OSC Proposes Adopting Global Standards for Ontario Clearing Agencies

Toronto - The Ontario Securities Commission (OSC) today published for comment local Rule 24-503 Clearing Agency Requirements, which proposes adopting global standards for Ontario financial market infrastructures (FMIs). FMIs include clearing agencies serving both securities and derivatives markets under the Ontario Securities Act. The Rule sets out ongoing requirements for recognized clearing agencies in Ontario and formalizes a framework for the OSC’s recognition or exemption of all clearing agencies seeking to carry on business in the province. This proposed rule would replace OSC Staff Notice 24-702 Regulatory Approach to Recognition and Exemption from Recognition of Clearing Agencies.

In 2012, the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) published the Principles for Financial Market Infrastructures to raise the international standards for payment, clearing and settlement systems. Under the OSC proposal published today, Ontario’s recognized clearing agencies would be required to meet these strengthened global standards, representing the next milestone for the OSC in meeting G-20 commitments for over-the-counter (OTC) derivatives reform.

“It is important that we maintain high standards for Ontario clearing agencies to ensure they are well placed to withstand financial shocks,” said Howard I. Wetston, Q.C., Chair and CEO of the OSC. “Fostering robust infrastructure will strengthen the resiliency of Ontario’s capital markets.”

The OSC is committed to working with clearing agencies impacted by these rules to help them meet the new standards. The affected clearing agencies are currently performing self-assessments of their operations against the global standards referred to in the proposed rules, and are developing plans to address any gaps. OSC staff will continue to work with these clearing agencies during this transition.

The PFMI Coordinating Group, made up of staff from the OSC, Autorité des marchés financiers, British Columbia Securities Commission and Bank of Canada, was formed to achieve consistent implementation of the CPSS-IOSCO standards in Canada. This group has developed supplementary guidance to clarify certain aspects of the new standards specific to the Canadian context, which is included in the companion policy to the proposed rule. The group will continue to work together to develop further guidance on this rule as necessary.

The proposed OSC rule 24-503 is open for comment until March 19, 2014 and can be found on the OSC’s website at www.osc.ca.

The OSC is meeting its G-20 commitments and reinforcing Canada’s financial stability framework through the implementation of OTC derivatives reforms. The OSC is developing internationally and Canadian harmonized legislative and regulatory proposals to strengthen oversight of Ontario’s OTC derivatives market.

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