Derivatives

Under the Securities Act, the British Columbia 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.