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As a result of an amendment to the definition of “clearing agency” under the Securities Act (Ontario), FundSERV is now required to be recognized as a clearing agency by the Ontario Securities Commission (the “Commission”).
FundSERV is not a clearing agency in the conventional sense, nor does it give rise to systemic risk concerns. Rather, FundSERV provides the network infrastructure for its customers to place and reconcile orders through efficient, secure data exchange and, for those who so elect, to enable them to settle orders through a payment-exchange handled by the Royal Bank of Canada through the Large-Value Transfer System operated by the Canadian Payments Association. Recognizing that FundSERV’s business model does not involve credit enhancement, the assumption of counter-party risk, novation or custody, the Commission’s proposed Recognition Order (the “Order”) focuses narrowly on FundSERV’s provision of centralized payment exchange facilities. New standards relating to such services that impact upon market participants will now be reviewed by the Commission, which has committed to do so in a manner that dove-tails with FundSERV’s own standard-setting process (so as not to impose additional costs or delays). In addition, the level of transparency and cooperation which FundSERV has always maintained with the Commission will be formalized.
The Commission will be publishing the Order (copy attached) for public comment. FundSERV believes that the dialogue it has undertaken with Commission Staff to craft the Order has helped the Commission to better appreciate FundSERV’s role and operations and should enable the Commission to more effectively exercise its responsibility.
If you have any questions or concerns about the Order, please feel free to contact Robert Smuk at
|OSC Draft Order|