For Immediate ReleaseDecember 15, 2014
Toronto – Members of the Canadian Securities Administrators (CSA) today set out their concerns with respect to the practice of routing retail equity orders to U.S. dealers.
Retail orders are an important part of the Canadian market ecosystem, and the CSA continue to support the existing rule framework, which emphasizes the importance of these orders to the quality of the Canadian equity market, including the price discovery process.
It has come to the attention of the CSA that a number of Canadian investment dealers have entered into, or are considering entering into, arrangements to route Canadian retail investor orders on a broad basis to U.S. dealers for execution.
Under these arrangements, retail orders are not typically executed on U.S. exchanges, but instead are executed by U.S. dealers off-marketplace. Canadian investment dealers may receive payment or other benefits for sending these orders to the U.S. dealers.
These retail orders are being executed by U.S. dealers without consistently meeting the minimum price improvement requirement set out in the dark liquidity regime implemented in 2012, and codified in Rule 6.6 of the Investment Industry Regulatory Organization of Canada (IIROC’s) Universal Market Integrity Rules (UMIR).
More broadly, the CSA have public interest concerns regarding this practice. Specifically, the CSA are concerned that widespread routing of retail order flow to U.S. dealers will negatively impact the quality of the Canadian market, and may affect the quality of execution achieved for investors.
The CSA is supportive of IIROC’s publication of guidance in relation to the definition of “Foreign Organized Regulated Market” as defined in UMIR, and are working with IIROC to evaluate and develop appropriate regulatory measures to ensure the continued quality of the Canadian equity market.
The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for Canadian capital markets.
Carolyn Shaw-Rimmington Ontario Securities Commission 416-593-2361
Mark Dickey Alberta Securities Commission 403-297-4481
Richard Gilhooley British Columbia Securities Commission 604-899-6713
Sylvain Théberge Autorité des marchés financiers 514-940-2176
Kevan Hannah Manitoba Securities Commission 204-945-1513
Andrew Nicholson Financial and Consumer Services Commission, New Brunswick 506-658-3021
Tanya Wiltshire Nova Scotia Securities Commission 902-424-8586
Janice Callbeck Office of the Superintendent of Securities, P.E.I. 902-368-6288
Don Boyles Office of the Superintendent of Securities Newfoundland and Labrador 709-729-4501
Rhonda Horte Office of the Yukon Superintendent of Securities 867-667-5466
Louis Arki Nunavut Securities Office 867-975-6587
Gary MacDougall Northwest Territories Securities Office 867-920-3318
Shannon McMillan Financial and Consumer Affairs Authority of Saskatchewan 306-798-4160
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