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ARTICLE · 04 MARCH 2015

IIROC Proposes Adjusting Margin Requirements For Agency Lending Agreements

Stikeman Elliott LLP
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The Investment Industry Regulatory Organization of Canada yesterday proposed amendments to Dealer Member Form 1.

CanadaFinance and Banking
The Securities Group
The Securities Group
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The Investment Industry Regulatory Organization of Canada yesterday proposed amendments to Dealer Member Form 1 intended to address concerns that current rules do not set out specific margin requirements for agency cash and security borrowing and lending arrangements, as well as the fact that current rules do not have the same margin requirements for arrangements with acceptable counterparties versus regulated entity counterparties.

The concerns are especially relevant considering the recent trend involving dealers entering into borrowing and lending arrangements with custodians that act as agents for counterparties. According to IIROC, the risk of such agreements is equivalent to comparable "principal" arrangements. However, since Dealer Member Form 1 does not cover these types of agency agreements, dealers are currently required to provide additional margin in these cases. 

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