Canada: Quebec Derivatives Scope Rule Expanded To Cover CCP Clearing And Customer Clearing Instruments

The Autorité des marchés financiers (AMF), Quebec's financial services regulator confirmed yesterday that, subject to necessary approvals, (i) Regulation 94-101 respecting Mandatory Central Counterparty Clearing of Derivatives (Regulation 94-101) and (ii) Regulation 94-102 respecting Derivatives: Customer Clearing and Protection of Customer Collateral and Positions (Regulation 94-102) will come into force respectively on April 4, 2017 and on July 3, 2017.

Regulation 94-101 sets out mandatory requirements for central counterparty clearing of certain standardized over-the-counter derivatives transactions. It aims at reducing counterparty risk in the derivatives market and enhancing market transparency. Regulation 94-102 sets out requirements related to segregation and portability of customer collateral and positions. It aims at protecting a local customer's positions and collateral and improving derivatives clearing agencies' resilience to a default by a clearing intermediary. For a detailed overview of these rules and their impact on the OTC derivatives market, we refer you to Margaret's post.

 Concurrently with the publication of the CSA Notices in respect of Regulation 94-101 and Regulation 94-102, the AMF published consequential amendments to Regulation 91-506 respecting product determination. Both Regulation 91-506 and its policy statement are proposed to be amended to include references to Regulation 94-101 and Regulation 94-102. As a result, Regulation 91-506 will apply to determine the scope of derivatives subject to the mandatory clearing and customer clearing and protection of customer collateral rules. As we previously discussed, OTC derivatives and other instruments that would be outside the scope of the derivatives product determination rule of Regulation 91-506, such as physical commodity contracts and spot FX contracts, will not be captured as mandatory clearable derivatives.

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