The Ontario Securities Commission has approved amendments to Investment Dealers Association rules regarding the optional use of value at risk modeling to determine firms’ capital requirements.

The purpose of the amendments is to allow for an alternative method of determining capital requirements for members’ security positions, for IDA firms who maintain sophisticated and/or significant proprietary inventories, “the by-product of which will be capital requirements which are more reflective of the overall market risk of the proprietary inventory”, it says.

The proposed amendments were published for comment on November 11, 2005. It notes that some nonmaterial changes have been made to the amendments that were originally published.

The IDA received one comment letter BMO Nesbitt Burns Inc. “The commenter was generally supportive of IDA efforts to improve how principle [sic] trading risks are assessed in the securities dealer regulatory capital formula but had concerns,” it notes. Those concerns and the IDA’s responses are laid out in the latest issue of the OSC Bulletin.