Notice Of Effective Date – Technical/Housekeeping Amendments to CDS Rules – CDS Clearing and Depository Services Inc.

Canadian Depository for Securities Limited (CDS) rule review
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A. DESCRIPTION OF THE CDS RULE AMENDMENTS

The CDS Rules marked for the amendments are attached as Appendix A and may be accessed at the CDS website at:

http://www.cds.ca/cdsclearinghome.nsf/Pages/-EN-Participantrules.

Rule 1.3.9 is updated to reflect current legislation. The reference to section 10.2 of the Quebec Securities Act (repealed in 2008) is replaced by a reference to theAct Respecting the Transfer of Securities and the Establishment of Security Entitlements of Quebec (in force since January 1, 2009). The reference to the recognition of CDS as a clearing agency under the Ontario Business Corporations Act is deleted, as the recognition is now only under the Ontario Securities Act. References are now made to both Quebec and Ontario current legislation with respect to Rules terminology, jurisdiction and effect of the Rules.

The definitions in Rule 1.2 are re-ordered alphabetically. Definitions in Rule 1.2, and Rules 7.2.6 and 7.3.2 are amended to use the correct defined terms. Rule 1.3.5 refers to facsimile rather than telecopier, consistent with Rules 1.3.6 and 5.10. In Rule 7.6.4, reversed references to "pledgor" and "pledgee" are corrected.

These amendments were reviewed and approved by the Board of Directors{1} of The Canadian Depository for Securities Limited on January 20, 2010.

B. REASONS FOR TECHNICAL CLASSIFICATION

The amendments proposed pursuant to this Notice are considered technical amendments as:

(i) the amendments to Rule 1.3.9(f) are required to ensure consistency or compliance with an existing rule, securities legislation or other regulatory requirement;

(ii) the other amendments are required for the correction of spelling, punctuation, typographical or grammatical mistakes or inaccurate cross-referencing.

C. EFFECTIVE DATE OF THE CDS RULE AMENDMENTS

Pursuant to Appendix A ("Rule Protocol Regarding The Review And Approval Of CDS Rules By The OSC") of the Recognition and Designation Order, as amended on November 1, 2006, and Annexe A ("Protocole d'examen et d'approbation des Règles de Services de Dépôt et de Compensation CDS Inc. par l'Autorité des marchés financiers") of AMF Decision 2006-PDG-0180, made effective on November 1, 2006, CDS has determined that the proposed amendments will become effective on a date subsequently determined by CDS, and as stipulated in the related CDS Bulletin.

D. QUESTIONS

Questions regarding this notice may be directed to:

Legal Department

CDS Clearing and Depository Services Inc.

85 Richmond Street West

Toronto, Ontario M5H 2C9

Fax: 416-365-1984

e-mail: [email protected]

{1} Pursuant to a unanimous shareholder agreement between The Canadian Depository for Securities Limited ("CDS Ltd.") and CDS, effective as of November 01, 2006, CDS Ltd., which acts under the supervision of its Board of Directors, assumed all rights, powers, and duties of the CDS Board of Directors.

 

APPENDIX A

CDS TECHNICAL/HOUSEKEEPING RULE AMENDMENTS

Text of CDS Participant Rules marked to reflect proposed

 

Text CDS Participant Rules reflecting the adoption of

amendments

 

proposed amendments

 
1.2.1 Definitions 1.2.1 Definitions
For the purposes of the Legal Documents, unless otherwise specified: For the purposes of the Legal Documents, unless otherwise specified:
 
Move the definitions of the terms "Euroclear UK Direct Charges", "Euroclear UK Direct Participant" and "Euroclear UK Direct Service" so that these terms are placed between the terms "Euroclear UK & Ireland" and "Exchange" instead of between the terms "CREST" and "CREST Software". Move the definitions of the terms "Euroclear UK Direct Charges", "Euroclear UK Direct Participant" and "Euroclear UK Direct Service" so that these terms are placed between the terms "Euroclear UK & Ireland" and "Exchange" instead of between the terms "CREST" and "CREST Software".
 
"FINet Obligation" means a Central Counterparty Obligation between CDS and a Participant that is calculated as the result of the processing of Trades, prior to Settlement, in the FINet FiNet Function. "FINet Obligation" means a Central Counterparty Obligation between CDS and a Participant that is calculated as the result of the processing of Trades, prior to Settlement, in the FINet Function.
 
"TA Participant" means a Participant participant who is classified as such by CDS pursuant to Rule 2.3.2. "TA Participant" means a Participant who is classified as such by CDS pursuant to Rule 2.3.2.
 
1.3.5Notice from CDS to Participants 1.3.5Notice from CDS to Participants
(a)Method Of Giving Notice To Participants Generally (a)Method Of Giving Notice To Participants Generally
When CDS gives a notice under the Rules or Participant Agreement that is directed to Participants generally or to a group of Participants, the notice shall be: When CDS gives a notice under the Rules or Participant Agreement that is directed to Participants generally or to a group of Participants, the notice shall be:
(iii)sent by confirmed recorded telecommunication to the telecopier facsimile number provided by each Participant to whom the notice is directed; or (iii)sent by confirmed recorded telecommunication to the facsimile number provided by each Participant to whom the notice is directed; or
 
(b)Method For Giving Notice To A Particular Participant (b)Method For Giving Notice To A Particular Participant
When CDS gives a notice under the Rules or Participant Agreement that is directed to a particular Participant, the notice shall be: When CDS gives a notice under the Rules or Participant Agreement that is directed to a particular Participant, the notice shall be:
(iii) sent by confirmed recorded telecommunication to the telecopier facsimile number provided by the Participant; or (iii)sent by confirmed recorded telecommunication to the facsimile number provided by the Participant; or
 
(d) Address For Notice (d) Address For Notice
Each Participant shall provide CDS with an appropriate e-mail address, street address, lock box number and telecopier facsimile number for purposes of this Rule, and CDS may rely upon the most recent notification provided by a Participant. Each Participant shall provide CDS with an appropriate e-mail address, street address, lock box number and facsimile number for purposes of this Rule, and CDS may rely upon the most recent notification provided by a Participant.
 
1.3.9 CDS as Clearing Agency 1.3.9 CDS as Clearing Agency
The Autorité des marchés financiers has authorized CDS to carry on clearing activities in Québec pursuant to the Securities Act of Quebec. The Ontario Securities Commission has designated CDS as a recognized clearing agency pursuant to the Business Corporations Act and the Securities Act of Ontario. The Securities Transfer Act, 2006 of Ontario ("Ontario STA") and the Act Respecting the Transfer of Securities and the Establishment of Security Entitlements of Quebec ("Quebec STA") refer to clearing agency transactions. CDSX has been designated as a clearing and settlement system under Part I of the Payment Clearing and Settlement Act of Canada. Accordingly, CDS and each Participant acknowledge that: The Autorité des marchés financiers has authorized CDS to carry on clearing activities in Québec pursuant to the Securities Act of Quebec. The Ontario Securities Commission has designated CDS as a recognized clearing agency pursuant to the Securities Act of Ontario. The Securities Transfer Act, 2006 of Ontario ("Ontario STA") and the Act Respecting the Transfer of Securities and the Establishment of Security Entitlements of Quebec ("Quebec STA") refer to clearing agency transactions. CDSX has been designated as a clearing and settlement system under Part I of the Payment Clearing and Settlement Act of Canada. Accordingly, CDS and each Participant acknowledge that:
(a)CDS is a "clearing agency" and a "securities intermediary" as those terms are defined in the Ontario STA and in the Quebec STA Securities Transfer Act, 2006 of Ontario ("STA"); (a)CDS is a "clearing agency" and a "securities intermediary" as those terms are defined in the Ontario STA and in the Quebec STA;
(b)each Participant is an "entitlement holder" of CDS, as that term is defined in the STA Ontario STA and in the Quebec STA; (b)each Participant is an "entitlement holder" of CDS, as that term is defined in the Ontario STA and in the Quebec STA;
(c)instructions given by Participants with respect to Securities held by CDS are "entitlement orders", as that term is defined in the STA Ontario STA and in the Quebec STA; (c)instructions given by Participants with respect to Securities held by CDS are "entitlement orders", as that term is defined in the Ontario STA and in the Quebec STA;
(d)financial assets referred to in the Rules are "financial assets", as that term is defined in the STA Ontario STA and in the Quebec STA; (d)financial assets referred to in the Rules are "financial assets", as that term is defined in the Ontario STA and in the Quebec STA;
(e)the Legal Documents constitute the agreement or juridical act between CDS as the securities intermediary and the Participants as entitlement holders governing the securities accounts maintained by CDS for each Participant and for itself, as that agreement or juridical act is referred to in the STA Ontario STA and in the Quebec Civil Code respectively; and (e)the Legal Documents constitute the agreement or juridical act between CDS as the securities intermediary and the Participants as entitlement holders governing the securities accounts maintained by CDS for each Participant and for itself, as that agreement or juridical act is referred to in the Ontario STA and in the Quebec Civil Code respectively;
(f)the Ledgers maintained by CDS for Participants and for itself are (i) securities accounts referred to in the STA Ontario STA and in the Quebec STA; and and (ii) the accounts of the clearing house referred to in section 10.2 of the Securities Act of Quebec. (f)the Ledgers maintained by CDS for Participants and for itself are securities accounts referred to in the Ontario STA and in the Quebec STA; and
(g)the Legal Documents constitute the rules of the clearing agency and are entitled to the protection of section 7 of the Ontario STA and of section 4 of the Quebec STA. (g)the Legal Documents constitute the rules of the clearing agency and are entitled to the protection of section 7 of the Ontario STA and of section 4 of the Quebec STA.
 
7.2.6 Mode of Settlement 7.2.6 Mode of Settlement
Each Trade must include a mode of settlement indicator that is one of Trade-for-Trade or CNS. The mode of settlement indicator is either included in the instructions when the Trade is reported or confirmed, or is added automatically by the system in accordance with the criteria in the Procedures and user User Guides. Each Trade must include a mode of settlement indicator that is one of Trade-for-Trade or CNS. The mode of settlement indicator is either included in the instructions when the Trade is reported or confirmed, or is added automatically by the system in accordance with the criteria in the Procedures and User Guides.
 
7.3.2 Eligibility 7.3.2 Eligibility
... A current or past or future value-dated Trade may be processed prior to Settlement through FiNet FINet, if FINet applies automatically to that class of Trades and if the Trade meets the eligibility criteria set out in the Procedures and the criteria set out in each Participant's service options. ... A current or past or future value-dated Trade may be processed prior to Settlement through FINet, if FINet applies automatically to that class of Trades and if the Trade meets the eligibility criteria set out in the Procedures and the criteria set out in each Participant's service options.
 
7.6.4Pledge 7.6.4 Pledge
... So long as the Pledged Securities or funds remain in the Collateral Account of the pledgor pledgee Participant to whom they are Pledged, CDS also reflects the delivery of such Securities or funds in the Pledge Account for the pledgee pledgor Participant who made the Pledge. ... ... So long as the Pledged Securities or funds remain in the Collateral Account of the pledgee Participant to whom they are Pledged, CDS also reflects the delivery of such Securities or funds in the Pledge Account for the pledgor Participant who made the Pledge. ...