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The Canadian Securities Administrators (CSA) recently issued Notice 24-307 Exemption from Transitional Rule: Extension of Transitional Phase-In Period in National Instrument 24-101 Institutional Trade Matching and Settlement. This notice extends the transitional phase-in period, contained in National Instrument 24-101 Institutional Trade Matching and Settlement, for matching DAP/RAP trades by midnight on trade date (T) by an additional 24 months to July 1, 2010.
In making its decision, the CSA cited concerns raised by the Canadian Capital Markets Association (CCMA) as well as industry working groups, which are borne out by trade matching statistics compiled by CDS Clearing and Depository Services Inc. (CDS), about the overall readiness of Canadian capital markets participants to comply with the requirement to match trades by midnight on T. CCMA contends that major new system and process enhancements will be required by participants in order for the securities industry to meet the improved matching rates. Unless more time is provided for the transitional phase-in period, the efficiency gains and cost benefits of moving to T would be negatively impacted.
In addition to deferring the current July 1, 2008 effective date in NI 24-101 for the midnight on T matching requirement to July 1, 2010, the CSA have also extended the transitional phase-in period in NI 24-101 for exception reporting by 24 months. The new transitional provisions for midnight on T matching and exception reporting requirements of NI 24-101 that apply to registered dealers and advisers are:
|
TIME PERIOD |
PERCENTAGE OF TRADES MATCHED |
|
October 1, 2007 - December 31, 2007 |
By 12:00 p.m. on T+1: 80 |
|
January 1, 2008 – June 30, 2010 |
By 12:00 p.m. on T+1: 90 |
|
July 1, 2010 – December 31, 2010 |
By 11:59 p.m. on T: 70 |
|
January 1, 2011 - June 30, 2011 |
By 11:59 p.m. on T: 80 |
|
July 1, 2011 – December 31, 2011 |
By 11:59 p.m. on T: 90 |
|
January 1, 2012 and following |
By 11:59 p.m. on T: 95 |
As is currently required, if the specified percentage is not met in any quarter, registrants must file with the applicable regulators an exception report, using the form specified in NI 24-101, within 45 days of each applicable calendar quarter-end. If an exception report must be filed, the registrant must describe the circumstances or underlying causes that resulted in or contributed to the failure to achieve the matching targets, along with the steps it will take to resolve any future delays in the trade reporting and matching process.
The extension is being effected as of June 30, 2008 through blanket orders in all jurisdictions except Ontario, which has adopted local OSC Rule 24-502.
For more information about NI 24-101, please see BLG's Investment Management Advisory October 1, 2007 Deadline for Institutional Trade-Matching by Canadian Capital Markets Participants September 2007.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.