This month, we spotlight the Derivatives team within the Trading and Markets division. Bringing together legal, policy, compliance, analytics and data specialists, the team leverages its broad expertise and experience to help the OSC oversee derivatives activity in rapidly changing markets.
A derivative is a financial contract whose value is based on (or “derives from”) something else—such as an interest rate, a commodity price, a stock index, a currency, or the occurrence of an event. Derivatives are typically traded in two ways: over‑the‑counter (OTC) or on an exchange. Derivatives are used to transfer price exposure between market participants, to manage risk (hedging) or to speculate by taking positions based on expectations about future prices, rates, or outcomes.
Derivatives activity can be complex, so regulatory oversight plays a critical role in promoting transparency, stability and market integrity.
On the legal and policy side, the team develops and maintains regulatory frameworks governing derivatives markets, including rules related to OTC derivatives. This work includes drafting regulatory instruments, advancing policy initiatives, handling exemptive relief applications related to derivatives rules, assisting with compliance reviews and applying their expertise to wider OSC policy projects.
Complementing this work is the team’s in-depth knowledge of derivatives markets, data management and analytics. The team receives and analyzes OTC derivatives trade data for Ontario entities reported under regulatory requirements. Data specialists handle large and complex datasets, collaborating with the OSC’s Information Services and Digital Solutions team to build tools that clean, organize, and analyze this information in support of evidence-based regulatory oversight.
Externally, the group engages with both domestic and international regulatory partners to promote aligned oversight of derivatives markets and to discuss emerging risks and market evolution. The data the team collects further enhances financial stability and facilitates collaboration with regulatory bodies and central bank economists studying systemic developments in Canadian markets.
Through publications like the 2024 Report on Canadian OTC Derivatives, the OSC provides transparency into derivatives markets and highlight key features of Canada’s OTC activity for investors and market participants.
The team’s work has also informed and contributed to several OSC, CSA, industry and international initiatives such as:
• OSC’s CORRA/Term CORRA-based OTC derivatives trend analysis page: This webpage provides monthly statistics on key Canadian interest rate benchmark trading activity.
• CSA Systemic Risk Committee Annual Report: This Report provides analysis of current financial market trends, emerging risks, and potential vulnerabilities within Canadian capital markets.
• IOSCO Committee on Derivatives (Committee 7): The team is currently leading international work on prediction markets, and is also contributing to work on OTC reporting fragmentation and to the consultation report on good practices for OTC commodity derivatives markets.
• The Committee on Derivatives Identifiers and Data Elements: The team is heavily involved in this international derivatives data standards committee, developing technical definitions used in the OSC’s derivatives trade reporting rules.
The team is also enhancing Canada’s derivatives regulatory framework, with work presently focused on:
• Creating a national instrument for derivatives data reporting to support greater consistency in how derivatives data is reported across Canada.
• Supporting continued implementation of the National Instrument 93-101 Derivatives: Business Conduct to help ensure expectations around derivatives trading and conduct are clearly understood.
• Analyzing the state of OTC derivatives markets and supporting rule amendments, including recent amendments to update the list of derivatives products that must be centrally cleared.
As derivatives markets continue to grow in complexity and speed, the expertise to interpret and understand them is more important than ever. Leveraging deep policy knowledge, strong market intelligence, and advanced data analysis capabilities, the team helps ensure the OSC can monitor trading activity effectively and respond quickly as new developments emerge.
For more information about the OSC’s Derivatives work, please visit the OSC website.
In each OSC Guide, we shine a spotlight on the leaders and teams that you can expect to interact with at the OSC. Stay tuned to meet more of the OSC team next month!
