Canada: CSA Consultation Paper 91-402 - Derivatives: Trade Repositories

The Canadian Securities Administrators (CSA) have published the first of eight consultation papers on OTC derivatives reform and, if the industry comment letters on this first paper are anything to judge by, there is a lot of work left to be done by Canadian regulatory authorities to implement Canada's G-20 commitments on Over-the-Counter Derivatives Regulation. Consultation Paper 91-402 considers the subject of reporting of OTC derivatives trades to trade repositories.

At the G-20 meeting in Pittsburgh in September 2009, Canada committed to require that all OTC derivatives contracts be reported to trade repositories. On June 23, 2011, the CSA Derivatives Committee published Consultation Paper 91-402 – Derivatives: Trade Repositories. It set out a framework for proposed rules for the reporting of OTC derivatives transactions to, and the operation of, trade repositories and sought public comment on a number of issues relating to OTC derivatives transaction reporting and the regulation of trade repositories, including whether a "made-in-Canada" solution is necessary or appropriate. The public comment period closed on September 12, 2011. The CSA received twenty one comment letters from interested parties, many of which were quite lengthy and detailed and raised many questions and considerations for the regulators. The CSA will have much to think about in taking this proposal to the next stage.

The CSA Derivatives Committee identified trade repositories, which are centralized facilities for the collection of OTC derivatives data, and the related availability and transparency of transaction and aggregate market data for market and prudential regulators, central banks and the public as one of the most important components of OTC derivatives regulatory reform.

There are currently no requirements for Canadian market participants to report their OTC derivative transactions and positions. Therefore, Canadian regulators and the Bank of Canada do not have formal access to data regarding the size and composition of the Canadian OTC derivatives market, the activities of Canadian market participants and "Canadian referenced derivatives" entered into by foreign participants.

Trade Repository Requirements

The CSA Derivatives Committee recommends that trade repositories operating in Canada should:

  • be required to meet internationally accepted governance and operational standards recommended by the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) including standards relating to legal framework, governance, market transparency and data availability, operational reliability, access and participation, safeguarding of data, timely recordkeeping and communication procedures and standards,
  • have boards of directors with appropriate independent representation,
  • have a chief compliance officer and robust operational risk management capabilities,
  • provide fair and open access to market participants,
  • be required to accept all trades for each asset class for which they accept trade data,
  • safeguard confidential data, and
  • prevent any data use that could represent a conflict of interest.

The CSA Derivatives Committee also recommends that Canadian provincial securities and derivatives laws should be amended to include approved trade repositories in the definition of market participant.

What is not clear from the recommendations is whether a trade repository, whether domestic or foreign, would have to become registered or recognized in each province in which it accepts trade data from market participants. Hopefully, registration or recognition in (and regulation by) thirteen different provincial and territorial securities regulators can be avoided, especially for non-Canadian trade repositories.

The comment letter from the Canadian Market Infrastructure Committee (CMIC) submitted that the federal authority over systemic risk and banking means that the Bank of Canada should be at the centre of trade repository regulation (i.e., not the provincial securities regulators) within harmonized federal and provincial approval processes. The framework should be designed to provide federal authorities with the appropriate data for their systemic risk purposes and provincial securities regulators with the appropriate data for their market conduct purposes. The legislative approach that should be followed is the developent by federal authorities of federal legislation that would focus on the Bank of Canada's trade repository requirements for systemic risk monitoring purposes, albeit in consultation with both provincial securities regulators and industry participants to ensure that the scheme of the federal legislation is consistent with the market conduct responsibilities of provincial securities regulators.

A Made-in-Canada Solution?

The CSA Derivatives Committee recommends studying whether a "made-in-Canada" solution is necessary and the requirements for foreign-based trade repositories. While there are efficiency arguments for a single global trade repository, at least for each asset class, there are of course reasons why Canadian regulators (federal and provincial) may prefer a local trade repository, including the possibility that foreign trade repositories may not develop systems that accept trade data from Canadian market participants for all types of OTC derivatives entered into domestically by Canadian counterparties or that Canadian regulators may not have sufficient access to foreign trade repositories holding trade data in respect of trades by Canadian counterparties or Canadian referenced derivatives or that such access might be interrupted in the future.

What is clear from the comment letters is that if Canada does pursue a domestic trade repository, the format and parameters of the data that are required must be the same as used by other trade repositories globally so that trade data feeds between market participants and trade repositories work efficiently.

OTC Derivatives Transactions Reporting Requirements

The consultation paper recommends that provincial market regulators mandate the reporting of all OTC derivatives transactions, both cleared and non-cleared, to an approved trade repository. This mandatory reporting includes the reporting of pre-existing OTC derivatives which should be reported within 180 days from the effective date of the new rules except for existing transactions which terminate or expire within one year of the effective date of the new rules. The CSA heard from industry in the comment letters that 180 days from the effective date of the new rules for the reporting of pre-existing OTC derivatives may be too short a period. Not only may it not be practical from an operational perspective for many market participants to meet that timeline, but data does not necessarily exist within organizations in the format that it would be required to be reported.

Who Must Report OTC Derivatives Transactions

The consultation paper proposes that one counterparty to each OTC derivative transaction should be required to report the transaction and any related post execution events to an approved trade repository. However, counterparties should be able to delegate reporting to a third-party service provider including a central counterparty clearing house. Financial intermediaries should bear the reporting onus in transactions with end users. Transaction counterparties should be permitted to elect the reporting party for transactions between two financial intermediaries or two end users. A foreign counterparty may assume reporting obligations provided that the transaction is reported to a trade repository approved in Canada.

OTC Derivatives Transaction Information Required to be Reported

The consultation paper recommends that the reported data include not only the principal economic terms, but also the full executed legal agreements entered into between the counterparties and should be reported in accordance with international standards for data reporting which would include unique identifiers for legal entities, transactions and product types. In addition, "continuation data" should be reported throughout the life of an OTC derivative transaction. Many comment letters state that the requirement to submit all legal documentation to a trade repository is too onerous for the institutions and in any event would not provide regulators with any additional useful information beyond the principal economic terms of the transaction. Also, the full legal documentation for some trades is often not executed until long after the trade date and, in the case of many bespoke trades, the full legal documentation can be voluminous. Also, not all parties use FpML confirmations so reporting the transaction documentation electronically is not always feasible.

Timing of Reporting

The CSA Derivatives Committee proposes that transaction reporting to trade repositories should be completed in real time once feasible for Canadian market participants and within one business day until real time reporting is implemented. Once real time reporting is implemented, large trades meeting a to-be-determined block trade threshold should be subject to a delayed reporting requirement in order to preserve the anonymity of market participants and ensure that there is no detrimental impact on market liquidity or function.

This real time reporting requirement engendered many comments, as it has in other jurisdictions. The need for real time reporting into a database that is not itself a market is questioned. While timely information is necessary, reporting time frames should depend on the level of data required to be reported, the complexity of the transaction and the availability of the required technology systems on a global basis.

The question of a block trade threshold is also addressed in many of the comment letters. For example, the International Swaps and Derivatives Association (ISDA) recommends that the analysis to determine appropriate minimum block trade threshold levels should be undertaken separately for the Canadian OTC derivatives market, different asset classes within the market and different products within each asset class as the appropriate threshold levels for different asset classes and products within assets classes in the Canadian market will be different. A uniform block trade threshold is too simplistic and would be damaging to liquidity. Also, all block trade thresholds should be reviewed periodically in light of current market conditions and there should be a mechanism for the immediate reassessment of thresholds during periods of market stress.

An appropriate publication delay for block trades should reflect the time it takes to hedge the exposure without unduly impacting the market and in light of liquidity in the particular market. Liquidity in many Canadian markets may be quite different from liquidity in some foreign markets. Many large Canadian market participants comment that the publication of block trade data should be delayed for at least a quarter as the public reporting of block trade data runs the risk of inadvertent disclosure of confidential information, potentially enables reverse-engineering strategies and runs the risk that the small number of relatively large participants in the Canadian markets would have the ability to figure out the individual positions of one another.

Access to Confidential Trade Repository Information

The consultation paper also raises a number of concerns relating to access to confidential information, including whether it is necessary for provincial regulators to enact legislation that expressly permits the disclosure of confidential information to and by trade repositories, that amendments to legislation should be enacted to ensure that confidential trade repository data is not made publicly available pursuant to public disclosure laws and that Canadian regulators and the central bank should establish cooperation agreements with foreign jurisdictions that have equivalent legal and supervisory frameworks to facilitate cross border access to trade repository data.

Availability of Information to Public

Another controversial proposal is that trade repositories should make available to the public aggregate data, including information on positions, transaction volumes and average prices. Anonymous post-trade transaction level data should also be made public provided that it would not be detrimental to market liquidity or function. The comment letters urge that the release of data to the public be studied thoroughly, because the publication of such data may compromise the positions of counterparties depending upon the size of the market and the level of aggregation of the data.

Inter-Affiliate Transactions and End User Exemptions

The consultation paper does not deal with the question of inter-affiliate trades. Should inter-affiliate trades be excluded from the reporting requirement (and possibly other aspects of OTC derivatives regulatory reform)? It has been argued that transactions between affiliates merely represent transfers of risk within a corporate group and should not be subject to the same reporting requirements as inter-affiliate transaction data will not provide any valuable information to regulators from either a systemic risk or market conduct perspective. Reporting of inter-affiliate trades will also increase the costs and burden for corporate groups that choose to consolidate their hedging activities in a single entity.

Nor does the consultation paper contemplate exemptions from the reporting requirements for hedging end users. The CSA will have to consider whether such exemptions should be made available for end users that are hedging risks (particularly in the commodities and energy markets) where they do not pose any systemic risk. Perhaps exemptions of this nature will be discussed by the CSA Derivatives Committee more broadly in its anticipated Consultation Paper 91-405 - Exemptions (Derivatives).

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.