Straight Talk  

CSA mandate to match trades on trade-date is final

On January 12, 2007, the Canadian Securities Administrators (CSA) published National Instrument 24-101 – Institutional Trade Matching and Settlement (the rule) together with Companion Policy 24-101CP.  The rule was revised by the regulators as a result of comments received in May 2006 from the industry and subsequent consultation with the industry.  As none of the revisions are considered material, the rule is now considered final and is expected to come into force on April 1, 2007. Only the securities regulatory authority may grant an exemption from the rule, in whole or in part.

The rule requires registered dealers/advisers to establish, maintain and enforce policies and procedures that will enable them to match DAP (deliver against payment) and RAP (receive against payment) trades no later than the end of trade date (T).  The dealer/adviser may adapt its policies and procedures to permit matching to occur no later than the end of T+1 (trade date plus one business day) for DAP/RAP trades resulting from an order to buy or sell securities received from an institutional investor whose investment decisions are usually made in and communicated from a geographical region outside of the western hemisphere.

Registered dealers/advisers are prohibited from opening DAP/RAP accounts or executing DAP/RAP trades for an institutional investor unless they have entered into a trade-matching agreement with the dealer, or alternatively provided a trade-matching statement to the dealer.  

Progressive trade-matching thresholds and target dates for the industry have been set as follows:

If the percentage thresholds for matching trades are not met, the registrant is required to complete and file forms and exhibits to the Canadian securities regulatory authorities no later than 45 days after the end of a calendar quarter.  An explanation as to why they failed to achieve the percentage threshold of matched DAP/RAP trades must be given.  In addition, they must also identify their action plan to resolve the matching delays and non-compliance.  There are also reporting requirements for clearing agencies and matching service utilities.

The purpose of the rule is to provide a general framework in provincial securities legislation for ensuring a more efficient and timely process for matching and settling institutional trades.

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