I-14.01 - Derivatives Act

Section 46 Disposition versions

2009-02-01

46. A clearing house must apply sound internal management practices in order to ensure its proper operation. To that end, it must put in place

(1)  an appropriate risk management process for derivatives clearing that integrates prudent risk limits;

(2)  sound information systems and risk measurement procedures;

(3)  comprehensive internal controls and audit procedures;

(4)  continuous monitoring, and frequent monitoring reporting to its senior management; and

(5)  appropriate oversight by its directors.

For the purposes of subparagraph 1 of the first paragraph, “derivatives clearing” includes all arrangements through which a clearing house, in accordance with its rules,

(1)  matches positions between market participants or parties to derivatives;

(2)  receives margin deposits or margins, and mutualizes or transfers the credit risk arising from a derivative among its members or clearing agents;

(3)  substitutes the credit of the clearing house for that of the parties to a derivative; and

(4)  nets those transactions on a multilateral basis, and settles them or, failing settlement, liquidates or cancels the relevant positions.

2008, c. 24, s. 46.