and end of the reporting period with non-resident counterparties, excluding clearing houses and central counterparties. It also collects movements in the value of holdings of derivatives with a gross negative mark to market value due to payments and receipts from, and due to, transactions and market value changes, exchange rate variations and other changes that occurred during the reporting period.

Futures should be excluded from this item, and reported only in item 9.

Section B: Derivatives with clearing houses and central counterparties that are margined

5. Derivatives with resident and non-resident clearing houses and central counterparties that are margined

Item 5 collects information on the value of derivatives held with resident and non-resident clearing houses and central counterparties that are margined. It collects information on the value of derivatives at the beginning and end of the reporting period, as well as movements in the value of holdings of derivatives due to net transactions and revaluations that occurred during the reporting period. In Item 5, movement information does not have to be split by side, e.g. by gross positive or gross negative.

Futures should be excluded from this item, and reported only in item 9.

Section C: Derivatives with clearing houses and central counterparties that are not margined

6. Derivatives with resident and non-resident clearing houses and central counterparties that are not margined

Item 6 collects information on the value of derivatives held with resident and non-resident clearing houses and central counterparties that are not margined. It collects information on the value of derivatives at the beginning and end of the reporting period, as well as movements in the value of holdings of derivatives due to net transactions and revaluations that occurred during the reporting period. In Item 6, movement information does not have to be split by side, e.g. by gross positive or gross negative.

Futures should be excluded from this item, and reported only in item 9.

Section D: Derivatives with all non-resident counterparties

7. Derivatives with closing gross positive mark to market values and non-resident counterparties, by currency and residual maturity (including clearing houses and central counterparties).

Item 7 collects information on the residual maturity profile by selected currencies of derivatives with a non-resident counterparty.

Residual maturity (of the closing positions for the quarter) refers to the time remaining until an asset or liability is due to be fully repaid. Positions denominated in foreign currency should be converted to Australian dollars as at the end of the reporting period, and all values should be reported in Australian dollars.

Item 7 includes non-resident clearing houses and central counterparties. Futures should be excluded from this item, and reported only in item 9.

8. Derivatives with closing gross negative mark to market values and non-resident counterparties, by currency and residual maturity (including clearing houses and central counterparties).

Item 8 collects information on the residual maturity profile by selected currencies of derivatives with a non-resident counterparty.

Residual maturity (of the closing positions for the quarter) refers to the time remaining until an asset or liability is due to be fully repaid. Positions denominated in foreign currency should be converted to Australian dollars as at the end of the reporting period, and all values should be reported in Australian dollars.

Item 8 includes non-resident clearing houses and central counterparties. Futures should be excluded from this item, and reported only in item 9.

Section E: Futures

Section E collects information on futures.

9. Futures with resident and non-resident counterparties

Item 9 collects information on movements in the value of futures due to net transactions and gross positive and gross negative revaluations.

Report separately for resident and non-resident counterparties. Resident means that the country of exchange is Australia.

Section F: Adjustments

Section F collects information on adjustments.

10. Counterparty-level adjustments

Item 10 collects information on adjustments in the value of derivatives made by the reporting entity across different counterparty types and at the book-level.

If no adjustments are included in reported values for other items, reporting of this item is not required.

Report separately for resident and non-resident counterparties. Resident counterparties should be chosen from the list provided.

Lists