The Investment Industry Regulatory Organization of Canada is implementing new fee models for market and dealer regulation to better reflect the evolution of trading activity and the drivers of IIROC’s regulatory costs, the self-regulatory organization said Thursday.

Effective April 1, IIROC says the changes are the direct result of extensive stakeholder consultations, guided by an industry committee representing a cross-section of firms and marketplaces that IIROC regulates.

“We developed the new fee models based on the principles of fairness, transparency and industry competitiveness,” says Susan Wolburgh Jenah, IIROC president and CEO.

The new fee structure replaces two fee models that were in place at IIROC’s predecessor organizations, the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS).

The SRO says it has been working with the industry to help prepare members by providing fee model guidelines, pro forma invoices and supplementary information in advance of the implementation.

IIROC notes that it operates on a cost-recovery basis and has returned almost $12 million to the industry since 2008 in operational surpluses.

Highlights of IIROC’s new fee models:

  • Under both models, each member’s share of fees paid will take into account its usage of IIROC’s regulatory resources.
  • Both fee models are designed not to inhibit new entrants or to favour one marketplace or dealer over another.
  • For the Dealer Regulation model, dealer fees are determined by a firm’s revenue tier and number of IIROC-registered staff. They include a modest risk premium for higher-risk firms to reflect IIROC’s costs of compliance oversight. As a result, 25% of firms will see a decrease and 37% will see an increase in fees under the new model. Some firms will be affected by a higher minimum fee, which will see its first increase in more than 10 years, from $25,000 to $27,500.
  • Under the Market Regulation model, the fees a dealer pays are now based on two components: its share on each marketplace of the total number of messages processed by IIROC’s surveillance system for technology costs; and its share on each marketplace of the total number of trades for all other costs.

IIROC says it is one of the first financial regulators globally to propose and implement recovering technology costs based on messages. Approximately 85% of firms will see a decrease based on the new market regulation model, while 15% of firms will experience a fee increase.

Full details on the integrated fee model and its various components, can be found in IIROC’s February 3, administrative notice, “Approval of Integrated Fee Model” and “IIROC Fee Model Guidelines” from March 5.