Whew! IIROC's proposed fair pricing rule excludes non-standardized OTC derivatives
Our securities colleagues recently published a note on their blog regarding IIROC's recent proposed amendments to its Dealer Member Rules that would address the fairness of pricing and transparency of OTC market transactions. IIROC's proposals would: (i) require dealers to fairly and reasonably price securities traded in OTC markets, with an exception for primary market transactions and OTC derivatives set out in the rule; (ii) require dealers to disclose yield to maturity on trade confirmations for fixed-income securities and notations for callable and variable rate securities; and (iii) require dealers to include on trade confirmations sent to retail clients in respect of OTC transactions a statement indicating that they have earned remuneration on those transactions unless the amount of any mark-up or mark-down, commissions and other service charges is disclosed on the confirmation.
Of particular note, the proposed rule specifically excludes OTC derivatives "which are non-standardized contracts customized to the needs of a particular client and for which there is no secondary market."
