Good news and bad news for OTC derivatives providers

The Financial Sector Conduct Authority (FSCA) confirmed on Friday, 1 March 2019, that it would be releasing the following key documents upon which over-the-counter derivative providers (ODPs) must rely upon, when submitting their applications for registration in terms of Conduct Standard 1 of 2018:

1. a set of Application Instructions;
2. an Application Index; and
3. a Capital Adequacy Calculation template.

ODP must adhere to the documentation listed above which, according to the FSCA, will be published by the FSCA on 15 March 2019. Therefore, for those ODPs who have already started collating their application documents, these applications should be reconsidered and aligned with the new documents and templates which the FSCA will prescribe in two weeks’ time.

The good news is that applicants for ODP registration have an extra two and a half months to submit their applications, as the 1 April 2019 deadline has been extended to 14 June 2019.

Background

In terms of the Financial Markets Act, 2012 and the regulations made pursuant thereto, any person transacting as principal who (as a regular feature of business):

• originates, issues or sells OTC derivatives; or
• makes a market in OTC derivatives,

must be licensed as an authorised ODP with the FSCA. Only once authorised, may an ODP hold itself out of advertise as an ODP or otherwise act as an ODP.

Exemptions

The Regulations refer to the power of the FSCA to exempt an ODP from the requirement to be authorised. We would recommend that any such exemption applications also be submitted before the 14 June 2019 deadline.