TMX Post-Trade: Developments at CDS & CDCC

September 8, 20172017 IIROC Financial and Operations Advisory Section ConferenceS

Brian Z. GelfandChief Commercial Officer, TMX | CDS CDCC

1. CDS and CDCC Modernization: Projects Atlas and Mercury

2. CDCC Buyside Repo

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TMX Post-Trade: Developments at CDS and CDCC

CDS and CDCC Modernization: Projects Atlas and Mercury

The CDS & CDCC Modernization Program is made up of two key projects

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1. Produces a modern, refreshed technology platform that will allow CDS/CDCC to keep pace with the evolving needs of the industry

2. Creates opportunities to participate in future financial market infrastructure initiative.

3. Delivers a simpler, more flexible technology platform - changes will be easier, faster and cheaper to implement

4. Supports operational efficiencies through a single point of contact

5. Delivers an integrated solution for clearing, depository and risk management

Project ATLASCore Clearing & Settlement

Start Date: May 2017

Project MERCURYCorp Actions & Entitlements

Start Date: September 2017

ATLAS and MERCURY will leverage TCS BaNCS Market Infrastructure Platform

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ATLAS

TCS BαNCS Solutions

MERCURY will be aligned to the ATLAS CDS Modernization Delivery dates

6 * & ** Indicative timelines to be confirmed after each Solution Analysis is complete

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ATLAS & MERCURY Participant Engagement

CDCC Direct Clearing for Buyside Firms

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Direct Clearing for Canadian Buyside Firms

• Proposal will enable certain Canadian buy-side firms to clear cash or repo trades directly through CDCC

• Will extend CCP clearing benefits of capital, margin and collateral efficiencies to a new membership category – Limited Clearing Members

• Developed in consultation with clearing members, public pension funds, securities regulators, the Bank of Canada and IIAC

• Will enhance the efficiency, resiliency and capacity of Canadian capital markets

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Core Principles for LCMs

1. LCMs not subject to Clearing Fund contributiona. Margin subject to a multiplier

2. LCMs have no obligation resulting from the default of another Clearing Member

3. LCMs are subject to recovery powers in a modified fashion

a. CDCC shall not reduce its obligation toward an LCM as part of Recovery Process, with one exception

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Distinct Eligibility and Membership Standards

• Eligible institutions:o Federal or provincial crown, or crown-related

entitieso Provincially or federally regulated pension funds

that manage public sector pension plans.

• Credit Standards

• Ongoing Monitoring of creditworthiness and financial resilience

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Distinct Margin Framework

• Adjusted Base Initial Margino LCM initial margin subject to a multiplier because

LCMs will not contribute to the Clearing Fund

• Additional Margin for uncovered residual risko Ensures that CDCC will meet Cover 1 requirements

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Distinct Operational Timelines and Processes

• LCMs generally rely on external service providers for most back-office functionso They will have distinct timelines to satisfy their

obligations regarding Settlement, Intra-Day margin Calls and Pledging of collateral

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Phased Implementation

Two Phases:First group: February 2018Second group: July 2018

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For more detailed information

Please consult our website : WWW.CDCC.CA

• CDCC Notice to members 2017 – 126, published August 30th, 2017

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Thank you!

Brian Gelfand - Chief Commercial Officerbrian.gelfand@tmx.com

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