On the margin of success: the legal and regulatory protections for customer margin in the Canadian derivatives markets

This article analyzes the new legal regime for protecting margin that is postedby cleared derivatives (or cleared swaps) customers in the Canadian derivativesmarkets. In response to the global financial crisis of 2008, Canada passedlegislation to reform these markets. One of the major reforms was the introductionof mandatory clearing for standardized over-the-counter (OTC) swaps through acentral counterparty clearing system (CCP). This reform requires customers thatenter into cleared swaps contracts to post margin with a clearing intermediary inorder to comply with the rules of the clearing system. The Canadian SecuritiesAdministrators OTC Derivatives Committee (CSA) has created a Model Law (theModel Provincial Rule, or MPR) for the provinces to implement in order toincrease legal certainty for cleared swaps customers that post margin with anintermediary