Appendix A – Terms and Conditions for Stablecoin Margin

1. Purpose and Nature of the InnovateSafe Test

1.1 These Terms and Conditions (“T&Cs”) govern participation in an InnovateSafe test to evaluate the prudential impacts of applying tiered margin rates to firm inventory positions in approved fiat-backed stablecoins.

1.2 The test is conducted pursuant to CIRO staff interpretation in the application of existing margin and concentration requirements.

1.3 These T&Cs:

• Do not constitute exemptive relief
• Do not amend CIRO Rules
• Do not establish a CIRO policy position
• Do not create precedent.

1.4 Participation is voluntary, temporary, and fully revocable at CIRO’s discretion.

2. Scope

2.1 These T&Cs apply solely to:

• Firm inventory (principal) positions; and
• Approved fiat-backed stablecoins.

2.2 Client positions, financing arrangements, and non-inventory exposures are excluded.

2.3 InnovateSafe treatment applies only to arm’s-length exposures unless otherwise approved by CIRO in writing.

3. Responsibilities and Accountability

3.1 The Dealer Member retains full responsibility for compliance with CIRO rules and securities legislation, as applicable to its role in the test.

3.2 Participation in InnovateSafe does not alter, replace, or diminish any regulatory obligations.

4. Stablecoin Eligibility Criteria

4.1 A stablecoin is eligible for reduced margin treatment under InnovateSafe only if all of the following are met on an ongoing basis:

1. The issuer has either:
   1. an active undertaking with the Canadian Securities Administrators under CSA Staff Notice 21-333 (or any successor framework); or
   2. been approved or authorized under applicable Canadian federal legislation governing fiat-backed stablecoin issuers.
2. The stablecoin is fully backed 1:1 by fiat reserves held in segregated, bankruptcy-remote accounts;
3. Monthly third-party reserve attestations are publicly available;
4. Redemptions are available at par within T+3 business days under normal conditions;
5. The stablecoin has at least six (6) months of acceptable trading history, with:
   1. no de-peg events exceeding 1% for more than 24 consecutive hours, and
   2. no single de-peg event exceeding 3%; and
6. The stablecoin has received explicit CIRO approval for InnovateSafe treatment.

4.2 Failure to meet any eligibility criterion results in immediate reversion to 100% margin.

5. Inventory Margin (Schedule 2 – IDPC Form 1)

5.1 For InnovateSafe testing purposes only, the following margin rates may be applied to eligible firm inventory positions:

5.2 Reduced margin treatment under these T&Cs applies only to long firm inventory positions in approved stablecoins. Short positions, including any short position arising from trading, settlement timing differences, or other arrangements, remain subject to 100% margin under Schedule 2 of the IDPC Form 1.

5.3 Approved stablecoins attract 100% margin while:

• held in the custody of a liquidity provider; or
• receivable from a liquidity provider and not yet delivered to the Dealer Member.

5.4 Market-capitalization thresholds are indicative only and may be overridden by CIRO based on liquidity, concentration, issuer, or market-risk considerations.

6. Concentration Margin (Schedule 9A – IDPC Form 1)

6.1 For arm’s-length exposures only, a supervisory monitoring trigger will be applied at one-third (1/3) of pre-concentration RAC, requiring notification to CIRO.

6.2 The reporting threshold in section 6.1 does not alter the standard Schedule 9A capital charging thresholds, including the two-thirds (2/3) RAC threshold (or one-half (½) RAC where the additional exposure requirement applies), which remain fully in effect.

6.3 Where an exposure to an approved stablecoin inventory position exceeds the applicable concentration threshold under section 6.2 of these T&Cs, the related concentration charge is not required to be applied provided the exposure is reduced below the applicable threshold within one (1) business day.

6.4 All other Schedule 9A mechanics continue to apply.

7. Event-Driven Escalations and Safeguards

7.1 Peg Monitoring

1. If the stablecoin deviates from par by more than 1% for over 24 hours:
   • Freeze net long exposure growth; and
   • Initiate enhanced monitoring.
2. If deviation persists beyond 72 hours or widens materially:
   • Notify CIRO immediately; and
   • CIRO may require increased margin, position limits, or other measures.

7.2 Issuer Settlement Failure

1. For purposes of these T&Cs, an issuer settlement failure occurs where an approved stablecoin issuer fails to deliver stablecoins or fiat, as applicable, within the issuer’s disclosed settlement timeframe, not to exceed T+3 business days under normal conditions, including where:
   • a redemption request is initiated but fiat is not delivered; or
   • fiat funds have been transferred to the issuer for the purchase of stablecoins, but the corresponding stablecoins are not delivered.
2. Failure at T+3:
   • Notify CIRO immediately;
   • Freeze net long exposure growth.
3. Failure at T+5:
   • Apply 100% margin to all firm inventory of the affected stablecoin.
4. Margin may revert to the applicable tier only after:
   • Two consecutive successful redemptions, and
   • CIRO confirmation.

A “successful redemption” means full redemption at par, settled in fiat, within the disclosed timeframe, without deferral or accommodation.

7.3 Settlement Failure (Counterparty):

If a trade fails beyond T+1, apply 100% margin to the failed position until resolved. For purposes of these T&Cs, a settlement failure occurs where a liquidity provider fails to deliver a stablecoin or other crypto asset to the Dealer Member within 24 hours of the Dealer Member’s instruction or scheduled delivery, as applicable. The Dealer Member must notify CIRO of any Settlement Failure within 1 business day of the Settlement Failure, including the reasons for the delay, the status of the transaction, and if not yet completed, the Dealer Member’s remediation plans.

8. Capital, Books and Records, & Ongoing Reporting Requirements

8.1 The Dealer Member must have in place books and records, monitoring, and reporting systems that are reasonably designed to:

8. Track eligible stablecoin inventory positions on a real-time basis
9. Monitor compliance with all eligibility, margin, concentration, redemption, and peg-related conditions set out in these T&Cs
10. Detect and escalate breaches or potential breaches of these conditions, including redemption delays, settlement failures, and material peg deviations; and
11. Produce timely and accurate information to support Form 1 reporting and CIRO supervisory requests.

8.2 The Dealer Member must at all times:

1. Maintain compliance with all applicable CIRO capital requirements, including Risk-Adjusted Capital (RAC) and margin requirements under Form 1;
2. Comply with CIRO Early Warning (EW) requirements, including any applicable thresholds, triggers, reporting, and supervisory actions; and
3. Remain in good standing with respect to all other applicable CIRO prudential, financial, and reporting obligations.

8.3 If the Dealer Member enters any Early Warning stage, or otherwise fails to meet applicable capital requirements, CIRO may, at its discretion:

1. Require the Dealer Member to provide supplemental information sufficient to assess the potential impact of InnovateSafe test margin treatment as follows:
   • the Dealer’s current RAC, calculated in accordance with the InnovateSafe test margin framework; and
   • a separate RAC calculation, prepared on an informational basis, assuming standard (100%) margin treatment for all approved stablecoin inventory. Such a separate RAC calculation is required for supervisory monitoring purposes only and does not constitute a requirement to maintain capital at that level unless directed by CIRO.
2. Require immediate reversion to 100% margin for all stablecoin inventory;
3. Impose position caps or additional measures; or
4. Suspend or terminate the Dealer Member’s participation in the sandbox test.

8.4 The Dealer Member must provide reporting to CIRO as follows:

1. Monthly Form 1 addendum, identifying:
   1. Eligible stablecoin holdings by issuer,
   2. Market values, and
   3. Applicable margin tiers;
2. Immediate notification to CIRO of:
   1. Stablecoin Eligibility failures,
   2. Stablecoin Redemption delays, or
   3. Material stablecoin peg deviations; and
   4. Any exposure to an approved stablecoin issuer that meets or exceeds one-third (1/3) of RAC pursuant to section 6.1.
3. Bi-monthly (every 2 months) Operational Metrics Summary Including, at a minimum:
   1. average and maximum settlement times for stablecoin versus fiat transactions;
   2. settlement volumes and frequency using stablecoins versus fiat;
   3. average EOD exposure to liquidity providers;
   4. any settlement failures, delays, or operational incidents; and
   5. any use of contingency fiat settlement rails.
4. Annual summary of stablecoin-specific stress-testing results.
5. Any information reasonably required for CIRO’s oversight including but not limited to:
   1. Material capital issues or operational disruptions;
   2. Notice of any material risks identified by the Dealer Members; and
   3. Any other information reasonably required for CIRO’s oversight.

8.5 For greater certainty, the reporting requirements set out in this section are in addition to, and do not replace or limit, the event-driven escalation and immediate notification requirements set out in Section 7, which continue to apply independently.

9. Public Communications & Marketing Restrictions

9.1 The Dealer Member must not market, promote, or publicly communicate the test in a manner that:

• Suggests availability to other non-approved Dealer Members, clients or investors;
• Implies CIRO approval of a commercial product or service; or
• Mischaracterizes InnovateSafe participation as endorsement.

10. Wind-Down and Exit

10.1 The Dealer Member must maintain a documented wind-down plan, and provide it to CIRO three months prior to the termination date, that addresses the orderly reduction or liquidation of excess stablecoin inventory by termination date.

10.2 Upon:

• InnovateSafe test termination,
• CIRO direction, or
• Failure to comply with these T&Cs,

the Dealer Member must immediately:

• Cease applying reduced margin rates;
• Revert to standard CIRO margin and concentration treatment; and
• Execute its wind-down plan.

10.3 The wind-down plan must ensure that the Dealer Member will be able to absorb immediate reversion to standard margin treatment without breaching capital requirements.

11. Duration and Review

11.1 The InnovateSafe test will run for a period of one year following the date of approval by CIRO.

11.2 Absent explicit CIRO confirmation, the InnovateSafe test expires automatically at the end of the evaluation period.

11.3 CIRO may modify, suspend, or terminate the InnovateSafe test at any time.

12. CIRO Discretion and No Reliance

12.1 CIRO may impose additional conditions or safeguards at any time upon written notice to the Dealer Member.

12.2 These T&Cs apply only to the participating Dealer Member and only for the duration of the InnovateSafe test.