TMX Group Inc. has issued a position paper outlining its views on international reforms to the Over-the-Counter derivatives markets, urging regulators to include the exchange and clearinghouse operator in implementing the changes in Canada.

As part of the international regulatory response to the financial crisis, the G20 has made a commitment to address issues arising from OTC derivatives markets. The G20 objectives include:

• Strengthening prudential oversight
• Improving risk management
• Increasing transparency
• Promoting market integrity
• Protecting against market abuse
• Mitigating systemic risk
• Reinforcing international cooperation

Canadian regulators are working towards the implementation of these recommendations through the Canadian Securities Administrators and the Canadian OTC Derivatives Working Group.

In TMX Group’s position paper, entitled: Transparency, Market Integrity & Risk Management: The Role of the Regulated Exchange, it says it supports these objectives. Furthermore, the paper says that the capabilities and technology available through TMX Group entities, such as Montréal Exchange, Canadian Derivatives Clearing Corporation and Natural Gas Exchange, should be employed in implementing the G20 objectives in Canada.

“We are pleased to put forward our views on how TMX Group, in partnership with the dealer and user community, can provide domestic solutions, linked to other global OTC marketplaces and clearinghouses,” said TMX Group CEO Thomas Kloet. “An effective solution must reduce risk, enhance transparency and, most importantly, increase the integrity of the Canadian system. Canada has a well-earned reputation for stability and trust and the world is looking to us to show leadership in tackling this important challenge.”

Commented Alain Miquelon, president of Montréal Exchange and group head of derivatives for TMX Group: “As an operator of a globally recognized exchange and an AA-rated derivative clearinghouse, we have the expertise, the technology and the track record and are building solutions to help reduce risk and strengthen the Canadian capital markets.”

TMX Group also calls for other parties to be involved in the reform process.

“Market participants, regulators, central bank representatives and exchange group operators should be engaged in the design of solutions that are appropriate to the markets being addressed,” the paper says.

IE