CANADA: IIROC Amend Schedule 12 of Form 1 – Margin on Futures Concentrations and Deposits

Friday March 31 2017

The Investment Industry Regulatory Organisation of Canada (IIROC) has made amendments to Schedule 12 of Form 1 – Margin on Futures Concentrations and Deposits and its Notes and Instructions (collectively, the Non-Material Amendments).. The Non-Material Amendments relate to the concentration margin calculation for futures and deposits.

The Non-Material Amendments were published for comment on June 23, 2016 in IIROC Rules Notice. All relevant background information, including the objectives of the amendments, is set out in Notice 16-0142.

The Non-Material Amendments will be effective on April 28, 2017.

The Schedule and its accompanying Notes and Instructions require updating to reflect changes in the futures markets over the past several years, including:

• the introduction of futures contracts on other asset classes beyond commodities (e.g. financial futures contracts)
• the fact that there are more valid risk-reduction offset strategies that are recognized by the futures exchanges
• make the Schedule easier to understand and complete.

The Non-Material Amendments would therefore clarify that the Schedule covers both commodities and financial futures, stipulate the additional risk-reduction offset strategies that can be excluded from the margin calculations, and make the margin calculations clearer.

The benefits of the Non-Material Amendments are:

• a more comprehensive set of margin requirements that will cover futures contracts on other asset classes
• a more logically organized set of margin requirements that would be easier to read and interpret
• a set of margin requirements that are more reflective of current industry practices.

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