Commission Approval of Rule: OSC Rule - 91-503 - Trades in Commodity Futures Contracts and Commodity Futures Options Entered Into on Commodity Futures Exchanges Situated Outside Ontario

Notice of Rule

The Commission has, under section 143 of the Securities Act (the "Act"), made Rule 91-503 Trades in Commodity Futures Contracts and Commodity FuturesOptions Entered into on Commodity Futures Exchanges Situate Outside Ontario (the "Rule").

The Rule and the material required by the Act to be delivered to the Minister of Finance were delivered on January 21, 1997. If the Minister does not approve theRule, reject the Rule or return it to the Commission for further consideration, the Rule will come into force on April 15, 1997. If the Minister approves the Rule,the Rule will come into force 15 days after it is approved.

Substance and Purpose of Rule

The purpose of the Rule is to provide relief from the registration and prospectus requirements under the Act in respect of trades in commodity futures contractsand commodity futures options on exchanges situate outside Ontario.

The need for relief arises because clause (p) of the definition of "security" in the Act includes "any commodity futures contract or any commodity futures optionthat is not traded on a commodity futures exchange registered with or recognized by the Commission under the Commodity Futures Act (the "CFA") or the formof which is not accepted by the Director under that Act". No non-Ontario futures exchange, other than The Winnipeg Commodity Exchange (the "WCE"), hasapplied for such recognition or the approval of the form of its contracts, and none is expected to so apply. Therefore all trades in these contracts by Ontarioresidents are, absent relief, subject to the normal prospectus and registration requirements of the Act. As compliance with these requirements is not practical,Ontario residents would effectively be prevented from legally trading on non-Ontario futures exchanges other than the WCE, absent relief. The policy reflected inthe Rule is that Ontario residents should not be denied access to such exchanges, and that such transactions should be governed by the provisions of the CFA,not the Act. As a result, the Rule provides complete relief from the prospectus and registration requirements of the Act for trades on non-Ontario futuresexchanges, other than the WCE.

The subject matter of the Rule is currently dealt with by five existing blanket orders and rulings (the "Existing Orders") made by the Commission in the periodfrom 1980 to 1989. The Existing Orders provide relief under both the Act and the CFA. The Rule supersedes the Existing Orders in respect of the relief providedunder the Act. The Existing Orders will continue to provide relief from provisions of the CFA.

Summary of Rule

Part 2 of the Rule provides complete relief from the registration and prospectus requirements of the Act for all transactions in commodity futures contracts andcommodity futures options, as defined under the CFA (collectively, "contracts"), effected on exchanges not registered with or recognized by the Commissionunder the CFA and the forms of contracts of which are not accepted by the Director under the CFA. The relief extends also to advice given in respect of thecontracts. There are no conditions to the relief, with the effect that the transactions will be governed by the CFA and the Existing Orders in respect of the reliefprovided under the CFA.

Summary of Written Comments Received by the Commission

A draft of the Rule was published for comment in the Ontario Securities Commission Bulletin on October 20, 1995 ((1995), 18 OSCB 4931).

The Commission received no written submissions with respect to the Rule.

The Rule does not vary in any significant way from the proposed Rule published for comment. A number of minor drafting changes have been made to providedrafting consistency with other rules.

Rule

The text of the Rule follows.

PART 1 DEFINITIONS

1.1 Definitions - In this Rule

"CFA means "the Commodity Futures Act";

"commodity futures contract", "commodity futures exchange" and "commodity futures option" have the respective meanings ascribed to them in the CFA;

"exempt exchange" means a commodity futures exchange that is not registered with or recognized by the Commission under the CFA and the forms of contractsof which are not accepted by the Director under the CFA; and

"exempt exchange contract" means a commodity futures contract or a commodity futures option entered into on an exempt exchange.

PART 2 REGISTRATION AND PROSPECTUS EXEMPTIONS

2.1 Registration Exemption - Section 25 of the Act does not apply to a trade in, or advice given in respect of, an exempt exchange contract.

2.2 Prospectus Exemption - Section 53 of the Act does not apply to a trade in an exempt exchange contract.

PART 3 REVOCATION OF BLANKET RULINGS

3.1 Revocation of Blanket Rulings - The following Blanket Rulings of the Commission are revoked only in respect of the relief provided under the Act:

1. In the Matter of Trading in Commodity Futures Contracts and Commodity Futures Options Entered Into On Commodity Futures Exchanges Situate OutsideCanada Other than Commodity Futures Exchanges in the United States of America (1980), 15 OSCB 7, as varied by (1984), 7 OSCB 995.

2. In the Matter of Trading in Commodity Futures Contracts Entered into on the Montreal Stock Exchange (August 25, 1980) OSCWS 15A, as varied by In theMatter of Trading in Commodity Futures Contracts and Commodity Futures Options Entered into on The Montreal Exchange (1989), 12 OSCB 3392.

3. In the Matter of Trading in Commodity Futures Contracts and Commodity Futures Options Entered into on Commodity Futures Exchanges in the UnitedStates of America (1984), 7 OSCB 4576.