In August 2016, the Canadian Securities Administrators (“CSA”) published for comment Proposed Amendments to National Instrument 24-101 (“NI 24-101”) – Institutional Trade Matching and Settlement, Proposed Changes to Companion Policy 24-101 (“CP 24-101”) – Institutional Trade Matching and Settlement and CSA Consultation Paper 24-402 – Policy Considerations for Enhancing Settlement Discipline in a T+2 Settlement Cycle Environment (the “Consultation Paper”).
The proposed amendments to NI 24-101 and CP 24-101 (the “Proposed Amendments”) are intended to assist in a successful migration to T+2 settlement from the current T+3 regime. The Proposed Amendments also update NI 24-101 to reflect certain developments since it came into force in 2007, as well as clarify certain existing provisions. For example, the Proposed Amendments include making trades in exchange-traded mutual fund (ETF) securities, a significant area of growth since 2007, subject to NI 24-101. Other proposed revisions to modernize or clarify NI 24-101 and CP 24-101 include broadening the definition of “clearing agency” to include clearing agencies other than CDS and enhancing the provisions on matching services utilities systems and business continuity planning.
The Consultation Paper provides an overview of existing settlement discipline measures in the Canadian equity and debt markets and raises policy considerations for addressing the risk that the transition to a standard T+2 settlement cycle might increase settlement failures. The CSA is using the Consultation Paper to seek comments on whether (i) additional settlement discipline measures might be required, including additional amendments to NI 24-101 and CP 24-101, and (ii) other settlement discipline mechanisms – similar to those already in place or proposed in certain foreign jurisdictions, such as a settlement-fail penalty mechanism or a close-out (or forced buy-in) requirement – for the Canadian equity and debt markets would deter settlement failures.
The comment period on the Proposed Amendments and the Consultation Paper expires on November 16, 2016.