New Registration Exemption For Foreign Dealers And Advisers Trading Or Advising In Standardized Derivatives In Quebec

 
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Copyright 2009, Blake, Cassels & Graydon

LLP

Originally published in Blakes Bulletin on Securities

Regulation, August 2009

INTRODUCTION

The Quebec Autorité des marchés financiers (the

Authority) published a draft amending regulation (Amending

Regulation) under the Quebec Derivatives Act (the QDA) on

July 31, 2009 which provides for a new exemption from the

registration requirements of the QDA for foreign dealers or

advisers who trade or advise in standardized derivatives (the

Standardized Derivatives Exemption).

The Standardized Derivatives Exemption applies where:

the person is authorized to act as a dealer or adviser or

exercise similar functions in a jurisdiction outside Quebec where

its head office or principal place of business is located (the

foreign dealer or adviser);

the foreign dealer or adviser carries on business solely with

"accredited counterparties" (ACs) within the meaning of

the QDA (we discuss the definition of ACs in greater detail below);

and

the activity involves a "standardized derivative"

that is offered primarily outside Quebec. The QDA defines

"standardized derivative" as a derivative that is traded

on a published market, whose instrinsic characteristics are

determined by that market and whose trade is cleared and settled by

a clearing house.

Subject to government approval, the Amending Regulation is

scheduled to come into force on September 28, 2009, in tandem with

National Instrument 31-103 – Registration

Requirements and Exemptions (NI 31-103).

RELATIONSHIP TO CURRENT OTC DERIVATIVES EXEMPTION AND EXEMPTION

FOR SPECIFIED OPTIONS AND FUTURES

Currently, the QDA contains a carve-out from the registration

requirements with respect to over-the-counter (OTC) derivatives

activities or transactions involving ACs only (the OTC Derivatives

Exemption). The Standardized Derivatives Exemption once in force

will provide relief complementary to the OTC Derivatives Exemption

in relation to standardized derivatives activities. As mentioned,

the dealer or adviser must be licensed in its home jurisdiction and

the standardized derivative must be offered primarily outside

Quebec for the Standardized Derivatives Exemption to apply.

When the QDA was brought into force on February 1, 2009, the

Authority adopted a blanket decision (the Blanket Decision)

exempting certain specified options and futures from the QDA where

such instruments are offered to "accredited investors"

(AIs) within the meaning of Regulation 45-106 respecting

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