In an effort to ease compliance costs and better align with global standards, Canadian securities regulators are adopting a series of amendments to derivatives trade data reporting rules.
The Canadian Securities Administrators (CSA) published a set of rule changes that aim to streamline over-the-counter derivatives data reporting requirements and more closely harmonize the domestic rules with global standards.
“By harmonizing and clarifying both the data elements and the technical format and values for reporting, we are reducing burden on market participants by reducing the data that they provide and enabling them to harmonize their reporting systems across multiple global regulators,” the CSA said in a notice of the changes.
“This should reduce the complexity of their reporting systems and decrease ongoing operational and compliance costs involved in interpreting and monitoring global reporting requirements, while at the same time strengthen the quality and consistency of the data,” the notice said.
As part of the effort to harmonize with global standards developed by the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions, the CSA noted it limited the number of Canadian-specific data requirements while also adopting the unique product and transaction identifiers used globally.
The changes also include updated requirements for trade repository governance, operations and risk management to align with international standards; enhancements to data validation and verification requirements; and optional position reporting for certain types of derivatives.
Additionally, the reforms introduce a new requirement for derivatives trading facilities to report transactions executed anonymously.
“The changes to derivatives reporting standards represent a significant milestone for market participants in Canada,” said Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission, in a release. “By harmonizing Canadian data reporting requirements with international standards, the CSA is reducing regulatory burden and increasing market efficiency.”
“The resulting improvements to data quality and consistency will enable us to more effectively identify risks and vulnerabilities in our derivatives markets and strengthen protections for derivatives market participants,” he said.
Expanded derivatives data reporting was one of the key reforms developed by global policymakers in response to the global financial crisis, which exposed the lack of oversight in this area and allowed for undetected risks to accumulate.
The CSA notice indicated its latest rule changes were revised in response to comments received on draft proposals published for comment in mid-2022.
“The commenters expressed general support for harmonizing trade reporting rules with global requirements and for the reduction in regulatory burden that would be achieved by the proposed amendments,” it said. “We found many of the recommended changes to be persuasive and revised the [rules] accordingly.”
Among other things, those changes include providing a one-year implementation period.
Assuming the changes are approved by the provincial governments, they will come into force on July 25, 2025.