1. Expanding Access to Canadian Derivatives Clearing

2. Agenda A Global Access to CDCC  CDCC with Canadian Clearing Members (CM), and Global Customers  CDCC with Canadian and non-Canadian CMs, and Global Customers  CDCC with Canadian and non-Canadian CMs, linked to non-Canadian CCP CDCC for Buy-side Participants  Client Clearing Model  How to clear an OTC trade?  Benefits to Clients  Client Protection 2

3. A Global Access to CDCC 3 Based on its established strengths in three key areas,  Risk management,  Legal and regulatory framework and,  Technology and clearing infrastructure, CDCC is committed to expanding its clearing services to ensure that the Canadian market is linked to the global marketplace,  With flexibility to develop international partnerships that best serve the domestic market,  While enabling product evolution and inclusive membership flexibility. A phased approach providing for foreign direct clearing access as a prelude to linkage is implemented.

4. A Global Access to CDCC (cont’d) CDCC with Canadian Clearing Members (CM), and Global Customers 4 In the current environment, Canadian clearing participants interact with each other and with foreign participants either directly with affiliates that are clearing members of CDCC or as foreign customers.

5. A Global Access to CDCC (cont’d) CDCC with Canadian and non-Canadian CMs, and Global Customers In a first phase, CDCC will initiate jurisdictional recognition of its status in the U.S. and European markets to facilitate direct clearing by foreign members of Canadian derivatives. 5

6. A Global Access to CDCC (cont’d) CDCC with Canadian and non-Canadian CMs, linked to non-Canadian CCP In a subsequent phase, CDCC will established links through interoperability arrangements with global CCPs providing either clients or product coverage for the Canadian marketplace. 6

7. CDCC for Buy-side Participants In addition to expanding the member clearing base to include global trading partners of the Canadian market, CDCC is also committed to increasing buy-side market participation. To this end, CDCC is developing:  Direct buy-side clearing opportunities Particularly as part of the fixed income clearing service initiative  Indirect buy-side clearing with robust segregation and portability arrangements Client clearing currently permissible in the exchange- traded marketplace and, for the OTC activities offered by CDCC 8

8. CDCC for Buy-side Participants Client Clearing Model CDCC operates a traditional FCM model for buy-side participation. Buy-side firms with no capacity for direct clearing can benefit of a CCP model by passing through a clearing member. Clients contract clearing arrangements with clearing members and clearing members contract with CDCC. A cleared trade results in the following legs:  CDCC vs. Clearing Member  CDCC vs. Executing Broker  Client vs. Clearing Member Margin is held at CDCC in a Client Account segregated from Firm. 9

9. CDCC for Buy-side Participants (cont’d) How to clear an OTC trade? 10

10. CDCC for Buy-side Participants (cont’d) Benefits to Clients Mitigation of credit risk  By reducing bilateral counterparty exposure Protection in case of a clearing member default  Clearing service for clients must provide a robust protection in the event of a clearing member default.  This protection comes in the form of: - Segregation of client margin from firm - Portability of assets and positions Operational efficiency  Trading anonymity  Existing relationships with executing dealers maintained  Improved price discovery mechanism and execution 11

11. CDCC for Buy-side Participants (cont’d) Client Protection Segregation and portability arrangements are currently under policymakers and regulators’ scope Key issues to be addressed to offer customer level protection:  Segregation - The manner in which assets are provided to cover margin requirements (Security Interest/Trust Arrangements vs. Title Transfer Arrangements) - Gross vs. net margin requirements and the segregation and accessibility of the difference - Where are margin assets maintained for clients: at the clearing member, at the CCP or at a third party custodian - Commingling of assets for those maintained at the clearing member level - Liens or setoff provisions on margin assets by clearing members  Portability - Margin assets held away from clearing members - No margin asset commingling - Margin assets free from liens and setoff rights 12