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CSA – Proposed amendments to mandatory central counterparty clearing of derivatives
Letter Summary:
The CAC submitted comments on the CSA’s consultation regarding proposed amendments to National Instrument 94-101 related to mandatory central counterparty clearing of derivatives.
The proposed amendments to National Instrument 94-101 aim to update the list of mandatory clearable derivatives to reflect the transition to a new interest rate benchmarks regime based on overnight risk-free interest rate benchmarks. Specifically, the Proposed Amendments reflect the cessation of certain inter-bank offered rates (IBORs) and the Canadian dollar offered rate (CDOR) interest rate benchmarks. The Proposed Amendments also contemplate adding credit default swaps (CDS) referencing certain indexes as mandatory clearable derivatives.
Overview of the Council’s Comments:
The CAC submitted comments on the CSA’s consultation regarding proposed amendments to National Instrument 94-101 related to mandatory central counterparty clearing of derivatives.
The proposed amendments to National Instrument 94-101 aim to update the list of mandatory clearable derivatives to reflect the transition to a new interest rate benchmarks regime based on overnight risk-free interest rate benchmarks. Specifically, the Proposed Amendments reflect the cessation of certain inter-bank offered rates (IBORs) and the Canadian dollar offered rate (CDOR) interest rate benchmarks. The Proposed Amendments also contemplate adding credit default swaps (CDS) referencing certain indexes as mandatory clearable derivatives.
The CAC agrees with the proposed amendments and appreciates the inclusion of a cost-benefit analysis. However, they request more detailed information to facilitate better stakeholder engagement and understanding of the decision-making process behind the proposed changes.
Specifically, the CAC seeks clarification on the thresholds used to determine which derivatives require clearing, including any factors beyond trading activity, and how international harmonization was considered. The CAC would like to review the analysis and criteria behind the selection of certain derivatives for mandatory clearing, as well as why some were excluded. Providing this additional data would help stakeholders assess the sufficiency of the proposed changes and understand potential future amendments to NI 94-101.