CSA MI 96-101 Trade Repositories

April 15, 2016

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CSA MI 96-101 Trade Repositories

Letter Summary:

The protection of data is not only to protect against the identification of end users, but to avoid parties being able to discern the intentions of other parties placing a hedge (for example, if a counterparty sought to hedge with multiple other parties). For example, in a multi-dealer request for quotes, other dealers could be able to determine intentions based on the net rounding information, particularly below the net $500 million level. In addition, even when it is not possible to identify the counterparties, it would be possible, for example in an interest rate swap transaction, to determine that a counterparty is not hedging but is taking a position on the direction of rates. Thus, if end users are simply looking to hedge, the current rounding brackets may not be useful;
the amount of the trade could be irrelevant and thus the bands between the categories could be much larger (e.g. to the nearest $100 million). The current table of granular rounding categories could increase the overall cost of trades on end users, which will ultimately impact all market participants and could lead to inefficiencies in the market.

Overview of the Council’s Comments:

We understand that public dissemination of derivatives data is intended to facilitate price discovery. However, it would be helpful to have additional statistics with respect to tangible benefits to the general public of public dissemination of the proposed transaction level data, particularly as the information in Canada will be released later than in other jurisdictions such as the United States. Other than entities that either look to profit from the trading patterns of end users and dealers, or who are paid from making trading recommendations based on such data, it is difficult to pinpoint who will benefit from the information. Prior to implementing additional costly reporting requirements, it is important to confirm that there will be appreciable benefits for the market, particularly if the regulators will themselves be receiving the information regardless of the success of the proposals, and have total transparency with respect to the trading activity.