*Updates with additional comment from DTCC in paragraph 5
Canadian regulators are planning on issuing swaps counterparties with a temporary relief from new derivatives reporting requirements following extended testing at the DTCC’s Global Trade Repository in Singapore and Europe.
Mandatory derivatives trade reporting – a central part of the G20 agreement signed in 2009 to bring safety and transparency to over-the-counter swaps markets – became effective across Canada on July 29 after similar rules entered into force across Manitoba, Ontario and Quebec in 2014.
The latest requirements have been adopted by 10 Canadian provinces and territories including Alberta, British Columbia, Nova Scotia and Saskatchewan under the “Multilateral Instrument 96-101 for Trade Repositories and Derivatives Data Reporting” rules that were published in February.
According to a London-based derivatives reporting specialist at one international bank, some counterparties were left confused over the weekend after they found that the DTCC’s European and Asian data centres were not yet fully set up to accept trades that are subject to Canada’s new reporting requirements.
A DTCC spokesperson said, “We decided to extend testing as a result of due diligence to ensure optimal performance.”
That has forced securities regulators across the 10 provinces to consider additional relief until DTCC rectifies the issue.
“We’re looking at the issue and expect to provide very temporary relief for counterparties reporting under EMIR [European Market Infrastructure Regulation] or Singapore rules,” said an official at one Canadian securities regulator. “It’s a very small number of counterparties that have been affected and we believe it will be fixed quickly.”
Canadian regulators including the Alberta Securities Commission, British Colombia Securities Commission and Financial and Consumer Authority of Saskatchewan approved three trade repositories – CME, DTCC and ICE Trade Vault – ahead of last Friday’s implementation date.
DTCC has been offering new reporting capabilities across the additional Canadian provinces for clients using its US data centre since July 22, a week ahead of the compliance deadline. Those capabilities will be extended to global market participants using the DTCC Europe and Asia data centres shortly.
Identifier relief
Ahead of the compliance date, the group of Canadian regulators confirmed additional relief for reporting counterparties that are not able to determine whether non-reporting counterparties were resident in the jurisdiction. The exemption mirrors similar relief provided by Manitoba, Ontario and Quebec in respect of their own reporting rules.
According to the regulator, major market participants – primarily large financial institutions - had expressed concerns surrounding their ability to report some of the data fields. The biggest sticking point has been the legal entity identifier codes, which many smaller Canadian counterparties including commodity producers have yet to obtain.
“Some counterparties still haven’t heard of LEIs or don’t know how to get them, while there’s still uncertainty over legislation in some jurisdictions that limits the ability to report the identity of counterparties,” said the regulator. “The exemption gives additional time to do that analysis and decide whether the information can be reported.”
The exemption, which applies only to the LEI data field, runs until December 2017, providing counterparties with additional time to complete due diligence, and for smaller counterparties to receive LEI codes.
