On November 2, 2010 the Canadian Securities Administrators (CSA) published a consultation paper in relation to Canada's response to the G20's commitments to develop a more robust oversight of the financial markets, including over-the-counter ("OTC") derivatives. The CSA consultation paper outlines (1) the CSA Derivatives Committee's assessment of deficiencies in the OTC derivatives market and (2) securities regulatory high level proposals to address such deficiencies. Comments on the proposals which are set out in Consultation Paper 91- 401 on Over-the-Counter Derivatives Regulation in Canada are due by January 14, 2011.

The Consultation Paper recommends:

  • mandatory central clearing of OTC derivatives that are suitable for clearing and capable of being cleared;
  • the reporting to securities regulators of all derivatives trading by Canadian counterparties to trade repositories;
  • granting regulatory power to securities regulators to mandate electronic trading of OTC derivatives products; adopting a risk-based approach to capital and collateral requirements, including imposing higher capital and collateral requirements on non-centrally cleared bilateral arrangements as opposed to arrangements where a central counterparty clearing house is involved; and
  • introducing exemptions for certain categories of end-users.