Canada: CSA Consultation Paper 91-301 - Derivatives: Model Provincial Rules

On December 6, 2012, the Canadian Securities Administrators OTC Derivatives Committee (the "Committee") published for interim guidance and comment, CSA Staff Consultation Paper 91-301 ("Consultation Paper 91-301").

Released as part of ongoing efforts by the Committee and the Canadian OTC Derivatives Working Group1 to fulfill Canada's G-20 commitments, Consultation Paper 91-301 sets out two model provincial rules with accompanying model explanatory guidance that relate to the regulation of the trading of derivatives. The model provincial rules, which have been drafted based on the Securities Act (Ontario) and which the Committee states should be considered in the context of that legislation, are open for comment for a consultation period of 60 days.

Model Provincial Rule – Derivatives: Product Determination

The first model provincial rule proposed by the Committee pertains to the determination of products which will be treated as derivatives (the "Scope Rule").

The Scope Rule provides a foundation for the regulation of derivatives, which the Committee feels is both responsive and flexible. As the definitions of "derivative" and "security" in provincial securities legislation are generally quite broad, and in some cases, overlapping, the Committee drafted the Scope Rule with the intent of resolving conflicts that arise when a contract or instrument meets both the definition of derivative and of security. By making clear which contracts or instruments are to be regulated as derivatives or securities, or are outside the scope of securities and derivatives legislation, the Scope Rule is intended to provide the flexibility to appropriately tailor regulations to a broad range of existing and emerging products.

The Scope Rule will initially only apply for the purposes of the TR Rule (as defined below). However, the Committee expects that elements of the Scope Rule, subject to amendments, will also become applicable to existing provisions of securities legislation, and to future derivatives rules that will be brought into force, including but not limited to rules relating to over-the-counter central counterparty clearing, end-user exemptions, trading platforms, capital and collateral, and registration. The Committee points out that there may be variations in the application of the Scope Rule for these new rules.

Until the Scope Rule has been extended to other derivatives rule-making areas, any legislation, rules, notice or other policies applicable to derivatives will continue to apply.

Model Provincial Rule - Trade Repositories and Derivatives Data Reporting

The second model provincial rule proposed by the Committee pertains to trade repositories and derivatives data reporting (the "TR Rule").

The TR Rule outlines proposed requirements for the operation and ongoing regulation of designated or recognized trade repositories and the reporting of derivative transaction data by market participants.It reflects proposals contained in the CSA Staff Consultation Paper 91-402 which was released on June 23, 2011. The Committee states that the purpose of the TR Rule is to improve transparency in the derivatives market to regulators and the public, and to ensure that designated trade repositories operate in a manner that promotes the public interest.

The TR Rule can generally be divided into two rulemaking areas: (i) those relating to the regulation of trade repositories (including rules with respect to the designation/recognition process, requirements and restrictions relating to data dissemination and ongoing operational requirements), and (ii) those relating to reporting requirements of derivatives market participants.

In order for any trade repository, local or foreign, to be an acceptable venue for local market participants to comply with the reporting obligations contained in the TR Rule, the trade repository must be designated or recognized in the applicable provincial jurisdiction. However, the Committee recommends that exemptions to certain requirements of the TR Rule be made available to a foreign-based trade repository if the trade repository is subject to an equivalent regulatory and oversight regime in its home jurisdiction. The Committee recognizes that some foreign-based trade repositories are already subject to equivalent regulation in their home jurisdiction and acknowledges that the imposition of a duplicate regime would be inefficient.

The TR Rule outlines the general requirements that an entity must meet in order to obtain and maintain a designation as a trade repository. Pursuant to the TR Rule, an applicant must demonstrate that: (i) the designation is in the public interest; (ii) it is, or will be in compliance with securities legislation; and (iii) it has established, implemented, maintained and enforced appropriate written rules, policies and procedures in accordance with standards applicable to trade repositories.

In outlining the reporting obligations for transactions, the Committee has identified the counterparties that will be subject to the duty to report and the data that is required to be reported, and has prescribed the reporting time. The Committee notes that it has attempted to harmonize reporting requirements under the TR Rule with international practice. Where minor differences exist between a foreign regime's reporting requirements and those in the TR Rule, the Committee states that it would be possible to apply for an exemption on the grounds of equivalency.

In addition to the general guidance and comment the Committee is seeking in connection with the two model provincial rules, the Committee is seeking specific feedback on subsection 40(2) of the TR Rule. This subsection pertains to an exemption from reporting requirements for derivatives transactions in the physical commodities market involving market participants with small derivatives exposures. The intention of the proposed exemption is to reduce regulatory burdens for small market participants whose physical commodity transactions may unwittingly become subject to the transaction reporting requirements of the TR Rule. The Committee seeks guidance as to whether the exemption and its proposed $500,000 threshold are appropriate.

Status of Consultation Paper 91-301

The model provincial rules published in Consultation Paper 91-301 will be open for comment until February 4, 2013. After this date the Committee will evaluate comments received and recommend appropriate amendments to the proposed rules. Each province will then publish province-specific rules for comment in accordance with the legislative requirements of each jurisdiction. Following a subsequent comment period, final rules will be implemented by the provinces.

Footnotes

1. The Canadian OTC Derivatives Working Group consists of the Bank of Canada, the federal Department of Finance, the Office of the Superintendent of Financial Institutions, the Alberta Securities Commission, the Autorité des marchés financiers,, the British Columbia Securities Commission and the Ontario Securities Commission.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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

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

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • 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