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Alpha Trading Systems Limited Partnership et al. – s. 15.1 of NI 21-101 Marketplace Operation
Headnote
Section 15.1 of National Instrument 21-101 Marketplace Operation (NI 21-101) – exemption from the requirement in section 5.10 of NI 21-101 that a marketplace not release a marketplace participant’s order and trade information to a person or company other than a marketplace participant, a securities regulatory authority or a regulation services provider unless (i) the marketplace participant has consented in writing, (ii) the release of the order and trade information is required by applicable law or NI 21-101, or (iii) the order and trade information was disclosed by another person or company, and the disclosure was lawful. The exemption will allow marketplaces to provide order and trade data for bona fide capital markets research, subject to terms and conditions.
Applicable Legislative Provision
Securities Act, R.S.O. 1990, c.S.5, as am.
National Instrument 21-101 Marketplace Operation, s. 15.1.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
AND
NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION
(“NI 21-101”)
AND
IN THE MATTER OF
ALPHA TRADING SYSTEMS LIMITED PARTNERSHIP,
ALPHA TRADING SYSTEMS INC.,
ALPHA MARKET SERVICES INC.,
ALPHA EXCHANGE INC.,
BLOOMBERG TRADEBOOK CANADA COMPANY,
CANDEAL.CA INC,
CHI-X CANADA ATS LIMITED,
CNSX MARKETS INC.,
EQUILEND CANADA CORP.,
INSTINET CANADA CROSS LIMITED,
LIQUIDNET CANADA INC.,
MARKETAXESS CANADA LIMITED,
OMEGA SECURITIES INC.,
PERIMETER MARKETS INC.,
TMX GROUP INC.,
TSX INC.,
TMX SELECT INC.,
AND
TRIACT CANADA MARKETPLACE LP
(each a “Marketplace” and together the “Marketplaces”)
ORDER
(Section 15.1 of NI 21-101)
WHEREAS an application has been made for an order pursuant to section 15.1 of NI 21-101 exempting the Marketplaces from section 5.10 of NI 21-101;
AND WHEREAS section 5.10 of NI 21-101 was amended as of July 1, 2012 ("2012 amendment") to require that a marketplace not release a marketplace participant's order and trade information ("order and trade information") to a person or company other than the marketplace participant, a securities regulatory authority or a regulation services provider unless (i) the marketplace participant has consented in writing, (ii) the release of the order and trade information is required by applicable law or NI 21-101, or (iii) the order and trade information was disclosed by another person or company, and the disclosure was lawful;
AND WHEREAS the 2012 amendment was not intended to prohibit any marketplace from providing order and trade information for the purposes of bona fide capital markets research;
AND WHEREAS the Director considers it to be in the public interest that capital markets research be conducted, subject to terms and conditions to ensure that the order and trade information is only used for the purpose for which it is provided and to protect the confidentiality of such order and trade information;
AND WHEREAS this order does not override any existing agreement with respect to providing a marketplace participant's order and trade information between a Marketplace and:
(a) a marketplace participant; or
(b) a researcher where the terms of such agreement are consistent with the terms and conditions in this Order;
AND WHEREAS this order does not impose any obligation on a marketplace to disclose information on the request of a researcher,
IT IS HEREBY ORDERED by the Director that subsection 5.10(1) of NI 21-101 shall not apply to a Marketplace
PROVIDED THAT the Marketplace is in compliance with the following terms and conditions:
(a) the order and trade information is or has been provided to a person or company ("recipient") solely for the purpose of bona fide capital markets research ("permitted purpose"), whether commissioned by the Marketplace or by any other person or entity;
(b) no information identifying a particular marketplace participant or its customers is provided directly or by inference, other than broker number and trader ID;
(c) the Marketplace has executed one or more agreements with each recipient and / or their employer(s) (each or together, the "Recipient") that provides that:
(i) the Recipient must not disclose any information that could directly or by inference identify marketplace participants or their customers to any other person or company without the Marketplace's consent;
(ii) despite paragraph (i), the Recipient may disclose order and trade information used in connection with research submitted to a journal or an academic publication provided that:
(A) the information disclosed is used for verification purposes only, and
(B) the journal or publication or any person involved in the verification of the research agrees to maintain the confidentiality of the information;
(iii) the Recipient may only publish or otherwise disseminate aggregated data or aggregated information that does not disclose directly or by inference information identifying a marketplace participant or any of its customers, or the business transactions, trading strategies or market positions of the marketplace participant or its customers;
(iv) the Recipient must not use the order and trade information or provide it to any person or company for any purpose other than the permitted purpose, including for the purposes of trading, advising others to trade, or reverse engineering trading strategies;
(v) the Recipient must keep the order and trade information securely stored at all times, including by encrypting files, logging access, and imposing restrictions on downloading, transferring or saving the order and trade information;
(vi) the order and trade information is only maintained for a reasonable period of time after the completion of the research and publication process;
(vii) the Recipient must immediately inform the Marketplace of any breach or potential breach of the agreement; and
(viii) the Marketplace must have appropriate remedies from the Recipient in the event of a breach of the agreement; and
(d) the Marketplace must promptly inform the Commission and seek such remedies as it may determine are appropriate against the party or parties to the agreement referred to in paragraph (c) if it becomes aware of any breach or potential breach of the agreement.
DATED this 3rd day of October, 2013
"Susan Greenglass"
Director, Market Regulation
Ontario Securities Commission