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Letter Summary:
The Proposed Amendments provide an exemption from reporting trades of commodities derivatives if, at the time of execution, the counterparty’s aggregate notional exposure under all contracts based on commodities, other than cash or currency, is less than $250 million. We believe that a number of companies who trade in over-the-counter derivatives where the underlying asset is a commodity may still do for financial purposes (and not hedging purposes) at amounts far lower than $250 million, and thus such financial transactions should be reportable as they currently are in Manitoba, Ontario and Quebec.
Overview of the Council’s Comments:
with respect to the trade repository rules, we agree that the draft rules relating to regulation and oversight are robust and will help ensure that recognized trade repositories operate in a transparent manner and in a way that will promote the public interest. The proposed three-month period for trade repositories to seek and obtain recognition should be sufficient since any entity that is either already operating as a trade repository or sophisticated enough to qualify would likely be preparing its application well in advance of the publication of the final rules. Ideally, the Proposed Amendments would impose the same recognition requirements on trade repositories already recognized in another Canadian jurisdiction, to minimize the administrative burden that would result in having to deal with a different trade repository by those market participants already reporting their trades.