Canadian securities regulators have published their first set of actual rule proposals that aim to enhance oversight of the over-the-counter (OTC) derivatives market, and reduce systemic risk.
The Canadian Securities Administrators (CSA) Thursday published a staff notice that outlines proposed rules for reporting derivatives trades to trade repositories.
The so-called ‘model reporting rules’ would define the types of contracts or instruments that are required to be reported to a trade repository; establish requirements for the operation of trade repositories; and, establish requirements for transaction data reporting.
The publication marks the first set of actual rules proposed by the CSA for the OTC derivatives market. So far, it has published a series of consultation papers on a wide range of aspects of derivatives regulation. And a couple of papers (dealing with registration and exchange trading) are still to be released.
Now, the CSA is finally proposing some actual rules. The regulators say that the reporting of derivatives transactions to trade repositories is one of the most important components of the G20 commitments to global reform of the OTC derivatives markets, and that these rules “will pave the way for other future rules that are essential to the regulation of OTC derivatives transactions and the improvement of market transparency.”
The proposed product determination rule sets out the contracts, or instruments, that are required to be reported to a trade repository. The trade repository rule describes requirements for the operation and ongoing regulation of recognized trade repositories, and the mandatory reporting of derivatives transaction data by market participants.
“Trade repositories and the requirement to report OTC derivatives contracts to trade repositories will improve transparency in the derivatives markets, mitigate systemic risk and protect against market abuse,” noted Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC).
The proposed rules are out for comment until February 4, 2013. The CSA says that a number of future proposed model rules will be published for comment that relate to the other key areas addressed by the consultation papers it has been publishing. “Together, all the model rules will formulate a proposed regime for the regulation of the OTC derivatives markets,” it says.
The G20’s target for OTC derivatives market reform was the end of 2012. Last week, a number of key regulators, including those from Ontario and Quebec, met and reaffirmed their commitment to the reforms, while also pledging to harmonize their requirements as much as possible to avoid regulatory arbitrage and excess compliance costs.