We support the efforts made by IIROC to require additional disclosure by Dealer Members of their best execution policies and procedures and believe the Proposed Amendments are a meaningful step forward. As a general principle, we are of the view that Dealer Members should handle client orders with the same level of care and scrutiny as would be applied when processing their own proprietary orders or orders of their affiliates. The matters that should be considered and applied in the same manner include the breadth and quality of market data, routing decisions, foreign exchange pricing and all other criteria that would be within the scope of the best execution standard. To the extent conflicts of interest exist between a Dealer Member’s business model and the interest of the client, the interest of the client should take priority.
Overview of the Council’s Comments:
With respect to trading on foreign markets, the Proposed Amendments include a statement to the effect that the sending of bulk orders to a specified foreign organized regulated market without considering other liquidity sources is not in compliance with achieving best execution. As noted in our comment above, we would add that such orders should be handled equitably and similarly between client and principal trades and that all such orders should be required to use the same foreign exchange rates and trading mechanisms such that there is no markup on client orders, in order to help achieve the best execution. Transparency relating to the foreign exchange rates accessed and executed should also be made available to investors, as this forms an integral portion of the Dealer Members’ fulfilling their best execution obligations relating to the particular securities transactions.