In a bid to enhance market surveillance, the Bourse de Montréal Inc. (MX) is proposing to introduce new order marking requirements.
The regulatory division of the exchange published a set of proposed changes to its rules that would introduce new requirements for unique client identifiers and identifiers for orders that are generated algorithmically, or originate through sponsored access.
“These new requirements will enhance regulatory data by increasing transparency and allowing the regulatory division to link client activity across multiple [market participants],” it said in a notice detailing the proposals, adding that this enhancement will enhance its market surveillance capabilities.
Currently, the MX requires firms to provide it with client information for positions in particular products that exceed a set threshold. This information is disclosed on a post-trade basis, and it means the exchange doesn’t have access to information of all positions. And, its requirements for sponsored access clients are limited too.
To address these shortcomings, back in 2021, the exchange launched a consultation on enhancing market surveillance with new identifier requirements. The proposed rule changes follow from the feedback on that consultation, input from a working group, and other regulatory analysis.
“The objectives of the proposed amendments are to better align the division’s requirements with those of other regulators, more effectively manage the risks of electronic trading, enhance market integrity and investor protection, and ensure consistency of information across Canadian marketplaces,” it said.
In addition to improving market oversight, the new requirements should help firms reduce their own risks by enhancing their ability to supervise their clients, while also reducing the volume of requests for information from the regulators (along with the costs of complying with these sorts of requests), the exchange said.
Enhancing the regulator’s market surveillance capabilities should increase the accuracy of the alerts it generates, and improving its, “insight into the trading behaviour of specific accounts,” it said.
The proposals are out for comment until May 27.