From the Regulators

Participation fees will now track more closely with current business conditions

By James Langton |

The Ontario Securities Commission (OSC) has backed off its plan to more than double the fees charged to new trade repositories that are collecting data on over-the-counter (OTC) derivatives trades.

The OSC published the final version of its fee rule today, which sees the regulator revert to charging firms their participation fees based on their most recent fiscal year, rather than on a historical reference year.

The commission introduced the reference year model a couple of years ago in a bid to make revenues more predictable, but some firms were upset that their fees didn't reflect current business conditions under this approach. By returning to using the most recent fiscal year, "fees will track more closely with the current fiscal situation", the OSC notes.

The other big issue in the commission's latest fee model was a proposal to more than double the fees charged to trade repositories from the current $30,000 to $75,000, with a possible $25,000 surcharge based on their share of trade reporting activity. The trade repositories, which began collecting data on OTC derivative trade activity late last year lashed out at the proposed increase as unfair and unjustified.

When the commission initially proposed the increase it cited the added oversight required by these firms as the reason for raising their fees. However, it has now decided to keep the participation fees for these firms at their current level for the time being. "Staff will continue to assess the costs of trade repository oversight and intend to develop and publish a revised proposal for comment at a later date," it notes in the rule.

The final rules, which are subject to ministerial approval, are slated to come into force on April 6; which, the OSC notes, is "in time to avoid increases in participation fee rates that were scheduled under the existing rules… As a result, participation fees will remain at the current rates."

"We believe that the rules provide a simplified and streamlined fee regime for our stakeholders," said Maureen Jensen, executive director and chief administrative officer of the OSC. "We are pleased that there has been enough growth in the market to allow us to maintain participation fee rates at current levels and still cover our costs and deliver on our important mandate, over the term of the rule."