Derivatives

Under the Securities Act, the BC Securities Commission (BCSC) has jurisdiction over derivatives markets in the province.

A derivative includes a broad range of contracts or instruments, including options, swaps, futures contracts, forward contracts or other financial or commodity contracts or instruments whose value is based on an underlying interest.

This includes a wide range of contracts or instruments, including over-the-counter (OTC) derivatives and derivatives traded on exchanges, including futures and options contracts. But it also includes contracts or instruments that people might not ordinarily consider to be derivatives, including contracts related to currency and commodities. More information about derivatives can be found here.

Derivatives are often used by large institutions to hedge business risks. But some derivatives, such as foreign exchange contracts or contracts for difference, are used by smaller market participants for both hedging and speculation.

The definition of derivatives also gives the BCSC flexibility to ensure that we can apply the appropriate regulatory regime to the instrument we regulate.

The BCSC works with other members of the Canadian Securities Administrators (CSA) to develop a tailored regulatory regime for derivatives that:

• meets Canada’s various commitments to the Group of 20 (an organization of finance ministers and central bank governors from 19 individual countries and the European Union) and the Financial Stability Board, especially in the creation of a transparent framework for regulating OTC derivatives markets,
• meets international standards, including standards developed by the International Organization of Securities Commissions (IOSCO), and
• protects financial markets in B.C. and the participants in those markets.

Rules and Proposed Rules Related to Derivatives

• National Instrument 24-102 – Clearing Agency Requirements
• National Instrument 31-103 - Registration Requirements, Exemptions and Ongoing Registrant Obligations
• Multilateral Instrument 91-101 – Derivatives: Product Determination
• Proposed National Instrument 93-101 – Derivatives: Business Conduct
• Proposed National Instrument 93-102 – Derivatives: Registration
• National Instrument 94-101 – Mandatory Central Counterparty Clearing of Derivatives
• Multilateral Instrument 96-101 – Trade Repositories and Derivatives Data Reporting

Key Blanket Orders Relating to Derivatives

(Designation orders and blanket orders relating to derivatives not otherwise linked above)

• Blanket Order 91-501 – Over-the-Counter Derivatives
• Blanket Order 91-502 - Short Term Foreign Exchange Transactions
• Blanket Order 91-503 – Contracts Providing For Physical Delivery of Commodities
• BC Instrument 96-501 - Exemption from certain derivatives reporting requirements in Multilateral Instrument 96-101 – Trade Repositories and Derivatives Data Reporting
• BC Instrument 96-503 - Exemption from derivatives reporting requirements in Multilateral Instrument 96-101 Trade Repositories and Derivatives Data Reporting for certain derivatives reported to certain data centres
• BC Instrument 96-504 - Exemption from derivatives reporting requirements in Multilateral Instrument 96-101 – Trade Repositories and Derivatives Data Reporting for certain financially settled electricity-based derivatives
• BC Instrument 96-505 - Exemption from certain requirements to publicly disseminate data under MI 96-101 Trade Repositories and Derivatives Data Reporting

Notices

• 21-327 Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets