Derivative Structures This article was edited and reviewed by FindLaw Attorney Writers | Last updated March 26, 2008 Defining the scope of the law as it relates to derivatives is difficult given the extent of the market, the variety of market participants and the paucity of jurisprudence related to derivatives. Derivatives take two forms: (i) exchange-traded derivatives, which are traded on recognized exchanges, and (ii) over-the-counter ("OTC") derivatives, which are privately negotiated and customized bilateral contracts under which two parties agree to complete transactions specific to the parties, the obligations under which may only be transferredRegulating Trades in Derivatives In Canada, the regulation of exchange- traded derivatives is the responsibility of the provinces and falls within the jurisdiction of provincial securities commissions. For example, in Ontario, the Commodity Futures Act ("CFA") regulates all commodity futures contracts trading on commodity exchanges. The CFA also provides for the registration of traders in commodity futures contracts. In respect of the OTC derivatives market, debate with respect to the need for regulation has focused on the expansion of the market into all sectors of the economy and the use of OTC derivatives by less sophisticated parties.Other elements of the definition of "accredited investor" that are applicable in the OTC derivatives context include: (i) a company, limited liability company, limited partnership, limited liability partnership, trust or estate, other than a mutual fund or non-redeemable investment fund, that had net assets of at least $5 million as reflected in its most recently prepared financial statements; and (ii) a mutual fund or non-redeemable investment fund that, in Ontario, distributes its securities only to persons or companies that are accredited investors.- A transaction must provide risk management services, a financial service, to a counterparty or to manage an FRFI's risk; and * FRFIs may only take title to the commodity for the purpose of facilitating the transaction and not for the purpose of proprietary trading. Additionally, OSFI required FRFls that wished to engage in PSC derivatives- trading to put in place risk management policies to mitigate the risks associated with taking transitory title to commodities in the course of trading PSC derivatives.> Key Trends in the Size and Composition of OTC Derivatives Markets in the First Half of 2021 Research Notes isa Key Trends in the Size and Composition of OTC Derivatives Markets in the First Half of 2021 ner Bank for International Settlements (BIS), Initial Margin, Interest Rate Derivatives, OTC Derivative December 6, 2021 The latest data from the Bank for International Settlements over- the-counter (OTC) derivatives statistics shows a significant decrease in the gross market value and gross credit exposure of interest rate derivatives (IRD) and foreign exchange derivatives during the first half of 2021 compared to the first half of 2020 and year-end 2020. This decline represents a return to pre- pandemic levels and was driven by a less uncertain macroeconomic outlook.Key highlights include: ¢ OTC derivatives notional outstanding increased by 0.5% at mid-year 2021 compared to mid-year 2020 and grew by 4.8% compared to year-end 2020. The gross market value of OTC derivatives contracts at the end of June 2021 was 18.5% lower than mid-year 2020 and 20.1% lower than year-end 2020. Gross credit exposure - gross market value after netting - decreased by 15.3% compared to mid-year 2020 and by 19.4% compared to year-end 2020.