Securities Law & Instruments


Application for relief from the registration and prospectus requirements of the Securities Act (Ontario) in connection with certain trades by the Filer to counterparties, and by counterparties to the Filer, in over-the-counter (OTC) derivative securities -- Filer is registered as a broker-dealer with the United States Securities and Exchange Commission under the Securities Exchange Act of 1934 and as a futures commission merchant with the United States Commodity Futures Trading Commission under the Commodities Exchange Act -- registration and prospectus relief sought on the basis that proposed OSC Rule 91-504 Over-The-Counter Derivatives would have provided similar relief for certain trades in OTC derivative transactions to "qualified parties" (as defined in the proposed rule) -- relief granted to the Filer subject to three-year sunset provision -- order redrafted to make reference to definition of "accredited investor" in OSC Rule 45-501 Exempt Distributions, with certain exceptions -- definition of "accredited investor" similar to the definition of "qualified party" -- going forward, staff no longer prepared to recommend relief on the basis of proposed rule -- existing exemptions available for such trades.

Ontario Statutes

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 53(1), and 74(1).

Ontario Rules

OSC Rule 45-501 Exempt Distributions.

Proposed OSC Rule 91-504 Over-The-Counter Derivatives.



R.S.O. 1990 C. S.5 AS AMENDED






(Section 74(1))


The Ontario Securities Commission (the Commission) has received an application from Calyon Financial Inc. (Calyon) for an order under section 74(1) of the Securities Act (Ontario) (the Act) that

(i) the requirements in the Act to be registered to trade in a security (the Registration Requirement), and

(ii) the requirements in the Act to file and obtain a receipt for a preliminary prospectus and a prospectus in respect of such security (the Prospectus Requirement)

shall not apply to certain trades in over-the-counter (OTC) derivatives entered into between Calyon and certain counterparties, subject to certain terms and conditions.


Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

In this Order,

"Qualified Party" means

(a) an "accredited investor", as defined in OSC Rule 45-501 Exempt Distributions (OSC Rule 45-501), other than a person or company described in clauses (n), (o), (p), (q) or (r) of that definition (the excluded categories) and clause (aa) of that definition to the extent that the owners of interests, direct or indirect, legal or beneficial, of the person or company described in clause (aa) includes a person or company in an excluded category; and

(b) a person or company registered under the Commodity Futures Act (Ontario) as a dealer in the category of futures commission merchant or as an advisor or in an equivalent capacity elsewhere in Canada.


This Order is based upon the following representations by Calyon:

1. Calyon is a corporation incorporated under the laws of Delaware and is an indirect, wholly-owned subsidiary of Credit Agricole S.A., a bank domiciled in France. The head office of Calyon is located in Chicago, Illinois.

2. Calyon is registered as a broker-dealer with the United States Securities and Exchange Commission of the United States under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers of the United States and is registered as a futures commission merchant with the Commodity Futures Trading Commission pursuant to the United States Commodities Exchange Act and is a member of the National Futures Association.

3. Calyon is not registered as a dealer or adviser under the securities legislation of any province or territory of Canada. Calyon is also not a reporting issuer in any province or territory of Canada.

4. Calyon has recently submitted an application with the Ontario Securities Commission for registration as a dealer in the registration category of international dealer. However, this category of registration does not permit Calyon to effect the trades in over-the-counter (OTC) derivatives in Ontario as contemplated by this application.

5. Calyon proposes to market and trade a full range of OTC derivative products with certain counterparties in Ontario.

6. The OTC derivatives will consist of one or more of an option, a forward contract, a swap, a repurchase agreement or a contract for differences of a type commonly considered to be a derivative, in which:

(a) the agreement relating to, and the material economic terms of the option, forward contract, swap, foreign exchange contract, repurchase agreement or contract for differences have been customized to the purposes of the parties to the agreement and the agreement is not part of a fungible class of agreements that are standardized as to their material economic terms;

(b) the creditworthiness of a party having an obligation under the agreement would be a material consideration in entering into or determining the terms of the agreement; and

(c) the agreement is not entered into or traded on or through an organized market, stock exchange or futures exchange and is not cleared by a clearing corporation.

7. The underlying interest of the OTC derivatives transacted between Calyon and the counterparties will consist entirely of a commodity, an interest rate, a foreign exchange rate, a security, an index, a benchmark or other variable, another OTC derivative, or some relationship between, or combination of, one or more of any of them.

8. The counterparties to such transactions will consist exclusively of parties that meet the following criteria:

(a) they are Qualified Parties;

(b) they have a high level of business and financial sophistication;

(c) they have access to their own independent advisors who can assist in the determination of the suitability of the transaction and the creditworthiness of Calyon; and

(d) they enter into OTC derivative trades as part of the ordinary course of their businesses or investing activity in order to hedge or otherwise manage specific risks associated with their businesses or investments or for speculative purposes.

9. Calyon will maintain books and records in respect of the trades contemplated by this Order that contain substantially the same information as would have been collected and filed as if such trades had been made in reliance on the "accredited investor" exemption in s. 2.3 of OSC Rule 45-501, or any successor instrument thereto.


Upon the recommendation of the staff of the Commission it is ordered pursuant to Section 74(1) that

1. Calyon and Calyon's counterparties who are Qualified Parties shall each be exempt from the Registration Requirement and the Prospectus Requirement in respect of trades in OTC derivatives provided that the representations contained in paragraphs 5, 6, 7, 8 and 9 remain true as at the time of the trade; and

2. this Order will expire on the third anniversary of the date of this Order.

December 21, 2004.

"Paul M. Moore"
"Wendell S. Wigle"