The Canadian Securities Administrators (CSA) has published a notice and second request for comment on Proposed National Instrument 93-101 Derivatives: Business Conduct and Proposed Companion Policy 93-101 CP Derivatives: Business Conduct (the Proposed Instrument). The Proposed Instrument establishes a business conduct regime for regulating dealers and advisers in over-the-counter (OTC) derivatives in Canada.

The Proposed Instrument was developed to help protect derivatives market participants by improving transparency, increasing accountability and promoting responsible business conduct by dealers and advisers in the OTC derivatives market. It was originally published for comment on April 4, 2017. Following this, the Proposed Instrument, together with Proposed National Instrument 93-102 Derivatives: Registration and a related companion policy (NI 93-102) published by the CSA on April 19, 2018.

The CSA split the proposed derivatives business conduct and derivatives registration regime into two separate rules to ensure that all dealers and advisers remain subject to certain minimum standards in all Canadian jurisdictions.

Some of the changes in the revised Proposed Instrument include an amendment to the definition of “eligible derivatives party,” which now includes a category for a commercial hedger, a revision to some of the restrictions on derivatives party assets and a change to certain senior manager obligations. The Proposed Instrument is intended to create a uniform approach to derivatives business conduct regulation in Canada and promote consistent protections for market participants, regardless of the type of firms they deal with. The Proposed Instrument will also ensure that derivatives dealers and advisers operating in Canada are subject to consistent regulation that does not result in any competitive disadvantage.

The Proposed Instrument takes a two-tiered approach to the protection of derivatives market participants, with requirements that are tailored depending on the nature of the derivatives dealer’s or adviser’s counterparty, customer, or other person or company that the firm deals with or advises.

In developing the Proposed Instrument, the CSA considered the existing business conduct regime in the securities markets while tailoring the requirements to the OTC derivatives markets.

Proposed National Instrument 93-101 Derivatives: Business Conduct and Proposed Companion Policy 93-101 CP Derivatives is available for download from the websites of participating jurisdictions.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

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