Canadian Dollar Offered Rate and Refinitiv Benchmark Services (UK) Limited

Headnote

The Director under the Securities Act (Ontario) and the Commodity Futures Act (Ontario) applied to the Commission for a decision that the Canadian Dollar Offered Rate (CDOR) be designated as a designated benchmark and that its administrator be designated as a designated benchmark administrator. The decision was granted and CDOR was assigned as a designated critical benchmark and a designated interest rate benchmark for the purposes of Multilateral Instrument 25-102 and Ontario Securities Commission Rule 25-501.

Applicable Legislative Provisions

Securities Act (Ontario), s. 24.1.

Commodity Futures Act (Ontario), s. 21.5.

Multilateral Instrument 25-102 Designated Benchmarks and Designated Benchmark Administrators.

Ontario Securities Commission Rule 25-501 (Commodity Futures Act) Designated Benchmarks and Benchmark Administrators.

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, CHAPTER S.5, AS AMENDED (THE "OSA") AND IN THE MATTER OF THE COMMODITY FUTURES ACT, R.S.O. 1990, CHAPTER C.20, AS AMENDED (THE "CFA") AND IN THE MATTER OF THE CANADIAN DOLLAR OFFERED RATE ("CDOR") AND IN THE MATTER OF REFINITIV BENCHMARK SERVICES (UK) LIMITED ("RBSL")

DESIGNATION ORDER

Background

The Ontario Securities Commission (the "Commission") has received an application (the "Application") from the Director under the OSA and the CFA (the "Director") for a decision under the OSA and the CFA that:

(a) CDOR be designated as a designated benchmark,

(b) CDOR be assigned as a designated critical benchmark and a designated interest rate benchmark for the purposes of Multilateral Instrument 25-102 Designated Benchmarks and Designated Benchmark Administrators ("MI 25-102") and Ontario Securities Commission Rule 25-501 (Commodity Futures Act) Designated Benchmarks and Benchmark Administrators ("OSC Rule 25-501"), and

(c) RBSL be designated as a designated benchmark administrator of CDOR.

The Director has given notice of the Application to RBSL and RBSL has declined the opportunity to be heard before the Commission makes its decision.

Interpretation

Terms defined in the OSA, the CFA, National Instrument 14-101 Definitions, MI 25-102 or OSC Rule 25-501 have the same meanings in this decision, unless otherwise defined herein.

Representations

This decision is based on the following facts represented by the Director:

1. CDOR is a key domestically important interest rate benchmark that is currently published in tenors of 1, 2 and 3 months. CDOR is used for a variety of purposes, including to:

(a) calculate the floating-rate component of certain over-the-counter and exchange-traded derivatives,

(b) determine interest payments on certain floating-rate notes and other securities, and

(c) determine the base interest rate on certain loan agreements between corporate borrowers and banks.

2. Significant reliance is placed by market participants on CDOR, which is used in various financial instruments with a notional value of at least $10.9 trillion dollars (based on data published by the Bank of Canada in 2018). This figure is approximately five times larger than the gross domestic product for Canada in 2019 (based on data published by the Government of Canada).

3. CDOR is subject to certain risks, including risks of manipulation of CDOR and risks of interruption or uncertainty in the operations of the administrator of CDOR. Given the reliance placed by market participants on CDOR, if one of these events were to occur, the loss of confidence that Canadian capital markets would suffer and the costs that would be borne by Canadian financial markets (including investors) could be significant.

4. Consequently, Commission staff believe that CDOR should be designated as a designated benchmark and RBSL -- the benchmark administrator of CDOR -- should be designated as a designated benchmark administrator of CDOR. After CDOR and RBSL are so designated, RBSL and the benchmark contributors to CDOR will be required to comply with the applicable provisions of MI 25-102 and OSC Rule 25-501 in respect of CDOR.

5. Furthermore, Commission staff believe that CDOR should be assigned as a designated critical benchmark and a designated interest rate benchmark for the purposes of MI 25-102 and OSC Rule 25-501.

Decision

The Commission is satisfied that it is in the public interest to make this decision.

The decision of the Commission, pursuant to section 24.1 of the OSA and section 21.5 of the CFA, is that:

1. CDOR is designated as a designated benchmark,

2. CDOR is assigned as a designated critical benchmark and a designated interest rate benchmark for the purposes of MI 25-102 and OSC Rule 25-501, and

3. RBSL is designated as a designated benchmark administrator of CDOR.

Dated this 15th day of September, 2021.