From the Regulators

The added time will give OSC staff more time to develop a mechanism for public disclosure

By James Langton |

The Ontario Securities Commission (OSC) is delaying derivatives trade reporting requirements that were due to take effect at the end of April until July 2016 to give it more time to develop a mechanism for the public disclosure of that data.

The OSC Thursday published amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting that will push back the requirement for transaction-level data reporting by designated trade repositories until July 29, 2016.

The commission says that delaying transaction-level public reporting will give OSC staff more time to study current over-the-counter (OTC) derivatives market data, and develop appropriate mechanisms for delaying the public dissemination of that data.

In the rule notice, the OSC indicates that it is seeking to "balance the benefits of post-trade transparency against the potential harm that may be caused to market participants' ability to hedge risk." To that end, it believes that certain transactions, or classes of products, should be subject to publication delays so that market participants can avoid signalling the market.

"Further study will be required to determine the appropriate parameters for publication delays in the Canadian market," the notice says. "The factors to be considered in making this determination could include the type of asset underlying the derivative, the size of a transaction relative to other similar transactions or the size of the transaction relative to the overall volume for a particular class or instrument."

The initial requirement for derivatives trade reporting only took effect in Ontario on Oct. 31, 2014 for clearing agencies and dealers. And, the commission notes that "market participants have experienced challenges to implementation which have affected the quality of data reported to designated trade repositories" under the new regime.

"Our objective is to create a public disclosure framework that balances the benefits of post-trade transparency with the importance of maintaining confidentiality for counterparties to derivatives transactions," said Kevin Fine, director of the OSC's derivatives branch. "This added time will allow us to gather and analyze additional data in order to effectively meet our goal."

The amendments also allow certain market participants to report under the European Union (EU) derivatives trade reporting rules, which the OSC says reflects "an ongoing effort to recognize as equivalent the rules of other jurisdictions where substituted compliance is appropriate." 

The amendments are scheduled to come into effect on April 30.