Beyond relevant interests: navigating the new deemed economic interest calculation

Background

Following ASIC’s release of ASIC Corporations (Listed Entities Enhanced Beneficial Ownership) Instrument 2026/482 (Instrument) and its revised Guidance Notes¹, we now have a clearer understanding of how deemed economic interests (particularly non-physically settleable derivatives) and offsetting short positions will be calculated.

Ahead of the commencement of the new disclosure requirements from 4 December 2026, we have set out below an overview of how a person’s deemed economic interest and offsetting short position will be calculated, which will impact substantial holding and director interest disclosures and beneficial interest tracing regimes.

Refresher on ‘deemed economic interest’ disclosure

As set out in more detail here, from 4 December 2026, the amendments to Chapters 6 and 6C of the Corporations Act will take effect to require disclosure of ‘deemed economic interests’, where a person has an economic and theoretical interest in securities underlying a derivative product. This is compared to the existing disclosure requirements which require disclosure of a specific interest in identifiable securities that give rise to a ‘relevant interest’. 

These changes introduce a number of new concepts to this disclosure regime, including: 

• Holding percentage: the aggregate of a person’s ‘relevant interest’ and their ‘deemed economic interest’; and
• Derivative-based holding: comprising both: 
  • relatable derivative-based holding – any relevant interest that the person or their associate has because of a derivative; and
  • deemed economic interest – economic interest in securities underlying a derivative that the person does not have a relevant interest in, which arise by way of a deemed physically settleable or non-physically settleable derivative-based holding. 

Similar to the existing relevant interest calculations, a deemed economic interest may also arise in a number of ‘extended circumstances’, including where a person: 

• has the power to dispose of, or control the disposal of, the derivative; 
• has voting power over 20% in, or controls, a body corporate or managed investment scheme that has a deemed economic interest; or
• enters into an agreement or understanding, or is granted an enforceable right or option, in relation to the derivative. 

Under the revised regime, disclosure will be required where a person:

• begins to have, or ceases to have, a holding percentage, i.e. the aggregate of ‘relevant interest’ (the current test) plus ‘deemed economic interest’ of at least 5% in a listed entity; o
• already has a 5% holding percentage (and has therefore already lodged a substantial holding notice) and there is a movement of at least 1% in any of the following changes: 
  • their overall holding percentage;  
  • their ‘derivative-based holding’ (as described above), even if overall holding percentage changes by less than 1%; 
  • between one type of derivative exposure to another, even if there is no change to overall holding percentage (see below for further details); or
  • their offsetting short position (as described below).

How do you calculate a deemed economic interest? 

(a)    Physically settleable derivatives

For physically settleable derivatives (derivatives where one party has a right to purchase or take delivery of the actual underlying securities, including derivatives with an option to settle physically as well as an option to cash settle), a person’s deemed economic interest is relatively straightforward, being: 

• the number of underlying securities which are deliverable at a physical settlement of the derivative); minus 
• any relevant securities that the person already has a relevant interest in (ie. their ‘relatable derivative-based holding’), to avoid double counting.

(b)    Non-physically settleable derivatives 

For non-physically settleable derivatives (being derivatives where one party is only entitled to receive a payment linked to the value of the underlying securities, including cash-settled derivatives), the approach depends on whether the derivative refers to a specific entity or a basket or index of securities.  

The general rule is that a person’s deemed economic interest is the number of underlying securities equal to the full notional amount of those securities underlying that derivative.

Where the derivative relates to a basket or index of securities, rather than a specific class of securities, a person’s deemed economic interest will be calculated based on the weight of the relevant securities by value in the basket or index as a proportion of the total value of all securities in the basket or index. 

By way of example: 

• If the value of the relevant Company’s securities in an index are $100, and the total value of the securities in the index are $1,000, then the weighting of the relevant Company is 10%. 
• Where the person has entered into a non-physically settleable derivative related to the index with a notional exposure of $1 million, their economic exposure in the relevant Company is equal to 10% of $1 million, or $100,000. 
• If the relevant Company’s share price is $20, then the person would have a deemed economic interest in 5,000 of the Company’s shares. 
• The deemed economic interest percentage would then be the number of Company A shares in which the person has a deemed economic interest divided by the total number of Company A shares on issue (e.g. if the Company has 250,000 shares on issue, then the person will have a deemed economic interest percentage of 2%).

(c)    Deemed nil interest for certain basket / index interests 

ASIC recognises that there are certain situations where the size of a person’s deemed economic interest is not sufficiently large (relative to the number of securities in the relevant class or the underlying basket or index) or that the person does not otherwise have a sufficient level of influence over those securities or the basket or index. In those circumstances, ASIC relieves market participants from disclosure by deeming their economic interest to be nil. This is consistent with the purpose of the revised disclosure regime being greater transparency of a person’s influence or exposure to securities of a listed entity. 

These situations where a deemed economic interest will be nil are where:

• (de minimis number of securities) the relevant securities in which a person has a deemed economic interest represent less than 5% of the total securities in that class on issue in the relevant Company and less than 30% (by value) of the total value of all securities in the relevant basket or index.

Applying this to the example above: 

• 5% of entity condition: since the person has a deemed economic interest percentage in the relevant Company of 2% of total shares in the Company, the first condition (less than 5% of relevant securities) would be satisfied; and
• 30% of index condition: since the relevant Company shares in the index represent 10% of the total value of the index, the second condition (less than 30% of index value) would be satisfied. 
  In the case of this worked example, a person would therefore be treated as having a nil deemed economic interest in the relevant Company securities (that it would otherwise have due to the derivative over the index).

In the case of this worked example, a person would therefore be treated as having a nil deemed economic interest in the relevant Company securities (that it would otherwise have due to the derivative over the index).

• (insufficient influence) either: 
  •  the index is compiled and calculated by major index providers (including S&P Dow Jones, NASDAQ and FTSE) and the constituent securities of the index (and their weightings) are determined solely in accordance with a public methodology of the index provider and are quoted on a financial market; or
  • the index or basket is tracked by at least one publicly traded exchange traded fund which operates on a licensed financial market. 

These exceptions will not apply where a person or their associates do in fact influence (or are capable of influencing) the composition of the basket or index.  

In addition, consistent with the heightened disclosure obligations in the context of a takeover bid or scheme of arrangement, none of these deemed nil interest exceptions apply if the person or associate is a bidder under a takeover bid or scheme of arrangement in relation to the relevant securities. 

Calculating an offsetting short position

In addition, a person may also have to disclose any ‘offsetting short positions’ that they hold to reduce their economic exposure to the relevant securities. 

A person will have an ‘offsetting short position’ if they are party to a derivative under which the consideration payable is determined by, derived from or varies by reference to, the value of the underlying securities and the person might benefit if the value of the underlying securities decreases.

ASIC considers that disclosure of a holding percentage without disclosure of an offsetting short position may have the effect of misleading other market participants about the person’s position in respect of the relevant securities. 

While an offsetting short position is effectively a hedge against the economic exposure to securities, the position needs to be separately disclosed. ASIC has specifically stated that an offsetting short position is not to be ‘netted off’ against a deemed economic interest or reported on a portfolio basis. 

A person’s offsetting short position is calculated in the same way as a deemed economic interest (i.e. the basic rule is that the offsetting short position is the full notional amount of securities of that class underlying the derivative). Similarly, in the case of a derivative over a basket or index, the ‘full notional amount’ is calculated based on the weight of the relevant securities as a proportion of the total value of the securities in that basket or index unless any of the same exceptions above would mean that a person’s offsetting short position is deemed to be nil. 

Substantial holding notices 

As our colleagues noted, from 4 December 2026, there will be a new consolidated substantial holding form where a person will need to identify the purpose of the form (i.e. initial, change or ceasing to become a substantial holder), although there will also remain three separate forms for the transition period until 4 June 2027. A copy of these forms is available here. 

In addition to the information which is already required to be disclosed under the substantial holding regime, the new regime will require disclosure of the following additional information for a person and their associates:

• their deemed economic interest and the aggregate of their relevant interest and their deemed economic interest;
• if any, their relatable derivative-based holding, and physically and non-physically settleable derivative-based holding, as a percentage of the total number of securities; and
• details of any offsetting short-positions of the holder. 

As noted above, the triggers requiring an update to an existing substantial holding notice have also been broadened in light of the need to disclose these additional derivative related interests. 

ASIC’s approach

ASIC has specifically acknowledged that market participants may not have perfect information, particularly where they are calculating their deemed economic interest or offsetting short position under an index or basket. 

Relevantly, the calculation needs to be based on information which is reasonably available to the person at the time and applying reasonable assumptions consistent with market practice and the nature of the relevant derivative. In the case of a basket or index, ASIC notes that this may include using the most recently published information by the index provider or other relevant source to determine composition, weighting or valuation.

Conclusion

The changes introduced by this regime are highly technical and likely to involve significant complexity for market participants to implement. While ASIC has issued helpful guidance, we expect that it will be challenging for market participants to accurately implement this. 

From experience, we recommend that market participants familiarise themselves with the new concepts and amended substantial holding forms, and start considering the disclosure which will be required under this new regime in advance to avoid any issues when the new regime takes effect later this year.