British Columbia Gazette Part II — B.C. Reg. 148/2017
B.C. Reg. 148/2017
British Columbia — Gazette
Copyright © Queen's Printer,
Victoria, British Columbia, Canada
Licence
Disclaimer
Volume 60, No. 11
148/2017
The British Columbia Gazette,
Part II
July 4, 2017
B.C. Reg. 148/2017 , deposited June 29, 2017, under the SECURITIES ACT [section 184]. Rule of the British Columbia Securities Commission, dated June 29, 2017.
The British Columbia Securities Commission orders that, effective July 3, 2017, National Instrument 94102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions , as set out in the attached Schedule, is made.
— B. LEONG, British Columbia Securities Commission .
Schedule
National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral And Positions
Part 1
Definitions,
Interpretation and Application
Definitions and
interpretation
(1) In this Instrument:
“Canadian financial institution” has the meaning ascribed to it in National Instrument 45-106 Prospectus Exemptions ;
“cleared derivative” means a derivative that is, directly or indirectly, submitted to and cleared by a
clearing agency;
“clearing intermediary” means a direct intermediary or an indirect intermediary;
“customer” means a counterparty to a cleared derivative other than a clearing intermediary or
a regulated clearing agency;
“customer collateral” means all cash, securities and other property if any of the following apply:
(
a) the cash, securities or other property is received or held by a clearing intermediary
or regulated clearing agency from, for or on behalf of a customer, and is intended
to or does margin, guarantee, secure, settle or adjust a cleared derivative of the
customer;
(
b) the cash, securities or other property is posted on behalf of a customer by
a clearing intermediary to satisfy the margin requirements arising from the customer’s
cleared derivatives;
“direct intermediary” means a person or company that
(
a) with respect to a cleared derivative, is a participant of the regulated clearing
agency at which the cleared derivative is cleared,
(
b) directly provides clearing services for a customer in respect of a cleared
derivative entered into by, for or on behalf of the customer, and
(
c) requires, receives or holds collateral from, for or on behalf of the customer
in providing clearing services;
“excess margin” means customer collateral in respect of a customer’s cleared derivatives that
(
a) is delivered to a regulated clearing agency or clearing intermediary from,
for or on behalf of the customer, and
(
b) has a value in excess of the amount required by the regulated clearing agency
to clear and settle the cleared derivatives of the customer;
“indirect intermediary” means a person or company that
(
a) indirectly provides clearing services for a customer in respect of a cleared
derivative entered into by, for or on behalf of the customer, and
(
b) requires, receives or holds collateral from, for or on behalf of the customer
in providing clearing services;
“initial margin” means, in relation to a regulated clearing agency’s margin system that manages credit
exposures to its participants, collateral that is required by the regulated clearing
agency to cover potential changes in the value of a customer’s cleared derivatives
over an appropriate close-out period in the event of a default;
“local customer” means a customer that, in respect of a local jurisdiction, is any of the following:
(
a) an individual who is resident in the local jurisdiction;
(
b) a person or company, other than an individual, to which any 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;
“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;
“permitted depository” means a person or company that is any of the following:
(
a) a Canadian financial institution or
Schedule III bank;
(
b) a regulated clearing agency;
(
c) the central bank of Canada or of a permitted jurisdiction;
(
d) in Québec, a person recognized or exempt from recognition as a central securities
depository under the Securities Act (Québec);
(
e) a person or company
(
i) whose head office or principal place of business is in a permitted jurisdiction,
(ii) that is a banking institution or trust company of a permitted jurisdiction,
and
(iii) that has shareholders’ equity, as reported in its most recent audited financial
statements, of not less than the equivalent of $100 000 000;
(
f) with respect to customer collateral that it receives from a customer or a
clearing intermediary for which it provides clearing services, an investment dealer
as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations ;
(
g) with respect to customer collateral that it receives from a customer or a
clearing intermediary for which it provides clearing services, a prudentially regulated
entity
(
i) whose head office or principal place of business is located outside of Canada,
and
(ii) that is subject to and in compliance with the laws of a permitted jurisdiction
relating to clearing services and the requiring, receiving and holding of customer
collateral;
“permitted investment” means cash or a security or other financial instrument with minimal market and credit
risk that is capable of being liquidated rapidly with minimal adverse price effect;
“permitted jurisdiction” means a foreign jurisdiction that is any of the following:
(
a) a country where the head office or principal place of business of a
Schedule
III bank is located, and a political subdivision of that country;
(
b) if a customer has provided express written consent to the clearing intermediary
or the regulated clearing agency clearing a cleared derivative in a foreign currency,
the country of origin of the foreign currency used to denominate the rights and obligations
under the cleared derivative entered into by, for or on behalf of the customer, and
a political subdivision of that country;
“position” means the economic interest of a counterparty in an outstanding cleared derivative
at a point in time;
“prudentially regulated entity” means a person or company that is subject to and in compliance with the laws of a
foreign jurisdiction that is a permitted jurisdiction under paragraph (
a) of the definition
of “permitted jurisdiction”, relating to minimum capital requirements, financial soundness
and risk management;
“qualifying central counterparty” means a person or company to which all of the following apply:
(
a) it is recognized, exempt from recognition or otherwise registered or authorized
to operate as a central counterparty in a jurisdiction of Canada or a foreign jurisdiction
by a government or regulatory authority;
(
b) it is subject to regulation that is consistent with the Principles for financial market infrastructures published by the Bank for International Settlements’ Committee on Payments and Market
Infrastructures and the International Organization of Securities Commissions in April
2012, as amended from time to time;
“regulated clearing agency” means
(
a) in British Columbia, Manitoba and Ontario, a person or company recognized
or exempt from recognition as a clearing agency in the local jurisdiction, and
(
b) in Alberta, Newfoundland and Labrador, New Brunswick, the Northwest Territories,
Nova Scotia, Nunavut, Prince Edward Island, Québec, Saskatchewan and Yukon, a person
or company recognized or exempt from recognition as a clearing agency or clearing
house pursuant to the securities legislation of any jurisdiction of Canada;
“Schedule III bank” means an authorized foreign bank named in
Schedule III of the Bank Act (Canada);
“segregate” means to separately hold or separately account for a customer’s positions or customer
collateral.
(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 the 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
(1) This Instrument does not apply to any of the following:
(
a) a regulated clearing agency whose head office or principal place of business
is in a foreign jurisdiction except with respect to a cleared derivative entered into
by, for or on behalf of a local customer;
(
b) a clearing intermediary that provides clearing services except with respect
to a cleared derivative entered into by, for or on behalf of a local customer.
(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 91-506 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.
In each other local jurisdiction, this Instrument applies to a derivative as defined
in subsection 1 (4) of this Instrument. This text box does not form part of this Instrument
and has no official status.
(3) Despite subsection (2), this Instrument does not apply to an option on a security.
(4) In British Columbia, Newfoundland and Labrador, the Northwest Territories,
Nunavut, Prince Edward Island and Yukon, subsection (3) does not apply to a security
that is a derivative as defined in subsection 1 (4).
Part 2
Treatment of Customer Collateral by a Clearing Intermediary
Segregation of customer collateral – clearing intermediary
(1) A clearing intermediary must segregate a customer’s positions and customer collateral
from the positions and property of other persons or companies including the positions
and property of the clearing intermediary.
(2) A clearing intermediary must segregate the positions and customer collateral
of a customer of an indirect intermediary from the positions and property of the indirect
intermediary.
Holding of customer collateral – clearing intermediary
4 A clearing intermediary must hold all customer collateral
(
a) in one or more accounts, at a permitted depository, that are clearly identified
as holding customer collateral, and
(
b) in separate accounts from the property of all persons who are not customers.
Excess margin – clearing intermediary
5 A clearing intermediary must at least once each business day identify and record
the value of excess margin it holds that is attributable to each customer for which
the clearing intermediary provides clearing services.
Use of customer collateral – clearing intermediary
(1) A clearing intermediary must not use or permit the use of customer collateral
except in accordance with this
section and sections 7 and 8.
(2) A clearing intermediary must not use or permit the use of customer collateral
of a customer except to do any of the following:
(
a) margin, guarantee, secure, settle or adjust a cleared derivative of the customer;
(
b) with respect to excess margin, guarantee, secure or extend the credit of the
customer.
(3) Other than with respect to excess margin used in accordance with paragraph
(2) (b), a clearing intermediary must not create or permit to exist any lien or other
encumbrance on a cleared derivative of a customer or customer collateral in respect
of the cleared derivative unless the lien or other encumbrance secures an obligation
resulting from the cleared derivative in favour of any of the following:
(
a) the customer;
(
b) the regulated clearing agency or clearing intermediary responsible for clearing
the cleared derivative.
Investment of customer collateral – clearing intermediary
(1) A clearing intermediary must not invest customer collateral or enter into an
agreement for resale or repurchase of customer collateral except in accordance with
subsections (2) and (3).
(2) A clearing intermediary may
(
a) invest customer collateral in a permitted investment, and
(
b) enter into an agreement for resale or repurchase of customer collateral if
all of the following apply:
(
i) the agreement is for the resale or repurchase of a permitted investment;
(ii) the agreement is in writing;
(iii) the term of the agreement is no more than one business day, or reversal
of the transaction is possible on demand;
(iv) written confirmation specifying the terms of the agreement is delivered by
the counterparty to the agreement to the clearing intermediary immediately on entering
into the agreement;
(
v) the agreement is not entered into with an affiliated entity of the clearing
intermediary.
(3) A loss resulting from an investment or use of a customer’s customer collateral
in accordance with subsection (1) or subsection (2) by the clearing intermediary must
be borne by the clearing intermediary making the investment and not by the customer.
Use of customer collateral – indirect intermediary default
(1) A clearing intermediary must not use customer collateral of a customer of an
indirect intermediary for which the clearing intermediary provides clearing services
to satisfy an obligation of the indirect intermediary.
(2) Despite subsection (1), a clearing intermediary may use the customer collateral
of a customer to fully or partially satisfy an obligation of an indirect intermediary
that arises or is accelerated as a consequence of the indirect intermediary’s default
only if the obligation is attributable to a cleared derivative of the customer.
Acting as a clearing intermediary
(1) A person or company must not act as a clearing intermediary for a customer unless
the person or company is any of the following:
(
a) a person or company that is subject to and is in compliance with the laws
of a jurisdiction of Canada relating to minimum capital requirements, financial soundness
and risk management;
(
b) a person or company that is registered as a dealer under securities legislation
in a local jurisdiction;
(
c) a person or company that is
(
i) a prudentially regulated entity, and
(ii) subject to and in compliance with the laws of a permitted jurisdiction relating
to clearing services and the requiring, receiving and holding of customer collateral.
(2) A clearing intermediary must not provide clearing services for a customer
unless the clearing services are provided in respect of derivatives that are cleared
by a regulated clearing agency.
Risk management – clearing intermediary
10 A clearing intermediary that provides or proposes to provide clearing services for
an indirect intermediary must adopt and implement rules, policies or procedures reasonably
designed to
(
a) identify, monitor and reasonably mitigate material risks arising from the
provision of clearing services, and
(
b) manage a default of the indirect intermediary.
Risk management – indirect intermediary
(1) An indirect intermediary must establish and implement rules, policies or procedures
reasonably designed to identify, monitor and reasonably mitigate the material risks
to the clearing intermediary or its customers arising from the provision of indirect
clearing services for a customer.
(2) An indirect intermediary that receives clearing services from a clearing intermediary
must provide the clearing intermediary with all information reasonably required to
identify, monitor and reasonably mitigate any material risks arising from the provision
of indirect clearing services for its customers.
Part 3
Recordkeeping by a Clearing Intermediary
Retention of records – clearing intermediary
(1) A clearing intermediary must keep a record required under this Part and
Part
4, and all supporting documentation,
(
a) in a readily accessible and safe location and in a durable form,
(
b) in the case of a record or supporting documentation that relates to a cleared
derivative, for a period of 7 years following the date on which the cleared derivative
expires or is terminated, and
(
c) in any other case, for a period of 7 years following the date on which a customer’s
last cleared derivative that is cleared for or on behalf of the customer through the
clearing intermediary expires or is terminated.
(2) Despite subsection (1), in Manitoba, with respect to a customer or clearing
intermediary located in Manitoba, the time period applicable to records and supporting
documentation kept pursuant to subsection (1) is 8 years.
Daily records – clearing intermediary
(1) A clearing intermediary that receives customer collateral must calculate and
record all of the following at least once each business day in its records:
(
a) for each customer, the amount of customer collateral it requires from, for
or on behalf of the customer;
(
b) the total amount of customer collateral it requires from, for or on behalf
of all customers.
(2) For each indirect intermediary that a clearing intermediary provides clearing
services for, the clearing intermediary must calculate and record all of the following
at least once each business day in its records:
(
a) the amount of customer collateral it requires from, for or on behalf of each
customer of each indirect intermediary;
(
b) the total amount of customer collateral it requires from, for or on behalf
of all customers of each indirect intermediary.
(3) For each customer, a clearing intermediary must record all of the following
in its records:
(
a) each permitted depository at which it holds customer collateral of the customer;
(
b) calculated at least once each business day, the current value of any customer
collateral received from, for or on behalf of the customer, including all of the following:
(
i) any accruals on the customer collateral creditable to the customer;
(ii) any gains or losses in respect of the customer collateral;
(iii) any charges accruing to the customer;
(iv) any distributions or transfers of the customer collateral.
Daily records – direct intermediary
14 For each customer, a direct intermediary must record all of the following at least
once each business day in its records:
(
a) the total amount of customer collateral required for the cleared derivatives
of the customer by each regulated clearing agency;
(
b) the total amount of the customer’s excess margin held by the direct intermediary.
Daily records – indirect intermediary
15 For each customer, an indirect intermediary must record all of the following at least
once each business day in its records:
(
a) the total amount of collateral required for the cleared derivatives of the
customer by each clearing intermediary through which the indirect intermediary clears;
(
b) the sum of the amounts for the customer referred to in paragraph (a);
(
c) the total amount of the customer’s excess margin held by the indirect intermediary.
Identifying records – direct intermediary
16 A direct intermediary must keep records that, at any time, enable it to identify
all of the following in its own accounts and in the accounts held with each regulated
clearing agency through which it provides clearing services:
(
a) the positions and property of the direct intermediary;
(
b) the positions and value of customer collateral held for or on behalf of each
of the direct intermediary’s customers.
Identifying records – indirect intermediary
17 An indirect intermediary must keep records that, at any time, enable it to identify
all of the following in its own accounts and in the accounts held with each clearing
intermediary through which it provides clearing services:
(
a) the positions and property of the indirect intermediary;
(
b) the positions and value of customer collateral held for or on behalf of each
of the indirect intermediary’s customers.
Identifying records – multiple clearing intermediaries
18 A clearing intermediary that provides clearing services in respect of a cleared derivative
for an indirect intermediary must keep records that, at any time, enable it and each
of its indirect intermediaries to identify all of the following in the accounts held
with the clearing intermediary:
(
a) the positions and property of the indirect intermediary;
(
b) the positions and value of customer collateral held for or on behalf of the
indirect intermediary’s customers.
Records of investment of customer collateral – clearing intermediary
19 A clearing intermediary that invests customer collateral must keep records of all
of the following with respect to each investment of customer collateral:
(
a) the date of the investment;
(
b) the name of each person or company through which the investment was made;
(
c) a daily market valuation of the investment, including any unrealized gain
or loss on the investment and related supporting documentation;
(
d) a description of each asset or instrument in which the investment was made;
(
e) the identity of each permitted depository where each asset or instrument in
which the investment was made is deposited;
(
f) the date on which the investment was liquidated or otherwise disposed of and
the realized gain or loss;
(
g) the name of each person or company liquidating or disposing of the investment.
Records of currency conversion – clearing intermediary
20 A clearing intermediary must keep a record of each conversion of customer collateral
from one currency to another.
Part 4
Reporting and Disclosure by a Clearing Intermediary
Clearing intermediary delivery of disclosure by regulated clearing agency
(1) Before receiving the first cleared derivative from, for or on behalf of a customer,
a clearing intermediary must provide the customer, or an indirect intermediary for
which it provides clearing services, with all of the following:
(
a) the written disclosure provided under subsection 41 (1) by each regulated
clearing agency the direct intermediary uses to clear a cleared derivative for the
customer or indirect intermediary;
(
b) the investment guidelines and policy provided under subsection 45 (1) by each
regulated clearing agency that invests customer collateral attributable to the customer.
(2) After accepting the first cleared derivative from, for or on behalf of a customer,
each time that the clearing intermediary receives written disclosure in accordance
with subsection 41 (2) or subsection 45 (2) from a regulated clearing agency that
invests customer collateral attributable to the customer, the clearing intermediary
must provide the written disclosure to the customer, or indirect clearing intermediary
for which it provides clearing services, within a reasonable period of time.
Disclosure to customer by clearing intermediary
(1) Before receiving the first cleared derivative from, for or on behalf of a customer,
a clearing intermediary must provide written disclosure to the customer describing
the treatment of customer collateral not held at a regulated clearing agency, including
the impact of relevant bankruptcy and insolvency laws, in the event of a default by
the clearing intermediary.
(2) After accepting the first cleared derivative from, for or on behalf of a customer,
each time there is a change to the written disclosure referred to in subsection (1),
the clearing intermediary must provide written disclosure to the customer, within
a reasonable period of time, describing the change.
Disclosure to customer by indirect intermediary
(1) Before receiving the first cleared derivative from, for or on behalf of a customer,
an indirect intermediary must provide written disclosure to the customer including
a description of all of the following:
(
a) the material risks associated with receiving clearing services through an
indirect intermediary;
(
b) the rules, policies or procedures for transferring positions and customer
collateral to another clearing intermediary or liquidating positions and customer
collateral, in the event of the indirect intermediary’s default.
(2) After accepting the first cleared derivative from, for or on behalf of a customer,
each time there is a change to the rules, policies or procedures referred to in paragraph
(1) (b), the indirect intermediary must provide written disclosure to the customer,
within a reasonable period of time, describing the change.
Customer information – clearing intermediary
(1) A direct intermediary must provide all of the following to a regulated clearing
agency:
(
a) before submitting to the regulated clearing agency the first cleared derivative
for or on behalf of a customer of the direct intermediary, or of an indirect intermediary
for which the direct intermediary provides clearing services, information sufficient
to identify the customer and the customer’s positions and customer collateral;
(
b) at least once each business day after providing the information referred to
in paragraph (a), information that identifies the customer’s positions and the current
value of the customer’s customer collateral.
(2) An indirect intermediary must provide all of the following to a clearing intermediary
through which it provides clearing services:
(
a) before submitting to the clearing intermediary the first cleared derivative
for or on behalf of a customer, information sufficient to identify the customer and
the customer’s positions and customer collateral;
(
b) at least once each business day after providing the information referred to
in paragraph (a), information that identifies the customer’s positions and the current
value of the customer’s customer collateral.
Customer collateral report – regulatory
(1) A direct intermediary that receives customer collateral must electronically deliver
to the regulator or securities regulatory authority, within 10 business days of the
end of each calendar month, a completed Form 94-102F1 Customer Collateral Report: Direct Intermediary .
(2) An indirect intermediary that receives customer collateral must electronically
deliver to the regulator or securities regulatory authority, within 10 business days
of the end of each calendar month, a completed Form 94-102F2 Customer Collateral Report: Indirect Intermediary .
Customer collateral report – customer
(1) A clearing intermediary must make available to each customer from, for or on
behalf of whom it receives customer collateral, a report, calculated and available
on a daily basis, setting out all of the following:
(
a) the current value of each position of the customer;
(
b) the current value of customer collateral received from, for or on behalf of
the customer that is held by the clearing intermediary or at a permitted depository;
(
c) the current value of the customer collateral received from, for or on behalf
of the customer that is posted with any of the following:
(
i) a regulated clearing agency;
(ii) another clearing intermediary.
(2) A clearing intermediary must make available to each indirect intermediary
from which it receives customer collateral a report, calculated and available on a
daily basis, setting out all of the following:
(
a) the current value of each position of each customer of the indirect intermediary;
(
b) the current value of customer collateral received from the indirect intermediary
for or on behalf of each customer of the indirect intermediary that is held by the
clearing intermediary or at a permitted depository;
(
c) the current value of the customer collateral received from the indirect intermediary
for or on behalf of each customer of the indirect intermediary that is posted with
any of the following:
(
i) a regulated clearing agency;
(ii) another clearing intermediary.
Disclosure of investment of customer collateral
(1) Before receiving the first cleared derivative from, for or on behalf of a customer,
a clearing intermediary that invests customer collateral must disclose in writing
its investment guidelines and policy directly to the customer, or, if applicable,
to the indirect intermediary that is providing clearing services to the customer.
(2) A clearing intermediary that invests customer collateral must, within a reasonable
period of time, disclose in writing any change to the investment guidelines and policy
referred to in subsection (1) directly to the customer or, if applicable, to the indirect
intermediary that is providing clearing services to the customer.
Part 5
Treatment of Customer Collateral by a Regulated Clearing Agency
Collection of initial margin
28 A regulated clearing agency must collect initial margin for each customer on a gross
basis.
Segregation of customer collateral – regulated clearing agency
29 A regulated clearing agency must segregate a customer’s positions and customer collateral
from the positions and property of other persons or companies including the positions
and property of the regulated clearing agency.
Holding of customer collateral – regulated clearing agency
30 A regulated clearing agency must hold all customer collateral
(
a) in one or more accounts, at a permitted depository, that are clearly identified
as holding customer collateral, and
(
b) in separate accounts from all other property that is not customer collateral.
Excess margin – regulated clearing agency
31 A regulated clearing agency must at least once each business day identify and record
the value of excess margin it holds for or on behalf of the customers of each clearing
intermediary.
Use of customer collateral – regulated clearing agency
(1) A regulated clearing agency must not use or permit the use of customer collateral
except in accordance with this
section and sections 33 and 34.
(2) A regulated clearing agency must not use or permit the use of customer collateral
of a customer except to do any of the following:
(
a) margin, guarantee, secure, settle or adjust a cleared derivative of the customer;
(
b) with respect to excess margin, guarantee, secure or extend the credit of the
customer.
(3) Other than with respect to excess margin used in accordance with paragraph
(2) (b), a regulated clearing agency must not create or permit to exist any lien or
other encumbrance on a cleared derivative of a customer or customer collateral in
respect of the cleared derivative unless the lien or other encumbrance secures an
obligation resulting from the cleared derivative in favour of any of the following:
(
a) the customer;
(
b) the regulated clearing agency or a clearing intermediary responsible for clearing
the cleared derivative.
Investment of customer collateral – regulated clearing agency
(1) A regulated clearing agency must not invest customer collateral or enter into
an agreement for resale or repurchase of customer collateral except in accordance
with subsections (2) and (3).
(2) A regulated clearing agency may
(
a) invest customer collateral in a permitted investment, and
(
b) enter into an agreement for resale or repurchase of customer collateral if
all of the following apply:
(
i) the agreement is for resale or repurchase of a permitted investment;
(ii) the agreement is in writing;
(iii) the term of the agreement is no more than one business day, or reversal
of the transaction is possible on demand;
(iv) written confirmation specifying the terms of the agreement is delivered by
the counterparty to the agreement to the regulated clearing agency immediately on
entering into the agreement;
(
v) the agreement is not entered into with an affiliated entity of the regulated
clearing agency.
(3) A loss resulting from an investment or use of a customer’s customer collateral
in accordance with subsection (1) or subsection (2) by the regulated clearing agency
must be borne by the regulated clearing agency making the investment or by a clearing
intermediary that is a participant of the regulated clearing agency and not by any
customer.
Use of customer collateral – clearing intermediary default
(1) A regulated clearing agency must not use customer collateral to satisfy an obligation
of a clearing intermediary to which the regulated clearing agency provides clearing
services.
(2) Despite subsection (1), a regulated clearing agency may use the customer collateral
of a customer to fully or partially satisfy an obligation of a clearing intermediary
that arises or is accelerated as a consequence of the clearing intermediary’s default
only if the obligation is attributable to a cleared derivative of the customer.
Risk management – NI 24-102 applies
Part 3 of National Instrument 24-102 Clearing Agency Requirements applies to a regulated clearing agency and, for that purpose, a reference in that
instrument to a “recognized clearing agency” is to be read as a reference to a “regulated
clearing agency”.
Part 6
Recordkeeping by a Regulated Clearing Agency
Retention of records – regulated clearing agency
36 A regulated clearing agency must keep a record required under this Part and
Part
7, and all supporting documentation, in a readily accessible and safe location and
in a durable form, until the date on which the cleared derivative that the record
or supporting documentation relates to expires or is terminated.
Daily records – regulated clearing agency
(1) A regulated clearing agency that receives customer collateral must calculate
and record all of the following at least once each business day in its records:
(
a) for each customer, the amount of customer collateral it requires from, for
or on behalf of the customer;
(
b) the total amount of customer collateral it requires from, for or on behalf
of all customers.
(2) A regulated clearing agency must record all of the following in its records:
(
a) each permitted depository at which it holds customer collateral;
(
b) calculated at least once each business day, the current value of the customer
collateral received from, for or on behalf of the customers of each direct intermediary
including all of the following:
(
i) any accruals on the customer collateral creditable to the direct intermediary’s
customers;
(ii) any gains or losses in respect of the customer collateral;
(iii) any charges accruing to the direct intermediary’s customers;
(iv) any distributions or transfers of the customer collateral.
Identifying records – regulated clearing agency
38 A regulated clearing agency must keep records that, at any time, enable it and each
of its direct intermediaries to identify all of the following in the accounts held
at the regulated clearing agency:
(
a) the positions and property held for the direct intermediary;
(
b) the positions and value of customer collateral held for or on behalf of the
direct intermediary’s customers;
(
c) the positions and value of customer collateral held for or on behalf of customers
of each indirect intermediary for which the direct intermediary provides clearing
services.
Records of investment of customer collateral – regulated clearing agency
39 A regulated clearing agency that invests customer collateral must keep records of
all of the following with respect to each investment of customer collateral:
(
a) the date of the investment;
(
b) the name of each person or company through which the investment was made;
(
c) a daily market valuation of the investment, including any unrealized gain
or loss on the investment and related supporting documentation;
(
d) a description of each asset or instrument in which the investment was made;
(
e) the identity of each permitted depository where each asset or instrument in
which the investment is made is deposited;
(
f) the date on which the investment was liquidated or otherwise disposed of and
the realized gain or loss;
(
g) the name of each person or company liquidating or disposing of the investment.
Records of currency conversion – regulated clearing agency
40 A regulated clearing agency must keep a record of each conversion of customer collateral
from one currency to another.
Part 7
Reporting and Disclosure by a Regulated Clearing Agency
Disclosure to direct intermediaries by regulated clearing agency
(1) Before receiving the first cleared derivative from, for or on behalf of a customer,
a regulated clearing agency must provide written disclosure to the direct intermediary
through which the derivative is cleared including a description of all of the following:
(
a) the rules, policies or procedures of the regulated clearing agency that govern
the segregation and use of customer collateral and the transfer or liquidation of
a cleared derivative of a customer in the event of a direct intermediary’s default;
(
b) the impact of laws, including bankruptcy and insolvency laws, on the customer,
its positions and customer collateral in the event of a direct intermediary’s default;
(
c) the circumstances under which an interest or ownership rights in customer
collateral may be enforced by the regulated clearing agency, the direct intermediary
or the customer.
(2) After accepting the first cleared derivative from, for or on behalf of a customer,
each time there is a change to the rules, policies or procedures referred to in paragraph
(1) (a), the regulated clearing agency must provide written disclosure to the direct
intermediary through which the derivative is cleared, within a reasonable period of
time, describing the change.
Customer information – regulated clearing agency
42 A regulated clearing agency must have rules, policies or procedures reasonably designed
to confirm that the information it receives from a direct intermediary in accordance
with subsection 24 (1) is complete and received in a timely manner.
Customer collateral report – regulatory
43 A regulated clearing agency that receives customer collateral must electronically
deliver to the regulator or securities regulatory authority, within 10 business days
of the end of each calendar month, a completed Form 94-102F3 Customer Collateral Report: Regulated Clearing Agency .
Customer collateral report – direct intermediary
44 A regulated clearing agency must make available to each direct intermediary from
which it receives customer collateral a report, calculated and available on a daily
basis, setting out all of the following:
(
a) the current value of each position of each customer of the direct intermediary;
(
b) the current value of customer collateral received from the direct intermediary
for or on behalf of each customer of the direct intermediary that is held by the regulated
clearing agency;
(
c) the total current value of customer collateral received from the direct intermediary
that is held at a permitted depository;
(
d) the location of each permitted depository at which the customer collateral
is held.
Disclosure of investment of customer collateral
(1) Before receiving the first cleared derivative from, for or on behalf of a customer,
a regulated clearing agency that invests customer collateral must disclose in writing
its investment guidelines and policy to the direct intermediary through which the
derivative is cleared.
(2) A regulated clearing agency that invests customer collateral must, within
a reasonable period of time, disclose in writing any change to the investment guidelines
and policy referred to in subsection (1) to the direct intermediary through which
the derivative is cleared.
Part 8
Transfer of Positions
Transfer of customer collateral and positions
(1) On default of a direct intermediary, a regulated clearing agency and the defaulting
direct intermediary must do all of the following:
(
a) facilitate a transfer of the defaulting direct intermediary’s customers’ positions
and customer collateral, or their liquidation proceeds, from the defaulting direct
intermediary to one or more non-defaulting direct intermediaries;
(
b) make reasonable efforts to ensure the transfer is facilitated in accordance
with the customer’s instructions.
(2) At the request of a customer, a regulated clearing agency and a non-defaulting
direct intermediary must facilitate a transfer of the customer’s positions and customer
collateral from the non-defaulting direct intermediary to one or more non-defaulting
direct intermediaries if all of the following apply:
(
a) the customer has consented to the transfer;
(
b) the customer’s account is not currently in default;
(
c) the transferred positions will have appropriate margin at the receiving direct
intermediary;
(
d) any remaining positions will have appropriate margin at the transferring direct
intermediary;
(
e) the receiving direct intermediary has consented to the transfer.
Transfer from a clearing intermediary
47 A clearing intermediary that provides clearing services for an indirect intermediary
must have rules, policies or procedures in respect of the portability and transfer
of a customer’s positions and customer collateral that include a reasonable mechanism
for transferring the positions and customer collateral of the indirect intermediary’s
customers, in the event of a default by the indirect intermediary or at the request
of the indirect intermediary’s customer, to one or more non-defaulting clearing intermediaries.
Part 9
Substituted Compliance
Substituted compliance
(1) A clearing intermediary whose head office or principal place of business is in
a foreign jurisdiction is exempt from this Instrument in respect of a cleared derivative
entered into by, for or on behalf of a local customer if all of the following apply:
(
a) the cleared derivative is cleared for or on behalf of a local customer
(
i) in a local jurisdiction other than British Columbia, Manitoba and Ontario,
by a qualifying central counterparty or a regulated clearing agency, and
(ii) in British Columbia, Manitoba and Ontario, by a regulated clearing agency;
(
b) the clearing intermediary is all of the following:
(
i) registered, licensed or otherwise authorized to perform the services of a
clearing intermediary in a foreign jurisdiction listed in Appendix A;
(ii) in compliance with the laws of the foreign jurisdiction applicable to the
clearing intermediary set out in Appendix A opposite the name of the foreign jurisdiction
relating to clearing services and the requiring, receiving and holding of customer
collateral.
(2) Despite subsection (1), a clearing intermediary relying on the exemption from
the Instrument set out in subsection (1) that provides clearing services in respect
of a cleared derivative entered into by, for or on behalf of a local customer must
comply with the provisions of this Instrument set out in Appendix A opposite the name
of the foreign jurisdiction referred to in paragraph (1) (b).
(3) A regulated clearing agency whose head office or principal place of business
is in a foreign jurisdiction is exempt from this Instrument in respect of a cleared
derivative entered into by, for or on behalf of a local customer if the regulated
clearing agency complies with all of the following:
any securities regulatory authority in respect of the regulated clearing agency;
(
b) the laws of a foreign jurisdiction applicable to the regulated clearing agency
set out in Appendix A opposite the name of the foreign jurisdiction relating to clearing
services and the requiring, receiving and holding of customer collateral.
(4) Despite subsection (3), a regulated clearing agency relying on the exemption
from the Instrument set out in subsection (3) that provides clearing services in respect
of a cleared derivative entered into by, for or on behalf of a local customer must
comply with the provisions of this Instrument set out in Appendix A opposite the name
of the foreign jurisdiction referred to in paragraph (3) (b).
Part 10
Exemptions
Exemption – general
(1) The regulator or the securities regulatory authority may grant an exemption from
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.
Appendix A
TO NATIONAL INSTRUMENT 94-102 DERIVATIVES: CUSTOMER CLEARING AND PROTECTION OF CUSTOMER POSITIONS AND COLLATERAL
Substituted Compliance
(Section 48)
PART A
LAWS, REGULATIONS OR INSTRUMENTS OF FOREIGN JURISDICTIONS APPLICABLE TO
CLEARING INTERMEDIARIES FOR SUBSTITUTED COMPLIANCE
Foreign Jurisdiction
Laws, Regulations or Instruments
Provisions of this Instrument applicable to a clearing intermediary despite compliance
with the foreign jurisdiction’s 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, as amended
by Regulation (EU) No 600/2014 of 15 May 2014 on markets in financial instruments
and amending Regulation (EU) No 648/2012.
Commission Delegated Regulation (EU) No 149/2013
of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament
and of the Council with regard to regulatory technical standards on indirect clearing
arrangements, the clearing obligation, the public register, access to a trading venue,
non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts
not cleared by a CCP.
Directive (EU) 39/2004 of 21 April 2004 on markets in financial
instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC
of the European Parliament and of the Council and repealing Council Directive 93/22/EEC.
Subsection 6 (2) Subsection 6 (3)
Section 12
Section 25
Section 26
United States of America
Commodity Futures Trading Commission, General Regulations Under the Commodity Exchange
Act , 17 CFR pt 1.
Commodity Futures Trading Commission, Registration , 17 CFR pt 3.
Commodity
Futures Trading Commission, Cleared Swaps ,
17 CFR pt 22.
Commodity Futures Trading
Commission, Bankruptcy ,
17 CFR pt
Section 12
Section 25
Section 26
PART B
LAWS, REGULATIONS OR INSTRUMENTS OF FOREIGN JURISDICTIONS APPLICABLE TO
REGULATED CLEARING AGENCIES FOR SUBSTITUTED COMPLIANCE
Foreign Jurisdiction
Laws, Regulations or Instruments
Provisions of this Instrument applicable to a regulated clearing agency despite
compliance with the foreign jurisdiction’s 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, as amended
by Regulation (EU) No 600/2014 of 15 May 2014 on markets in financial instruments
and amending Regulation (EU) No 648/2012.
Commission Delegated Regulation (EU) No 149/2013
of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament
and of the Council with regard to regulatory technical standards on indirect clearing
arrangements, the clearing obligation, the public register, access to a trading venue,
non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts
not cleared by a CCP.
Commission Delegated Regulation (EU) No 153/2013 of 19 December 2012
supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council
with regard to regulatory technical standards on requirements for central counterparties,
as amended by Commission Delegated Regulation (EU) No 822/2016 of 21 April 2016 amending
Delegated Regulation (EU) No 153/2013 as regards the time horizons for the liquidation
period to be considered for the different classes of financial instruments.
Directive
(EU) 39/2004 of 21 April 2004 on markets in financial instruments amending Council
Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament
and of the Council and repealing Council Directive 93/22/EEC.
Section 28 Subsection 32 (2) Subsection 32 (3)
Section 36
Section 43
Section 44
United States of America
Commodity Futures Trading Commission, General Regulations Under the Commodity Exchange
Act , 17 CFR pt 1.
Commodity Futures Trading Commission, Cleared Swaps ,
17 CFR pt 22.
Commodity
Futures Trading Commission, Derivatives Clearing Organizations , 17 CFR pt 39.
Commodity
Futures Trading Commission, Provisions Common to Registered Entities , 17 CFR pt 40.
Commodity
Futures Trading Commission, Swap Data Recordkeeping and Reporting Requirements , 17
CFR pt 45.
Commodity Futures Trading Commission, Bankruptcy , 17 CFR pt
Section 36
Section 43
Section 44
FORM 94-102F1
CUSTOMER COLLATERAL REPORT: DIRECT INTERMEDIARY
This Form 94-102F1 is to be completed by each direct intermediary in order to comply
with its reporting obligations to the local securities regulator under subsection
25 (1) of National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions (the “Instrument” ).
Type of Filing: INITIAL AMENDMENT 1
Reporting Date 2
DD/MM/YY
Reporting Period 3
MM/YY
Reporting direct intermediary
[LEI] 4
Table A
Table A is to be completed by each direct intermediary that receives customer collateral
from a customer in accordance with the Instrument. For calculations in Table A, include
all customers that have posted customer collateral with the reporting direct intermediary.
Total value of non-cash customer collateral posted with the direct intermediary
as of the last business day of the Reporting Period
Total value of customer collateral posted with the direct intermediary as of the
last business day of the Reporting Period
Number of customers represented by the reported total value of customer collateral
posted with the direct intermediary5
Table B
Table B is to be completed by each direct intermediary that receives customer collateral
from an indirect intermediary in accordance with the Instrument. Complete a separate
line for each indirect intermediary that has posted customer collateral with the reporting
direct intermediary. Where an LEI is not available, please provide the complete legal
name of the indirect intermediary.
Indirect intermediary
Customer collateral
Total value of non-cash customer collateral posted with the direct intermediary
as of the last business day of the Reporting Period
Total value of customer collateral posted with the direct intermediary as of the
last business day of the Reporting Period
[LEI of any indirect intermediary that has posted customer collateral with the
reporting direct intermediary]
Table C
Table C is to be completed by each direct intermediary that receives customer collateral
from a customer or from an indirect intermediary in accordance with the Instrument.
Complete a separate line for each location at which customer collateral is held by
or for the reporting direct intermediary. Where an LEI is not available, please provide
the complete legal and operating name(
s) of the permitted depository.
Permitted depository
[LEI of reporting direct intermediary, if holding customer collateral itself]
[LEI of any permitted depository holding customer collateral for the reporting
direct intermediary]
Table D
Table D is to be completed by each direct intermediary that has posted customer
collateral with a regulated clearing agency in accordance with the Instrument. Complete
a separate line for each regulated clearing agency with which the reporting direct
intermediary has posted customer collateral. Where an LEI is not available, please
provide the complete legal and operating name(
s) of the regulated clearing agency.
Regulated clearing agency
Customer collateral
Total value of non-cash customer collateral posted with the regulated clearing
agency as of the last business day of the Reporting Period
Total value of customer collateral posted with the regulated clearing agency as
of the last business day of the Reporting Period
[LEI of any regulated clearing agency with which the reporting direct intermediary
has posted customer collateral]
FORM 94-102F2
CUSTOMER COLLATERAL REPORT: INDIRECT INTERMEDIARY
This Form 94-102F2 is to be completed by each person or company that acts as an
indirect intermediary in order to comply with its reporting obligations to the local
securities regulator under subsection 25 (2) of National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions (the “Instrument” ).
Type of Filing: INITIAL AMENDMENT 1
Reporting Date 2
DD/MM/YY
Reporting Period 3
MM/YY
Reporting indirect intermediary
[LEI] 4
Table A
Table A is to be completed by each indirect intermediary that receives customer
collateral from a customer in accordance with the Instrument. For calculations in
Table A, include all customers that have posted customer collateral with the reporting
indirect intermediary.
Total value of non-cash customer collateral posted with the indirect intermediary
as of the last business day of the Reporting Period
Total value of customer collateral posted with the indirect intermediary as of
the last business day of the Reporting Period
Number of customers represented by the reported total value of customer collateral
posted with the indirect intermediary5
1 Please mark the form as “amendment” if the form is being resubmitted to correct
or replace a form previously filed for a Reporting Period. Otherwise, please mark
the form as “initial”.
2 The Reporting Date must be within 10 business days of the end of the Reporting
Period.
3 The Reporting Period is the calendar month for which the form is submitted.
4 Where an LEI is not available, please provide the complete legal name of the
reporting direct intermediary together with the complete address of its head office.
5 Please report the number of customers whose customer collateral was included
in calculating the value reported in the second column of Table A.
Table B
Table B is to be completed by each indirect intermediary that receives customer
collateral from a customer in accordance with the Instrument. Complete a separate
line for each location at which customer collateral is held by or for the reporting
indirect intermediary. Where an LEI is not available, please provide the complete
legal and operating name(
s) of the permitted depository.
Permitted depository
[Reporting indirect intermediary, if holding customer collateral itself]
[Any permitted depository holding customer collateral for the reporting direct
intermediary]
Table C
Table C is to be completed by each indirect intermediary that has posted customer
collateral with a direct intermediary in accordance with the Instrument. Complete
a separate line for each direct intermediary with which the reporting indirect intermediary
has posted customer collateral. Where an LEI is not available, please provide the
complete legal and operating name(
s) of the direct intermediary.
Direct intermediary
Customer collateral
Total value of non-cash customer collateral posted with the direct intermediary
as of the last business day of the Reporting Period
Total value of customer collateral posted with the direct intermediary as of the
last business day of the Reporting Period
[LEI of any direct intermediary with which the reporting indirect intermediary
has posted customer collateral]
FORM 94-102F3
CUSTOMER COLLATERAL REPORT: REGULATED CLEARING AGENCY
This Form 94-102F3 is to be completed by each regulated clearing agency in order
to comply with its reporting obligations to the local securities regulator under
section
43 of National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions (the “Instrument” ).
Type of Filing: INITIAL AMENDMENT 1
Reporting Date 2
DD/MM/YY
Reporting Period 3
MM/YY
Reporting regulated clearing agency
[LEI] 4
Table A
Table A is to be completed by each regulated clearing agency that receives customer
collateral from a direct intermediary in accordance with the Instrument. Complete
a separate line for each direct intermediary that has posted customer collateral with
the reporting regulated clearing agency. Where an LEI is not available, please provide
the complete legal name of the direct intermediary.
1 Please mark the form as “amendment” if the form is being resubmitted to correct
or replace a form previously filed for a Reporting Period. Otherwise, please mark
the form as “initial”.
2 The Reporting Date must be within 10 business days of the end of the Reporting
Period.
3 The Reporting Period is the calendar month for which the form is submitted.
4 Where an LEI is not available, please provide the complete legal name of the
reporting regulated clearing agency together with the complete address of its head
office.
Direct intermediary
Customer collateral
Total value of non-cash customer collateral posted with the regulated clearing
agency as of the last business day of the Reporting Period
Total value of customer collateral posted with the regulated clearing agency as
of the last business day of the Reporting Period
[LEI of any direct intermediary that has posted customer collateral with the reporting
regulated clearing agency]
Table B
Table B is to be completed by each regulated clearing agency that holds customer
collateral in accordance with the Instrument. Complete a separate line for each location
at which customer collateral is held by or for the reporting regulated clearing agency.
Where an LEI is not available, please provide the complete legal and operating name(
s) of the permitted depository.
Permitted depository
[LEI of reporting regulated clearing agency, if holding customer collateral itself]
[LEI of any permitted depository holding customer collateral for the reporting
regulated clearing agency]
Copyright © 2017: Queen's Printer, Victoria, British Columbia, Canada