?With derivatives trade reporting soon to be required in some Canadian provinces, on June 26 2014 the Ontario Securities Commission (OSC) released a second set of amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting which will, among other things, allow parties to designate a single reporting party for dealer to dealer trades and for non-dealer to non-dealer trades. The trade reporting rules in the other provinces are expected to include similar provisions. If approved by the minister of finance, the amendments to the trade reporting rule will come into force on September 9 2014.
As part of ongoing Canadian and international over-the-counter (OTC) derivatives reform, the OSC 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 OSC enacted OSC Rule 91-506 Derivatives: Product Determination, the purpose of which is to define the types of derivative that will be subject to reporting requirements under the trade reporting rule (and to other relevant OSC rules governing derivatives once such rules are enacted). The trade reporting rule was first amended on April 17 2014. As a result, trade reporting was delayed until October 31 2014 and the local counterparty 'fall-back' reporting requirement was removed.
On June 26 2014 the OSC released further amendments to the trade reporting rule. Under the trade reporting rule, if a transaction is between two dealers or two local counterparties, neither of which is a dealer, both parties have a reporting obligation. The amendment allows parties to agree voluntarily to the Canadian Transaction Reporting Party Requirements published by the International Swaps and Derivatives Association (ISDA), which provide for a single party reporting obligation in these two circumstances, with the following reporting counterparty hierarchy:
- swap dealer;
- major swap participant;
- dealer which is neither a swap dealer nor a major swap participant; or
- local counterparty that is not a swap dealer, major swap participant or dealer.
Under the ISDA rules, the term 'dealer' includes any counterparty that has elected in its ISDA Canadian representation letter to be deemed a dealer for purposes of the rules. If agreed to by the parties, the recognition of the ISDA rules in the trade reporting rule allows a party to assume the 'dealer' designation only for purposes of trade reporting and the hierarchy set out in the ISDA rules. Parties that voluntarily adopt the ISDA rules will also need to become party to an ISDA multilateral agreement, which contemplates the release of certain information to the OSC so that the OSC can identify the parties that will rely on the ISDA rules.
The amendment also allows certain OTC derivatives participants that currently report pursuant to the Commodity Futures Trading Commission swap data reporting rules to benefit from substituted compliance under the trade reporting rule. The ability to rely on substituted compliance is dependent on compliance with certain conditions set out in the trade reporting rule. In addition, the amendment includes some changes to the data fields that must be included in the reports made under the trade reporting rule.
For further information on this topic please contact Carol E Derk or Julie Mansi at Borden Ladner Gervais LLP by telephone (+1 416 367 6000), fax (+1 416 367 6749) or email (email@example.com firstname.lastname@example.org). The Borden Ladner Gervais website can be accessed at www.blg.com.