CSA Notice of Consultation: Draft Regulation to Amend Regulation 25-102 Respecting Designated Benchmarks and Benchmark Administrators

CSA Notice of Consultation
Draft Regulation to amend Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators Draft Amendments to Policy Statement to Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators April 29, 2021 Introduction Today, the securities regulatory authorities (each an Authority and collectively the Authorities or we) of the Canadian Securities Administrators (the CSA) in British Columbia, Alberta, Saskatchewan, Ontario, Québec, New Brunswick and Nova Scotia (the Participating Jurisdictions) published Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators (the Regulation) and Policy Statement to Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators (the Policy Statement). Subject to obtaining all necessary Ministerial approvals, the Regulation will come into force and the Policy Statement will come into effect in each of the Participating Jurisdictions on July 13, 2021. At the same time, as detailed in this Notice, the Participating Jurisdictions are also publishing for a 90-day comment period:

• Draft Regulation to amend Regulation 25-102 respecting Designated Benchmarks and
  Benchmark Administrators, and
• Draft Amendments to Policy Statement to Regulation 25-102 respecting Designated
  Benchmarks and Benchmark Administrators.
  Together, the draft amendments to the Regulation and the draft amendments to the Policy Statement are referred to as the Draft Amendments. The Draft Amendments incorporate provisions for a securities regulatory regime for commodity benchmarks and their administrators. The text of the Draft Amendments is published with this Notice and will also be available on websites of the Participating Jurisdictions, including:
  www.lautorite.qc.ca www.albertasecurities.com www.bcsc.bc.ca nssc.novascotia.ca 1 For further details, see the CSA Notice of Publication, Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators, Policy Statement to Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators, dated April 29, 2021.

www.fcnb.ca www.osc.ca www.fcaa.gov.sk.ca
We are issuing this Notice to solicit comments on the Draft Amendments. We welcome all comments on this publication and have also included specific questions in the “Request for Comments” section below. Currently, the Regulation provides a comprehensive regime for the designation and regulation of specific benchmarks and their administrators, and the regulation of contributors and of certain users.2 An overview of this regime was provided in the March 14, 2019 CSA Notice of Consultation on Draft Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators and Draft Policy Statement to Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators (the March 14, 2019 CSA Notice), and today, in the April 29, 2021 CSA Notice of Publication accompanying the final published version of the Regulation. The Draft Amendments published with this Notice are the amendments that were contemplated in the March 14, 2019 CSA Notice, under the heading “Expected Future Amendments for Commodity Benchmarks”. The Draft Amendments intend to implement a comprehensive regime for:

• the designation and regulation of commodity benchmarks (designated commodity
  benchmarks), including specific requirements (or exemptions from requirements) for benchmarks dually designated as designated critical benchmarks and designated commodity benchmarks (designated critical and designated commodity benchmarks or critical commodity benchmarks), and for benchmarks dually designated as designated regulated-data benchmarks and designated commodity benchmarks (designated regulated-data and designated commodity benchmarks or regulated-data commodity benchmarks), and

• the designation and regulation of persons that administer such benchmarks (designated
  benchmark administrators or administrators).
  Currently, the Authorities do not intend to designate any administrators of commodity benchmarks. However, the Authorities may designate administrators and their associated commodity benchmarks in the future on public interest grounds, including where:

• a commodity benchmark is sufficiently important to commodity markets in Canada,

• a benchmark administrator applies for designation to allow its commodity benchmark to
  be referenced in financial instruments that are invested in by, or where a counterparty is, one or more European institutional investors pursuant to the EU BMR (defined below), and 2 As explained in this “Introduction”, the coming into force of the Regulation is still subject to Ministerial approvals in the Participating Jurisdictions.

• the Authorities become aware of activities of a benchmark administrator that raise concerns
  that align with the regulatory risks identified below in respect of such parties and conclude that the administrator and commodity benchmark in question should be designated. Background In 2011, the G20 Leaders requested the International Organization of Securities Commissions (IOSCO), in collaboration with other organizations, to prepare recommendations to improve the functioning and oversight of oil price reporting agencies (PRAs). 3 This request followed an earlier request by the G8 Finance Ministers in 2008, arising from concerns about oil price volatility, for IOSCO to produce recommendations intended to improve the efficiency and functioning of commodities markets.4 As outlined in the March 14, 2019 CSA Notice, in 2012, allegations of manipulation of the London inter-bank offered rate (LIBOR) led to the loss of market confidence in the credibility and integrity of not only LIBOR, but also in financial benchmarks in general. Although not on the scale of the LIBOR scandal, there have also been examples of manipulation or attempted manipulation of energy price indexes to benefit positions on futures exchanges.5 IOSCO PRA Principles In October 2012, IOSCO published the Principles for Oil Price Reporting Agencies (the IOSCO PRA Principles), 6 setting out principles intended to enhance the reliability of oil price assessments that are referenced in derivative contracts subject to regulation by IOSCO members. This was followed by the publication in July 2013 of the Principles for Financial Benchmarks (together with the IOSCO PRA Principles, the IOSCO Principles). Although both sets of IOSCO Principles reflect similar concerns regarding the need for safeguards to ensure the integrity of benchmarks, the IOSCO PRA Principles were developed to focus on the specifics of the underlying physical oil markets. 7 Even though the IOSCO PRA Principles were developed in the context of PRAs in oil derivatives markets, IOSCO has encouraged the adoption of these principles more generally to any commodity derivatives contract that references a PRA-assessed price without regard to the nature of the underlying commodity.8 3 PRAs are publishers and information providers who report prices transacted in physical and some derivatives markets and provide informed assessments of price levels at distinct points in time. See the IEA, IEF, OPEC and IOSCO October 2011 Report on Oil Price Reporting Agencies, specifically paragraph 1, available online at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD364.pdf. 4 See the IOSCO March 2012 Consultation Report on the Functioning and Oversight of Oil Price Reporting Agencies, specifically Chapter 2, page 10, available online at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD375.pdf. 5 For specific examples, see footnote 87 within IOSCO’s September 2011 Final Report on the Principles for the Regulation and Supervision of Commodity Derivatives Markets, available online at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD358.pdf. 6
  Available online at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD391.pdf. 7 See the IOSCO September 2014 Report on the Implementation of the Principles for Oil Price Reporting Agencies, specifically Chapter 1, pages 1 and 2, available online at https://www.iosco.org/library/pubdocs/pdf/IOSCOPD448.pdf. 8 See page 7, supra note 6.

EU Benchmarks Regulation
Regulation in the European Union (EU) of commodity benchmarks is embedded within the EU’s Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (EU BMR).9 A detailed overview of the EU BMR, including the regime applicable to third country administrators and specifics on the process of obtaining an EU equivalency decision, was provided in the March 14, 2019 CSA Notice. The preamble of the EU BMR generally acknowledges that “[p]hysical commodity markets have unique characteristics which should be taken into account. Commodity benchmarks are widely used and can have sector-specific characteristics, so it [was] necessary to introduce specific provisions in [the EU BMR] for such benchmarks.”10 Annex II of the EU BMR sets out the provisions that are applicable to commodity benchmarks, and these provisions closely track the IOSCO PRA Principles. Substance and Purpose The Draft Amendments were developed to establish an EU BMR-equivalent commodity benchmarks regulatory regime and to ensure the integrity of Canada’s commodity and capital markets, thereby protecting Canadian investors and other Canadian market participants. Although currently the Authorities have no intention of designating any commodity benchmarks or administrators of commodity benchmarks, as outlined earlier in this Notice, the Authorities may designate administrators and their associated commodity benchmarks in the future on public interest grounds, including in the case where an administrator applies for designation. The draft amendments to the Policy Statement are meant to assist in the interpretation and application of the draft amendments to the Regulation. EU Equivalency It is desirable and important to have the EU recognize the proposed Canadian commodity benchmarks regime as equivalent since it would allow EU institutional market participants to continue to use any Canadian commodity benchmark designated under the Regulation. Although Canada-based administrators are able to directly apply for registration under the EU BMR, the Authorities are of the view that:

• Canadian securities regulators have a sovereign responsibility and are best positioned to
  directly regulate commodity benchmarks with a significant connection to Canada, including such commodity benchmarks’ administrators, and 9 The EU BMR that came into force on June 30, 2016 is available online at https://eur-lex.europa.eu/legal￾content/EN/TXT/PDF/?uri=CELEX:32016R1011&from=EN; the consolidated version of the EU BMR, as of 10/12/ 2019, is available online at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02016R1011- 20191210&from=EN. 10 See P(34) of the EU BMR that came into force on June 30, 2016, supra note 9.

• it would be prudent to implement a Canadian regime by, or soon after, the EU equivalency
  deadline (i.e., January 1, 2024) in the event that, for example, a non-EU registered benchmark administrator of a Canadian commodity benchmark would like the benefit of a Canadian domestic regime that has been recognized as equivalent by the EU. Risk Reduction and Investor Protection We believe that we should now amend the Regulation to establish and implement a regulatory regime for commodity benchmarks for the following reasons:

• commodity benchmarks may be subject to vulnerabilities arising from voluntary reporting
  of input data, relatively low liquidity in physically-settled contracts, and variation in methodologies both across benchmark administrators and within a single administrator (largely due to the complexities of the physical commodity markets),

• these vulnerabilities could create opportunities for manipulation of the input data (i.e., data
  on physically-settled trades) and for deliberate manipulation or attempted manipulation of a benchmark for the benefit of the contributor,

• methodologies generally use expert judgment, and without appropriate policies, procedures
  and controls in place, the price determination could be an unreliable indicator of the physical commodity market it is attempting to measure, and in turn make commodity derivatives contracts more susceptible to manipulation,

• many factors that have resulted in benchmark-related misconduct in other jurisdictions are
  also present in Canada,11

• a commodity benchmark that does not accurately and reliably represent the value of the
  underlying interest of the commodity benchmark for that part of the market the benchmark is intended to represent, either because of deliberate misconduct or because of inadequate controls to ensure the integrity of that benchmark, could adversely impact investors, market participants, and the reputation and confidence in, Canada’s commodity and capital markets, and

• a commodity benchmark regime would clarify, strengthen and specify the legal basis upon
  which Canadian securities regulators may take enforcement and other regulatory action against benchmark administrators in the event of misconduct involving a commodity benchmark that harms (or threatens to harm) investors, market participants, and commodity and capital markets in general. 11 For example, in 2008, the Commodity Futures Trading Commission obtained a $10 million civil monetary penalty in a consent order settling charges against Energy Transfer Partners, L.P., of Dallas, Texas and three subsidiaries. They were charged with attempting to manipulate natural gas prices at the Houston Ship Channel delivery hub. For further details, see footnote 46 in the IOSCO Final Report on PRAs, supra footnote 6.

We are of the view that amending the Regulation to incorporate the commodity benchmark provisions would codify international best practices, as articulated under the IOSCO PRA Principles. Summary of the Draft Amendments to the Regulation Designated Commodity Benchmarks and Benchmark Administrators Under the securities legislation of each of the Participating Jurisdictions, a benchmark administrator can apply for designation as a designated benchmark administrator and request the designation of a commodity benchmark. Alternatively, the regulator can also apply for a benchmark administrator or commodity benchmark to be designated under securities legislation, or in Québec or Alberta the securities regulatory authority may designate a benchmark administrator or commodity benchmark on its own initiative. The proposed definition of a commodity benchmark is found in section 40.1 of the draft amendments to the Regulation. The Policy Statement explains that when applying for designation, a benchmark administrator should provide the same information as is set out in Form 25-102F1 and Form 25-102F2, with respect to the administrator and the benchmark, respectively. The Policy Statement also provides guidance on what factors a regulator or securities regulatory authority would consider in determining if a benchmark, including a commodity benchmark, should also be designated as a critical benchmark or a regulated-data benchmark. When designating a commodity benchmark, a securities regulatory authority will issue a decision document designating the commodity benchmark as a designated commodity benchmark. If applicable, the decision document will also indicate if the designated commodity benchmark is dually designated as a designated critical benchmark or a designated regulated-data benchmark. As explained below, a regulated-data benchmark that is also a commodity benchmark may be designated only as a regulated-data benchmark, or dually designated as a regulated-data commodity benchmark. Such benchmarks, whether they receive a single or dual designation, would not also be designated as critical benchmarks. This is in contrast to the possible dual designation of a financial benchmark as a designated regulated-data and designated critical benchmark.

In summary, the possible designations for a commodity benchmark are as follows:
Designation
Type of benchmark
Designated commodity benchmark
Designated commodity and designated critical benchmark Designated regulated-data benchmark Designated regulated-data and designated commodity benchmark Commodity benchmark X Critical benchmark X Regulated-data benchmark (type 1)12 X Regulated-data benchmark (type 2)13 X General Requirements for Administrators of Commodity Benchmarks Both the IOSCO PRA Principles and the regulations under Annex II of the EU BMR were developed by considering the characteristics of physical commodity markets without focusing on the regulation of contributors of input data, largely because of the voluntary nature of market participants’ contributions of input data and the concern that overregulation of potential contributors could discourage such participants from providing their data. The approach has been to create incentives for PRAs or benchmark administrators to institute processes designed to enhance the reliability of assessments that are indicators of the price or value of the physical commodity that underlies a derivatives contract.14 Designated benchmark administrators of commodity benchmarks have to comply with some requirements that are applicable to all administrators, and some, as provided under draft Part 8.1 of the Regulation, that are specific to administrators of commodity benchmarks. These requirements include:

• delivering audited annual financial statements and certain forms (e.g., Form 25-102F1
  Designated Benchmark Administrator Annual Form and Form 25-102F2 Designated Benchmark Annual Form) to Canadian securities regulators (Part 2); 12 Regulated-data benchmark that meets the definition of a commodity benchmark under section 40.1, but not the criteria under subsection 40.2(3). 13 Regulated-data benchmark that meets the definition of a commodity benchmark under section 40.1 and the criteria under subsection 40.2(3). 14 See specifically page 8 of the October 2012 IOSCO paper, supra note 6.

• maintaining a control framework to manage operational risk and to ensure that there are
  controls in place with respect to business continuity and disaster recovery plans, and contingency procedures in the event of a disruption to the provision of the designated commodity benchmark (section 40.4);

• maintaining appropriate controls and oversight over the process of the provision of a
  commodity benchmark (subsection 5(1)), including specifying the responsibilities of a compliance officer (section 6) and the requirements and responsibilities of benchmark individuals (section 40.11);

• maintaining an appropriate accountability and control framework to address conflicts of
  interest (section 40.13), complaints (section 12), reporting of contraventions (section 11) and outsourcing (section 13);

• applying policies, procedures and controls relating to input data (section 40.10), as well as
  complying with obligations relating to the benchmark methodology used by the administrator (sections 40.5, 40.7 and 40.8) and any changes to such methodology (section 17);

• publishing information about the administration of its designated commodity benchmarks,
  including publishing:

• key elements of the methodology and other required information about the
  methodology or the determination of a designated commodity benchmark (sections 40.5, 40.6 and 40.9),

• the procedures relating to a significant change or cessation of a benchmark (sections
  17, 20 and 22), and

• a specified benchmark statement (section 19);

• keeping specified books, records and other documents for a period of 7 years (section
  40.12); and

• engaging a public accountant to provide an assurance report on the administrator’s
  compliance with certain key sections, including proposed sections of the Regulation and the methodology for the commodity benchmark and publishing a copy of the assurance report (section 40.14). Additional Administrator Requirements for Critical Commodity Benchmarks Where a commodity benchmark is also designated as a critical benchmark and the underlying commodity is gold, silver, platinum or palladium, then it is proposed that Part 8.1 not apply. Typically, such commodities function as stores of value, and their benchmarks, if critical, closely resemble financial, rather than commodity benchmarks. Thus, the requirements under Parts 1

through 8 would apply to such benchmarks, including the additional requirements under Part 8, Division 1, specifically sections 27 to 33 of the Regulation. If the underlying commodity is not gold, silver, platinum or palladium, then a dually-designated critical commodity benchmark would be subject to draft Part 8.1, which provides for some exemptions from Part 8, Division 1 requirements. The additional requirements that would apply include:

• that the administrator provide specific notice to securities regulators and comply with other
  requirements if it intends to cease administering the critical commodity benchmark,

• that the administrator take reasonable steps to ensure that users have direct access to the
  critical commodity benchmark on a fair, reasonable, transparent and non-discriminatory basis, and

• that the administrator provide securities regulators with an assessment at least once in each
  24-month period of the capability of the critical commodity benchmark to accurately and reliably represent that part of the market the critical commodity benchmark is intended to represent. Exemptions for Regulated-Data Commodity Benchmarks Under the Draft Amendments, a commodity benchmark designated as a regulated-data benchmark is subject to the requirements under Parts 1 to 8, including the exemptions under section 40. However, if a commodity benchmark is determined from input data arising from transactions of the commodity that is the underlying interest of the benchmark and the parties to those transactions, in the ordinary course of business, make or take physical delivery of the commodity, and that benchmark also meets the requirements of a regulated-data benchmark, then it is proposed that such a benchmark be dually designated as a designated commodity and a designated regulated￾data benchmark. Such dually-designated benchmarks would be subject to Part 8.1 requirements, but exempted from certain requirements as provided by subsection 40.2(4). Fundamentally, this subset of regulated-data benchmarks, determined from transactions where, in the ordinary course of business, parties make or take physical delivery of the commodity, would maintain a closer link to the commodity markets, rather than the financial markets, and should be treated as commodity benchmarks. In contrast, regulated-data benchmarks based on financial transactions where counterparties hedge their exposure in underlying physical contracts or speculate on the movement of the price of a commodity, would more closely resemble financial benchmarks, and should be subject to the requirements under Parts 1 to 8. To the extent possible, the proposed exemptions under subsection 40.2(4) would ensure that administrators of benchmarks dually designated as commodity and regulated-data benchmarks would receive comparable treatment under Part 8.1 as administrators of designated regulated-data benchmarks receive under Parts 1 to 8. Administrators of such dually designated benchmarks would be exempted from certain requirements, including requirements for:

• systems and controls for detecting manipulation or attempted manipulation,

• policies, procedures and controls relating to the contribution of input data and the accuracy,
  reliability and completeness of such data, and the publication of certain explanations for each determination of a benchmark, and

• the engagement of a public accountant to provide an assurance report on the administrator’s
  compliance with certain key sections of the Regulation, and the methodology for the commodity benchmark. Summary of the Draft Amendments to the Policy Statement The draft amendments to the Policy Statement provide interpretational guidance on elements of the draft amendments to the Regulation. Anticipated Costs and Benefits of the Draft Amendments to the Regulation The integrity and reliability of commodity benchmarks is important to the functioning of commodity derivatives markets. Currently, the Authorities do not intend to designate any administrators of commodity benchmarks, but as outlined earlier in this Notice, we may do so in the future based on public interest grounds, including in the case where an administrator applies for designation or if we become aware of activities that raise risk or investor protection concerns. The proposed requirements under Part 8.1 of the Regulation are substantially similar to the requirements under Annex II of the EU BMR, which generally codify international best practices, as articulated under the IOSCO PRA Principles. Such regulation is meant to ensure that commodity benchmarks have adequate protections against potential manipulation and that the provision of these benchmarks is subject to appropriate systems and controls, with administrators having in place appropriate standards of corporate governance. Where appropriate, such as in the case of certain regulated-data benchmarks, we have tailored the requirements to the Canadian commodity markets. The proposed regulation of commodity benchmarksshould enhance the confidence of stakeholders in the Canadian commodity markets and minimize the potential costs that may be borne by the Canadian commodity and financial markets, including investors, in the event of the unreliability or manipulation of designated commodity benchmarks. Overall, the Authorities are of the view that the regulatory costs of the Draft Amendments are proportionate to the benefits that would be realized by impacted market participants and the broader Canadian commodity market. Unpublished Materials In developing the Draft Amendments, we have not relied on any significant unpublished study, report or other written materials. Local Matters Where applicable, an annex to this Notice provides additional information required by the local securities legislation.

Request for Comments
We welcome your comments on the Draft Amendments and also invite comments on the specific questions set out in Annex A of this Notice. Please submit your comments in writing on or before July 28, 2021. If you are not sending your comments by email, an electronic file containing the submissions should also be provided in Microsoft Word format. We cannot keep submissions confidential because securities legislation in certain provinces requires publication of the written comments received during the comment period. All comments received will be posted on the websites of each of the Alberta Securities Commission at www.albertasecurities.com, the Autorité des marchés financiers at www.lautorite.qc.ca and the Ontario Securities Commission at www.osc.ca. Therefore, you should not include personal information directly in comments to be published. It is important that you state on whose behalf you are making the submission. Address your submission to the following CSA jurisdictions:
British Columbia Securities Commission
Alberta Securities Commission
Financial and Consumer Affairs Authority of Saskatchewan Ontario Securities Commission Autorité des marchés financiers Financial and Consumer Services Commission (New Brunswick) Nova Scotia Securities Commission Deliver your comments only to the addresses below. Your comments will be distributed to the other participating CSA jurisdictions. Me Philippe Lebel Corporate Secretary and Executive Director, Legal Affairs Autorité des marchés financiers Place de la Cité, tour Cominar 2640, boulevard Laurier, bureau 400 Québec (Québec) G1V 5C1 Fax: 514 864-6381 consultation-en-cours@lautorite.qc.ca Navdeep Gill Manager, Legal, Market Regulation Alberta Securities Commission Suite 600, 250 – 5th Street SW Calgary, Alberta T2P 0R4 Fax: 403-297-4113 navdeep.gill@asc.ca

The Secretary
Ontario Securities Commission
20 Queen Street West, 22nd Floor
Toronto, Ontario M5H 3S8
Fax: 416-593-2318 comment@osc.gov.on.ca
Contents of Annexes:
This Notice includes the following Annex:
Annex A: Specific Questions of the Authorities Relating to the Draft Amendments
Questions
Please refer your questions to any of the following:
Serge Boisvert Roland Geiling
Senior Policy Advisor Derivatives Product Analyst Autorité des marchés financiers Autorité des marchés financiers 514 395-0337, ext. 4358 514 395-0337, ext. 4323 serge.boisvert@lautorite.qc.ca roland.geiling@lautorite.qc.ca Eniko Molnar Janice Cherniak Senior Legal Counsel, Market Regulation Senior Legal Counsel, Market Regulation Alberta Securities Commission Alberta Securities Commission 403 297-4890 403 585-6271 eniko.molnar@asc.ca janice.cherniak@asc.ca Michael Bennett Melissa Taylor Senior Legal Counsel, Corporate Finance Legal Counsel, Corporate Finance Ontario Securities Commission Ontario Securities Commission 416 593-8079 416 596-4295 mbennett@osc.gov.on.ca mtaylor@osc.gov.on.ca Michael Brady Faisel Kirmani Manager, Derivatives Senior Analyst, Derivatives British Columbia Securities Commission British Columbia Securities Commission 604-899-6561 604-899-6844 mbrady@bcsc.bc.ca fkirmani@bcsc.bc.ca

ANNEX A
SPECIFIC QUESTIONS OF THE AUTHORITIES RELATING TO THE DRAFT AMENDMENTS15 Interpretation

1. The definition for “commodity benchmark” excludes a benchmark that has, as an
   underlying interest, a currency or a commodity that is intangible. Is the scope of the proposed definition, and the guidance in the Policy Statement, appropriate to cover the commodity benchmark industry in Canada? Please explain with concrete examples. Applicable Requirements from the Financial Benchmarks Regime
2. Despite a different proposed regime for commodity benchmarks, the Authorities expect
   that certain requirements, applicable to financial benchmarks, would also be applicable, sometimes with minor modifications, to commodity benchmarks. These include, for example, the requirements to report contraventions (section 11), the requirement for a control framework (section 40.4), and governance and control requirements (section 40.11). Are these requirements appropriate in the context of commodity benchmarks? Please explain with concrete examples. Dual Designation as a Commodity Benchmark and a Critical Benchmark
3. Where the underlying commodity is gold, silver, platinum or palladium, a benchmark
   dually designated as a commodity benchmark and a critical benchmark would be subject to the requirements applicable to critical financial benchmarks, rather than critical commodity benchmarks. Do you think that there are benchmarks in Canada that could be dually designated as critical commodity benchmarks where the underlying is gold, silver, platinum or palladium, and is there a need to provide for the specific regulation of such benchmarks? Dual Designation as a Commodity Benchmark and a Regulated-Data Benchmark
4. Subsection 40.2(4) provides for certain exemptions for benchmarks dually designated as
   commodity and regulated-data benchmarks, where such benchmarks are determined from transactions in which the transacting parties, in the ordinary course of business, make or take physical delivery of the commodity. Is carving out such a subset of dually-designated benchmarks necessary for appropriate regulation of commodity benchmarks in Canada? If so, are the exemptions provided for, which generally mirror exemptions for regulated-data benchmarks from Parts 1 to 8 requirements, appropriate? Please explain with concrete examples. 15 The specific questions are with respect to the Draft Amendments published by the Authorities today, on April 29, 2021. For further details, see the CSA Notice of Publication, Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators, Policy Statement to Regulation 25-102 respecting Designated Benchmarks and Benchmark Administrators, dated April 29, 2021.

Input Data
5. We have distinguished between input data that is “contributed” for the purposes of the
Regulation (see subsection 1(3)), and data that is otherwise obtained by the administrator. Certain provisions in Part 8.1 impose requirements on a designated benchmark administrator if input data is “contributed”, whereas other obligations are imposed irrespective of how input data is obtained. Where the word “contributed” is not specifically used or implied,16 we mean all the input data, not only “contributed” data. Taking into consideration the obligations imposed on designated benchmark administrators of commodity benchmarks, through the use or lack of use of “contributed”, are the obligations imposed under the provisions of Part 8.1 appropriate?17 Please explain with concrete examples.
6. The guidance on paragraph 40.8(2)(a) of the Policy Statement states that, where consistent
with the methodology, we expect the administrator to give priority to input data in a certain order. Does the order of priority of use of input data for purposes of determination of a commodity benchmark, as stated in the Policy Statement, reflect the methodology used for your commodity benchmarks? Are there any other types of input data that should be specified in the order of priority? Methodology
7. Under the Draft Amendments, designated administrators are expected to ensure that
particular requirements are met whenever their methodology is implemented and a designated benchmark is determined. Are the elements of the methodology that we propose to regulate, specifically within section 40.5, sufficiently clear such that an administrator would be able to comply with the requirements? Conflicts of Interest
8. Paragraphs 40.13(1)(a), (b) and (d) mirror the conflict of interest requirements under
paragraphs 10(1)(a), (b) and (d) of the Regulation, to ensure that certain overarching requirements apply to all designated benchmark administrators. Is this approach appropriate? Do commodity benchmark administrators face potential conflicts of interest that are not addressed by these or the other conflict of interest provisions? Assurance Report on Designated Benchmark Administrator
9. Subsection 40.14(2) requires a designated benchmark administrator of a designated
commodity benchmark, whether or not the benchmark is also designated as a critical benchmark, to engage a public accountant to provide a limited or reasonable assurance report on compliance once in every 12-month period. In contrast, pursuant to subsection 16 For example, in paragraph 40.5(2)(g), it is implied that input data is “contributed”, within the meaning of subsection 1(3) of the Regulation. 17 See for example subparagraphs 40.5(2)(a)(i) and (iii), which apply in respect of all input data, while paragraphs 40.5(2)(g), (h) and (i) apply in respect of contributed data.

36(2), an administrator of a designated interest rate benchmark is required to engage a public accountant to provide such a report, once in every 24-month period, albeit a report is required 6 months after the introduction of a code of conduct for benchmark contributors. Given the general risks raised by the activities of administrators of commodity benchmarks versus of interest rate benchmarks, are the proposed requirements appropriate? Please explain your response. Concentration Risk
10. Pursuant to subsection 20(1), designated benchmark administrators of designated
commodity benchmarks would be subject to certain obligations when they cease to provide a designated commodity benchmark. However, market users may potentially have more limited benchmarks to utilize for purposes of their transactions (concentration risk) where a designated benchmark administrator that administers a number of designated commodity benchmarks unexpectedly delays in providing or ceases to provide those benchmarks. Do you think that additional requirements should be added under Part 8.1 to address this concentration risk? If yes, what requirements should be added? Designated Benchmarks
11. If your organization is a benchmark administrator of commodity benchmarks, please:
a) advise if you intend to apply for designation under the Regulation, b) advise of any benchmark you intend to also apply for designation under the Regulation, and c) indicate the rationale for your intention. Anticipated Costs and Benefits
12. The Notice sets out the anticipated costs and benefits of the Draft Amendments (in Ontario,
additional detail is provided in a local annex). Do you believe the costs and benefits of the Draft Amendments have been accurately identified and are there any other significant costs or benefits that have not been identified in this analysis? Please explain and/or identify furthers costs or benefits.