The Ontario Securities Commission, the Autorité des marchés financiers and the Manitoba Securities Commission have announced that "end users" will not be required to comply with derivatives trade reporting requirements in respect of trades between an end user and an affiliate in certain circumstances. An "end user" is essentially a reporting counterparty that is not a derivatives dealer, a clearing agency, or, in Quebec and Manitoba, a Canadian financial institution.
End users are subject to the trade reporting obligation as of June 30, 2015 under local trade reporting rules adopted in these three provinces. However, the AMF and the MSC have granted temporary relief for end users in respect of certain inter-affiliate trades pending codification of this relief in their respective local rules. The OSC has indicated in its staff notice that it intends to propose amendments to the local Ontario trade reporting rule to provide similar relief.
OSC staff state that they are considering proposing amendments to the trade reporting rules to reduce the frequency and data requirements for trade reporting of inter-affiliate transactions by end users. OSC staff are also considering proposing amendments which would permit the reporting of certain end user inter-affiliate transactions pursuant to the laws of a foreign jurisdiction if the affiliate is reporting under the rules of that jurisdiction. In other words, unlike the AMF and MSC notices, the OSC staff notice does not appear to contemplate a complete exemption from reporting of inter-affiliate trades by end users.
Meanwhile, the AMF and MSC have granted temporary relief provided certain conditions are satisfied. First, the transaction to which the end user is a party must be between the end user and a counterparty which is an affiliate and the financial statements of the parties must be prepared on a consolidated basis in accordance with National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards. Second, the transaction must be governed by a written agreement which sets out the terms of the transaction, including terms relating to centralized evaluation, measurement and risk controls designed to identify and manage risks. Third, the parties to the transaction must maintain records of the transaction and must make these records available to the MSC and the AMF, as applicable, upon request.
For further information, please consult OSC Staff Notice 91-703, AMF Decision 2015-PDG-0089 and MSC Notice 2015-23. The local trade reporting rules in these three provinces can be accessed at the links below. We have also written about similar rules proposed in certain other Canadian jurisdictions.
- OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting
- AMF Regulation 91-507 respecting Trade Repositories and Derivatives Data Reporting
- MSC Rule 91-507 Trade Repositories and Derivatives Data Reporting
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