Securities Law & Instruments


Subsection 74(1) - Exemption from sections 25and 53 of the Act in connection with the writing of over-the-counteroptions subject to certain conditions.

Section 59, Schedule I - Issuer exempt fromsection 28 of Schedule I to the Regulation in connection withthe writing of over-the-counter covered call options and cashcovered put options.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am.25, 53 and 74(1).

Regulations Cited

Regulation made under the Securities Act, R.R.O.1990, Reg. 1015, as am., ss. 28 and 59 of Schedule I.



R.S.O. 1990, c. S.5, AS AMENDED(the "Act")



R.R.O. 1990, REGULATION 1015,

AS AMENDED (the "Regulation")






(Subsection 74(1) of the Actand Subsection 59(1) of Schedule 1 of the Regulation)

UPON the application of Travelex CanadaLimited (the "Applicant") to the Ontario SecuritiesCommission (the "Commission") for: (i) a ruling undersubsection 74(1) of the Act that certain over-the-counter ("OTC")derivatives transactions entered into between the Applicantand certain counterparties are not subject to sections 25 and53 of the Act; and (ii) an exemption under subsection 59(1)of Schedule 1 of the Regulation from the fees required to bepaid under section 28 of Schedule 1 of the Regulation in respectof such OTC derivatives transactions;

AND UPON considering the applicationand the recommendation of the staff of the Commission;

AND UPON the Applicant having representedto the Commission that:

1. The Applicant is an indirect wholly-ownedsubsidiary of Travelex Holdings Limited. The Travelex Group(Travelex Holdings Limited and its subsidiaries, which includesthe Thomas Cook Global and Financial Services business) isthe world's largest retail foreign exchange business; theworld's largest non-bank corporate international payment business;and the world's oldest issuer of travellers cheques. The TravelexGroup is a diversified worldwide money business which, amongother things, creates and markets a range of foreign exchangeproducts that address the risk management needs of its clients.The Applicant's corporate international payment business servesa sophisticated client base, offering its services to, amongothers, major corporations, banks, governments and institutionalinvestors. As at February 3, 2003, the Applicant is a QualifiedParty as defined in Appendix 1 to this Ruling;

2. The Applicant transacts in OTC derivativesin Ontario with counterparties that the Applicant believeshave the following general characteristics: they have a highlevel of business and financial sophistication; they haveaccess to their own independent advisors who can assist inthe determination of the suitability of the transaction andthe creditworthiness of the Applicant; in the case of counterpartiesthat are customers of the Applicant, they enter into OTC derivativestransactions in order to hedge or otherwise manage specificrisks associated with their businesses as part of the ordinarycourse of their business;

3. The Applicant and the counterparties describedabove transact in very specialized products. All of the OTCderivatives transactions engaged in by the Applicant willinvolve a foreign currency option ("Foreign CurrencyOption") or a foreign exchange forward contract ("ForeignExchange Forward Contract") in which:

(i) the agreement relating to, and the materialeconomic terms of the option or forward contract are negotiatedon an individual basis and have been customized to the purposesof the parties to the agreement and the agreement is notpart of a fungible class of agreements that are standardizedas to their material economic terms;

(ii) the creditworthiness of a party havingan obligation under the agreement would be a material considerationin entering into or determining the terms of the agreement;and

(iii) the agreement is not entered intoor traded on or through an organized market, stock exchangeor futures exchange and cleared by a clearing corporation;

4. Each Foreign Currency Option is a contractwhere the seller grants to the buyer the right (but does notimpose the obligation) to buy or sell a specific amount ofone currency for another, at a specified price on or beforea specific future date. Each Foreign Exchange Forward Contractis an agreement to buy or sell foreign currency for a specificprice for settlement at some point in the future; and

5. The underlying interest of the OTC derivativestransactions between the Applicant and the counterpartieswill consist of Canadian or foreign currency, a foreign exchangerate or some relationship between, or combination of, anyof them.

AND UPON the Commission being satisfiedthat to do so would not be prejudicial to the public interest;

IT IS RULED, under subsection 74(1) ofthe Act, that OTC derivatives transactions entered into betweenthe Applicant and certain counterparties in Ontario as contemplatedby paragraphs 2, 3, 4 and 5 of this Ruling shall be exempt fromsections 25 and 53 of the Act, provided that:

(a) each transaction involves an OTC derivativewhich is a Foreign Currency Option or a Foreign ExchangeForward Contract, or some relationship between, or combination,of any of them; and


(i) one party to the transaction is aQualified Party, as defined in Appendix 1 to this Ruling;or

(ii) each party to the transaction isa person or company entering into the transaction forOTC derivatives hedging purposes;

AND PURSUANT to section 59 of Schedule1 of the Regulation, the OTC derivatives transactions enteredinto in reliance on this Ruling are hereby exempted from thefees which would otherwise be payable under section 28 of Schedule1 of the Regulation.

February 7, 2003.

"Robert W. Korthals"                    "RobertL. Shirriff"


Appendix 1



(1) The terms "subsidiary" and "holdingbody corporate" used in paragraphs (w), (x) and (y) ofsubsection (3) of this Appendix have the same meaning as theyhave in the Business Corporations Act (Ontario).

(2) All requirements contained in this Appendixthat are based on the amounts shown on the balance sheet ofan entity apply to the consolidated balance sheet of the entity.

Qualified Parties Acting as Principal

(3) The following are Qualified Parties forall OTC derivatives transactions, if acting as principal:


(a) A bank listed in Schedule I or II tothe Bank Act (Canada).

(b) The Business Development Bank of Canadaincorporated under the Business Development Bank of CanadaAct (Canada).

(c) A bank subject to the regulatory regimeof a country that is a member of the Basle Accord, or thathas adopted the banking and supervisory rules set out inthe Basle Accord, if the bank has a minimum paid up capitaland surplus, as shown on its last audited balance sheet,in excess of $25 million or its equivalent in another currency.

Credit Unions and Caisses Populaires

(d) A credit union central, federation ofcaisses populaires, credit union or regional caisse populaire,located, in each case, in Canada.

Loan and Trust Companies

(e) A loan corporation or trust corporationregistered under the Loan and Trust Corporations Act(Ontario) or under the Trust and Loan Companies Act(Canada), or under comparable legislation in any other provinceor territory of Canada.

(f) A loan company or trust company subjectto the regulatory regime of a country that is a member ofthe Basle Accord, or that has adopted the banking and supervisoryrules set out in the Basle Accord, if the loan company ortrust company has a minimum paid up capital and surplus,as shown on its last audited balance sheet, in excess of$25 million or its equivalent in another currency.

Insurance Companies

(g) An insurance company licensed to dobusiness in Canada or a province or territory of Canada;

(h) An insurance company subject to theregulatory regime of a country that is a member of the BasleAccord, or that has adopted the banking and supervisoryrules set out in the Basle Accord, if the insurance companyhas a minimum paid up capital and surplus, as shown on itslast audited balance sheet, in excess of $25 million orits equivalent in another currency.

Sophisticated Entities

(i) A person or company that, together withits affiliates:

(i) has entered into one or more transactionsinvolving OTC derivatives with counterparties that arenot its affiliates, if

(A) the transactions had a total grossdollar value of or equivalent to at least $1 billionin notional principal amount; and

(B) any of the contracts relating toone of these transactions was outstanding on any dayduring the previous 15-month period, or

(ii) had total gross marked-to-marketpositions of or equivalent to at least $100 million aggregatedacross counterparties, with counterparties that are notits affiliates in one or more transactions involving OTCderivatives on any day during the previous 15-month period.


(j) An individual who, either alone or jointlywith the individual's spouse, has a net worth of at least$5 million, or its equivalent in another currency, excludingthe value of his or her principal residence.


(k) Her Majesty in right of Canada or anyprovince or territory of Canada and each crown corporation,instrumentality and agency of a Canadian federal, provincialor territorial government.

(l) A national government of a country thatis a member of the Basle Accord, or that has adopted thebanking and supervisory rules set out in the Basle Accord,and each instrumentality and agency of that government orcorporation wholly-owned by that government.


(m) Any Canadian municipality with a populationin excess of 50,000 and any Canadian provincial or territorialcapital city.

Corporations and other Entities

(n) A company, partnership, unincorporatedassociation or organization or trust, other than an entityreferred to in paragraph (a), (b), (c), (d), (e), (f), (g)or (h), with total revenue or assets in excess of $25 millionor its equivalent in another currency, as shown on its lastfinancial statement, to be audited only if otherwise required.

Pension Plan or Fund

(o) A pension fund that is regulated byeither the Office of the Superintendent of Financial Institutions(Canada) or a provincial pension commission, if the pensionfund has total net assets, as shown on its last auditedbalance sheet, in excess of $25 million, provided that,in determining net assets, the liability of a fund for futurepension payments shall not be included.

Mutual Funds and Investment Funds

(p) A mutual fund or non-redeemable investmentfund if each investor in the fund is a Qualified Party.

(q) A mutual fund that distributes its securitiesin any of the Jurisdictions, if the portfolio manager ofthe fund is registered as an adviser, other than a securitiesadviser, under the Legislation or securities legislationelsewhere in Canada.

(r) A non-redeemable investment fund thatdistributes its securities in any of the Jurisdictions,if the portfolio manager of the fund is registered as anadviser, other than a securities adviser, under the Legislationor securities legislation elsewhere in Canada.

Brokers/Investment Dealers

(s) A person or company registered underthe Legislation or securities legislation elsewhere in Canadaas a broker or an investment dealer or both.

(t) A person or company registered underthe Legislation as an international dealer if the personor company has total assets, as shown on its last auditedbalance sheet, in excess of $25 million or its equivalentin another currency.

Futures Commission Merchants

(u) A person or company registered underthe CFA as a dealer in the category of futures commissionmerchant, or in an equivalent capacity elsewhere in Canada.


(v) A registered charity under the IncomeTax Act (Canada) with assets not used directly in charitableactivities or administration, as shown on its last auditedbalance sheet, of at least $5 million or its equivalentin another currency.


(w) A wholly-owned subsidiary of any ofthe organizations described in paragraph (a), (b), (c),(d), (e), (f), (g), (h), (j), (n), (o), (s), (t) or (u).

(x) A holding body corporate of which anyof the organizations described in paragraph (w) is a wholly-ownedsubsidiary.

(y) A wholly-owned subsidiary of a holdingbody corporate described in paragraph (x).

(z) A firm, partnership, joint venture orother form of unincorporated association in which one ormore of the organizations described in paragraph (w), (x)or (y) have a direct or indirect controlling interest.

Guaranteed Party

(aa) A party whose obligations in respectof the OTC derivatives transaction for which the determinationis made is fully guaranteed by another Qualified Party.

Qualified Party Not Acting as Principal

(4) The accounts of a person, company, pensionfund or pooled fund trust that are fully managed by a portfoliomanager or financial intermediary referred to in paragraphs(a), (d), (e), (g), (s), (t), (u) or (w) of paragraph (3)or a broker or investment dealer acting as a trustee or agentfor the person, company, pension fund or pooled fund trustunder section 148 of the Ontario Regulation are QualifiedParties, in respect of all OTC derivative transactions.

Subsequent Failure to Qualify

(5) A party is a Qualified Party for the purposeof any OTC derivatives transaction if it, he or she is a QualifiedParty at the time it, he or she enters into the transaction.