Securities Law

24-301 - Responses to comments received on Discussion Paper 24-401 on Straight-through Processing, Proposed National Instrument 24-101 Post-trade Matching and Settlement, and Proposed Companion Policy 24-101CP to National Instrument 24-101 Post-trade Matching and Settlement [CSA Notice - Lapsed]

Published Date: 2005-02-11
Effective Date: 2005-02-11
Document(s):

Concurrently Published:

Introduction

On April 16, 2004, the Canadian Securities Administrators (the CSA or we) published for comment the following documents (collectively, STP Release):[1]

  • Discussion Paper 24-401 on Straight-through Processing and Request for Comments (Paper)
  • Proposed National Instrument 24-101 Post-trade Matching and Settlement (National Instrument)
  • Proposed Companion Policy 24-101CP to National Instrument 24-101 Post-trade Matching and Settlement (Companion Policy)

The CSA published the STP Release to: (a) acknowledge the importance of post-execution functions; (b) advance the industry discussions on straight-through processing (STP); and (c) build upon previous initiatives to improve the securities clearing and settlement system in the Canadian capital markets. The Paper described the industry-wide STP efforts and proposed CSA regulatory measures to address inefficiencies in certain clearing and settlement and post-settlement processes. The topics addressed in the STP Release include: (i) the post-execution, pre-settlement process for institutional trades in Canada, particularly the confirmation and affirmation process; (ii) the process of disseminating entitlement information on publicly traded securities (also known as corporate actions); (iii) entitlement payments made by issuers or offerors (such as dividend, interest, redemption, repurchase or take-over bid payments) to the clearing agency in funds that are not same-day final funds; (iv) the post-execution processing of investment fund transactions in the context of the client name business model as compared to the nominee name business model; (v) the processing of securities lending transactions; and (vi) the continued use of physical securities in connection with the settlement of transactions in publicly traded securities. 

Because the CSA and the industry, through the Canadian Capital Markets Association (CCMA), identified the confirmation and affirmation—or matching—process for institutional trades as the most pressing STP initiative, we published for comment the proposed National Instrument and Companion Policy. Generally, the proposed National Instrument requires that, as of July 1, 2005, institutional trades be matched as soon as practicable after a trade is executed and in any event no later than the close of business on trade date (or T). In addition, dealers and advisers would be required to enter into a trade matching compliance agreement before allowing an institutional client to trade with delivery-versus-payment / receive-versus-payment (DVP/RVP) privileges. Under the National Instrument, the CSA also proposed to adopt a general settlement cycle rule of trade date plus three (T+3) and a good delivery rule.

This Notice provides an update on industry and regulatory STP developments and a summary of the comments received on the STP Release. The Notice also discusses the CSA process going forward. The CSA remain committed to supporting an institutional trade-matching (ITM) rule in force by January 1, 2006, but intend to pursue this objective through a co-operative approach with the self-regulatory organizations (SROs) that also have an interest in establishing ITM requirements. Our objective is to have the appropriate rule or rules finalized by December 31, 2005.


[1]    BCN 2004/25