CSA NVS, CSA Que, CSA OSC, CSA NBW, and CSA BC published third request for comments on proposed business conduct rule for derivatives dealers and advisers.
Establishes uniform business conduct regime for dealers, advisers in OTC derivatives.
Previous Consultations
The proposed derivatives business conduct rule was initially published for comment in 2017, and again on Jun. 14, 2018, see rule #44347; this is the third consultation.
Aims to improve transparency, accountability, promote responsible business conduct.
In response to comments received, CSA is publishing revisions to the proposed rule.
Re potential negative impacts on derivatives market liquidity, continued market access.
Also, allowing firms to efficiently implement requirements within compliance systems.
Notable Changes from 2018 Proposal
Added new exemptions for foreign liquidity providers and derivatives sub-advisers.
Streamlined existing foreign derivatives dealer, adviser exemptions so that they more closely conform to international dealer and adviser exemptions in NI 31-103.
New foreign sub-advisers exemption similar to international sub-advisers in NI 31-103.
Provided additional guidance on the application of the business trigger test as it relates to dealers that conduct activities in Canada and in foreign jurisdictions.
As well as on the availability of exemptions from business conduct requirements.
Made significant changes to definition of eligible derivatives party (EDP) to eliminate certain restrictions and to allow firms to also qualify as eligible commercial hedgers.
Transition period to allow derivatives firms to treat permitted clients, qualified parties, accredited counterparties, eligible contract participants as EDPs for up to five years.
Modified senior derivatives manager provisions to add exemptions for derivatives dealers based on aggregate outstanding gross notional amount of derivatives trades.
Included other derivatives and foreign exchange definitions and additional exemptions.
Delayed effective date of one year from the date of the final publication of the rule, together with transition provisions, for treatment of certain clients as EDPs for 5 years.
Effectiveness
Comments to proposed NI 93-101 should be submitted in writing by Mar. 21, 2022.
Aug. 2022 Derivatives Business Conduct Roundtable
On Aug. 12, 2022, CSA reported roundtable on business conduct rule, Sep. 28, 2022.
Expert panels will explore regulatory, implementation, compliance issues re plan to adopt final rule in upcoming year; also, status update on other OTC derivatives rules.
During comment period for 3rd consultation, received submission from 10 commenters
Notable changes to instrument included adopting a bright-line test for qualifying clients as EDPs; expanding the commercial hedger concept under the EDP definition to clarify.
Applying more limited subset of provisions to derivatives dealers relying on notional amount exemptions, increasing financial threshold for commodity derivatives dealers.
Also, expanding the list of status representations that derivatives firms can rely on.
Clarifications re the inclusion of short-term FX contracts in the institutional FX market.
Removing the requirement for foreign derivatives dealers to provide additional reports.
Including detailed guidance for registered advisers relying on the exemption; closely aligning record retention requirements in instrument to timeframe within NI 31-103.
Sep. 28, 2023 CSA OSC Rule Adoption
On Sep. 28, 2023, CSA OSC published MI 93-101, CP 93-101, effective Sep. 28, 2024.
On May 24, 2024, CSA OSC issued Appendix A to CP 93-101, business conduct -suggested form of report for reportable material non-compliance under section 33.
Also issued Form 93-101F1 - submission to jurisdiction and appointment of agent.
Jul, 11, 2024 CSA BC Rule Adoption
On Jul. 11, 2024, CSA BC published commission notice of approval of NI 93-101.
Upon approval of BC Minster of Finance, rule will become effective Sep. 28, 2024.
