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Derivatives
Derivatives allow companies and individuals to manage risk by transferring what they consider to be an undesired risk to other interested parties and to gain exposure to certain assets without taking a position on the assets themselves. Financial institutions, pension funds, and other corporations and individuals participate in Ontario’s over-the-counter (OTC) derivatives market.
The Ontario Securities Commission (OSC) is responsible for compliance and oversight of derivatives market participants in Ontario. In addition, the OSC continues to improve the regulatory framework for OTC derivatives trading in Ontario.
Securities regulators—both in Canada and in international markets—are adopting reforms that provide a transparent framework for regulating OTC derivatives markets. Our work in this area helps us fulfill our mandate to contribute to the stability of the financial system and to reduce systemic risk. The OSC works closely with the Canadian Securities Administrators (CSA) and the International Organization of Securities Commissions to fulfill Canada’s commitments to the G20 and the Financial Stability Board.
In Ontario, the derivatives market is regulated by a mixture of national instruments and provincial rules. These include:
Trade reporting
- OSC Rule: 91-506 Derivatives: Product Determination and Related Companion Policy
- OSC Rule: 91-507 Trade Repositories and Derivatives Data Reporting and Related Companion Policy
Clearing and protection of customer collateral
- National Instrument 94-101 Mandatory Central Counterparty Clearing of Derivatives and Related Companion Policy
- National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions and Related Companion Policy
Business conduct and registration
- Proposed National Instrument 93-101 Derivatives: Business Conduct and Related Proposed Companion Policy
- Proposed National Instrument 93-102 Derivatives: Registration and Related Proposed Companion Policy
Binary options ban
The CSA has published the following derivatives consultation papers:
- CSA Consultation Paper: 91-401 Over-the-Counter Derivatives Regulation in Canada
- CSA Consultation Paper: 91-402 Derivatives: Trade Repositories
- CSA Consultation Paper: 91-403 Derivatives: Surveillance and Enforcement
- CSA Consultation Paper: 91-404 Segregation and Portability in OTC Derivatives Clearing
- CSA Consultation Paper: 91-405 Derivatives: End-User Exemption
- CSA Consultation Paper: 91-406 Derivatives: OTC Central Counterparty Clearing
- CSA Consultation Paper: 91-407 Derivatives: Registration
- CSA Consultation Paper: 92-401 Derivatives Trading Facilities
Staff notices from the OSC and CSA further elaborate on the regulation of derivatives markets in Ontario.
Trade reporting
- Compliance Review Plan for OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting Ontario Securities Commission Staff Notice 91-704
- Multilateral CSA Staff Notice 91-306 Compliance Review Findings for Reporting Counterparties
- OSC Staff Notice 91-703 Staff Recommendation on the Reporting of Inter-Affiliate Transactions by End-Users under OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting
Clearing and protection of customer collateral
- CSA Staff Notice: 91-303 Proposed Model Provincial Rule on Mandatory Central Counterparty Clearing of Derivatives
- CSA Staff Notice: 91-304 Proposed Model Provincial Rule – Derivatives: Customer Clearing and Protection of Customer Collateral and Positions
Contract for difference, foreign exchange contracts and similar OTC derivatives products
Margin and collateral
OTC derivatives market concentration
Derivatives participants are required to file the following forms with the OSC through our online filing portal.
- Form 13-502F9 Derivatives Participation Fee, for reporting counterparties required to pay the derivatives participation fee
- Form 93-101F1 Submission to Jurisdiction and Appointment of Agent for Service of Process – for foreign derivatives dealers and advisers to notify the OSC of reliance on the exemption under sections 39 and 46.
- Form for reporting material non-compliance under section 33 of MI 93-101 – for notifying the OSC of any material non-compliance with the requirements of MI 93-101.
- Form 94-101F1 Intragroup Exemption, for local counterparties relying on intragroup exemption in section 7 of NI 94-101
- Form 94-101F2 Derivatives Clearing Services, for regulated clearing agencies identifying derivatives or classes of derivatives
- Form 94-102F1 Customer Collateral Report: Direct Intermediary, for direct intermediaries receiving customer collateral
- Form 94-102F2 Customer Collateral Report: Indirect Intermediary, for indirect intermediaries receiving customer collateral
- Form 94-102F3 Customer Collateral Report: Regulated Clearing Agency, for regulated clearing agencies receiving customer collateral