First trade repository designations granted

The Ontario Securities Commission (OSC) and Quebec's Autorité des marchés financiers (AMF) today issued parallel orders designating the Chicago Mercantile Exchange Inc., DTCC Data Repository (U.S.) LLC and ICE Trade Vault, LLC as trade repositories in each province. The Manitoba Securities Commission also confirmed today that it had received corresponding applications for designation as trade repository from those three entities and that it would coordinate with the OSC and the AMF in reviewing and finalizing the designations. The orders are expected to be similar in nature to those issued by the OSC and the AMF.

As we've previously discussed, under each province's respective Rule 91-507, over-the-counter derivatives transactions involving counterparties in the province must be reported to a designated trade repository. Each of the three trade repositories applied for designation this past summer. The first phase of reporting obligations becomes effective on October 31.

OSC publishes trade reporting FAQ

The Ontario Securities Commission today published answers to frequently asked questions concerning compliance with Ontario derivatives trade reporting requirements.

Topics discussed include, among other things, the types of transactions and data that need to be reported, the treatment of hybrid instruments under the product determination rule, the time of data reporting, the treatment of dealers not registered in Ontario, deemed compliance, and the use of legal entity identifiers.

As we've previously discussed, clearing agencies and dealers must begin trade reporting on October 31, 2014, while all other OTC derivatives market participants are required to report beginning on June 30, 2015. The requirement for trade repositories to make transaction-level reports publicly is effective April 30, 2015.

Proposal for Canadian cooperative capital markets regulator released

The federal Department of Finance this week announced that the federal government, Ontario, British Columbia, Saskatchewan and New Brunswick have signed a Memorandum of Agreement setting out the terms and conditions of a Cooperative Capital Markets Regulatory System. As we discussed in July, the Finance Minister had recently stated that the new regulator could be in operation by next year.

Under the proposed cooperative system, participating provincial and territorial jurisdictions would enact uniform legislation addressing all matters in respect of the regulation of capital markets within their jurisdictions. Complementary federal legislation would address criminal matters and systemic risk in national capital markets and data collection. Federal legislation would apply across the country, regardless of whether a jurisdiction participated in the new capital markets regime. Meanwhile, a common regulator, the Capital Markets Regulatory Authority, would administer the provincial and federal legislation and regulations under authority delegated by the participating jurisdictions. 

A backgrounder setting out the key features of the cooperative system was also released, as were consultation drafts of the proposed federal Capital Markets Stability Act and the proposed provincial Capital Markets Act, as well as commentary on the governance and legislative framework. Comments are being accepted until November 7, 2014.

Summer readin' happened so fast...

Margaret Grottenthaler -

I can honestly say that every novel I read this summer was more entertaining than any of the OTC Derivatives Rules. Yes, even the Trade Reporting Rule. So here is my annual review of favourite (and not so favourite) reads, if you are looking for some distraction: 

The Goldfinch – Donna Tartt

The Marriage Plot – Jeffrey Eugenides

The Truth About the Harry Quebert Affair: A Novel – Joel Dicker

The Goldfinch is a best seller about a boy and a priceless painting that he sorta mistakenly stole that will no doubt win some of the biggie book awards this year. Nevertheless, I was initially reluctant to pick it up. I mean, actually physically pick it up, because it was over 700 pages and weighed about two pounds. But I’m glad I did make the effort. The characters are highly developed, colourful, and likeable (even the depraved ones), the prose is beautiful, and the plot is original. Many longish novels make you ask, “did this guy have an editor”, but not this one. Other than the last sort of preachy 10 pages, I was not bored. So pick it up (if you can).

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Thoughts on Finance Canada's recently issued consultation paper on bail-in capital

Peter E. Hamilton

Last month, Canada’s Department of Finance published a consultation paper outlining a proposed taxpayer protection and bank recapitalization (bail-in) regime. The implementation of such a regime is intended to avoid the “unacceptable costs to the economy” that would result were a domestic systematically important bank to fail. The proposed regime is thus intended to reduce the likelihood of failure and, in the unlikely event of such failure, ensure the restoration of a bank’s viability with minimal taxpayer exposure to loss.

Below are some of my thoughts on the proposal.

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AMF extends comment period on draft derivatives data reporting regulation AMF extends comment period on draft derivatives data reporting regulation

The period to provide comments on Quebec’s draft Regulation to amend Regulation 91-507 respecting Trade Repositories and Derivatives Data Reporting, which was initially set to expire on August 2, 2014, has been extended until August 21. As we reported last month, Quebec’s Autorité des marchés financiers (AMF) published the draft amending regulation on July 3. 

The extension is intended to allow interested parties to consider the amending regulation in light of the AMF’s Decision No. 2014-PDG-0084 – Blanket decision regarding exemption from reporting obligation under Regulation 91-507 respecting Trade Repositories and Derivatives Data Reporting (available in French only) that was rendered on July 31.

The stated purpose of the decision is to permit the use of the reporting counterparty determination methodology developed by the International Swaps and Derivatives Association, Inc. (ISDA) by exempting the counterparty that is not the reporting counterparty under that methodology from the reporting obligation under Regulation 91-507 under certain conditions. According to the AMF, the decision is intended to ensure that the implementation of Regulation 91-507 will be harmonized with Ontario and Manitoba. As previously discussed, the Ontario Securities Commission incorporated the ISDA methodology through amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting, which received Ministerial approval on August 14. The rule in Manitoba was similarly amended effective July 2.

ASC proposes rule amendments related to derivatives regulation

Last week, the Alberta Securities Commission proposed amendments to various national instruments and certain Alberta Commission Rules intended to harmonize terminology with recently adopted (but not yet proclaimed into force) changes to the province's derivatives regulatory scheme under the Securities Act. The proposal would, for example, change references to "exchange contract" to the term "derivative".

As we've previously discussed, various provinces are currently in the process of adopting legislative changes to provide their securities regulators with the authority to regulate derivatives trading. Securities regulators have responded by developing regulatory proposals intended to utilize that authority while attempting to achieve a level of national harmonization.

The ASC is accepting comments on the proposals until August 23, 2014. The changes would come into force once the amendments to Alberta's Securities Act come into force.

First applications for trade repository designation submitted

The Ontario Securities Commission yesterday published the applications submitted by the Chicago Mercantile Exchange, DTCC Data Repository and ICE Trade Vault to become designated as trade repositories in the province, as well as draft orders for each applicant. The submissions each set out how the respective applicant will comply with OSC rules.

As we've previously discussed, under the recently adopted OSC Rule 91-507, over-the-counter derivatives transactions involving Ontario counterparties must be reported to a designated trade repository. The first phase of reporting obligations become effective on October 31. The OSC is accepting comments on the applications and draft orders until August 30.

Meanwhile, Quebec’s Autorité des marchés financiers published applications filed by DTCC Data Repository and ICE Trade Vault for recognition as trade repositories in Quebec under Regulation 91-507. Consultation on the Quebec submissions ends on September 2.

CSA release list of Canadian qualifying central counterparties

Earlier this week, the Bank of Canada and securities regulators in Alberta, Quebec, B.C., Manitoba and Ontario released a list of Canadian central counterparties that can be considered qualifying central counterparties (QCCP) under the applicable Basel standard.

Specifically, the Basel standard defines a QCCP as 

…an entity that is licensed to operate as a CCP (including a license granted by way of confirming an exemption), and is permitted by the appropriate regulator/overseer to operate as such with respect to the products offered. This is subject to the provision that the CCP is based and prudentially supervised in a jurisdiction where the relevant regulator/overseer has established, and publicly indicated that it applies to the CCP on an ongoing basis, domestic rules and regulations that are consistent with the CPSS-IOSCO Principles for Financial Market Infrastructures (PFMIs).

In Canada, CDS Clearing and Depository Services Inc., Canadian Derivatives Clearing Corporation, ICE Clear Canada, Inc., and Natural Gas Exchange Inc. have been designated or recognized by at least one of the regulators above.

For more information, see CSA Multilateral Staff Notice 24-311.

CSA intend to publish national rule for clearing agencies

Alix d'Anglejan-Chatillon -

The Canadian Securities Administrators yesterday released an update on the proposed local rules designed to set out certain requirements in relation to the application process for seeking recognition as a clearing agency (or an exemption from the recognition requirement), which were published in December 2013.

As we discussed late last year, the proposed rules were published in substantially the same form by the Ontario Securities Commission, Quebec's Autorité des marchés financiers and the Manitoba Securities Commission, while the securities regulators in British Columbia, Alberta, Saskatchewan, New Brunswick and Nova Scotia announced an intention to develop a materially similar multilateral rule in the future.

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