TMX Group Inc. today issued a position paper that discusses its views on the appropriate Canadian solution to the G-20 leaders’ objectives related to improving the Over-the-Counter (OTC) derivatives markets. The paper, entitled: Transparency, Market Integrity & Risk Management: The Role of the Regulated Exchange, outlines the various goals set out by the G20 leaders and matches them to the capabilities and technology available through Canadian partners operated by TMX Group, such as Montréal Exchange, Canadian Derivatives Clearing Corporation (CDCC) and Natural Gas Exchange (NGX).
Commenting on the position paper, TMX Group Chief Executive Officer Thomas Kloet stated:
"In response to the recent global economic crisis, G-20 leaders have called for important improvements to the Over-The-Counter derivatives market. We are pleased to put forward our views on how TMX Group, in partnership with the dealer and user community, can provide domestic solutions, linked to other global OTC marketplaces and clearinghouses. An effective solution must reduce risk, enhance transparency and, most importantly, increase the integrity of the Canadian system. Canada has a well-earned reputation for stability and trust and the world is looking to us to show leadership in tackling this important challenge."
Alain Miquelon, President of Montréal Exchange and Group Head, Derivatives for TMX Group added the following comments:
"This is a critical undertaking and work is already underway on a number of initiatives. We look forward to partnering with the industry and regulatory authorities as we bring robust, highly tailored solutions for OTC derivatives clearing to the market rapidly and effectively. As an operator of a globally recognized exchange and an AA-rated derivative clearinghouse, we have the expertise, the technology and the track record and are building solutions to help reduce risk and strengthen the Canadian capital markets."
Overview of Position Paper
The document expands on the commitments made by the G20 leaders and demonstrates the strong capabilities that exist in Canada today. This includes:
- Prudential oversight of financial institutions – aimed at reducing the risk of insolvency of institutions.
- Improved risk management – in terms of liquidity, operational risk (such as internal processes, people and systems) and counterparty risk.
- Increased transparency – both in the price formation process as well as post-trade.
- Promotion of market integrity – inherent in regulated markets and clearing houses.
- Mitigation of systemic risk – which can benefit from leveraging the existing capabilities of an established Canadian clearing house and electronic exchange.
- Reinforcement of international cooperation – critical in a global environment, effective central counterparty clearing (CCP) linked to other international markets will limit the risk of "too big to fail" and allow for a more robust risk management framework.