CSA delays margin requirements for OTC derivatives

By James Langton | April 8, 2021 | Last updated on April 8, 2021
2 min read
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Following its latest review of derivatives trading data, the Canadian Securities Administrators (CSA) are continuing to push back the publication of proposed rules setting margin requirements.

In a notice on Thursday, the CSA reported that it will “further delay” publication of a proposed rule to adopt margin requirements for over-the-counter (OTC) derivatives.

“We will provide an update when we believe changes in the results from the harmonized monitoring process or circumstances warrant the continuation of work to implement margin requirements,” the CSA said in its notice.

The move follows a decision last April by global banking and securities regulators (the Basel Committee on Banking Supervision and the International Organization of Securities Commissions) to extend their deadlines for phasing in requirements to September 2022, citing the impact of Covid-19 on the industry.

Global regulators sought to introduce mandatory margin and collateral requirements for non-centrally cleared derivatives as part of their response to the global financial crisis.

According to the Basel Committee, the crisis revealed that “improved transparency in the OTC derivatives markets and further regulation of OTC derivatives and market participants would be necessary to limit excessive and opaque risk-taking through OTC derivatives and to mitigate the systemic risk posed by OTC derivatives transactions, markets and practices.”

In 2019 the CSA said a review of trading data at that time suggested that delaying the implementation of margin rules would not increase systemic risk in Canadian financial markets.

It said on Thursday that its latest examination of trading data “found no material changes” since its previous review, allowing it to again push back margin requirements.

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James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.