The Canadian Securities Administrators (CSA) last week released Consultation Paper 91-405 Derivatives: End-User Exemption, the latest in a series of eight papers intended to build on the high-level proposals found in Consultation Paper 91-401 released in November 2010.
As is suggested by its title, the paper considers an end-user exemption to OTC derivatives regulation. Ultimately, an end-user exemption is intended to avoid discouraging the use of OTC derivatives by market participants that are not in the business of derivatives trading but that trade in OTC derivatives to mitigate commercial risks related to their business. As such, according to the CSA, an end-user exemption must address this specific segment of the market without undermining the broad objective of increased regulation of OTC derivatives contracts.
Thus the paper, among other things, sets out the CSA Derivatives Committee's position on the application of an end-user exemption, the criteria for determining eligibility, and what an eligible end-user would need to do in order to rely on the exemption.
The consultation paper, which includes specific questions for the consideration of commentators, is open for public comment until June 15.