Just over four months after the coming into force of OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting (the Trade Reporting Rule), the Ontario Securities Commission (the Commission) has released amendments to the Trade Reporting Rule that will delay the effective date of the reporting obligations for all counterparties and remove the “fall-back” reporting mechanism that required Ontario non-dealer counterparties to monitor the transaction reporting of a foreign dealer reporting counterparty. These amendments, if approved by the Minister of Finance, come into force July 2, 2014.
As part of ongoing Canadian and international over- the-counter (OTC) derivatives reform, the Commission enacted the Trade Reporting Rule on December 31, 2013 in order to regulate and oversee trade repositories and mandate derivatives data reporting requirements by counterparties to derivatives transactions. At the same time, the Commission also enacted OSC Rule 91-506 Derivatives: Product Determination, the purpose of which is to define the types of derivatives that will be subject to reporting requirements under the Trade Reporting Rule (and to other relevant Commission rules governing derivatives once such rules are enacted).
As we previously reported in a notice on April 11, 2014, the Canadian Securities Administrators announced that derivative trade reporting would be delayed to allow time for a trade repository to be recognized under the Trade Reporting Rule. On April 17, 2014, the Commission released amendments to the Trade Reporting Rule (the Amendments) designed to put these reporting delays into effect. As a result of the Amendments, derivatives dealers and recognized or exempt clearing agencies will have to report prescribed data for derivatives transactions starting October 31, 2014. All other reporting counterparties will now have to start reporting on June 30, 2015. These delays are necessitated by the fact that no trade depository will be in a position to be designated within the original trade reporting time frame (July 2, 2014 for derivatives dealers and recognized or exempt clearing agencies and September 30, 2014 for all other reporting counterparties). In light of these changes to the reporting obligation dates, corresponding changes are also made by the Amendments to the reporting dates of pre-existing derivative transactions.
The Trade Reporting Rule has also become less burdensome to local counterparties, as the Amendments repeal the “fall-back” reporting mechanism that required Ontario non-dealer counterparties to monitor the transaction reporting of a foreign dealer reporting counterparty. This mechanism required that a local counterparty act as a reporting counterparty and fulfill the reporting counterparty duties under the Trade Reporting Rule where a foreign dealer reporting counterparty did not report a transaction or otherwise failed to fulfill its reporting obligations. The revocation of the “fall-back” reporting mechanism was prompted by significant resource and technological difficulties faced by a number of Ontario non-dealer counterparties in having to develop systems to monitor their counterparties’ reporting.