The Investment Industry Regulatory Organization of Canada (IIROC) is proposing changes to its dealer rules to accommodate changes relating to ongoing derivatives market reforms.
Specifically, IIROC's proposals aim to restrict linkages between a dealer's futures business and its other business lines that are not subject to the futures markets' segregation and portability rules.
The proposed rule changes "are intended to facilitate the adoption of a gross customer margin segregation and portability regime by central clearing counterparties (CCPs) that serve the domestic futures markets," according to an IIROC notice published on Thursday.
Canadian futures market CCPs such as ICE Clear Canada Inc. and Canadian Derivatives Clearing Corp. (CDCC) are making these changes to comply with new global principles for financial market infrastructure firms, the IIROC notice indicates.
"These CCP rule changes would create a new futures market customer-protection regime that is not entirely consistent with, and adds incremental risk for, the existing IIROC-CIPF customer-protection regime," IIROC says in its notice.
IIROC's proposed changes may have a material impact on the market, the notice states: "The amendments may result in higher margin requirements for certain institutional customers, which may significantly affect both unhedged futures trading and cross-product hedge trading involving futures and underlying cash market securities."
The self-regulatory organization also adds in the notice that several "significant outstanding" issues still need to be resolved and that it plans to "take a phased approach to consider and develop proposed amendments as we receive and assess additional information on these outstanding matters."
Comments on the initial set of proposals are due by Aug. 16.