On Nov. 21, C-IIROC proposed derivative rule reform, in stage 1.
On Nov. 21, 2019, C-IIROC proposed derivatives rule modernization, stage 1 following CSA request for comment on NI 93-101 on business conduct, NI 93-102, registration.
Review of all dealer/member determined that rule inconsistencies would be created by adoption, derivatives-related scope of application unclear, too narrow, to be clarified.
Outdated sections needed to be enhanced, conflicting sections needed amendments.
Follows Aug. 22, C-IIROC-issued plain language dealer member rules, see #64210.
Objectives
Ensure rules are materially harmonized with CSA rules as applied to securities and derivatives; clearly specify which core regulatory obligations apply to securities, listed, OTC derivatives, eliminate inconsistencies in regulatory treatment where applicable.
Due to extent, nature of proposed amendments, comments requested in two stages.
Stage 1
Includes all proposed C-IIROC amendments other than margin requirements related.
Expand scope to apply only to securities-related activities to also apply to derivatives-related activity; those involving futures, listed options to also apply to OTC derivatives.
Including contracts for difference (CFDs) and foreign exchange contracts (Forex); also adopt, where appropriate, requirements/standards by other jurisdictional agencies.
Stage 2
Will include proposed amendments to margin requirements in order to adequately constrain leverage, address margin requirements; for public comment at later date.
2 key considerations, objectives that all rule amendments pursued should avoid the creation of new regulatory arbitrage situations, reduce, eliminate existing regulatory arbitrage situations, have consistent rules on securities- derivatives-related activities.
Effectiveness
Comments due 90 days from publication of notice, latest by Feb. 19, 2020.
The revised proposed amendments reduced most of the initial changes using the updated version of IIROC Rules, which was implemented on Dec. 31, 2021, #64210.
Also, addressed issues and suggestions in comments received on the initial proposal.
Comments on revised proposed amendments to derivatives rule due on Jun. 13, 2022.
Revised proposal to incorporate recent Investment dealer and partially consolidated rules (IDPC), formerly the IIROC rules, which came into effect on Jan. 1, 2023.
Derivatives modernization rule, stage 1 provided on page 237 of the CSA Que bulletin.
Comments on republished derivatives proposal must be submitted by Aug. 14, 2023.
Jan. 18, 2024 CSA Approval
On Jan. 18, 2024, CSA published approval of Phase 1 amendments intended to modernize and simplify requirements of IDPC rules re derivatives in CSA Que bulletin.
The approved Phase 1 amendments will take effect on Sep. 28, 2024.
Jan. 18, 2024 CIRO on CSA Approval, Guidance Issued
On Jan. 18, 2024, CIRO issued Bulletin 24-0014, IDCP rules 1st stage of amendments.
Non-material changes approved; removed term contract when used in conjunction with derivatives; removed the term trading when referring to derivative accounts.
Replaced term transaction with derivative in the definition of hedger, to clarify the underlying interest and intended effect is that of derivative and not the transaction.
Replace marketplace with exchange in definition of listed derivative, to reflect intention
Published Applying and interpreting the definitions of hedger and institutional client.
Clarified whether a client qualifies as a hedger; classification as institutional client.
Also, Derivatives risk disclosure statement, replaced GN-3500-21-004, see #118928.
Member who is registered as investment dealer must provide client with most recent derivatives risk disclosure statement approved before accepting initial derivatives order
Provided redline version of amendments to rules and summary of received comments.
Final rule amendments and new guidance issued will be effective on Sep. 28, 2024.
On the same say, CSA OSC published approval for the derivates rules modernization.
Regulators
C-IIROC; CIRO; CSA; CSA OSC; CSA Que
Entity Types
Auditor; B/D; FCM; HF; IA; OTC
Reference
CSA Que: Bul Vol. 21 No. 2 p. 251, 1/18/2023; Dec 2023-DPEMD-0011, 12/21/2023; Bul Vol. 20 No. 27 p. 237, 7/13/2023; CIRO: Bul 24-0014, RF, Info, Gd GN-1200-24-001, Gd GN-3200-24-001, Rpl Gd GN-3500-21-004, 1/18/2024; CSA OSC: Bul Vol. 47 No. 3 p. 775, 1/18/2024; Bul Vol. 46 No. 28 p. 6187, 7/13/2023; IIROC: RF 23-0092, 7/13/2023; 45 OSCB 4281, RN 22-0055, 4/14/2022; PR, 11/21/2019; RN 19-0220; NI 93-101, NI 93-102;
