From the Regulators

The goal is to improve transparency and regulatory oversight of the OTC derivatives markets

By James Langton |

Securities regulators Wednesday proposed rules that would extend derivatives trade reporting requirements to five more provinces.

Regulators in Alberta, British Columbia, New Brunswick, Nova Scotia and Saskatchewan have published for comment Proposed Multilateral Instruments 91-101 Derivatives: Product Determination and 96-101 Trade Repositories and Derivatives Data Reporting.

Together, these proposed instruments would form a derivatives reporting regime that is largely harmonized with regimes previously implemented in Manitoba, Ontario and Quebec, and with international rules in this area.

The goal is to improve transparency and regulatory oversight of the over-the-counter (OTC) derivatives markets in the wake of the global financial crisis.

The proposals include a rule that establishes the reporting requirements to improve transparency in the OTC derivatives market; and, it sets requirements for trade repositories designed to ensure that they operate in a manner that promotes the public interest.

"Derivatives data is essential for effective regulatory oversight of the derivatives market, including the ability to identify and address systemic risk and the risk of market abuse," the regulators said in the proposal. Additionally, they note that the data will provide regulators with information on the nature and characteristics of the Canadian derivatives market to support further rules in this area.

A second rule establishes the types of derivatives that will be subject to the reporting requirements, which excludes contracts that have not traditionally been considered OTC derivatives, and aims to resolve conflicts when a particular instrument meets both the definition of "derivative" and "security" in certain provinces.

"Collection of this OTC derivatives data is intended to assist in the regulatory oversight of the OTC derivatives market, including the ability to identify and address systemic risk and the risk of market abuse," said Bill Rice, chairman of the Canadian Securities Administrators (CSA) and chairman and CEO of the Alberta Securities Commission (ASC). "These proposed multilateral instruments will harmonize with reporting requirements applicable in other Canadian jurisdictions and internationally."

The proposed rules are out for comment period until March 24.