Notice and Request for Comment – Material Amendments to CDS Procedures – Decommissioning of NSCC’s OTC Comparison Service – CDS Clearing and Depository Services Inc.

A. DESCRIPTION OF THE PROPOSED CDS PROCEDURE AMENDMENTS

The proposed amendments will remove references to the National Securities Clearing Corporation (NSCC) Over-the-counter (OTC) Comparison Service and CDS's OTC Trade Correction Service from CDS's procedures.

B. NATURE AND PURPOSE OF THE PROPOSED CDS PROCEDURE AMENDMENTS

Pending approval by the U.S. Securities and Exchange Commission, NSCC proposes to decommission its OTC Comparison Service by the end of December 2012. Once this service is decommissioned, OTC Comparison Service related input will no longer be accepted by NSCC and OTC Comparison Service related output will no longer be produced by NSCC.

CDS's OTC Trade Correction Service is to be discontinued simultaneously as this service provides input to the NSCC OTC Comparison Service.

NSCC's OTC Comparison Service

NSCC's OTC Comparison Service is an OTC trade matching facility that accepts one-sided transactions from participants and matches buyers and sellers based on criteria including: clearing firm, executing market participant ID, CUSIP or trading symbol, share quantity, price and trade date. Once a match is established, the trade is recorded and a contract is forwarded to the participants confirming the comparison. Transactions that do not result in a match during the NSCC comparison process are reported as such to participants on the night the trade was submitted. Participants may continue to try and establish a match by resubmitting the trade to the NSCC comparison process the following day.

Matched transactions (trades) are forwarded to NSCC's CNS system where they are novated. Trades that are not eligible for CNS either settle on a trade-for-trade basis or are included in NSCC's multi-lateral net balance order process.

CDS's OTC Trade Correction Service

CDS provides participants who subscribe to the New York Link service with the OTC Trade Correction Service. This service allows participants to provide CDS with OTC trade information that is to be sent to NSCC's OTC Comparison Service.

Participants provide CDS with OTC trade information and CDS Operations staff use an internal facility/user interface to capture this information. The OTC trade information is then reported to NSCC's OTC Comparison Service via file transmissions.

Files are also received by CDS from participant's service bureaus that contain OTC trade information and these files are forwarded to NSCC's OTC Comparison Service by CDS.

C. IMPACT OF THE PROPOSED CDS PROCEDURE AMENDMENTS

The decommissioning of NSCC's OTC Comparison Service will have the following impacts on participants:

• Participants will need to make the necessary arrangements (in conjunction with their counterparties and/or service bureaus) to migrate to an alternative OTC trade reporting facility
• CDS will no longer accept OTC trade information from participants
• CDS will no longer accept OTC trade information in file format from participant's service bureaus
• The OTC Purchase/Sale Contract report that is made available to participants through CDS's reporting facility (RMS) will be discontinued (the file provided by NSCC to CDS to generate this report will no longer be produced by NSCC).

The CDS participants that use NSCC's OTC Comparison Service have been identified and have been contacted by CDS to ensure that they are making the necessary arrangements with their counterparties and/or service bureaus to migrate to an alternative OTC trade reporting facility.

C.1 Competition

The proposed changes are consequential to a service change at NSCC and are not of our own volition or at the request of our participants.

C.2 Risks and Compliance Costs

The proposed changes are consequential to a service change at NSCC and are not of our own volition or at the request of our participants.

C.3 Comparison to International Standards -- (a) Committee on Payment and Settlement Systems of the Bank for International Settlements, (b) Technical Committee of the International Organization of Securities Commissions, and (c) the Group of Thirty

The proposed changes are consequential to a service change at NSCC and are not of our own volition or at the request of our participants.

D. DESCRIPTION OF THE PROCEDURE DRAFTING PROCESS

D.1 Development Context

CDS's participant procedures were reviewed by CDS staff and references to NSCC's OTC Comparison Service and CDS's OTC Trade Correction Service were identified. The proposed amendments to CDS's participant procedures were subsequently reviewed and approved by CDS management.

D.2 Procedure Drafting Process

CDS Procedure Amendments are reviewed and approved by CDS's Strategic Development Review Committee ("SDRC"). The SDRC determines or reviews, prioritizes and oversees CDS-related systems development and other changes proposed by participants and CDS. The SDRC's membership includes representatives from the CDS Participant community and it meets on a monthly basis.

The proposed amendments were reviewed and approved by the SDRC on October 25, 2012.

D.3 Issues Considered

The participants that use the NSCC OTC Comparison Service will need to conduct this OTC trading activity via an alternative OTC trade reporting facility.

All of the impacted participants currently subscribe to CDS's ACT Service and may use this facility to conduct their OTC trading activity.

CDS has contacted all of the impacted participants to ensure that they are making the necessary arrangements with their counterparties and/or service bureaus to migrate to an alternative OTC trade reporting facility.

D.4 Consultation

A CDS Bulletin was released on June 21, 2012 advising participants of the decommissioning of NSCC's OTC Comparison Service and the discontinuation of CDS's OTC Trade Correction Service.

The Debt & Equity Subcommittee of the SDRC has been kept apprised of the decommissioning of NSCC's OTC Comparison Service and the discontinuation of CDS's OTC Trade Correction Service.

D.5 Alternatives Considered

The participants that will be impacted by the decommissioning of NSCC's OTC Comparison Service may utilize CDS's ACT Service to conduct their OTC trading activity.

D.6 Implementation Plan

CDS is recognized as a clearing agency by the Ontario Securities Commission pursuant to section 21.2 of the Ontario Securities Act and by the British Columbia Securities Commission pursuant to Section 24(d) of the British Columbia Securities Act. The Autorité des marchés financiers has authorized CDS to carry on clearing activities in Québec pursuant to sections 169 and 170 of the Québec Securities Act. In addition CDS is deemed to be the clearing house for CDSX^®, a clearing and settlement system designated by the Bank of Canada pursuant to section 4 of the Payment Clearing and Settlement Act. The Ontario Securities Commission, the British Columbia Securities Commission, the Autorité des marchés financiers and the Bank of Canada will hereafter be collectively referred to as the "Recognizing Regulators".

The amendments to the participant procedures may become effective on or after date of approval of the amendments by the Recognizing Regulators following public notice and comment.

E. TECHNOLOGICAL SYSTEMS CHANGES

E.1 CDS

Technological systems changes are required by CDS in order to:

• retire CDS's internal OTC trade correction facility/user interface
• de-schedule and remove the automated processes (jobs) that process incoming files from participant's service bureaus that contain OTC trade information
• de-schedule and remove the jobs that generate files that are sent by CDS to NSCC's OTC Comparison Service
• de-schedule and remove the jobs that process incoming files from NSCC that contain the OTC Purchase/Sale Contract reports.

E.2 CDS Participants

Technological systems changes may be required by CDS participants in order to conduct their OTC trading activity using an alternative facility.

E.3 Other Market Participants

Technological systems changes may be required by the CDS participant's service bureaus in order to direct their customer's (CDS participants) OTC trading activity to an alternative facility.

F. COMPARISON TO OTHER CLEARING AGENCIES

The proposed changes are consequential to a service change at NSCC and are not of our own volition or at the request of our participants.

G. PUBLIC INTEREST ASSESSMENT

CDS has determined that the proposed amendments to the CDS procedures are not contrary to the public interest.

H. COMMENTS

Comments on the proposed amendments should be in writing and submitted within 30 calendar days following the date of publication of this notice in the Ontario Securities Commission Bulletin, the British Columbia Securities Commission Bulletin or the Autorité des marchés financiers Bulletin to:

Rob Argue
Senior Product Manager,
Business Systems Development and Support
CDS Clearing and Depository Services Inc.
85 Richmond Street West
Toronto, Ontario M5H 2C9

Phone: 416-365-3887
Fax: 416-367-2755
Email: [email protected]

Copies should also be provided to the Autorité des marchés financiers, the British Columbia Securities Commission, and the Ontario Securities Commission by forwarding a copy to each of the following individuals:

Me Anne-Marie Beaudoin Secrétaire générale Autorité des marchés financiers 800, square Victoria, 22e étage C.P. 246, tour de la Bourse Montréal (Québec) H4Z 1G3 Télécopieur: 514-864-6381 Courrier électronique: [email protected]	Doug MacKay Manager, Market and SRO Oversight British Columbia Securities Commission 701 West Georgia Street P.O. Box 10142, Pacific Centre Vancouver, B.C. V7Y 1L2 Fax: 604-899-6506 Email: [email protected]
Manager, Market Regulation Market Regulation Branch Ontario Securities Commission Suite 1903, Box 55 20 Queen Street West Toronto, Ontario M5H 3S8 Fax: 416-595-8940 Email: [email protected]	Mark Wang Manager, Legal Services British Columbia Securities Commission 701 West Georgia Street P.O. Box 10142, Pacific Centre Vancouver, B.C., V7Y 1L2 Fax: 604-899-6506 Email: [email protected]

CDS will make available to the public, upon request, all comments received during the comment period.

I. PROPOSED CDS PROCEDURE AMENDMENTS

Access the proposed amendments to the CDS Procedures on the User documentation revisions web page (http://www.cds.ca/cdsclearinghome.nsf/Pages/-EN-blacklined?Open) and to the CDS Forms (if applicable) on Forms online (Click View by Form Category and in the Select a Form Category list, click External review) on the CDS Services web page (www.cdsservices.ca).