In an effort to boost transparency in the over-the-counter derivatives market and curb systemic risks, Canadian securities regulators are proposing a model rule that would set requirements for mandatory central counterparty clearing.
The Canadian Securities Administrators (CSA) today published for comment CSA Staff Notice 91-303 – Proposed Model Provincial Rule on Mandatory Central Counterparty Clearing of Derivatives, which sets out the requirements for central counterparty (CCP) clearing of OTC derivatives.
The notice proposes a requirement to submit certain derivatives to a CCP for clearing; establishes proposed end-user and intra-group exemptions to that requirement; and, sets out which derivatives would be subject to the CCP clearing requirement.
Following consultations on the proposed model rule, the CSA will make any necessary amendments and then proceed with the process of adopting actual rules in their various jurisdictions. The overall aim of the initiative follows global efforts to improve transparency in OTC derivatives markets, and help mitigate systemic risks, in the wake of the financial crisis.
Among other things, the CSA is specifically seeking comment on a proposed exemption from mandatory CCP clearing for end-users that are not financial entities, and that are using derivatives to hedge commercial risks related to the operation of their businesses.
The proposals are out for comment until March 19, 2014.