Amendments bolster market integrity
TORONTO, July 4, 2013 /CNW/ - The Investment Industry Regulatory
Organization of Canada (IIROC) announced today it has adopted rule
amendments, approved by the Canadian Securities Administrators (CSA),
to manage the risks associated with electronic trading relationships
between IIROC-regulated dealers and other parties.
The amendments create a uniform rule framework, applicable to all IIROC
Dealer Members, that defines permissible electronic trading
arrangements and prescribes appropriate supervisory and compliance
procedures. Dealers will be required to manage the financial,
regulatory and other risks that may arise when third parties
electronically transmit orders directly to a marketplace.
"This new framework aligns Canada's regulations with rapidly evolving
trading technologies and practices. It ensures there are proper
controls in place for all trading activity regardless of the source,"
said Wendy Rudd, IIROC's Senior Vice-President, Market Regulation and
The changes complement IIROC's electronic trading rules that require
appropriate controls for all trading activity, and the CSA's amendments
to National Instrument 23-103 Electronic Trading and Direct Electronic
Access to Marketplaces.
The amendments are effective March 1, 2014 to ensure there is sufficient time for implementation by dealers and
their clients. As well, IIROC dealers with existing access agreements
have until September 1, 2014 to replace or amend them.
● On June 28, 2012:
The CSA announced the approval of National Instrument 23-103 Electronic
Trading which became effective March 1, 2013.
IIROC issued a package of proposed rule changes and guidance to align
its Universal Market Integrity Rules (UMIR) with the electronic trading
provisions of NI 23-103.
These changes, which are now effective, ensure that market participants
have automated pre-order-entry filters in place for all trading
activity, regardless of source, to effectively manage the risks
associated with electronic trading.
The Notices related to these changes are:
Provisions Respecting Electronic Trading (12-0363); and
Guidance Respecting Electronic Trading. (12-0364)
All automated order systems (also known as algorithms) used by dealers
or their clients must be regularly tested and monitored.
● On October 25, 2012:
The CSA issued a news release titled: Canadian Securities Regulators
Seek Comment on Amendments Relating to Direct Electronic Access.
IIROC proposed Rule Amendments and Guidance Respecting Third-Party
Electronic Access to Marketplaces.
● The final IIROC amendments announced today and related guidance confirm that third-party electronic access to a marketplace is a
"closed system" under which a Participant may provide a third party
with electronic access to a marketplace by:
"direct electronic access" or "DEA",
a "routing arrangement", or
an "order execution service".
The UMIR provisions regarding DEA complement the proposed amendments to
NI 23-103. In addition, they establish clear requirements for IIROC
Dealer Members regarding routing arrangements with other dealers.
While the IIROC amendments introduce a new and more comprehensive
framework for third-party electronic access to marketplaces, many of
the requirements formalize or clarify existing requirements, guidance
and industry practices.
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
SOURCE: Investment Industry Regulatory Organization of Canada (IIROC) - General News
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