The Investment Industry Regulatory Organization of Canada (IIROC) is proposing rule amendments and guidance that aim to ensure adequate oversight of trading through order execution services (OES).
IIROC Tuesday published proposed amendments that would require dealers that offer order execution services to identify clients with trading activity that exceeds established thresholds (100 trades per day, or 500 orders per day, on average in a month), and to provide their identities to IIROC. Dealers would also be required to have policies and procedures to deal with the risks associated with OES accounts that have limited direct order handling by staff.
“The proposed amendments are designed to ensure that all electronic trading, regardless of channel, has the same level of supervision and oversight,” it says.
Additionally, it’s proposing new guidance that sets out IIROC’s expectations for: the inclusion of these client identifiers on each order entered for clients whose OES account activity exceeds the thresholds set out in the proposed rules; reporting to the regulator; and, supervisory requirements relating to manipulative and deceptive trading, and to address the risks associated with the lack of intermediation in OES trading.
The proposed amendments replace prior proposals that would have prohibited institutional clients from using OES dealers, among other things. Following the comments received, the earlier proposals were not adopted; however, rules regarding third-party electronic access to markets were implemented earlier this year.
Comments on these latest proposals are due by January 14, 2014. IIROC says that if the amendments are approved they would be expected to be implemented within 180 days.