TORONTO, Sept. 1, 2011 /CNW/ - The Investment Industry Regulatory
Organization of Canada has received regulatory approval for the
enactment of a rule that addresses fair pricing of fixed-income and
other securities traded over-the-counter (OTC).
The OTC Securities Fair Pricing Rule and changes to Trade Confirmation
Requirements set out clear standards for IIROC-regulated firms to have
policies and supervisory procedures in place to ensure they offer fair
and reasonable prices, as well as clear disclosure to their clients.
"Fixed-income is a large and important market for retail investors,"
said Susan Wolburgh Jenah, IIROC's Chief Executive Officer and
"The standards are designed to give individual retail and institutional
investors more confidence that the price they pay for bonds and other
fixed-income securities is a fair price."
The OTC fair pricing rule will take effect on October 3, 2011; and the
confirmation disclosure requirements will take effect on September 4,
2012. Highlights of the rule include requirements for IIROC-regulated
Fairly and reasonably price fixed-income and other securities traded in
Disclose yield to maturity on trade confirmations for fixed-income
securities and include notations for callable and variable rate
securities, where applicable;
Include a statement on trade confirmations to clients indicating that
they earned remuneration on transactions, unless otherwise disclosed.
* * *
The rule represents a key advance in enhancing IIROC's ability to
conduct regulatory oversight and to enforce industry compliance against
a set of common standards.
OTC markets differ significantly in structure and operation from markets
for listed securities. These differences have tended to result in less
transparency, particularly for retail investors as they enjoy less
access to pricing and yield information for fixed-income securities
than they do with listed markets. In addition, many retail investors
are unable to take advantage of options available to institutional
investors to determine if pricing is fair, such as contacting multiple
bond desks and using electronic quote systems.
Retail investor participation in the fixed-income market is significant.
Recent statistics showed that approximately a quarter of retail client
assets entrusted with investment dealers in Canada is invested in
fixed-income securities, according to the Investment Industry
Association of Canada. Statistics from CDS Clearing and Depository
Services Inc. reveal the value on deposit in the Canadian debt market
stands at more than $2.1 trillion, compared to $1.6 trillion in the
Other OTC securities covered by the rule include Contracts for
Differences (CFDs) and foreign exchange contracts. The rule does not
apply to primary market transactions or certain OTC derivatives.
For more information, including dealer firm compliance responsibilities
and related amendments to existing dealer rules, see the related Notice.
* * *
IIROC is the national self-regulatory organization which oversees all
investment dealers and trading activity on debt and equity marketplaces
in Canada. Created in 2008 through the consolidation of the Investment
Dealers Association of Canada and Market Regulation Services Inc.,
IIROC sets high quality regulatory and investment industry standards,
protects investors and strengthens market integrity while maintaining
efficient and competitive capital markets.
IIROC carries out its regulatory responsibilities through setting and
enforcing rules regarding the proficiency, business and financial
conduct of dealer firms and their registered employees and through
setting and enforcing market integrity rules regarding trading activity
on Canadian equity marketplaces.
SOURCE Investment Industry Regulatory Organization of Canada (IIROC) - General News
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