Canadian securities regulators adopt changes to OTC trading rules

Canadian securities regulators adopt changes to OTC trading rules

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The Canadian Securities Administrators (CSA), an umbrella organization of Canada’s provincial and territorial securities regulators, said on Thursday the country’s securities regulatory bodies have adopted two new rules for over-the-counter (OTC) trading.

The two newly-adopted instruments – for Mandatory Central Counterparty Clearing of Derivatives and for Customer Clearing and Protection of Customer Collateral and Positions, are scheduled to come into force on 4 April and 3 July, 2017, respectively.

Mandatory Central Counterparty Clearing of Derivatives requires certain counterparties to clear certain standardized OTC derivatives through a central counterparty clearing agency. Meanwhile, the Customer Clearing and Protection of Customer Collateral and Positions instrument includes requirements related to the segregation and portability of customer collateral and positions as well as detailed record-keeping, reporting and disclosure requirements. Its aim is to protect a local customer’s positions and collateral when clearing OTC derivatives and to improve clearing agencies’ resilience to default by a clearing intermediary.

“These national instruments are designed to align with international standards and provide safeguards in the Canadian market for counterparties transacting in over-the-counter derivatives, while fostering a flexible and competitive market for clearing service providers,” said Louis Morisset, chair of the CSA.

The new rules are part of an ongoing commitments to reform the global OTC derivatives markets is taking place on a national level. They provide certain exemptions for foreign entities that comply with similar laws of the US or the EU.

The CSA said it has worked on the development of the new national instruments with several other Canadian authorities – the Bank of Canada, the Office of the Superintendent of Financial Institutions, the Department of Finance Canada , as well as with other market participants.

In Canada, financial markets fall under the regulation and supervison of provincial watchdogs and legislation rules may vary in the various provinces. The CSA is the council of the 10 provincial and three territorial securities regulators in the country. It co-ordinates and harmonizes regulation for the Canadian capital markets. The majority of enforcement activities are executed locally, but in some cases regulators of different provinces and territories work together to supervise market players and investigate possible misconduct.


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