We do not have sufficient market data to determine what percentage of the CAD IRS market is between two dealers in Canada, between two international dealers or between one dealer in Canada and one international dealer. If CAD IRS were included in the category of a mandatory clearable derivative, it could result in Canadian dealers utilizing their non-Canadian affiliates to trade in order to avoid the requirement. The requirement could be helpful to the extent the data illustrates that most trades in CAD IRS only occur between Canadian dealers, but if the data were to prove otherwise, imposing a clearing requirement would only further fragment the market.
Overview of the Council’s Comments:
We believe that including CAD IRS should be delayed until such time as either data with respect to where the participants who trade in those instruments are located is more readily available, or when foreign mandates for those instruments are in place, in order to avoid the impact on the competitiveness of local counterparties that are subject to the Proposed National Instrument.