Regulators in Canada Recognise Clearing Entities

Thomas Murray Market Flashes
SMI Markets: Canada
Date: 30 Jul 2014
CMIRR Markets: Canada
CCP: CDCC (CAN), ICE Clear Canada (CAN), CDS (CAN), NGX (CAN)
Regulators in Canada Recognise Clearing Entities as Qualifying CCPs
The Bank of Canada (BoC), the Alberta Securities Commission (ASC), the Autorité des marchés financiers (AMF, Québec), the British
Columbia Securities Commission (BCSC), the Manitoba Securities Commission (MSC) and the Ontario Securities Commission (OSC) have
jointly announced that the following Canadian-domiciled central counterparties (CCPs) can each be considered qualifying central
counterparties (QCCPs) pursuant to the standards developed by the Basel Committee on Banking Supervision (BCBS) and adopted by the
Office of the Superintendent of Financial Institutions (OSFI). This status allows certain bank exposures to the CCPs to be subject to lower
capital requirements.
Legal Entity (System)
Designated or recognized by
CDS Clearing and Depository Services Inc. (CDSX)
BoC, AMF, BCSC, OSC
Canadian Derivatives Clearing Corporation
BoC, AMF, BCSC, OSC
ICE Clear Canada, Inc.
MSC
Natural Gas Exchange Inc.
ASC
The Bank of Canada and provincial securities regulators have the authority to oversee or regulate CCPs in Canada. The ASC, AMF, BCSC,
MSC and OSC have all adopted the CPSS-IOSCO Principles for Financial Market Infrastructures (PFMIs) and require the CCPs that they
recognise to observe the CPSS‑IOSCO PFMIs under their respective recognition orders. Moreover, such authorities are developing rules
governing clearing agencies, including CCPs, that will be consistent with the CPSS-IOSCO PFMIs, and have publicly indicated that such
rules will apply to recognised CCPs on an ongoing basis.
The official press release is available here: Regulators in Canada Recognise Clearing Entities as Qualifying CCPs.
Market Information Impact
Canada
This information affects the data contained in the Local Market Administrative Organisations sections of the Securities Market Information
Service.
Infrastructure Risk Ratings Impact
Canada
Market Rating: AA
Market Flash Impact: Stable
The recognition as Qualifying CCPs of all four entities will enable them to provide CCP services to transactions executed on the whole
Canadian market. CCPs generally mitigate risk by applying risk management measures, including adequate capital requirements for
clearing members, collection of margins, maintenance of a guarantee fund, etc.
CCP Risk Impact
CDCC (CAN)
CCP Flash Impact: Stable
Impacted Risk Type: Financial Risk
Flash Impact = Stable
Under the Basel III framework (under the Capital Adequacy Requirements), banks are required to hold relatively lower capital against their
exposures to a QCCP than to a non-QCCP. The hypothetical capital requirements (Kccp) must be provided in order for clearing members to
calculate their exposures. To do this, Canadian CCPs have the option of choosing between Method 1 or Method 2, as referenced in BCBS
227.
The designation of QCCP status will help to ensure that CDCC keeps its existing clearing members and maintain its clearing volumes. The
impact on Financial Risk is ‘Stable’.
ICE Clear Canada (CAN)
CCP Flash Impact: Stable
Impacted Risk Type: Financial Risk
Flash Impact = Stable
Under the Basel III framework (under the Capital Adequacy Requirements), banks are required to hold relatively lower capital against their
exposures to a QCCP than to a non-QCCP. The hypothetical capital requirements (Kccp) must be provided in order for clearing members to
calculate their exposures. To do this, Canadian CCPs have the option of choosing between Method 1 or Method 2, as referenced in BCBS
227.
The designation of QCCP status will help to ensure that ICE Clear Canada keeps its existing clearing members and maintain its clearing
volumes. The impact on Financial Risk is ‘Stable’.
CDS (CAN)
CCP Flash Impact: Stable
Impacted Risk Type: Financial Risk
Flash Impact = Stable
Under the Basel III framework (under the Capital Adequacy Requirements), banks are required to hold relatively lower capital against their
exposures to a QCCP than to a non-QCCP. The hypothetical capital requirements (Kccp) must be provided in order for clearing members to
calculate their exposures. To do this, Canadian CCPs have the option of choosing between Method 1 or Method 2, as referenced in BCBS
227.
The designation of QCCP status will help to ensure that CDSX keeps its existing clearing members and maintain its clearing volumes. The
impact on Financial Risk is ‘Stable’.
NGX (CAN)
CCP Flash Impact: Stable
Impacted Risk Type: Financial Risk
Flash Impact = Stable
Under the Basel III framework (under the Capital Adequacy Requirements), banks are required to hold relatively lower capital against their
exposures to a QCCP than to a non-QCCP. The hypothetical capital requirements (Kccp) must be provided in order for clearing members to
calculate their exposures. To do this, Canadian CCPs have the option of choosing between Method 1 or Method 2, as referenced in BCBS
227.
The designation of QCCP status will help to ensure that NGX keeps its existing clearing members and maintain its clearing volumes. The
impact on Financial Risk is ‘Stable’.
For further information contact:
For further information, please contact the following Senior Analysts:
Ana Giraldo - Americas and Eurasia
Ana Giraldo - Americas and Eurasia
Barry Morales - Asia Pacific
Guillaume Viteau – Europe (EU/EEA)
Luis Carlos Nino – Africa and Middle East
Tel. +44 (0)20 8600 2300 | Fax. +44 (0)20 8741 7468
Email: [email protected]
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