Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

The country's largest securities regulator has finalized the first set of sweeping rules that will dictate how over-the-counter derivatives will be governed in Canada.

Following G20 commitments inked in 2009, when the federal government agreed to things such as mandatory derivatives clearing, the Ontario Securities Commission met with myriad industry players and regulators to suss out best practices for derivatives regulation. Those efforts ramped up in the past year, and the OSC has now released its final guidelines for when and how these opaque derivative trades must be reported.

To start, the new rules determine precisely what kind of derivatives will be regulated. While that may seem like a simple question to answer, the term 'derivative' is thrown around quite loosely. For the most part, the OSC's guidelines pertain to things like interest rate swaps, foreign exchange forward contracts and credit default swaps.

Story continues below advertisement

Examples of things that do not fall under the umbrella include commodity forward contracts, provided that physical delivery of the commodity is intended, and gaming and insurance contracts that are already regulated by a domestic or an equivalent foreign regulatory regime.

The OSC also mandates that for derivatives that meet its definitions, their trades must be reported to special "trade repositories," that will keep track of everything outstanding in the market. Such records are necessary because one of the biggest problems during the financial crisis was that no one could see just how big the web of derivatives interconnecting the likes of Lehman Brothers and AIG really was.

OSC derivatives director Kevin Fine said that more is coming down the pipe, particularly draft rules on how derivatives must be cleared, which are expected to come out in the very near future. Figuring out the clearing process is a much more complicated task. "There has been acceptance in the market, particularly among the dealers," regarding derivative trade reporting, he said, but there are still a number of key issues to figure out when it comes to clearing.

However, it is not as though Canadian dealers aren't already voluntarily clearing some of their derivatives trades. It's just that they are some battles over what the final legal framework should say.

To date, Canada has been a bit slower on derivatives regulation that its major Western partners, but the new trade reporting framework is a big step forward. The U.S. already implemented its trade reporting rules, and Europe's kick in early next year. Canada's become law just a few months later.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies