On November 27, the CSA published for comment proposed harmonized rules respecting clearing agencies that would set out certain requirements in relation to the application process for seeking recognition as a clearing agency (or an exemption from the recognition requirement), as well as the ongoing requirements for recognized clearing agencies that act as central counterparties, central securities depositories or securities settlement systems.

The requirements under proposed National Instrument 24-102 Clearing Agency Requirements and its Companion Policy are generally based on the Principles for Financial Market Infrastructures (PFMI) developed by the Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements and the Board of the International Organization of Securities Commissions (IOSCO). The PFMI set out in the April 2012 CPSS/IOSCO consultative report are considered to be minimum international standards for payment, clearing and settlement systems which must be implemented globally to strengthen core financial infrastructures and markets (including derivatives markets) and critical market infrastructures, and to limit systemic risks.

To that end, the proposed rules include requirements in respect of, among other things, (i) governance; (ii) credit risk; (iii) collateral; (iv) margin; (v) liquidity risk; (vi) settlement finality; (vii) money settlements; (viii) physical deliveries; (ix) central securities depositories; (x) participant default rules and procedures; (xi) segregation and portability; (xii) general business risk; (xiii) custody and investment risks; (xiv) operational risks; (xv) access, participation requirements; and (xvi) efficiency and effectiveness.

As we previously discussed, Canadian regulators previously proposed similar local rules last year. The more recent proposal is intended to achieve the same objectives as the proposed local rules while taking a harmonized approach across the country. The CSA are accepting comments on the proposal until February 10, 2015.