Canadian derivatives reporting

What is Canadian derivatives reporting?

In September 2009, G20 Leaders made a number of commitments regarding the operation of over-the-counter (OTC) derivatives markets, including the statement that all OTC derivatives contracts should be reported to trade repositories in order to improve financial market transparency, mitigate systemic risk and protect against market abuse in the OTC derivatives markets.

The Canadian Securities Act represents a key step towards the government of Canada’s commitment to establish a Canadian securities regulator. Canada is made up of 10 provinces, each with different securities laws. Much like a pre-MiFID Europe, there is fragmentation across markets and a need for a harmonised, single framework and increased transparency across derivatives markets. 

The derivative trade reporting rules were proposed, updated and finalised by Canadian provincial securities regulators working under a collaborative identity as the Canadian Securities Administrators (CSA). The CSA was set up due to G20 commitments to establish a new regulatory regime relating to the trading of OTC derivatives in Canada; the CSA addresses trade repositories and derivatives data reporting. The derivatives reporting regulation applies to all 10 provinces in Canada, however, there is a need for local adaptation of the regulations in each province due to differences in securities laws.

Who will be affected by this regulation?

This regulation will affect any counterparty to an OTC derivatives trade. However, reporting is unilateral and double-reporting should be avoided by prescription of the regulator. This results in designation of reporting obligation on a case-by-case basis. 

In a similar fashion to MiFID and EMIR in the EU, a counterparty can delegate it’s reporting obligation to either it’s counterparty or a third party service provider.

Timeline for the regulation

  • 31 October 2014 - the effective date of the reporting obligation for derivatives dealers and recognised or exempt clearing agencies (changed from July 2)
  • 30 June 2015 - the effective date of the reporting obligation for all other reporting counterparties (changed from September 30, 2014)
  • 30 April 2015 - public dissemination of transaction-level reports (changed from December 31, 2014)
  • 30 April 2015 - the latest date by which a derivatives dealer or a recognized or exempt clearing agency must report a preexisting transaction (one which entered into has outstanding contractual obligations as of October 31, 2014)
  • 31 December 2015 -  the latest day by which a counterparty that is not a derivatives dealer or a recognized or exempt clearing agency must report a preexisting transaction (one which has outstanding contractual obligations as of June 30, 2015)

Key points 

The Canadian derivatives reporting regulation has two main components:

Scope rule

Define types of derivatives that will be subject to reporting requirements under the TR rule. 

Exemptions include but are not limited to:

  • Gaming and insurance contracts regulated by a domestic or an equivalent foreign regulatory regime
  • currency exchange contracts provided that the contract 
  • Settles within prescribed timelines, 
  • Is intended by the counterparties to be settled by delivery of the currency referenced in the contract, and 
  • Is not rolled-over
  • Commodity forward contracts provided that physical delivery of the commodity is intended and the contract does not permit cash settlement in the ordinary course

Reporting Obligation

Reporting of derivatives to a trade repository is unilateral; the TR rules outlines a hierarchy for determining which counterparty will be required to report a transaction.

Trade reporting is to be completed on a real-time basis. However, where it is not technologically possible to do so, the reporting counterparty must report as soon as possible but not later than T+1. Transactions that were entered into prior to the TR Rule coming into force will be required to be reported provided they have not expired or been terminated within a prescribed period after the TR Rule comes into force (31st December 2014).

Three main types of data must be reported under the TR Rule: 

  1. Creation data
  2. Life-cycle event data, including any amendments to derivatives data previously reported or novation.
  3. Valuation data which includes the current value of the transaction.

For more detail on this regulation, click here

How UnaVista can help.

UnaVista can offer connectivity to a Canadian Trade Repository

As part of UnaVista’s partnership with DTCC, UnaVista can forward trades reportable to Canadian regulators to the DTCC Canadian Trade Repository as part of our G20 Derivatives Reporting solution.   Should you be interested please fill your details in the form at the bottom of the page.

Benefit from our transaction reporting experience

London Stock Exchange has been transaction reporting since its inception in 1989. In 2010, working with major institutions, we created UnaVista Transaction Reporting. The service is more flexible, developed a wider choice of interfaces, and improved its validation. Now, it doesn’t just meet the regulators requirements – it exceeds them, reducing the risk of incorrect, late or duplicate reporting.

Have one system for all of your transaction reports

UnaVista allows you to report on every reportable asset class, including derivatives with the new Aii code. 

Be confident you have been compliant

Regulatory authorities encourage firms to regularly review the integrity of their transaction reporting to ensure they have been successfully submitted". UnaVista assists with this process by enabling firms to reconcile between their own back-office data, the data held by UnaVista and the data held trade repository.

Have a system with smart validation

UnaVista Transaction Reporting does all the mandatory validation you would expect. But it also validates the data by checking it against the reference data sources you choose, such as ESMA’s list of regulated markets, MiFID eligible securities and the London Stock Exchange’s SEDOL Masterfile. UnaVista enables users to correct exceptions manually, export selected reports, clear non-relevant exceptions, as well as a number of other exception management tools.

Save the cost of middleware

You can submit transaction reports in any UnaVista endorsed format, which UnaVista then standardises for derivatives reporting to the specified format of the authorised trade repository. This reduces the need for expensive middleware.

Know what’s happening in your business all the time

You can receive alerts based on your custom tolerances and thresholds for things like transaction volumes or transaction size. This ensures you are never surprised late on by a problem of which you were unaware.

Improve your workflow

You can set different levels of access for individuals or groups, so people only see the information you want them to see. You can also set as many mandatory audit steps as you like. As a result, you’ll know that the right checks are in place. You’ll also have a full audit trail if you need to check back over things later on.

Get the management information you need

You can use UnaVista to monitor trends within your transaction reporting, helping you identify where errors are recurring. You can use UnaVista to take a snapshot of all your transactions at any time, choose from a variety of report templates, or create your own custom report. You can even include a variety of charts from the dashboard.