J.P. Morgan Clearing Corp.

Decision

Headnote

Filer exempted from section 13.12 [restriction on lending to clients] of National Instrument 31-103 Registration Requirements and Exemptions -- The filer is applying for registration as a restricted dealer -- The filer is a registered broker-dealer with the SEC and a member of FINRA -- Terms and conditions on the exemptions require that: (i) the head office or principal place of business of the filer be in the USA; (ii) the filer be registered under the securities legislation of the USA in a category of registration that permits it to carry on the activities in the USA that registration as an investment dealer would permit it to carry on in Ontario, (iii) by virtue of the securities legislation of the USA, the filer is subject to requirements in respect of lending money, extending credit or providing margin to clients that result in substantially similar regulatory protections to those provided for under the capital and margin requirements of IIROC, that would be applicable if the filer if it were registered under the Act as an investment dealer and were a member of IIROC.

Instruments Cited

Multilateral Instrument 11-102 Passport System, s. 4.7.

National Instrument 14-101 Definitions.

National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 13.12, 15.1.

November 11, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

J.P. MORGAN CLEARING CORP.

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer (the "Application") for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for an exemption from the requirement contained in section 13.12 [restriction on lending to clients] of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations ("NI 31-103") that a registrant must not lend money, extend credit or provide margin to a client (the "Exemption Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport review application):

(a) the Ontario Securities Commission is the principal regulator for this Application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is being relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (and together with the Jurisdiction, the "Canadian Jurisdictions").

Interpretation

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

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a company incorporated under the laws of the State of Delaware. Its head office is located at One Metrotech Center North, Brooklyn, NY 11201, United States of America ("USA").

2. The Filer is a wholly owned subsidiary of J.P. Morgan Securities LLC, a Delaware corporation, and an indirect wholly owned subsidiary of JP Morgan Chase & Co., a Delaware corporation.

3. The Filer is registered as a broker-dealer with the United States ("U.S.") Securities and Exchange Commission ("SEC"), and is a member of the Financial Industry Regulatory Authority ("FINRA"). This registration permits the Filer to carry on in the USA, being its home jurisdiction, substantially similar activities that registration as an investment dealer would authorize it to carry on in the Jurisdiction if the Filer were registered under the Legislation as an investment dealer.

4. The Filer is a member of major securities exchanges, including the Chicago Stock Exchange and NYSE Euronext ("NYSE").

5. The Filer is a Foreign Approved Participant of the Montreal Exchange and a Registered Futures Commission Merchant of ICE Futures Canada, Inc. The Filer is also a member of the CME Group (including the Chicago Board of Trade), ICE Futures U.S., Inc., and other principal U.S. commodity exchanges, and may facilitate trades through affiliated or unaffiliated member firms on all other exchanges, including exchanges in Canada, France, Italy, Japan, Singapore, Spain, Taiwan, Mexico, Korea and the United Kingdom.

6. The Filer is relying on the international dealer exemption under section 8.18 of NI 31-103 in the Canadian Jurisdictions.

7. The Filer was established for the express purpose of holding and financing customer accounts and clearing and settling transactions. The Filer does not make proprietary investments or engage in market making activities.

8. The Filer may engage in activities which may be considered lending money, extending credit or providing margin to clients. All such activities are conducted in compliance with the rules of its home jurisdiction.

9. The Filer is registered, or has applied to be registered, in the category of restricted dealer, with terms and conditions including that it may only deal with permitted clients as defined in section 1.1 of NI 31-103 in the Canadian Jurisdictions. As a restricted dealer under the securities legislation of the Canadian jurisdictions, the Filer is subject to the prohibition on lending money, extending credit or providing margin to a client in section 13.12 of NI 31-103.

10. In certain comments received on NI 31-103, after it was published for comment, it was suggested that the prohibitions in section 13.12 should not apply to certain dealers that are members of foreign self-regulatory organizations, or subject to regulatory requirements in a foreign jurisdiction, where the dealer is subject to margin regimes similar to that imposed by the Investment Industry Regulatory Organization of Canada ("IIROC"). The Canadian Securities Administrators responded to these comments by suggesting that these circumstances could be considered on a case-by-case basis, through exemption applications, and that an exemption should be made available to registrations who have "adequate measures in place to address the risks involved and other related regulatory concerns".

11. The Filer is subject to regulations of the Board of Governors of the USA Federal Reserve System ("FRB"), the SEC, FINRA and the NYSE regarding the lending of money, extension of credit and provision of margin to clients (the "USA Margin Regulations") that provide protections that are substantially similar to the protections provided by the requirements regarding the lending of money, extension of credit and provision of margin to clients to which dealer members of IIROC are subject. In particular, the Filer is subject to the margin requirements imposed by the FRB, including Regulations T, U and X, under applicable SEC rules and under FINRA Rule 4210. The Filer is in compliance in all material respects with all applicable USA Margin Regulations.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted so long as:

(a) the head office or principal place of business of the Filer is in the USA;

(b) the Filer is registered under the securities legislation of the USA in a category of registration that permits it to carry on the activities in the USA that registration as an investment dealer would permit it to carry on in the Jurisdiction;

(c) by virtue of the registration referred to in paragraph (b), including required membership in one or more self-regulatory organizations, the Filer is subject to requirements in respect of its lending money, extending credit or providing margin to clients (including clients that are located in Canada) that result in substantially similar regulatory protections to those provided for under the capital and margin requirements of IIROC that would be applicable to the Filer if it were registered under the Legislation as an investment dealer and were a member of IIROC.

It is further the decision of the principal regulator that the Exemption Sought shall expire on the date that is the earlier of:

(a) the date that the Filer's registration as a restricted dealer in the Jurisdiction expires or is revoked; and

(b) March 31, 2013.

"Erez Blumberger"
Deputy Director,
Compliance & Registrant Regulation
Ontario Securities Commission