Securities regulators are turning to guidance, rather than new rules, in a bid to address concerns about firms systematically sending their retail order flow south of the border.

The Investment Industry Regulatory Organization of Canada (IIROC) announced today that it is scrapping the proposed rule known as the “dark rules anti-avoidance provision,” which is designed to prevent firms from directing the bulk of their retail order flow to U.S. wholesalers for execution in U.S. dark pools. That proposal ran into strong opposition from the industry.

Instead, IIROC is aiming to address the concern about southbound order flow with revisions to its guidance on best execution. To that end, IIROC is now proposing to include a statement in its rules that “sending of client orders in bulk to a specific foreign organized regulated market without considering other liquidity sources, including liquidity sources in Canada, is not in compliance with the requirement to achieve best execution.”

In light of this new guidance, IIROC says it intends to withdraw the proposed anti-avoidance provision. The revised guidance comes as part of proposed rule amendments and guidance that would consolidate the best-execution requirements in the trading rules and the dealer rules into a single dealer rule.

IIROC says that the proposals aim to help dealers comply with their best-execution obligations in the multi-market environment; address changes in market structure; and align its rules with proposals from the Canadian Securities Administrators that would require firms to disclose their best-execution policies.

“After careful consideration of all the constructive feedback we received from stakeholders and with enhanced transparency,” said Victoria Pinnington, senior vice president, market regulation, at IIROC, “we believe best execution for Canadian investors can be achieved efficiently and with consistency.”

The proposals are out for comment until March 24, 2016.