British Columbia Gazette Part II — B.C. Reg. 129/2017

B.C. Reg. 129/2017

British Columbia — Gazette

Victoria, British Columbia, Canada

Licence

Disclaimer

Volume 60, No. 6

129/2017

The British Columbia Gazette,

Part II

April 11, 2017

B.C. Reg. 129/2017 , deposited March 31, 2017, under the SECURITIES ACT [section 184]. Rule of the British Columbia Securities Commission, dated March 31, 2017.

The British Columbia Securities Commission orders that, effective April 4, 2017,

National Instrument 94101 Mandatory Central Counterparty Clearing of Derivatives , as set out in the attached Schedule, is made.

— B. LEONG, British Columbia Securities Commission .

Schedule

National Instrument 94-101

Mandatory Central Counterparty Clearing of Derivatives

Part 1 Definitions And

Interpretation

Definitions and

interpretation

(1) In this Instrument:

“local counterparty” means a counterparty to a derivative if, at the time of execution of the transaction,

either of the following applies:

(

a) the counterparty is a person or company, other than an individual, to which

one or more of the following apply:

(

i) the person or company is organized under the laws of the local jurisdiction;

(ii) the head office of the person or company is in the local jurisdiction;

(iii) the principal place of business of the person or company is in the local

jurisdiction;

(

b) the counterparty is an affiliated entity of a person or company referred to

in paragraph (

a) and the person or company is liable for all or substantially all

the liabilities of the counterparty;

“mandatory clearable derivative” means a derivative within a class of derivatives listed in Appendix A;

“participant” means a person or company that has entered into an agreement with a regulated clearing

agency to access the services of the regulated clearing agency and is bound by the

regulated clearing agency’s rules and procedures;

“regulated clearing agency” means,

(

a) in Alberta, New Brunswick, Newfoundland and Labrador, the Northwest Territories,

Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan and Yukon, a person or company

recognized or exempted from recognition as a clearing agency or clearing house pursuant

to the securities legislation of any jurisdiction of Canada,

(

b) in British Columbia, Manitoba and Ontario, a person or company recognized

or exempted from recognition as a clearing agency in the local jurisdiction, and

(

c) in Québec, a person recognized or exempted from recognition as a clearing

house;

“transaction” means any of the following:

(

a) entering into a derivative or making a material amendment to, assigning, selling

or otherwise acquiring or disposing of a derivative;

(

b) the novation of a derivative, other than a novation with a clearing agency

or clearing house.

(2) In this Instrument, a person or company is an affiliated entity of another

person or company if one of them controls the other or each of them is controlled

by the same person or company.

(3) In this Instrument, a person or company (the first party) is considered to

control another person or company (the second party) if any of the following apply:

(

a) the first party beneficially owns or directly or indirectly exercises control

or direction over securities of the second party carrying votes which, if exercised,

would entitle the first party to elect a majority of the directors of the second party

unless the first party holds the voting securities only to secure an obligation;

(

b) the second party is a partnership, other than a limited partnership, and the

first party holds more than 50% of the interests of the partnership;

(

c) the second party is a limited partnership and the general partner of the limited

partnership is the first party;

(

d) the second party is a trust and a trustee of the trust is the first party.

(4) In this Instrument, in Alberta, British Columbia, New Brunswick, Newfoundland

and Labrador, the Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island,

Saskatchewan and Yukon, “derivative” means a “specified derivative” as defined in

Multilateral Instrument 91101 Derivatives: Product Determination .

Application

2 This Instrument applies to,

(

a) in Manitoba,

(

i) a derivative other than a contract or instrument that, for any purpose, is prescribed

by any of sections 2, 4 and 5 of Manitoba Securities Commission Rule 91-506 Derivatives: Product Determination not to be a derivative, and

(ii) a derivative that is otherwise a security and that, for any purpose, is prescribed

section 3 of Manitoba Securities Commission Rule 91-506 Derivatives: Product Determination not to be a security,

(

b) in Ontario,

(

i) a derivative other than a contract or instrument that, for any purpose, is

prescribed by any of sections 2, 4 and 5 of Ontario Securities Commission Rule 91-506

Derivatives: Product Determination not to be a derivative, and

(ii) a derivative that is otherwise a security and that, for any purpose, is prescribed

section 3 of Ontario Securities Commission Rule 91506 Derivatives: Product Determination not to be a security, and

(

c) in Québec, a derivative specified in

section 1.2 of Regulation 91-506 respecting

derivatives determination, other than a contract or instrument specified in

section

2 of that regulation.

Part 2

Mandatory Central Counterparty Clearing

Duty to submit for clearing

(1) A local counterparty to a transaction in a mandatory clearable derivative must

submit, or cause to be submitted, the mandatory clearable derivative for clearing

to a regulated clearing agency that offers clearing services in respect of the mandatory

clearable derivative, if one or more of the following applies to each counterparty:

(

a) the counterparty

(

i) is a participant of a regulated clearing agency that offers clearing services

in respect of the mandatory clearable derivative, and

(ii) subscribes to clearing services for the class of derivatives to which the

mandatory clearable derivative belongs;

(

b) the counterparty

(

i) is an affiliated entity of a participant referred to in paragraph (a), and

(ii) has had, at any time after the date on which this Instrument comes into force,

a month-end gross notional amount under all outstanding derivatives exceeding $1 000 000 000

excluding derivatives to which paragraph 7 (1) (

a) applies;

(

c) the counterparty

(

i) is a local counterparty in any jurisdiction of Canada, other than a counterparty

to which paragraph (

b) applies, and

(ii) has had, at any time after the date on which this Instrument comes into

force, a month-end gross notional amount under all outstanding derivatives, combined

with each affiliated entity that is a local counterparty in any jurisdiction of Canada,

exceeding $500 000 000 000 excluding derivatives to which paragraph 7 (1) (

a) applies.

(2) Unless paragraph (1) (

a) applies, a local counterparty to which paragraph

(1) (

b) or (1) (

c) applies is not required to submit a mandatory clearable derivative

for clearing to a regulated clearing agency if the transaction in the mandatory clearable

derivative was executed before the 90th day after the end of the month in which the

month-end gross notional amount first exceeded the amount specified in subparagraph

(1) (b) (ii) or (1) (c) (ii), as applicable.

(3) Unless subsection (2) applies, a local counterparty to which subsection

(1) applies must submit a mandatory clearable derivative for clearing no later than

(

a) the end of the day of execution if the transaction is executed during the

business hours of the regulated clearing agency, or

(

b) the end of the next business day if the transaction is executed after the

business hours of the regulated clearing agency.

(4) A local counterparty to which subsection (1) applies must submit the mandatory

clearable derivative for clearing in accordance with the rules of the regulated clearing

agency, as amended from time to time.

(5) A counterparty that is a local counterparty solely pursuant to paragraph (

b) of the definition of “local counterparty” in

section 1 is exempt from this

section

if the mandatory clearable derivative is submitted for clearing in accordance with

the law of a foreign jurisdiction to which the counterparty is subject, set out in

Appendix B.

Notice of rejection

4 If a regulated clearing agency rejects a mandatory clearable derivative submitted

for clearing, the regulated clearing agency must immediately notify each local counterparty

to the mandatory clearable derivative.

Public disclosure of clearable and mandatory clearable derivatives

5 A regulated clearing agency must do both of the following:

(

a) publish a list of each derivative or class of derivatives for which the regulated

clearing agency offers clearing services and state whether each derivative or class

of derivatives is a mandatory clearable derivative;

(

b) make the list accessible to the public at no cost on its website.

Part 3

Exemptions from Mandatory Central Counterparty Clearing

Non-application

6 This Instrument does not apply to the following counterparties:

government of a foreign jurisdiction;

(

b) a crown corporation for which the government of the jurisdiction where the

crown corporation was constituted is liable for all or substantially all the liabilities

of the corporation;

(

c) a person or company wholly owned by one or more governments referred to in

paragraph (

a) if the government or governments are liable for all or substantially

all the liabilities of the person or company;

(

d) the Bank of Canada or a central bank of a foreign jurisdiction;

(

e) the Bank for International Settlements;

(

f) the International Monetary Fund.

Intragroup exemption

(1) A local counterparty is exempt from

section 3, with respect to a mandatory clearable

derivative, if all of the following apply:

(

a) the mandatory clearable derivative is between a counterparty and an affiliated

entity of the counterparty and each of the counterparty and the affiliated entity

are consolidated as part of the same audited consolidated financial statements prepared

in accordance with “accounting principles” as defined in National Instrument 52-107

Acceptable Accounting Principles and Auditing Standards ;

(

b) both counterparties to the mandatory clearable derivative agree to rely on

this exemption;

(

c) the mandatory clearable derivative is subject to a centralized risk management

program reasonably designed to assist in monitoring and managing the risks associated

with the derivative between the counterparties through evaluation, measurement and

control procedures;

(

d) there is a written agreement between the counterparties setting out the terms

of the mandatory clearable derivative between the counterparties.

(2) No later than the 30th day after a local counterparty first relies on subsection

(1) in respect of a mandatory clearable derivative with a counterparty, the local

counterparty must deliver electronically to the regulator or securities regulatory

authority a completed Form 94-101F1 Intragroup Exemption .

(3) No later than the 10th day after a local counterparty becomes aware that the

information in a previously delivered Form 94-101F1 Intragroup Exemption is no longer accurate, the local counterparty must deliver or cause to be delivered

electronically to the regulator or securities regulatory authority an amended Form 94-101F1

Intragroup Exemption .

Multilateral portfolio compression exemption

8 A local counterparty is exempt from

section 3, with respect to a mandatory clearable

derivative resulting from a multilateral portfolio compression exercise, if all of

the following apply:

(

a) the mandatory clearable derivative is entered into as a result of more than 2

counterparties changing or terminating and replacing existing derivatives;

(

b) the existing derivatives do not include a mandatory clearable derivative entered

into after the effective date on which the class of derivatives became a mandatory

clearable derivative;

(

c) the existing derivatives were not cleared by a clearing agency or clearing

house;

(

d) the mandatory clearable derivative is entered into by the same counterparties

as the existing derivatives;

(

e) the multilateral portfolio compression exercise is conducted by an independent

thirdparty.

Recordkeeping

(1) A local counterparty to a mandatory clearable derivative that relied on

section 7

or 8 with respect to a mandatory clearable derivative must keep records demonstrating

that the conditions referred to in those sections, as applicable, were satisfied.

(2) The records required to be maintained under subsection (1) must be kept in

a safe location and in a durable form for a period of

(

a) except in Manitoba, 7 years following the date on which the mandatory clearable

derivative expires or is terminated, and

(

b) in Manitoba, 8 years following the date on which the mandatory clearable derivative

expires or is terminated.

Part 4

Mandatory Clearable Derivatives

Submission of information on derivatives clearing services provided by a regulated

clearing agency

10 No later than the 10th day after a regulated clearing agency first offers clearing

services for a derivative or class of derivatives, the regulated clearing agency must

deliver electronically to the regulator or securities regulatory authority a completed

Form 94-101F2 Derivatives Clearing Services , identifying the derivative or class of derivatives.

Part 5 Exemption

(1) The regulator or the securities regulatory authority may grant an exemption to

this Instrument, in whole or in part, subject to such conditions or restrictions as

may be imposed in the exemption.

(2) Despite subsection (1), in Ontario, only the regulator may grant an exemption.

(3) Except in Alberta and Ontario, an exemption referred to in subsection

(1) is granted under the statute referred to in Appendix B of National Instrument 14-101

Definitions opposite the name of the local jurisdiction.

Part 6

Transition

Transition – regulated clearing agency filing requirement

12 No later than May 4, 2017, a regulated clearing agency must deliver electronically

to the regulator or securities regulatory authority a completed Form 94-101F2 Derivatives Clearing Services , identifying all derivatives or classes of derivatives for which it offered clearing

services on April 4, 2017.

Transition – certain counterparties’ submission for clearing

13 A counterparty specified in paragraph 3 (1) (

b) or (

c) to which paragraph (3) (1) (

a) does not apply is not required to submit a mandatory clearable derivative for clearing

to a regulated clearing agency until October 4, 2017.

APPENDIX A

NATIONAL INSTRUMENT 94-101

MANDATORY CENTRAL COUNTERPARTY CLEARING OF DERIVATIVES

MANDATORY CLEARABLE DERIVATIVES

(Section 1(1))

Interest Rate Swaps

Type

Floating index

Settlement currency

Maturity

Settlement currency type

Optionality

Notional type

Fixed-to-float

CDOR

GBP

7 days to 3 years

Single currency

Constant or variable

Forward Rate Agreements

Type

Floating index

Settlement currency

Maturity

Settlement currency type

Optionality

Notional type

Forward rate agreement

LIBOR

USD

3 days to 3 years

Single currency

Constant or variable

Forward rate agreement

EURIBOR

EUR

3 days to 3 years

Single currency

Constant or variable

Forward rate agreement

LIBOR

GBP

3 days to 3 years

Single currency

Constant or variable

APPENDIX B

NATIONAL INSTRUMENT 94-101

MANDATORY CENTRAL COUNTERPARTY CLEARING OF DERIVATIVES

LAWS, REGULATIONS OR INSTRUMENTS OF FOREIGN JURISDICTIONS APPLICABLE FOR SUBSTITUTED

COMPLIANCE

(Subsection 3(5))

Foreign jurisdiction

Laws, regulations or instruments

European Union

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July

2012 on OTC derivatives, central counterparties and trade repositories

United States of America

Clearing Requirement and Related Rules, 17 C.F.R. pt. 50

FORM 94-101F1

INTRAGROUP EXEMPTION

Type of Filing: INITIAL AMENDMENT

Section 1 – Information on the entity delivering this Form

1. Provide the following information with respect to the entity delivering this Form:

Full legal name:

Name under which it conducts business, if different:

Head office

Address:

Mailing address (if different):

Telephone:

Website:

Contact employee

Name and title:

Telephone:

E-mail:

Other offices

Address:

Telephone:

E-mail:

Canadian counsel (if applicable)

Firm name:

Contact name:

Telephone:

E-mail:

2. In addition to providing the information required in item 1, if this Form is delivered

for the purpose of reporting a name change on behalf of the entity referred to in

item 1, provide the following information:

Previous full legal name:

Previous name under which the entity conducted business, if different:

Section 2 – Combined notification on behalf of counterparties within the group

to which the entity delivering this Form belongs

1. For the mandatory clearable derivatives to which this Form relates, provide all of

the following information in the table below:

(

a) the legal entity identifier of each counterparty in the same manner as required

under the following instruments:

(

i) in Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, the

Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan and

Yukon, Multilateral Instrument 96-101 Trade Repositories and Derivatives Data Reporting ;

(ii) in Manitoba, Manitoba Securities Commission Rule 91-507 Trade Repositories and Derivatives Data Reporting ;

(iii) in Ontario, Ontario Securities Commission Rule 91-507 Trade Repositories and Derivatives Data Reporting ;

(iv) in Québec, Regulation 91-507 respecting Trade Repositories and Derivatives

Data Reporting;

(

b) whether each counterparty is a local counterparty in a jurisdiction of Canada.

Pairs

LEI of counterparty 1

Jurisdiction(

s) of Canada in which counterparty 1 is a local counterparty

LEI of counterparty 2

Jurisdiction(

s) of Canada in which counterparty 2 is a local counterparty

2. Describe the ownership and control structure of the counterparties identified in

item

Section 3 – Certification

I certify that I am authorized to deliver this Form on behalf of the entity delivering

this Form and on behalf of the counterparties identified in

Section 2 of this Form

and that the information in this Form is true and correct.

DATED at ____________ this ________ day of _________________, 20____

________________________________________________________

(Print name of authorized person)

________________________________________________________

(Print title of authorized person)

________________________________________________________

(Signature of authorized person)

_________________________________

(E-mail)

_________________________________

(Phone number)

FORM 94-101F2

DERIVATIVES CLEARING SERVICES

Type of Filing: INITIAL AMENDMENT

Section 1 – Regulated clearing agency information

1. Full name of regulated clearing agency:

2. Contact information of person authorized to deliver this form

Name and title:

Telephone:

E-mail:

Section 2 – Description of derivatives

1. Identify each derivative or class of derivatives for which the regulated clearing

agency offers clearing services in respect of which a Form 94-101F2 has not previously

been delivered.

2. For each derivative or class of derivatives referred to in item 1, describe all significant

attributes of the derivative or class of derivatives including

(

a) the standard practices for managing life-cycle events associated with the

derivative or class of derivatives, as defined in the following instruments:

(

i) in Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, the

Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Saskatchewan and

Yukon, Multilateral Instrument 96-101 Trade Repositories and Derivatives Data Reporting ;

(ii) in Manitoba, Manitoba Securities Commission Rule 91-507 Trade Repositories and Derivatives Data Reporting ;

(iii) in Ontario, Ontario Securities Commission Rule 91-507 Trade Repositories and Derivatives Data Reporting ;

(iv) in Québec, Regulation 91-507 respecting Trade Repositories and Derivatives

Data Reporting,

(

b) the extent to which the transaction is confirmable electronically,

(

c) the degree of standardization of the contractual terms and operational processes,

(

d) the market for the derivative or class of derivatives, including its participants,

and

(

e) the availability of pricing and liquidity of the derivative or class of derivatives

within Canada and internationally.

3. Describe the impact of providing clearing services for each derivative or class of

derivatives referred to in item 1 on the regulated clearing agency’s risk management

framework and financial resources, including the protection of the regulated clearing

agency on the default of a participant and the effect of the default on the other

participants.

4. Describe the impact, if any, on the regulated clearing agency’s ability to comply

with its regulatory obligations should the regulator or securities regulatory authority

determine a derivative or class of derivatives referred to in item 1 to be a mandatory

clearable derivative.

5. Describe the clearing services offered for each derivative or class of derivatives

referred to in item 1.

6. If applicable, attach a copy of every notice the regulated clearing agency provided

to its participants for consultation on the launch of the clearing service for a derivative

or class of derivatives referred to in item 1 and a

summary of concerns received in

response to the notice.

Section 3 – Certification

CERTIFICATE OF REGULATED CLEARING AGENCY

I certify that I am authorized to deliver this Form on behalf of the regulated

clearing agency named below and that the information in this Form is true and correct.

DATED at ____________ this ________ day of _________________, 20____

________________________________________________________

(Print name of regulated clearing agency)

________________________________________________________

(Print name of authorized person)

________________________________________________________

(Print title of authorized person)

________________________________________________________

(Signature of authorized person)

Document details

Collection	British Columbia — Gazette
Citation	B.C. Reg. 129/2017
Type	gazette
Volume / chapter	bcgaz2 v60n06 129 2017
Language	en
Format	xml
Source	PROVINCIAL
Identifier	582db107dc69ca29d2412fab648bbdea013beba3

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