Canada: Letter In Response To Request For Comments From The Alberta Securities Commission, November 16, 2012

Last Updated: November 27 2012
Article by Priscilla P. Bunke and Courtney R. Burton

DELIVERED VIA ELECTRONIC MAIL

Alberta Securities Commission

Suite 600, 250 - 5th Street SW

Calgary, Alberta T2P 0R4

Fax: (403) 297-4113

E-mail: shane.altbaum@asc.ca

Attention: Shane Altbaum, Legal Counsel, Market Regulation

Dear Sir:

RE: Comment Letter to Notice Of Republication And Request For Comment Regarding Regulation Of Over-The-Counter Derivatives Transactions

We appreciate the opportunity to comment on the Alberta Securities Commission's (the "Commission") Notice of Republication and Request for Comment regarding proposed amendments to Alberta's regulation of Over-the-Counter Derivatives Transactions1 issued on October 15, 2012, by the Commission requesting for comment. The Commission is specifically proposing amendments to Alberta legislation under the Securities Act, R.S.A. 2000, and c S-4 (the "Act") required to:

...enable the Commission to comply with the G20 Commitments in the interim while the Commission and the other CSA jurisdictions continue work to modernize the regulatory framework governing derivatives trades in Canada.

As counsel to major Alberta energy market participants that include energy producers, energy trading and marketing organizations who enter into bilateral over-the-counter ("OTC") derivatives that avail themselves of the exemption provided by the Commission in Blanket Order 91-503, global CCPs, other financial market infrastructures and other market participants that include global financial institutions and derivatives market intermediaries, Fraser Milner Casgrain LLP ("FMC Law") has had extensive involvement with the OTC derivatives market, and its regulation, in Alberta. We believe the Commission should endeavor to assist Canada in meeting its international commitments and commitments to Canada as a whole in modernizing the regulatory framework governing derivatives transactions in Canada in a way that would not stifle the growth of Alberta energy derivatives markets that is already facing challenges under the U.S. Dodd Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") because of the continental cross-border nature of energy trading.

In this letter, we comment from a legal, as opposed to a business, standpoint on the proposed amendments in the Notice of Republication and Request for Comment. This letter reflects the general comments of certain members of FMC Law's energy transactions and derivatives practice groups and does not necessarily reflect the overall views of our firm or our clients.

I. BACKGROUND

A. International

In September 2009 the G20 leaders on behalf of their nations, including Canada, met in Pittsburgh to examine the status of the financial market infrastructures that had failed or undergone significant stress in the years prior. Following this meeting, the G20 nations issued a communiqué and committed, in part, to the following:2

All standardized OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by end2012 at the latest. OTC derivative contracts should be reported to trade repositories. Noncentrally cleared contracts should be subject to higher capital requirements.

Therefore, because of the commitments made by the G20 nations in 2009 (the "G20 Commitments") Canada now has obligations to establish a new regulatory regime related to trading OTC derivatives in Canada. Since December 2009, the Bank of Canada, the Canadian Securities Administrators ("CSA"), the Office of the Superintendent of Financial Institutions and the Canadian Department of Finance have coordinated efforts to align Canada's OTC derivatives markets with the G20 Commitments.

B. Regulation of Derivatives in Alberta

1. Authority to Make Regulations and Rules

By way of background, the Lieutenant Governor in Council in Alberta has the authority to make regulations under the Act pursuant to section 2233 and the Commission has the authority under section 2244 of the Act to make rules,5 including, the Commission Rules. The Commission uses rules to administer the requirements of Alberta securities laws.6 While any amendment to the Act requires a legislative amendment, the Commission has the authority under section 224 to make and amend rules without a legislative amendment.

2. Authority to Issue Blanket Orders

The Commission has the authority under section 2137 of the Act to exempt certain persons from Alberta securities laws. The Commission relies on Section 213 of the Act to issue blanket orders. We note that, despite the fact that the Commission articulates in its Notice of Republication and Request for Comment that it proposes to "enact" Blanket Order 91-505, there is no legislative enactment necessary to bring a blanket order of this nature into force. We believe that since the Commission is given this authority under section 213 of the Act, it would therefore be more accurate to say that the Commission proposes to "issue" Blanket Order 91-505.

3. Definition of OTC Derivative

The only existing definition of OTC derivative, in Alberta securities laws, is currently contained in Blanket Order 91-503, which provides that an OTC derivative:

...means an agreement in respect of an option, forward contract, contract for differences or other instrument of a type commonly considered to be a derivative, or any combination of any of them, if:

(i) the material economic terms of the agreement have been customized to the purposes of the parties to the agreement and the agreement is not part of a fungible class of agreements that are standardized as to their material economic terms;

(ii) the creditworthiness of a party to the agreement would be a material consideration in entering into or determining the terms of the agreement,

(iii) the agreement is not entered into or traded on or through an organized market, stock exchange or futures exchange; and

(iv) the agreement, if cleared, is cleared through an acceptable clearing corporation.

In addition to the defined term of OTC derivative in Blanket Order 91-503, the definition of "security"8 in the Act includes futures contracts9 and options10 that are not exchange contracts.11 As a result, certain parties and their clients who contract with one another for such futures contracts and options (including certain OTC derivatives) are subject to registration and prospectus requirements, unless exempted.

II. SPECIFIC COMMENTS

The Commission has indicated that "[t]he Proposed Amendments will codify the Commission's legal authority under the Act to comply with the G20 Commitments on regulating [OTC] derivatives." To that end, the Commission is proposing to regulate OTC derivatives transactions under the Act by implementing the following proposed amendments:

A. revisions to section 8(2) of the Alberta Securities Commission Rules (General) (the "Commission Rules);

B. revocation of Blanket Order 91-503 Over-the-Counter Derivatives and Commodities Contracts ("Blanket Order 91-503") and replacement of Blanket Order 91-503 with Blanket Order 91-505 Over-the-Counter Derivatives Transactions ("Blanket Order 91- 505");

(collectively, the "Proposed Amendments").

We have the below comments related to the Proposed Amendments as they are contained in the Notice of Republication and Request for Comment.

A. Section 8(2) of the Alberta Securities Commission Rules

The Commission, in its Notice of Republication and Request for Comment, indicates that:

[t]he proposed amendments to section 8(2) of the [Commission Rules] will provide the Executive Director with power to require registrants to comply with the G20 Commitments respecting trading and clearing of OTC derivatives trades.

There are two portions of this quotation which market participants would find confusing and we believe warrant further analysis and comment: (1) the requirement for "registrants" to comply with the G20 Commitments respecting trading and clearing of OTC derivative trades; and (2) the term "registrant" itself.

1. "Registrants" to Comply with the G20 Commitments

First, the Commission indicates that, through the Proposed Amendments, the Executive Director is given the power to require registrants to comply with the G20 Commitments. There is nothing in the communiqué from the G20 leaders' summit in Pittsburgh in September 2009 that indicates that the G20 commitments were made by market participants. It was the national authorities and international bodies, with the Financial Stability Board as a central locus of coordination, which have further advanced a reform program of OTC derivatives markets. The onus is on Canada to work with other national authorities and international bodies to meet its G20 Commitments. Therefore, we would humbly suggest that the quotation should, instead indicate that the Commission, in assisting Canada in meeting its G20 Commitments, proposes to regulate certain market participants who engage in OTC Derivatives trades.

We would recommend that the Commission clarify, how Alberta market participants' subject to the Commission's regulation in Alberta fit under the Commission's goal in regulating the OTC derivatives market in Alberta to assist Canada in meeting its international obligations, and not to require market participants to meet the G20 Commitments.

2. Definition of "Registrant"

Second, the Act defines the term "registrant" as a person or company registered or required to be registered under the Act or the regulations.12 We do not see any existing language under current Alberta securities laws which, provides that Alberta OTC Derivatives market participants must register (i.e. become registrants) because they are engaged in trades of OTC derivatives. Should the Commission wish to mandate registration of market participants engaged in OTC derivatives trading, a specific requirement to do so should be clearly articulated and communicated to the relevant market participants as most Alberta energy market participants are already in the process of determining if they are subject to the U.S. Commodities Futures Trading Commission's ("CFTC") regulations as a regulated entity who enter into swaps with so called "US persons" under the CFTC's rules implementing the Dodd-Frank Act.

Section 8(2) of the Commission Rules currently provides the Executive Director with the power to require any class of registrants, as a condition of registration, to report all trades in the OTC market to an agency.

Specifically, the section 8(2) indicates:

The Executive Director may require any class of registrants, as a condition of registration:

(a) to report all trades in the over-the-counter market to an agency in accordance with the requirements of the agency13, and

(b) to pay the agency fees of the agency that are approved by the Commission.

The Commission Rules do not indicate that market participants involved in OTC derivatives trades must be registered.

The Commission, in the Notice of Republication and Request for Comment, suggests section 8(2) (as it is currently drafted) "already provides the Executive Director with power to require trade reporting of OTC derivatives transactions." We find it difficult to see how Alberta market participants would interpret this section in the same way it has been interpreted in the Notice of Republication and Request for Comment. Although section 8(2) of the Commission Rules gives the Executive Director the right to impose conditions on registration, upon a strict reading, it does currently mandate registration of market participants engaged in the trading of OTC derivatives.

As the Commission is aware, the proposed amendments to section 8(2)(a) of the Rules are shown below in bold/underlined text, as follows:

The Executive Director may require any class of registrants, as a condition of registration:

(a) to report all trades in the over-the-counter market to an agency in accordance with the requirements of the agency recognized by the Commission, and

(b) to pay the agency fees of the agency that are approved by the Commission,

(c) to trade futures contracts, or classes of futures contracts, on or through the facilities of an exchange recognized by the Commission or exempted by the Commission from the requirement to be recognized as an exchange,

(d) to clear trades in futures contracts, or classes of futures contracts, on or through the facilities of a clearing agency recognized by the Commission, and

(e) to maintain at least a prescribed minimum excess working capital in respect of trades in futures contracts, or classes of futures contracts, not cleared on or through the facilities of a clearing agency recognized by the Commission.

The Notice of Republication and Request for Comment suggests that these amendments "will provide the Executive Director with power to require registrants to comply with the G20 Commitments respecting trading and clearing of OTC derivatives trades." We fail to see how these amendments mandate registration of market participants who engage in OTC derivative trades. Again, based on a strict interpretation of section 8(2), as amended by the Proposed Amendments, we would suggest that it could be concluded that the Commission has the power to place conditions on registration only; not require registration.

We would suggest that if the Commission requires registration of market participants who are engaged in the trade of OTC derivatives, it does so explicitly by enacting a legislated registration requirement.

We would also suggest that the Commission use caution when referring to the OTC derivatives market participants that it proposes to register as "registrants" under any new legislation or rules. The term "registrant" is used in other pieces of securities legislation, for example, National Instrument 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations ("NI 31-103"). NI 31-103 uses the term "registrant" liberally throughout and NI 31- 103 deals only with securities regulation; an area discretely different from the regulation of OTC derivatives.

Finally, should the Commission require registration of OTC derivatives market participants, we would suggest that it would be prudent to communicate this requirement clearly to such market participants. Forms of communication could include press releases, direct communication by email or letter and posting the requirement on the ASC website under its Regulatory Reform of Over-the-Counter (OTC) Derivatives Markets webpage. We note that no such notice or publication of the Notice of Republication and Request for Comments was given to, or made easily available, to OTC derivatives market participants.

B. Additional Powers contained in the amendments to Section 8(2) of the Commission Rules

It appears that the Commission's intent in proposing these amendments is to give the Commission additional powers which it sees as necessary in order to assist Canada in meeting its various G20 Commitments. Again, the section only contemplates the imposition of conditions related to registration, but does not mandate registration itself. The Proposed Amendments seem to suggest the Executive Director will have the authority to impose additional conditions on registration if mandated, as follows:

  • the authority to require that market participants report all trades in OTC derivatives to trade repositories14 which must be recognized by the Commission;
  • the authority to require market participants to trade their OTC derivatives onexchange unless they are specifically exempted from such requirement;
  • the authority to recognize clearing agencies; and
  • the authority to prescribe margin thresholds for those OTC derivatives that are not cleared by a recognized clearing agency.

The above list is only our assumption based on the Proposed Amendments. We would recommend that the Commission make its intentions clear to OTC derivatives market participants as to its objectives with respect to the amendments to Section 8(2) of the Commission Rules. For example, is it indeed the case that the Commission will (in the future) be recognizing trade repositories? Will the Commission recognize clearing agencies? If yes, what sort of requirements will trade repositories and clearing agencies need to meet to be registered? When will these types of regulations be implemented? How will OTC derivatives market participants access a recognized listing of trade repositories and clearing agencies to ensure they are not off-side their obligations under Section 8(2) of the Commission Rules or any other legislation that the Commission may enact? (We note that certain sections of the Securities Act that would give the Commission the authority to mandate the recognition of clearing agencies though amended, is yet to be proclaimed.)

C. Proposed revocation of Blanket Order 91-503 Over-the-Counter Derivatives and Commodities Contracts and issuance of Blanket Order 91-505 Over-the-Counter Derivatives Transactions

1. Background the Regulatory Regime

The Commission's regulatory model respecting derivatives, prior to 1999, was patterned after the typical regulation of securities in most Canadian jurisdictions. Securities regulators oversee exchange markets that have self-regulatory responsibilities in some cases. Exchanges are required to set out and enforce rules to protect customers, prevent fraud and manipulation, maintain orderly and fair markets, and so on. The regulators have the power to modify the exchanges' rules and issue rules and regulations of their own. Common to securities laws as found in the Act, is a presumption that certain forms of trading, including where public investors are involved, should take place on a regulated exchange.

It is assumed that this presumption led to the inclusion of OTC derivatives transactions within the scope of the Commission's regulation on June 1, 1999. This was done by amending the Act as follows: (i) the amendment of the definition of a futures contract; and (ii) the expansion of the definition of "trade" 15 to include entering into a futures contract or an option that is an exchange contract.

As a result, the Act regulated trading and advising in both securities and exchange contracts. The definition of a security under the Act specifically excludes an exchange contract. A futures contract or option that is not traded on an exchange under standardized terms is not an exchange contract and is therefore included in the definition of "security". As a result of this amendment to the Act, OTC derivatives (which are customized and do not includes standardized terms) became, and are still subject to, all of the provisions in the Act applicable to securities but are not subject to the provisions that only apply to exchange contracts.

Following these amendments, it is our understanding that many market participants questioned their ability to carry out OTC derivatives transactions in the derivatives market. In response to these concerns, the Commission conducted consultations with participants and their advisers for a week, and thereafter issued Blanket Order 91-502 Over-the-Counter Derivatives Transactions & Commodity Contracts ("Blanket Order 91-502"). Blanket Order 91-502, retroactive to June 1, 1999, essentially exempted all OTC derivatives and commodity transactions between entities considered to be a "qualified party"16 ("Qualified Party").

Blanket Order 91-502 has since been revoked and replaced with Blanket Order 91-503. The revocation and replacement occurred as a result of complaints by market participants that Blanket Order 91-502 was obsolete, as it did not permit transactions which involved clearing agencies acting as central counterparties. The involvement of clearing agencies was becoming increasingly common in such transactions, and resulted from attempts to mitigate the risks undertaken by the counterparties to an OTC transaction by transferring the risks to a central counterparty (i.e. the clearing agency). Blanket Order 91-503, which is currently in effect and which the Commission is proposing to revoke, recognized this development respecting the clearing of OTC derivatives transactions.

Blanket Order 91-503 provides that OTC derivatives transaction and commodity contracts are not to be deemed to be futures contracts pursuant to Section 10 of the Act. Blanket Order 91- 503 reads, in part, as follows:

...the following OTC derivatives transactions and commodity contracts are not futures contracts as defined in subsection 1(x) of the Act:

(i) an OTC derivatives transaction of which the underlying interest consists of an interest rate, Canadian or foreign currency, a foreign exchange rate, a commodity, a security, an index, a benchmark, or other variable, or another OTC derivative, or some relationship between, or combination of, one or more of any of them;

(ii) a commodity contract; or

(iii) a contract for the sale or exchange of a commodity that provides for the physical delivery only of the subject matter of the contract;

provided, in the case of the OTC derivatives transactions and commodity contracts referred to in paragraphs (i) and (ii) are made between Qualified Parties who each act as principal except in respect of Qualified Parties described in paragraphs (BB) and (CC) of the Appendix to this Order;

The end result of Blanket Order 91-503 was that a Qualified Party that traded in OTC derivatives received a blanket exemption from the registration and prospectus requirements that would otherwise be applicable to such transactions. In light of the current Canadian initiative to reform the regulation of OTC derivatives markets, Blanket Order 91-503 may be seen as being too broad. In addition, Blanket Order 91-503 does not address the fundamental question of a permanent regulatory solution for the regulation of the diverse spectrum of derivatives traded in Alberta both on-exchange and off-exchange (i.e. OTC).

As a result, the Commission had published a proposed Alberta Securities Commission Rule 91- 505 Over the Counter Derivatives ("Proposed Rule 91-505") together with the proposed revocation of Blanket Order 91-503 for public comment in February 2011. The Commission stated that it received six (6) comment letters on the Proposed Rule 91-505. The Commission indicates in analyzing these comments, together with participating in the ongoing work being done by the CSA to modernize the regulatory framework governing OTC derivatives trades in Canada that it has decided to re-publish Proposed Rule 91-505 in a new form, along with the above noted Proposed Amendments in order to better facilitate compliance with the G20 Commitments. The Commission now proposes to re-issue Blanket Order 91-505 - Over the Counter Derivatives Transactions ("Blanket Order 91-505") as a replacement to Blanket Order 91-503.

2. Blanket Order 91-505

Blanket Order 91-505 relies on the authority given to the Commission in section 213 of the Act, which allows the Commission to exempt any person from all or any of the provisions of Alberta securities laws. Generally, the Commission is proposing that it would not be prejudicial to the public interest to exempt a Qualified Party from the prospectus requirement related to the distribution of futures contracts. Further, Blanket Order 91-505 proposes to waive the "dealer registration requirement" related to OTC derivatives trades in futures contracts where each party to the trade is a Qualified Party and to OTC derivatives trades in physical commodity contracts.

Specifically, Blanket Order 91-505 reads as follows:

The Commission, considering it would not be prejudicial to the public interest, orders under section 213 of the Act as follows:

(a) the prospectus requirement does not apply to a distribution of a futures contract to a qualified party; and

(b) the dealer registration requirement does not apply in respect of an over-the-counter trade in

(i) a futures contract where each party to the trade is a qualified party; or

(ii) a physical commodity contract;

provided that a person or company relying on this paragraph 5(b) complies with such requirements, among the following, as the Executive Director of the Commission may impose on such person or company, or in respect of such trade or class of trades:

(iii) to report the trade to an agency recognized by the Commission in accordance with the requirements of the agency;

(iv) to effect the trade, or class of trades, on or through the facilities of an exchange recognized by the Commission or exempted by the Commission from the requirement to be recognized as an exchange;

(v) to clear the trade, or class of trades, on or through the facilities of a clearing agency recognized by the Commission; or

(vi) to maintain a prescribed minimum excess working capital in respect of a trade, or class of trades, not cleared on or through the facilities of a clearing agency recognized by the Commission.

(a) Definition of OTC Derivatives

Should the Commission revoke Blanket Order 91-503, thus revoking the definition of OTC derivative,17 there will no longer be a definition of OTC derivative in force in Alberta.

Although Blanket Order 91-505 includes a definition of "over-the-counter trade," this definition only captures trades which are traded pursuant to the by-laws, rules or regulations of an exchange, and is fully defined in Blanket Order 91-505 as follows:

over-the-counter trade' includes any trade in futures contracts other than trades in exchange contracts which are traded pursuant to the by-laws, rule, or regulations of an exchange;

A trade of derivatives made pursuant to the by-laws, rules or regulations of an exchange is a trade made "on-exchange," otherwise known as exchange trading. Derivatives can be bought and sold "on-exchange" and "off-exchange" (i.e. OTC). On-exchange refers to the futures markets (i.e. central exchange where market participants can trade standardized futures contracts). In the trade of energy derivatives, examples of two large exchanges are the New York Mercantile Exchange (part of the CME Group) and the Intercontinental Exchange, Inc. The OTC market is specific to customized swaps and OTC options. These customized trades are traded bilaterally between two counterparties.

It is unclear from the definition of "over-the-counter trade" contained in Blanket Order 91-505 whether the Commission is referring to OTC derivatives trades, on-exchange trading, or is potentially referring to OTC derivatives trades which are subsequently cleared by a clearing agency. We would suggest that the Commission make this distinction clear to OTC derivatives market participants as regulation in this area will significantly impact their business practices related to hedging and risk mitigation.

(b) The "Dealer Registration Requirement"

It is not clear why the Commission refers to the "dealer registration requirement" in Section (b) of Blanket Order 91-505. The background to the prospectus and registration exemption, contained in Blanket Order 91-503, in our interpretation contemplated a broader application to "...certain parties and their clients who contract directly with one another for such OTC derivatives and commodity contracts are subject to registration and prospectus requirements, unless exempted."

As mentioned above, there is currently no requirement for OTC derivatives market participants to register (and thus become a "registrant"). Further, unlike trade in securities, there are typically no "dealers" of OTC derivatives. Again, for many OTC derivatives market participants, the trade in OTC derivatives occurs "off-exchange" as the OTC market is specific to customized swaps. These customized trades are traded bilaterally between two counterparties. It would be unusual for a "dealer" to be involved in these bilateral transactions. Therefore, it is counterintuitive to suggest that "dealers" of derivatives register with the Commission if no such person(s) commonly exist in the OTC derivatives market.

We would suggest that the Commission clarify which type of entity they are seeking to recognize when referring to the "dealer registration requirement" in Section (b) of Blanket Order 91-505. Currently, there is no registration requirement for OTC derivative market participants, nor are their typically "dealers" of OTC derivatives. Many OTC derivatives market participants will be unable to determine if they are off-side registration requirements if the Commission is not clear on which type of entities they require to be registered.

(c) Additional Obligations

Pursuant to Blanket Order 91-505, any Qualified Party relying on the "dealer registration exemption" may be subject to prescribed requirements which may be imposed by the Executive Director of the Commission and may include the requirement to:

  • report the trade to a recognized agency;
  • effect the trade on or through recognized exchange facilities, or those facilities that are exempt from the recognition requirement);
  • clear the trade on or through a recognized clearing agency; or
  • maintain a prescribed minimum working capital for those trades not cleared on or through a recognized clearing agency.

The term Qualified Party refers to a listing of those entities which the Commission considers to be a Qualified Party and is attached as an Appendix to Blanket Order 91-505. Again, we would suggest that the Commission clarify which entities are entitled to rely on the "dealer registration exemption" in the first instance as it is currently unclear what registration requirement OTC derivatives market participants must comply with (or be exempt from).

III. CONCLUSION

We thank you for the opportunity to comment on the Notice of Republication and Request for Comment.

Footnotes

1 A copy of which is available here.

2 See The G-20 Toronto Summit Declaration, sections 25 and 19, June 27, 2010, available here.

3 Due to its length, section 223 is not reproduced herein. However, this particular section of the Act may be viewed here.

4 Section 224 prescribes that the Commission may, subject to this section and the regulations referred to in section 223(ii), make rules concerning of any of the matters in respect of which the Lieutenant Governor in Council may make regulations under section 223. (2) Notwithstanding subsection (1), the Commission shall not do the following: (a) make rules in respect of matters referred to in section 223(ee); (b) make rules in respect of matters referred to in section 223(hh.1) (i) except with the approval of the Minister, or (ii) unless no change is being made to the minimum requirements under existing rules made in respect of section 223(hh.1); (c) make rules in respect of matters referred to in section 223(ii). (3) Notwithstanding that the Commission may make rules, (a) where the provisions of a regulation made under section 223 and a rule made under this section conflict, the regulation prevails, and (b) the Lieutenant Governor in Council may amend or repeal any rule made by the Commission under this section. (4) A rule made by the Commission under this section has the same force and effect as a regulation made by the Lieutenant Governor in Council under section 223. (5) The Regulations Act does not apply to a rule made by the Commission under subsection (1).

5 "Rules" means the rules made by the Commission under section 224 or under section 211.6(2).

6 "Alberta securities laws" means the Act, the regulations and any decisions made by the Commission or the Executive Director and any extra-provincial securities laws adopted or incorporated by reference under section 211.4.

7 Section 213 of the Act provides that the Commission may by order exempt (a) any person, company, trade or distribution, or (b) any class or classes of persons, companies, trades or distributions from all or any provision of Alberta securities laws.

8 Due to its length, the complete definition of "security" is not reproduced herein. This definition may be viewed within the Act itself, a copy of which is available here.

9 "Futures contract" means any obligation to make or take future delivery of (i) a commodity, (ii) a security, or (iii) cash if the amount of cash is derived from, or by reference to, a variable, including (A) a price or quote for a commodity or security, (B) an interest rate, (C) a currency exchange rate, or (D) an index or benchmark, but does not include an obligation or a class of obligations that is designated not to be a futures contract pursuant to an order made under section 10."

10 Note: the Act does not contain a specific definition of "option". The term option is, however, captured in the following definitions: "exchange contract" and "security".

11 "Exchange contract" means a futures contract or an option where (i) its performance is guaranteed by a clearing agency, and (ii) it is traded on an exchange pursuant to standardized terms and conditions set out in the bylaws, rules or regulations of that exchange at a price agreed on when the futures contract or option is entered into on the exchange, and includes any instrument or class of instruments that (iii) meets the requirements referred to in subclauses (i) and (ii), and (iv) is designated as an exchange contract by an order of the Commission.

12"Regulations" means the regulations made under the Act and, unless the context otherwise indicates, includes the rules.

13 "Agency" is not a defined term in the Act or regulations.

14 It is assumed the term "agency" as it is used in section 8(2) refers to trade repositories.

15 The definition of "trade" following the amendments includes: (i) any sale or disposition of a security for valuable consideration, whether the terms of payment are on margin, instalment or otherwise, but does not include (A) a purchase of a security, or (B) except as provided in subclause (v), a transfer, pledge or encumbrance of securities for the purpose of giving collateral for a bona fide debt; (ii) any entering into a futures contract or an option that is an exchange contract; (iii) any participation as a trader in any transaction in a security or an exchange contract through the facilities of an exchange or a quotation and trade reporting system; (iv) any receipt by a registrant of an order to buy or sell a security or an exchange contract; (v) any transfer, pledge or encumbrance of securities of an issuer from the holdings of a control person for the purpose of giving collateral for a bona fide debt; and (vi) any act, advertisement, solicitation, conduct or negotiation made directly or indirectly in furtherance of anything referred to in subclauses (i) to (v).

16 "Qualified Party" is defined in Blanket Order 91-503 and means any of the entities listed in the Appendix to this Order, where each is acting as principal, or alternatively as an agent or trustee for accounts that are fully managed by it. For the purposes of this order, a party is a Qualified Party for the purpose of any OTC derivative transaction or commodity contract if that party is a Qualified Party at the time the party enters into the transaction or contract.

17 See the discussion above regarding definition of OTC derivative on page 3.

About Fraser Milner Casgrain LLP (FMC)

FMC is one of Canada's leading business and litigation law firms with more than 500 lawyers in six full-service offices located in the country's key business centres. We focus on providing outstanding service and value to our clients, and we strive to excel as a workplace of choice for our people. Regardless of where you choose to do business in Canada, our strong team of professionals possess knowledge and expertise on regional, national and cross-border matters. FMC's well-earned reputation for consistently delivering the highest quality legal services and counsel to our clients is complemented by an ongoing commitment to diversity and inclusion to broaden our insight and perspective on our clients' needs. Visit: www.fmc-law.com

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  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions