CSA NI 23-101 Trading Rules

June 15, 2016

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CSA NI 23-101 Trading Rules

Letter Summary:

As noted by market participants, trading fees in Canada are problematic because the fees are large relative to the bid/ask spreads on securities. As any rebates offered by marketplaces are unlikely to flow back to the investor and instead reside at the dealer level, distortions are created which benefit certain market participants over others, causing conflicts of interest issues. In the original 2014 notice, a pilot project was proposed which would have examined the effect of a prohibition on rebates by marketplaces. The notice accompanying the Proposed Amendments indicates the pilot has been deferred as a result of the potential loss of liquidity for securities that are inter-listed in the United States if a similar project was not simultaneously run in both markets. We agree that a pilot project would be more useful if it included inter-listed securities and was conducted as a joint pilot project with the U.S. regulators. We agree that the lower fee cap should only be seen as an interim step to reduce the agency problem identified above, and encourage the CSA to continue to discuss the potential of conducting a joint project with the U.S. in the near future.

Overview of the Council’s Comments:

We note that the maximum fee applies to the execution of an order against displayed volume. Additional guidance and clarity with respect to the application of the caps to non-displayed markets may be helpful.