Coinsquare Capital Markets Ltd. has been cleared to operate Canada’s first alternative trading system (ATS) in the crypto space, allowing it to bring together digital asset buyers and sellers in a regulated market.
The Ontario Securities Commission (OSC) published a decision on Wednesday granting regulatory relief to Coinsquare from certain prospectus, trade reporting and marketplace requirements. The firm was also approved as a member of the Investment Industry Regulatory Organization of Canada (IIROC).
The firm sought approval to be registered as an investment dealer, and to be approved as both a dealer and marketplace member with IIROC, along with permission to operate an ATS as a registered investment dealer.
According to the OSC’s decision, the Coinsquare platform allows clients to enter a market order after receiving a quote, and also to execute limit orders in a displayed two-sided order book operated as an ATS — where orders can be matched with other client orders, principal orders or orders from other marketplace subscribers (including IIROC dealers and large buy-side firms).
“The marketplace platform will provide a two-sided, electronic auction market with a visible central limit order book that matches buy and sell orders at ‘top of book’ in strict price/time priority,” the decision said, noting that it will not support market orders, contingent orders, dark orders or indications of interest, and, at least initially, will not allow short sales.
Coinsquare’s marketplace platform will be regulated as an ATS in most provinces, but it will be treated as an “exempt exchange” in British Columbia, Saskatchewan, Nova Scotia and New Brunswick, the decision said.
While regulators have previously granted relief to enable crypto trading platforms to operate as restricted dealers, Wednesday’s decision also grants relief from certain marketplace requirements, noting that the rules that govern markets were not drafted with cryptoasset markets in mind, and that some requirements may not apply to these businesses.
“The marketplace relief is limited and reflects the balance between needing to be flexible in order to foster innovation in the Canadian capital markets and promoting investor protection and fair and efficient capital markets,” the OSC’s decision said.
The firm’s plans for the ATS were published for public comment in mid-May, and the OSC published a notice on Wednesday setting out the feedback received on that initial plan, and the firm’s responses. The notice indicated that OSC staff also completed their review of its initial filing.