Marketplaces, SROs & Clearing Agencies
A clearing agency is a person or company that facilitates the clearing and settlement of trades. Its function is to:
- act as an intermediary in paying funds or delivering securities;
- provide centralized facilities for the clearing and settlement of trades; or
- provide centralized facilities as a depository of securities.
For the full definition, please see Section 1(1) of the Securities Act (Ontario)
As of March 1, 2011, Section 21.2 of the Securities Act (Ontario) will prohibit clearing agencies from carrying on business in Ontario unless they are recognized by the Commission as a clearing agency or are exempt from the requirement to be recognized by order of the Commission. The OSC will assess an application for recognition or exemption based on a variety of factors, including:
- rules and rulemaking;
- systems and technology;
- access standards;
- financial viability and reporting;
- risk management;
- operational reliability;
- protection of assets;
- outsourcing; and
- information sharing and regulatory cooperation.
The OSC may impose terms and conditions on the recognition of the clearing agency. OSC Staff have published a notice setting out Staff’s regulatory approach to applications for recognition as a clearing agency or exemption from the recognition requirement. See:
- OSC Staff Notice 24-702 Regulatory Approach to Recognition and Exemption from Recognition of Clearing Agencies
A clearing agency is required to comply with the terms and conditions imposed by the OSC resulting from recognition or exemption from recognition. Depending on the functions performed by a clearing agency, it may also be subject to various requirements of Ontario securities law, including National Instrument 24-101 Institutional Trade Matching and Settlement (NI 24-101) and National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101). Some of these requirements include:
- Delivering to the OSC aggregate and individual institutional trade matching statistics on Form 24-101F2 no later than 30 days after the end of a calendar quarter.
- Implementing rules, instruments and procedures that are consistent with the institutional trade matching and settlement requirements of NI 24-101.
- Facilitating the process for reporting issuers to communicate with, and send materials to, beneficial owners of securities under NI 54-101.
The OSC oversees the compliance of a clearing agency with regulatory requirements. As part of its oversight, the OSC may review required filings and proposals for amendments to by-laws, rules and policies of the clearing agency, and may perform on-site oversight reviews. The OSC also oversees a recognized clearing agency’s compliance with the automation review program.
Clearing agencies either recognized or exempted from recognition by the OSC for operation in Ontario:
- Canadian Depository for Securities Limited (CDS) (recognized)
- Canadian Derivatives Clearing Corporation (interim exemption)
- Chicago Mercantile Exchange Inc. (exempted)
- CLS Bank International (exempted)
- CME Clearing Europe Limited (exempted)
- FundSERV Inc. (recognized)
- ICE Clear Canada, Inc. (exempted)
- ICE Clear Credit LLC (interim exemption)
- LCH.Clearnet Limited (recognized)
- Omgeo Canada Matching Ltd. (exempted)
- Options Clearing Corporation (exempted)
- SS&C Technologies Canada Corp. (exempted)