Order: LatAm SEF, LLC

Market Regulation Document Type
LatAm SEF, LLC orders and notices

Headnote

 

Application for an order that a swap execution facility registered with the United States Commodity Futures Trading Commission is exempt from the requirement to register as an exchange in Ontario – requested order granted.

Applicable Legislative Provisions

 

Securities Act, R.S.O. 1990, c. S. 5, as am., s. 147.

IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S. 5,
AS AMENDED (THE ACT)

AND

IN THE MATTER OF
LatAm SEF, LLC

ORDER
(Section 147 of the Act)

    WHEREAS LatAm SEF, LLC (“LatAm”) has filed an application dated December 5, 2013 (Application) with the Ontario Securities Commission ( Commission) requesting an interim order pursuant to section 147 of the Act exempting LatAm from the requirement to be recognized as an exchange under subsection 21(1) of the Act (Exchange Relief);

    AND WHEREAS LatAm has represented to the Commission that:

1.1     It is a limited liability company organized under the laws of the State of Delaware and is an indirect wholly-owned subsidiary of Enlace Int SA de CV, a corporation organized under the laws of Mexico;

 

1.2     LatAm operates a swap execution facility that initially will facilitate transactions in Mexican peso denominated interest rate swaps and non-deliverable forward contracts;

 

1.3     LatAm’s swap execution facility offers a central limit order book where orders are executed based on price/time priority and a request for quote functionality pursuant to which participants may transmit a request for a quote to buy or sell a specific swap to other participants;

1.4     LatAm has entered into a clearing services agreement with the Chicago Mercantile Exchange;

1.5     In the United States, LatAm operates under the jurisdiction of the Commodity Futures Trading Commission (CFTC) and was temporarily registered with the CFTC as a swap execution facility on November 18, 2013;

1.6     LatAm is obliged under CFTC rules to have requirements governing the conduct of participants, to monitor compliance with those requirements and to discipline participants, including by means other than exclusion from the marketplace;

 

1.7     LatAm does not utilize a third party as a regulatory services provider and thus is responsible for conducting its own trade practice, market and financial surveillance;

1.8     Because LatAm regulates the conduct of its participants, it is considered by the Commission to be an exchange;

1.9     Because LatAm has participants located in Ontario, it is considered by the Commission to be carrying on business as an exchange in Ontario and is required to be recognized as such or exempted from recognition pursuant to section 21 of the Act;

 

1.10     LatAm has no physical presence in Ontario and does not otherwise carry on business in Ontario except as described above; and

1.11     LatAm intends to file a full application to the Commission for a subsequent order exempting it from the requirement to be recognized as an exchange pursuant to section 147 of the Act (Subsequent Order);

    AND WHEREAS the products traded on LatAm are not commodity futures contracts as defined in the Commodity Futures Act (Ontario) and LatAm is not considered to be carrying on business as a commodity futures exchange in Ontario;

    AND WHEREAS the Commission will monitor developments in international and domestic capital markets and LatAm activities on an ongoing basis to determine whether it is appropriate for the Exchange Relief to continue to be granted subject to the terms and conditions set out in Schedule “A” to this order;

 

    AND WHEREAS LatAm has acknowledged to the Commission that the scope of the Exchange Relief and the terms and conditions imposed by the Commission set out in Schedule “A” to this order may change as a result of the Commission’s monitoring of developments in international and domestic capital markets or LatAm activities, or as a result of any changes to the laws in Ontario affecting trading in derivatives or securities;

 

    AND WHEREAS based on the Application, together with the representations made by and acknowledgements of LatAm to the Commission, the Commission has determined that the granting of the Exchange Relief would not be prejudicial to the public interest;

    IT IS HEREBY ORDERED by the Commission that, pursuant to section 147 of the Act, LatAm is exempt on an interim basis from recognition as an exchange under subsection 21(1) of the Act,

 

    PROVIDED THAT:

1.     This Order terminates on the earlier of (i) December 10, 2014 and (ii) the effective date of the Subsequent Order;

 

2.     LatAm complies with the terms and conditions contained in Schedule “A.”; and

 

3.     LatAm shall file a full application to the Commission for the Subsequent Order by March 31, 2014.

 

        DATED: December 10, 2013.

“Judith N. Robertson”

“James E. A. Turner”