Canada: What Data Related To Your Reportable Derivative Transactions Will Be Disseminated Publicly In July 2016?

With the publication of proposed amendments (the Amendments) to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting (the TR Rule), the answer to that question has become clearer. The Amendments also introduce new exemptions from the reporting obligations under the TR Rule of certain transactions between end-user local counterparties and their affiliates and a new requirement for local counterparties to obtain a legal entity identifier (LEI). Comments are due on the Amendments by February 3, 2016.

Protecting the anonymity of publicly disseminated data

Recognizing that the publication of anonymized transaction-level data by designated trade repositories could potentially allow market participants to determine the identity of one or both of the counterparties to specific transactions, the Ontario Securities Commission (the Commission) is proposing to introduce publication delays and additional anonymity precautions with respect to transaction details disseminated publicly under the TR Rule.

The Amendments introduce a new Appendix C to the TR Rule, which sets out the data required to be disseminated and limits the application of the requirement for public dissemination of transaction-level reports to OTC derivatives related to certain asset classes and underlying benchmarks. Appendix C provides for certain exclusions from public dissemination — for instance, a transaction in a derivative that requires the exchange of more than one currency is excluded from this requirement. Finally, Appendix C set outs certain other mechanisms for protecting anonymity, including:

  • the requirement for a designated trade repository to round the notional amount of a transaction in accordance with prescribed rounding conventions;
  • the reporting of a prescribed capped rounded notional amount in place of the rounded notional amount in certain circumstances; and
  • the introduction of delays with respect to the public dissemination of transaction-level data.

The Commission intends to amend Appendix C over a series of future phases after additional study of trade repository data and public consultation to determine the additional data and product types that are appropriate for public dissemination and the timing for the release of such data to the public.

New exemptions from the reporting obligations for transactions between affiliates

Transactions between affiliates that are local counterparties

The Amendments introduce a new section 41.1 that excludes transactions between end-user local counterparties who are affiliated companies from the requirement to report derivatives data to a designated trade repository. In order to make use of this exclusion:

  • the transaction must be between affiliated companies;
  • neither counterparty can be a derivatives dealer, a recognized or exempt clearing agency, or an affiliated entity of a derivatives dealer or a recognized or exempt clearing agency; and
  • each counterparty must be a local counterparty pursuant to the securities legislation of a province or territory of Canada.

This exclusion can be used where a counterparty is a local counterparty in any province or territory of Canada and is also available to affiliates located in foreign jurisdictions if its Canadian affiliate is responsible for its liabilities.

Transactions with foreign affiliates

The Amendments propose to amend subsection 26(5) of the TR Rule in order to permit local counterparties who are not derivatives dealers, recognized clearing agencies or exempt clearing agencies and who are subject to the reporting obligation under the TR Rule, to benefit from substituted compliance in respect of reportable transactions entered into with their foreign affiliates. To rely on this exemption, the transaction must be reported to a designated trade repository pursuant to the securities legislation of a province of Canada other than Ontario or the laws of a foreign jurisdiction listed in Appendix B of the TR Rule (currently, the foreign jurisdictions included in Appendix B are the United States of America and the European Union).

Obligation to obtain a legal entity identifier

The Amendments introduce a new requirement that requires each eligible local counterparty to a transaction that is reportable under the TR Rule to obtain a LEI in accordance with the standards set by the Global Legal Entity Identifier System. As a result, all local counterparties to reportable transactions are subject to a direct obligation to acquire a LEI.

The Commission is also proposing to amend section 28 of the TR Rule to provide for situations where a counterparty to a transaction is not eligible to receive a LEI, such as an individual. Under new subsection 28(4), the reporting counterparty is required to identify such a non-eligible counterparty using an alternative identifier. New subsection 28(5) requires the designated trade repository to identify the counterparty with the same alternative identifier.

Equivalent rules in Manitoba and Québec

Similar amendments are also proposed to the TR Rule equivalents in each of Manitoba and Québec (the Québec Rule). The Québec Rule is also being amended to broaden the concept of affiliated entities to include partnerships and trusts. We expect that similar changes will be introduced into the final versions of the reporting rule in the other provinces and territories of Canada.

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