The Investment Industry Regulatory Organization of Canada has released the latest tranche of its plain language rules, dealing with dealer margin requirements.
IIROC notes that the existing margin rules require substantive revision in order to: eliminate unnecessary provisions; clarify the regulator’s expectations regarding certain rules; ensure that the rules reflect current industry practices and other IIROC rules; and, to streamline the decision making and rule interpretation process. It proposes to bring together all margin related definitions into one rule and to provide guidance on the application of the margin requirements.
In addition to the plain language rewrite of the existing requirements, a new provision has been added to specifically set out the steps a dealer must take in deciding whether to allow a client to trade on margin, and a provision has been added to require that a dealer obtain a margin ruling from IIROC staff when the margin treatment for a particular investment product is not specified within the IIROC rules.
It also proposes a new definition for the term ‘exempt purchaser’; introduces new provisions to set out the margin requirements for government debt called for redemption, and margin requirements for other non-commercial debt called for redemption. The proposed rules adopt one set of rates for the margining of commercial debt. They establish a 50% margin requirement for bank paper trading at or below 50% of par or with a low credit rating. Other margin rates and treatments have also been revised.
This latest publication represents the fifth of eight planned tranches as part of IIROC’s project to rewrite its rules in plain language. The primary objective of the project is to develop a set of rules that is clearer and more concise and organized, largely without changing the rules themselves.
The proposed rules are out for a 90-day comment period.