Securities Law & Instruments

PDF Version
PDF Version

 

AMENDMENTS TO NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION

PART 1 AMENDMENTS

1.1 Amendments

(1) This Instrument amends National Instrument 21-101 Marketplace Operation.

(2) Section 1.1 is amended by repealing the definition of "market integrator".

(3) Section 5.2 is amended by repealing "or user" and substituting ", user or a person or company with access to the recognized exchange or recognized quotation and trade reporting system".

(4) Part 6 is amended by:

(a) adding in section 6.12 "or a person or company with access to the ATS" after "a subscriber"; and

(b) adding the following section:

"6.13 Access Requirements -- An ATS shall

(a) establish written standards for granting access to trading on it;

(b) not unreasonably prohibit, condition or limit access by a person or company to services offered by it; and

(c) keep records of

(i) each grant of access, including, for each subscriber, the reasons for granting access to an applicant, and

(ii) each denial or limitation of access, including the reasons for denying or limiting access to an applicant.".

(5) Part 7 is amended by repealing sections 7.1, 7.2, 7.3, 7.4 and 7.5 and substituting the following:

"7.1 Pre-trade Information Transparency - Exchange-Traded Securities

(1) A marketplace that displays orders of exchange-traded securities to a person or company shall provide accurate and timely information regarding orders for the exchange-traded securities displayed on the marketplace to an information processor as required by the information processor or, if there is no information processor, any information vendor that meets the standards set by a regulation services provider with which the marketplace has executed a contract under NI 23-101 as required by the information vendor.

(2) Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.

7.2 Post-trade Information Transparency -- Exchange-Traded Securities -- A marketplace shall provide accurate and timely information regarding orders for exchange-traded securities executed on the marketplace to an information processor as required by the information processor or, if there is no information processor, any information vendor that meets the standards set by a regulation services provider with which the marketplace has executed a contract under NI 23-101 as required by the information vendor.

7.3 Pre-trade Information Transparency -- Foreign Exchange-Traded Securities

(1) A marketplace that displays orders of foreign exchange-traded securities to a person or company shall provide accurate and timely information regarding orders for the foreign exchange-traded securities displayed on the marketplace to any information vendor.

(2) Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.

7.4 Post-trade Information Transparency -- Foreign Exchange-Traded Securities -- A marketplace shall provide accurate and timely information regarding orders for foreign exchange-traded securities executed on the marketplace to any information vendor.

7.5 Exemption for Options -- This Part does not apply to exchange-traded securities that are options and foreign exchange-traded securities that are options until January 1, 2007.".

(6) Part 8 is amended by:

(a) repealing sections 8.1, 8.2, 8.3, 8.4 and 8.5 and substituting the following:

"8.1 Pre-Trade and Post-Trade Information Transparency Requirements - Government Debt Securities

(1) A marketplace that displays orders of government debt securities shall provide to an information processor accurate and timely information regarding orders for government debt securities displayed on the marketplace as required by the information processor.

(2) Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.

(3) A marketplace shall provide to an information processor accurate and timely information regarding details of trades of government debt securities executed on the marketplace as required by the information processor.

(4) An inter-dealer bond broker shall provide to an information processor accurate and timely information regarding orders for government debt securities executed through the inter-dealer bond broker as required by the information processor.

(5) An inter-dealer bond broker shall provide to an information processor accurate and timely information regarding details of trades of government debt securities executed through the inter-dealer bond broker as required by the information processor.

8.2 Pre-Trade and Post-Trade Information Transparency Requirements - Corporate Debt Securities

(1) A marketplace that displays orders of corporate debt securities shall provide to an information processor accurate and timely information regarding orders for corporate debt securities displayed on the marketplace as required by the information processor.

(2) Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.

(3) A marketplace shall provide to an information processor accurate and timely information regarding details of trades of corporate debt securities executed on the marketplace as required by the information processor.

(4) An inter-dealer bond broker shall provide to an information processor accurate and timely information regarding details of trades of corporate debt securities executed through the inter-dealer bond broker as required by the information processor.

(5) A dealer executing trades of corporate debt securities outside of a marketplace shall provide to an information processor accurate and timely information regarding details of trades of corporate debt securities traded by or through the dealer as required by the information processor.

8.3 Exemption for Government Debt Securities - Section 8.1 does not apply until January 1, 2007."; and

(b) renumbering existing sections 8.6 and 8.7 as sections 8.4 and 8.5.

(7) Part 9 is amended by:

(a) striking out the title of Part 9 and substituting "REQUIREMENTS FOR MARKETPLACES";

(b) repealing sections 9.1, 9.2 and 9.3;

(c) adding "or an information vendor" after "to an information processor" in existing subsection 9.4(2); and

(d) renumbering existing section 9.4 as section 9.1.

(8) Part 10 is amended by repealing sections 10.1 and 10.2 and substituting the following:

"10.1 Disclosure of Transaction Fees for Marketplaces - If a marketplace charges a transaction fee to participants of another marketplace to execute a trade by accessing an order on the first marketplace, the marketplace

(a) shall disclose a schedule of all transaction fees to

(i) an information processor; or

(ii) if there is no information processor, an information vendor that meets the standards set by a regulation services provider; or

(b) shall make its schedule of transaction fees publicly available.".

(9) Part 11 is amended by:

(a) repealing subparagraphs 11.2(1)(c)(xii), (xvi) and (xviii) and renumbering the subparagraphs accordingly;

(b) striking out "," after "of the order" in existing subparagraph 11.2(1)(c)(xvii) and substituting "; and";

(c) striking out the reference to the market integrator in subparagraph 11.2(1)(d)(viii); and

(d) adding in paragraph 11.3(1)(b) after the reference to section 5.1 "or 6.13".

PART 2 EFFECTIVE DATE

2.1 Effective Date -- This Instrument comes into force on December 31, 2003.

AMENDMENTS TO FORMS 21-101F1, 21-101F2, 21-101F3, 21-101F4, 21-101F5 and 21-101F6

PART 1 AMENDMENTS

1.1 Amendments - This Instrument amends Forms 21-101F1, 21-101F2, 21-101F3, 21-101F4, 21-101F5 and 21-101F6 by striking out the following:

"[ ] THE FILER CONSENTS TO HAVING THE INFORMATION ON THIS FORM AND ATTACHED EXHIBITS PUBLICLY AVAILABLE."

PART 2 EFFECTIVE DATE

2.1 Effective Date -- This Instrument comes into force on December 31, 2003.

AMENDMENTS TO COMPANION POLICY 21-101CP - TO NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION

PART 1 AMENDMENTS

1.1 Amendments

(1) This Amendment amends Companion Policy 21-101CP.

(2) Section 2.1 is amended by repealing subsection (1) and substituting the following:

"(1) The Instrument uses the term "marketplace" to encompass the different types of trading systems that match trades. A marketplace is an exchange, a quotation and trade reporting system or an ATS. Paragraphs (c) and (d) of the definition of "marketplace" describe marketplaces that the Canadian securities regulatory authorities consider to be ATSs. A dealer that internalizes its orders of exchange - traded securities and does not print trades on an exchange or quotation and trade reporting system is considered to be a marketplace pursuant to paragraph (d) of the definition of "marketplace" and an ATS.".

(3) Section 3.4 is amended by striking out subsection 3.4(7) and substituting the following:

"(7) Any marketplace that is required to provide notice under section 6.7 of the Instrument will determine the calculation based on publicly available information."

(4) Subsection 5.1(3) is amended by:

(a) striking out the reference to section 8.3; and

(b) including a reference to sections 7.3 and 8.2.

(5) Section 6.1 is amended by repealing subsection 6.1(2) and substituting the following:

"(2) The forms filed by a marketplace under the Instrument will be kept confidential. The Canadian securities regulatory authorities are of the view that the forms contain intimate financial, commercial and technical information and that the interests of the filers in non-disclosure outweigh the desirability of adhering to the principle that the forms be available for public inspection.".

(6) Section 7.1 is amended by adding the following after "standards for access.":

"In addition, the reference to "a person or company" in subsection (b) includes a system or facility that is operated by a person or company.".

(7) Part 8 is amended by:

(a) striking out the title and substituting "REQUIREMENTS ONLY APPLICABLE TO ATSs"; and

(b) adding the following:

"8.2 Access Requirements -- Section 6.13 of the Instrument sets out access requirements that apply to an ATS. The Canadian securities regulatory authorities note that the requirements regarding access do not prevent an ATS from setting reasonable standards for access. In addition, the reference to "a person or company" in subsection (b) includes a system or facility that is operated by a person or company.".

(8) Part 9 is amended by repealing sections 9.1 and 9.2 and substituting the following:

"PART 9 INFORMATION TRANSPARENCY REQUIREMENTS FOR EXCHANGE-TRADED SECURITIES

9.1 Information Transparency Requirements for Exchange-Traded Securities

(1) Subsection 7.1(1) of the Instrument requires a marketplace that displays orders of exchange-traded securities to any person or company to provide information to an information processor or, if there is no information processor, to any information vendor that meets the standards set by a regulation services provider with which the marketplace has executed a contract under NI 23-101. Section 7.2 requires the marketplace to provide information regarding trades of exchange-traded securities to an information processor or, if there is no information processor, any information vendor that meets the standards set by a regulation services provider with which the marketplace has executed a contract under NI 23-101. A regulation services provider, in consultation with the industry and subject to the approval of the Canadian securities regulatory authorities, will determine the standards. Those standards will be publicly available and will be updated as necessary by the regulation services provider.

(2) Section 7.5 of the Instrument states that the pre-trade and post-trade transparency requirements in Part 7 do not apply to exchange-traded securities and foreign exchange-traded securities that are options until January 1, 2007. The Canadian securities regulatory authorities are of the view that additional study is necessary to determine the appropriate transparency standards for options.".

(9) Part 10 is amended by repealing sections 10.1 and 10.2 and substituting the following:

"10.1 Information Transparency Requirements for Unlisted Debt Securities

(1) The requirement to provide transparency of information regarding orders and trades of government debt securities in section 8.1 of the Instrument does not apply until January 1, 2007. The Canadian securities regulatory authorities will continue to review the transparency requirements, to determine if the transparency requirements summarized in subsections (2) and (3) below should be amended. One of the issues we will consider is to what extent systems displaying executable prices compete with inter-dealer bond brokers and therefore should be subject to the same level of transparency as the inter-dealer bond brokers.

(2) The requirements of the information processor for government debt securities are as follows:

(a) Marketplaces trading government debt securities and inter-dealer bond brokers are required to provide in real time quotation information displayed on the marketplace for all bids and offers with respect to unlisted debt securities designated by the information processor, including details as to type, issuer, coupon and maturity of security, best bid price, best ask price and total disclosed volume at such prices; and

(b) Marketplaces trading government debt securities and inter-dealer bond brokers are required to provide in real time details of trades of all government debt securities designated by the information processor, including details as to the type, issuer, series, coupon and maturity, price and time of the trade and the volume traded;

(3) The requirements of the information processor for corporate debt securities are as follows:

(a) Marketplaces trading corporate debt securities, inter-dealer bond brokers and dealers trading corporate debt securities outside of a marketplace are required to provide details of trades of all designated corporate debt securities, including details as to the type, issuer, class, series, coupon and maturity, price and time of the trade and, subject to the caps set out below, the volume traded, within one hour of the trade. If the total par value of a trade of an investment grade corporate debt security is greater than $2 million, the trade details provided to the information processor shall report the trade as "$2 million+". If the total par value of a trade of a non-investment grade corporate debt security is greater than $200,000, the trade details provided to the information processor shall report the trade as "$200,000+".

(b) Although subsection 8.2(1) of the Instrument requires marketplaces to provide information regarding orders of corporate debt securities, the information processor has not required this information to be provided.

(4) The marketplace upon which the trade is executed will not be shown, unless the marketplace determines that it wants its name to be shown.

(5) The information processor will use transparent criteria and a transparent process to select the designated government debt securities and designated corporate debt securities. The information processor will make the criteria and the process publicly available.

(6) An "investment grade corporate debt security" is a corporate debt security that is rated by one of the listed rating organizations at or above one of the following rating categories or a rating category that preceded or replaces a category listed below:

Rating Organization

Long Term Debt

Short Term Debt

 

Fitch, Inc.

BBB

F3

Dominion Bond Rating Service Limited

BBB

R-2

Moody's Investors Service, Inc.

Baa

Prime-3

Standard & Poors Corporation

BBB

A-3

(7) A "non-investment grade corporate debt security" is a corporate debt security that is not an investment grade corporate debt security.

(8) The information processor will publish the list of designated government debt securities and designated corporate debt securities. The information processor will give reasonable notice of any change to the list.

(9) The information processor may request changes to the transparency requirements by filing an amendment to Form 21-101F5 with the Canadian securities regulatory authorities pursuant to subsection 14.2(1) of the Instrument. The Canadian securities regulatory authorities will review the amendment to Form 21-101F5 to determine whether the proposed changes are contrary to the public interest, to ensure fairness and to ensure that there is an appropriate balance between the standards of transparency and market quality (defined in terms of market liquidity and efficiency) in each area of the market. The proposed changes to the transparency requirements will also be subject to consultation with market participants.".

(10) Part 11 is amended by:

(a) repealing sections 11.1 and 11.4;

(b) repealing the second sentence of existing section 11.2 beginning with "This requirement applies...";

(c) striking out the reference to subsection 9.4(1) in existing subsection 11.2 and substituting a reference to subsection 9.1(1);

(d) striking out the reference to subsection 9.4(2) in existing subsection 11.3 and substituting a reference to subsection 9.1(2);

(e) adding "or an information vendor" after "information processor" in existing section 11.3;

(f) renumbering existing section 11.2 as section 11.1 and section 11.3 as section 11.2; and

(g) adding the following section:

"11.3 Market Integration -- Although the Canadian securities regulatory authorities have removed the concept of a market integrator, we continue to be of the view that market integration is important to our marketplaces. We expect to achieve market integration by focusing on compliance with fair access and best execution requirements. We will continue to monitor the market to ensure that the lack of a market integrator does not unduly affect the market.".

(11) Part 12 is amended by striking out section 12.1 and substituting the following:

"12.1 Disclosure of Transaction Fees for Marketplaces -- Section 10.1 of the Instrument requires that each marketplace disclose a schedule of transaction fees to an information processor, or if there is no information processor, an information vendor that meets the standards set by a regulation services provider, or the marketplace is required make its schedule of transaction fees publicly available. It is not the intention of the Canadian securities regulatory authorities that a commission fee charged by a dealer for dealer services be disclosed. Each marketplace is required to publicly post a schedule of all trading fees that are applicable to outside marketplace participants that are accessing an order and executing a trade displayed through an information processor or information vendor. The requirement to disclose transaction fees does not require a combined price calculation by each marketplace.".

(12) Part 16 is amended by adding the following subsection to section 16.2:

"(3) The forms filed by an information processor under the Instrument will be kept confidential. The Canadian securities regulatory authorities are of the view that they contain intimate financial, commercial and technical information and that the interests of the filers in non-disclosure outweigh the desirability of adhering to the principle that all forms be available for public inspection.".

PART 2 EFFECTIVE DATE

2.1 Effective Date -- This Amendment comes into force on December 31, 2003.