The Investment Industry Regulatory Organization of Canada is proposing a new fee model to cover the market regulation services it provides.

In a notice published Tuesday, IIROC notes that the current model is not fair because it uses shares traded volume as the sole driver of fees, “ignoring the significant evolution of trading activity in relation to messages, including orders and order-to-trade ratios. As new marketplaces launch with highly differentiated trading models, the appropriateness of shares traded as the sole driver to track IIROC’s costs of providing market regulation is questionable,” it says.

As a result, the regulator is proposing a new model that will impose a minimum monthly fee, levy a fee on each market based on its share of the total number of messages processed by IIROC’s surveillance system during the month, and a fee charged to each market based on its share of the total number of trades during the month. IIROC will continue to recover market-specific costs directly, it adds.

The relationship between IIROC’s cost drivers — messages and trades — and the impact on market regulation are the same for dealers as they are for markets, it says.

As a result, dealers that have a greater percentage share of messages or trades or orders compared to their percentage share of shares traded will incur higher fees under the proposed model compared to the current model, IIROC says.

The regulator estimates that approximately 25% of dealers who trade will see a fee increase, and the remainder will experience a fee decrease.

IIROC is seeking comments on the proposed new fee model by Jan. 29, 2011.