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Letter Summary:
The proposed amendments would prohibit a dealer from providing order execution only services (OES) to another registered dealer (or a person exempt from registration). By way of background, an OES allows a dealer to trade on behalf of a client without a suitability determination. The purpose of the change is to ensure registered dealers use an appropriate channel to access marketplaces and can’t access marketplaces when conducting dealing activity. It is intended to avoid a regulatory arbitrage and to assist with surveillance over advisers and better address the risks of electronic trading, the amendments require order execution only dealers to assign identifiers to certain entities, including persons registered or exempt from registration as an adviser or a foreign adviser equivalent that has been granted trading authority.
Overview of the Council’s Comments:
We are strongly supportive of the intended purpose of the proposed amendments, as they would prohibit a dealer from providing order execution only services (OES) to another registered dealer. In addition, to support market surveillance and to better address risks of electronic trading, we expressed support for the amendments that require order execution dealers to assign identifier to entities exempt from registration.