Canadian Securities Regulators Adopt Rules for OTC Derivatives Clearing

The new instruments will provide safeguards in the Canadian market for counterparties transacting in OTC derivatives.

The Canadian Securities Administrators (CSA), which coordinates and harmonises regulation for the Canadian capital markets, has announced two new national instruments affecting over-the-counter (OTC) derivatives trading in Canada, part of the country’s ongoing implementation of commitments to reform the global OTC derivatives markets.

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Louis Morisset, Chair of the CSA and President and CEO of the Autorité des marchés financiers, said: “These national instruments are designed to align with international standards and provide safeguards in the Canadian market for counterparties transacting in over-the-counter derivatives, while fostering a flexible and competitive market for clearing service providers.”

New Instruments

The two new instruments are as follows:

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National Instrument 94-101 Mandatory Central Counterparty Clearing of Derivatives requires certain counterparties to clear certain standardised OTC derivatives through a central counterparty clearing agency, subject to exemptions set out in the instrument.

National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions is designed to protect a local customer’s positions and collateral when clearing OTC derivatives and to improve clearing agencies’ resilience to default by a clearing intermediary. The instrument includes requirements related to the segregation and portability of customer collateral and positions as well as detailed record-keeping, reporting and disclosure requirements.

Both national instruments provide certain exemptions for foreign entities that comply with similar laws of the United States or the European Union.

The CSA collaborated with the Bank of Canada, the Office of the Superintendent of Financial Institutions, the Department of Finance Canada and market participants on the national instruments and provided the necessary approvals are obtained, NI 94-101 comes into force on 4 April, 2017 and NI 94-102 on 3 July, 2017.

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