The Montreal Exchange Inc. is welcoming the passage of Bill S-40, an “Act to amend the Payment Clearing and Settlement Act”, which received Royal Assent on June 4.

It says the legislation will allow the ME to compete on an equal footing with derivative exchanges and their clearinghouses in the United States and Europe.

A clearinghouse guarantees the payment by the purchaser of the amount committed to the vendor on a market transaction.

“Passage of Bill S-40 ensures that the Canadian Derivatives Clearing Corporation, a subsidiary of the ME, now has the same legal protection as clearing corporations operating in other major countries,” says Luc Bertrand, president and CEO of the ME.

Leading clearinghouses in the U.S. and Europe have had a significant competitive edge because of the favourable treatment they receive under their domestic bankruptcy laws. They have immediate and unrestricted authority to liquidate the collateral given by a bankrupt clearing member to cover losses on exchange transactions.

This right provides increased certainty to members that the clearinghouse can meet its commitment to clear their transactions. Now that Bill S-40 is law, Canadian clearinghouses benefit from this same protection.

“This new legislative environment will stimulate business at the Montreal Exchange and at CDCC. It will enable us to step up plans for additional investments in CDCC so its operations can provide the same high level of performance as those of the electronic exchange we now offer in Montreal,” adds Bertand.