Notice of Commission Approval – Amendments Regarding Margin Requirements for Structured Products – Canadian Investment Regulatory Organization (CIRO)

The Ontario Securities Commission has approved CIRO’s proposed amendments to the Investment Dealer and Partially Consolidated (IDPC) Rules and IDPC Form 1 that allow qualifying structured products to be margin eligible (Amendments).

The main purpose of the Amendments is to set a margin methodology for structured products which considers the different risk profiles of the two main structured product types. The Amendments:

• require a fixed margin rate of 50% for principal at risk notes and 30% of principal protected notes that meet eligibility criteria;
• clarify the requirements for reporting concentration exposures in structured products on IDPC Form 1; and
• allow an alternative component-based margin methodology for structured products with a principal protection component.

The Investment Industry Regulatory Organization of Canada (IIROC), a predecessor entity to CIRO, initially published proposed amendments for comment in IIROC Rules Notice 21-0032, followed by a republication for comment in CIRO Rules Bulletin 23-0095. No comment letters were received in response to the second publication for comment. Non-material changes were made following the second publication to reflect the renumbering of certain rule subsections.

A copy of the CIRO Implementation Bulletin, including text of the Amendments, can be found at www.osc.ca.

The Amendments are effective immediately.

In addition, the Alberta Securities Commission; the Autorité des marchés financiers; the British Columbia Securities Commission; the Financial and Consumer Affairs Authority of Saskatchewan; the Financial and Consumer Services Commission of New Brunswick; the Manitoba Securities Commission; the Northwest Territories Office of the Superintendent of Securities; the Nova Scotia Securities Commission; the Nunavut Office of the Superintendent of Securities; the Office of the Superintendent of Securities, Digital Government and Services, Newfoundland and Labrador; the Office of the Yukon Superintendent of Securities; and the Prince Edward Island Office of the Superintendent of Securities have either not objected to or have approved the Amendments.