In 2018 when the Committee on Payment and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued the Technical Guidance for the Harmonisation of critical OTC derivatives data elements (the CDE), one by one securities commissions from across the world began implementing the CDE in their derivatives reporting rules.
In July 2024 the Canadian Securities Administrators announced that the Canadian implementation of the CDE will begin to apply from the 25th of July 2025. In this blog we will present a few of the major changes the revised spec introduces.
Reporting format
Unlike other jurisdictions such as the EU, UK, Australia and Singapore, the revised Canadian specs do not require a specific reporting format (e.g. xml, csv, json etc.) as such the TRs will be presenting to their end clientele their preferred submission method.
Additional validations
The current Canadian reporting spec did not mandate many reporting validation rules for TRs to implement prior to accepting a given submission. The revised rules introduce a host of validation rules e.g. several data points are either conditional, or mandatory, optional, or not required at all, subject to how other data points within the report are communicated. This creates a much more rigid reporting framework where reporting entities will need to consider the conditions for each data value reported.
Position Level Reporting
The Canadian implementation of the CDE also introduces the possibility (under specific circumstances) for reporting entities to report derivatives at a position level. In simple terms derivatives, which are fungible, with the same counterparty can be netted into a single derivative report, for which the counterparties will report collateral and valuation messages. The conditions/what instruments are eligible for position reporting are laid out in the CSA Derivatives Data Technical Manual.
Unique Product Identifier – UPI
As we have mentioned in previous blogs (see here for a brief overview and an explanation on the UPI’s technical aspects) the UPI is being deployed for the revised Canadian reporting. The UPI is a unique code that identifies the OTC derivative that the counterparties will be trading with. Upon coming into effect, the revised Canadian reporting rules will require the UPI for all derivative classes except for commodities. Canadian authorities will require the UPI for commodities at a later stage.
It should be noted that where the UPI denotes as its underlying OTHER due to the fact that the underlying reference value is not included in ANNA DSB’s UPI enumeration lists, additional data elements must be reported.
Transaction Identifier – UTI
The Canadian reporting revised spec endorses the ISO 23897:2020 spec regarding the Unique Transaction Identifier (UTI). Counterparties will need to construct the Unique Trade Identifier in accordance with the technical specs of the said ISO as established by the Regulatory Oversight Committee. The UTI will have a length of up to 52 characters, where characters 1-20 will be the LEI of the Generating Entity, followed by unique code assigned by the same entity.
Action and Event Types
Similar to other jurisdictions’ implementation of the CDE the revised Canadian reporting specs introduce different Events applicable to different Action Types. Consider the following examples:
Compression
Where 2 counterparties proceed with a portfolio compression exercise whereby they terminate some, or all, outstanding derivative trades between them and replace the terminated trades with another derivative(or derivatives) whose combined notional value is equal or less than the combined notional value of the terminated trades then the termination (TERM) and new action (NEWT) types should be accompanied by a compression (COMP) event.
Exercise
A counterparty decides to exercise an American Put Option before its expiry date. This triggers an obligation to report a termination to the TR, the said termination message must be accompanied by the exercise event type (EXER).
Allocations
A counterparty trading on behalf of clients, executes a bulk trade with another derivatives dealer and then allocates to each client its portion of the bulk trade. The counterparty will report a new trade with each client with the combination action type new (NEWT) and event type allocation (ALOC). The allocation reports will be linked to the trade with the derivatives dealer by reporting the Prior Unique Trade Identifier (PriorUTI) value. The PriorUTI value should be the same UTI as the one used to report trade between the counterparty-derivatives dealer.
Derivative reports outstanding as at the go live date of the revised Canadian rules.
Derivatives that were reported under the existing Reporting Regime and which are still outstanding (i.e. non-terminated) should be updated to the new data requirements with the Action-Event combination Modification – Update after the revised go live date. It should be noted that the Transaction Identifier code for these outstanding derivatives will not be updated to the new standard.
MAP FinTech is in process of updating its systems and processes to assist clients who have an obligation to report in any Canadian jurisdiction. Contact our team of experts for more information or any assistance you may require.
Disclaimer: The above blog was written by MAP FinTech’s internal teams and under no circumstance does it replace advice or guidance by Firms’ compliance and/or risk management functions. Firms affected by the Canadian rewrites should consult with their compliance/risk management personnel and or consultants for specific guidance and must not rely on the information contained herein.