The global financial crisis brought the over-the-counter (“OTC”) derivatives market into the limelight, and highlighted the considerable risks that OTC derivatives can pose to the financial system. The Canadian Securities Administrators (“CSA”) Derivatives Committee (“Committee”) has been closely following international regulatory proposals and legislative development, consulting with Canada’s OTC derivatives market participants and collaborating with other Canadian regulators to determine the most appropriate approach to enhancing the regulatory framework for our markets.
The regulatory projects presented below are intended to strengthen Canada’s financial markets and manage specific risks related to OTC derivatives, implement G20 commitments in a manner appropriate for our markets, harmonize regulatory oversight to the extent possible with international jurisdictions, all while avoiding causing undue harm to our markets.
The purpose of Regulation 91-507 respecting Trade Repositories and Derivatives Data Reporting is to improve transparency in the derivatives market and to ensure that recognized trade repositories operate in a manner that promotes the public interest. Access by regulators to derivatives data is essential for an effective regulatory oversight of the derivatives market. Derivatives data reported to recognized trade repositories will also support policy-making by providing regulators with information on the nature and characteristics of the Canadian derivatives market.
The purpose of Regulation 91-506 is to define the types of derivatives that will be subject to reporting requirements under Regulation 91-507. The contracts or instruments that are not required to be reported under Regulation 91-507 are contracts or instruments that have not traditionally been considered to be over-the-counter derivatives.
Mandatory Central Counterparty Clearing
Regulation 94-101 describes proposed requirements for central counterparty clearing of OTC derivatives transactions. The purpose of the Central Counterparty Clearing Rule is to improve transparency in the derivatives market to regulators and the public, and enhance the overall mitigation of risks.
Protection of Customer Collateral and Positions
The purpose of Regulation 94-102 is to ensure that customer clearing is done in a manner that protects customer collateral and positions and improves derivatives clearing agencies’ resilience to a clearing member default.
The following forms should be used by clearing intermediaries and regulated clearing houses to submit to the Authority the information required by Form 94-102F1, 94-102F2 and 94-102F3 of Regulation 94-102. Please send them to the following email address within the prescribed timeframe: EncadrementDerives@lautorite.qc.ca.
- Form 94-102F1 (xlsx - 37 KB)This link will open in a new window Customer collateral report: Direct intermediary
- Form 94-102F2 (xlsx - 30 KB)This link will open in a new window Customer collateral report: Indirect intermediary
- Form 94-102F3 (xlsx - 29 KB)This link will open in a new window Customer collateral report: Regulated clearing agency
Clearing Agency Requirements and concordant
The proposed regulation 24-102 sets out certain requirements in connection with the application process for recognition or for an exemption from recognition by the Authority as a clearing house, central securities depository or settlement system. The proposed regulation 24-102 also sets out on-going requirements for recognized clearing houses that act as, or perform the services of, a central counterparty, a central securities depository or a settlement system and for recognized central securities depositories or recognized settlement systems.
The registration regime would have three distinct registration categories: derivatives dealers, derivatives advisers and large derivative participants. A registration regime already exists in Quebec within the Derivatives Act.
The regulatory project proposes requirements to trade eligible OTC derivatives on derivative trading facilities. Such requirements would result in highly visible prices, volumes and open interests, as well as facilitating market access.
Capital and Collateral
The primary objective of the regulatory project on capital requirements and related margin requirements for non-cleared OTC derivatives is to address a variety of risks including systemic risk, counterparty risk and market risk, without creating inconsistencies with other major jurisdictions.