Margaret Grottenthaler -
Last week, the International Swaps and Derivatives Association released a letter it submitted to the Ontario government in support of the Ontario Bar Association's proposal to provide an automatic first priority ranking to financial institutions that have a security interest in cash in financial accounts perfected by control. As I noted in my post of February 14, the OBA proposal would give secured parties holding cash collateral the same degree of legal certainty as to their priority against other creditors that the Securities Transfer Act, 2006 provides to holders of securities as collateral.
In its letter, the ISDA stated that there is no legal assurance of priority in a registration regime. According to the ISDA, however, the certainty and predictability resulting from the proposed changes would "significantly contribute to financial stability in the derivatives markets" in which market participants take part and "enhance their ability to compete in these markets on a more cost-efficient basis." Ontario's Ministry of Consumer Services is accepting input on the issue until May 17.