The Clearing Agreement serves as the foundational document establishing the legal and operational framework for clearing services in the Canadian financial markets. This contract type is essential when an investment firm, broker-dealer, or institutional investor (the client) requires access to clearing and settlement services through a clearing member, typically a bank or large financial institution. The agreement comprehensively addresses critical aspects such as margin requirements, default procedures, risk management, and regulatory compliance under Canadian federal and provincial laws. It becomes necessary when entities wish to participate in cleared markets but either cannot or choose not to become direct clearing members themselves. The document ensures alignment with Canadian regulatory requirements, including those set forth by provincial securities regulators and federal financial authorities.
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1. Parties: Identification of the clearing member and the client
2. Background: Context of the agreement and the parties' intentions
3. Definitions and Interpretation: Comprehensive definitions of terms used throughout the agreement and rules of interpretation
4. Scope of Services: Description of clearing services provided and products covered
5. Membership Requirements: Requirements for maintaining clearing membership and client status
6. Client Obligations: Core obligations of the client including margin requirements and payment obligations
7. Clearing Member Obligations: Core obligations of the clearing member including execution of trades and maintenance of accounts
8. Margin Requirements: Detailed provisions regarding initial and variation margin requirements
9. Default Procedures: Events of default and consequences, including close-out procedures
10. Risk Management: Risk management procedures and requirements for both parties
11. Fees and Payments: Fee structure, payment terms, and related obligations
12. Representations and Warranties: Standard and specific representations and warranties from both parties
13. Confidentiality: Obligations regarding confidential information and data protection
14. Term and Termination: Duration of agreement and termination provisions
15. Governing Law and Jurisdiction: Choice of law and jurisdiction for dispute resolution
1. Give-Up Arrangements: Provisions for give-up trades, used when the client wishes to use executing brokers
2. Cross-Border Services: Additional provisions for clearing services in multiple jurisdictions
3. Indirect Clearing: Provisions for when the client provides clearing services to its own clients
4. Securities Lending: Terms for securities lending services if offered
5. Electronic Trading Services: Provisions regarding electronic trading platforms and systems
6. Insurance Requirements: Specific insurance requirements beyond standard coverage
7. Tax Matters: Specific tax-related provisions for complex clearing arrangements
1. Schedule A - Eligible Products: List of products and asset classes covered by the clearing services
2. Schedule B - Fee Schedule: Detailed breakdown of all fees, charges, and commission rates
3. Schedule C - Operational Procedures: Detailed operational procedures and requirements
4. Schedule D - Risk Management Procedures: Specific risk management procedures and requirements
5. Schedule E - Contact Details: List of key contacts and authorized persons
6. Schedule F - Account Structure: Details of account structure and segregation arrangements
7. Appendix 1 - Required Documentation: List of required documentation and forms
8. Appendix 2 - Service Level Agreement: Detailed service levels and performance metrics
9. Appendix 3 - Technical Requirements: Technical specifications and system requirements
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