The Canadian Securities Administrators yesterday released an update on the proposed local rules designed to set out certain requirements in relation to the application process for seeking recognition as a clearing agency (or an exemption from the recognition requirement), which were published in December 2013.

As we discussed late last year, the proposed rules were published in substantially the same form by the Ontario Securities Commission, Quebec's Autorité des marchés financiers and the Manitoba Securities Commission, while the securities regulators in British Columbia, Alberta, Saskatchewan, New Brunswick and Nova Scotia announced an intention to develop a materially similar multilateral rule in the future.

According to the update provided yesterday, however, the CSA now intend to develop a proposed national instrument that takes into consideration the comments received in response to the earlier local proposals, and that applies across all Canadian jurisdictions to facilitate uniform, consistent and transparent requirements for clearing agencies across the country. The new regulatory framework is also intended to facilitate ongoing compliance by recognized clearing agencies with international minimum standards applicable to financial market infrastructures (FMIs).

The CSA note that the proposed national instrument would further facilitate the efforts of Canadian CCPs to meet the “qualifying CCP” (QCCP) status under the Basel III and Canadian banking guidelines. The notice reminds market participants that Canadian and foreign banks that have certain counterparty exposures to Canadian CCPs would be subject to higher capital requirements if these CCPs do not meet the QCCP status.

The CSA also state that, as with the earlier proposed companion policies, the companion policy to the proposed national instrument will include supplementary guidance jointly developed by the CSA and the Bank of Canada for domestic clearing agencies that are regulated by CSA jurisdictions and the Bank of Canada. The CSA and the Bank of Canada intend to publish for comment further joint supplementary guidance on other standards.

The CSA note that the Bank of Canada has published the Joint Supplementary Guidance related to liquidity risk on its website for a 30-day comment period and state their intention to republish the guidance related to liquidity risk later this fall with the proposed national instrument and related companion policy. The notice encourages prospective commenters to provide their views, if any, during the Bank of Canada’s comment period, which expires on August 4, 2014 so that any feedback can be incorporated in the next round of proposals.

For more information, see CSA Staff Notice 24-310.