TSX Notice of Proposed Amendments and Request for Comments – Trading Sustainable Bonds

July 24, 2020

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TSX Notice of Proposed Amendments and Request for Comments – Trading Sustainable Bonds 

Letter Summary:

TSX is proposing to post for trading sustainable bonds (“Sustainable Bonds”) that satisfy the eligibility criteria set by TSX. Eligible Sustainable bonds issue size must be Cdn$75 million or greater and they must have received a “second opinion” from an independent third party. TSX will not post for trading Sustainable Bonds issued by any corporate issuer (including TSX-listed issuers) other than quasi-governmental corporations. It is anticipated that TSX will post for trading Sustainable Bonds issued in Canadian or US dollars, and the Sustainable Bonds will trade in the currency in which they are issued. TSX anticipates initially posting for trading approximately 30 Sustainable Bonds.

The posting of Sustainable Bonds for trading on TSX is intended to increase the accessibility and transparency of these securities to Canadian investors.

TSX is proposing changes to the TSX Rule Book and to certain TSX marketplace functionality (collectively, the “Proposed Amendment”) to accommodate trading of Sustainable Bonds on TSX. The Sustainable Bonds will not be listed by TSX, but will only be posted for trading similar to how a Canadian ATS posts TSX-listed securities for trading today.

Overview of the Council’s Comments:

The CAC is generally in favour of the Proposed Amendments, chiefly if the posting of the bonds does in fact result in greater pricing transparency for retail investors than what is currently available from over-the-counter trading. We also support the TSX’s plans to keep retail investors educated through a section of its website, which will be devoted to information about the Sustainable Bonds and their issuers, as well as by ensuring an explanation of the difference between listing and posting securities is displayed prominently. We are also in favour of enforcing tighter bid/ask tick limits to protect orders from adverse pricing.

In general, a more robust framework for the posting of Sustainable Bonds could help achieve the proposed objectives of accessibility and transparency for Canadian retail investors.

We understand that the Luxembourg Stock Exchange (the “LuxSE”), has developed extensive rules with respect to sustainable bonds, and we recommend that similar requirements be considered.

We believe that should the Proposed Amendments take effect, the posting of Sustainable Bonds issued by a wider array of issuers such as corporations should be considered after a reasonable observation period.