Canadian derivatives investors will be allowed to process trades through new global clearinghouses that are being created to curb the risk of another financial squeeze, the country’s central bank said.
The Bank of Canada said improvements in the new trading systems are sufficient to protect financial markets, according to a statement from Ottawa today. Canada has also developed a domestic clearinghouse.
A global overhaul of rules governing derivatives contracts mandates the use of central counterparties by derivatives traders. Regulators have sought tougher rules for over-the-counter derivatives since the collapse in 2008 of Lehman Brothers Holdings Inc. and the rescue of American International Group Inc., two of the largest traders of credit-default swaps.
“Canadian authorities are committed to clearing standardized over-the-counter derivative contracts, subject to appropriate exemptions, through central counterparties, CCPs,” the Bank of Canada said. “Canadian authorities judge that global CCPs will provide a safe, robust and resilient environment for clearing OTC derivatives.”