Securities regulators are proposing a revised rule that would create a new system for debt transaction reporting in order to bolster market oversight.

The Investment Industry Regulatory Organization of Canada (IIROC) today published Proposed Rule 2800C–Transaction Reporting for Debt Securities that would create a new debt transaction reporting requirement, in an effort to facilitate more timely market surveillance, and improved oversight of Canadian debt market activity.

“IIROC’s proposed reporting requirements will bring greater regulatory transparency to the Canadian debt markets. The changes will enable more effective oversight of debt trading, resulting in enhanced market integrity and investor protection,” said Wendy Rudd, senior vice president, market regulation and policy, at IIROC.

The proposal would not make individual transaction data available to the public however. Rather, IIROC says that it plans to continue publishing aggregate debt trading statistics. “IIROC recognizes that transparency is an important issue and believes that extensive industry and stakeholder consultation would be necessary to move forward with any initiative regarding public transparency of transaction data,” it says.

IIROC initially proposed the new system in February of last year. Now, it is publishing a revised proposal, with a number of changes, for a further 60-day comment period. It anticipates finalizing the rule later this year, and then implementing the new regime over the next couple of years. A fee model for funding the new system, which will operate on a cost-recovery basis, will also be published later this year, IIROC notes; and, it’s planning to set up an industry working group to help develop that model.

The rule would require dealers to report all debt market transactions, including trades executed on an alternative trading system (ATS) or through an inter-dealer bond broker, to IIROC within a day of the trade. This reporting will, in turn, facilitate the creation of a database of transaction information that will enable IIROC to oversee over-the-counter (OTC) debt market trading. This would replace the current system which relies on weekly reporting to the Bank of Canada.

Next: Changes from the original proposal
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Changes from the original proposal

Changes from the original proposal include: pushing back the deadline to report transactions to IIROC from T+1 at 2:00am to T+1 at 2:00pm; the data that must be reported is now set out in the rule, certain elements have been dropped, others have been added, or clarified; and definitions have been added to improve clarity.

The proposed reporting requirements would be implemented in two phases. In phase 1, which is targeted for April 2015, dealers that belong to the current reporting system will have to start complying with the new system for all trades that are denominated in Canadian dollars. IIROC says that this will cover more than 90% of dealer debt trading activity.

In phase 2, which is expected to implemented in April 2016, the requirements will be extended to non-Canadian dollar trades; and, dealers that don’t currently report to the Bank of Canada will have to start reporting their trades, excluding repo transactions.