The CSA yesterday published for comment the CSA Staff Notice 91-303 Proposed Model Provincial Rule on Mandatory Central Counterparty Clearing of Derivatives(the Proposed CCP Model Rule).
The Proposed CCP Model Rule sets out requirements for central counterparty (CCP) clearing of OTC derivatives transactions. The purpose of the rule is to enhance market transparency and the overall mitigation of risks in OTC derivatives markets through the introduction of requirements for CCP clearing of previously bilaterally cleared or uncleared derivatives transactions.
The CSA Derivatives Committee, in its Consultation Paper 91-406 Derivatives OTC Central Counterparty Clearing published in June 2012, had sought public comment on a number of recommendations relating to the clearing of eligible OTC derivatives which have been incorporated into the Proposed CCP Model Rule.
The Proposed CCP Model Rule is divided into two rule-making areas, namely (i) the determination of derivatives subject to the CCP clearing requirement (the concept of a “clearable derivative”), and (ii) the requirement to submit a “clearable derivative” to a CCP for clearing, subject to proposed end-user and intragroup exemptions.
Rule 91-506 Derivatives: Product Determination which, as noted in our earlier posts, is scheduled to come into force in Ontario, Quebec and Manitoba on December 31, 2013 in conjunction with local Rule 91-507 Trade Repositories and Derivatives Data Reporting would be made applicable to the CCP clearing rule.
The comment period on these proposals ends on March 19, 2014.
The publication yesterday of the Proposed CCP Model Rule follows the publication by certain members of the CSA of draft Rule 24-503 relating to clearing agency requirements. The CSA are also expected to release Model Provincial Model Rule 91-304 Derivatives Customer Clearing and Protection of Customer Positions and Collateral. The CSA invite industry stakeholders to consider these three publications comprehensively since they each relate to CCP clearing.