The Ontario Securities Commission Friday issued a staff notice in regard to a new mandatory requirement for clearing agencies to be recognized by the OSC.

Effective March 1, 2011, entities carrying on business as a clearing agency in Ontario will be required to be recognized or have obtained an exemption from the recognition requirement.

There are several criteria that the OSC will consider in deciding whether to issue a recognition order or exemption, described in detail in the Staff Notice.

As set out in the notice, OSC staff recommends that those entities that perform certain key functions or provide certain facilities, such as central depository, central counter-party, and/or guarantor functions, be recognized and be subject to full clearing agency regulation and oversight. Depending on the circumstances, staff may recommend that a clearing agency be granted an exemption from recognition.

“In helping facilitate securities transactions, clearing agencies play an important role in protecting investors and enhancing the efficiency of the capital markets,” said Susan Greenglass, the OSC’s director of market regulation.

“The new mandatory recognition requirement for clearing agencies will provide the tools necessary to impose requirements on all entities that perform this critical role.”

IE