The Ontario Securities Commission is proposing several amendments to rules regarding marketplace operation (NI21-101) and trading rules (NI 23-101).

The amendments were delivered to the Minister of Finance on October 31. The Canadian Securities Administrators intends to have the amendments become effective in all jurisdictions on December 31.

The CSA published a proposal for comment that would amend the Alternative Trading System (ATS) Rules on June 13. As a result of these comments, the CSA has decided to make non-material changes to some of the provisions of the proposed amendments.

It has proposed amendments to the ATS Rules that: will allow information on trades to be sent to an information vendor that meets the standards set by (RS Inc.: delete the concept of “market integrator” and instead focus on ensuring compliance with best execution requirements for dealers and fair access requirements for marketplaces; and provide an exemption from the transparency requirements for three years for options trades.

The CSA also made non-material amendments based on the input of the Trade Reporting and Electronic Audit Trail Committee, which was struck to examine and determine the appropriate standards that should be applied to the consolidation of the pre-trade and post-trade data of marketplaces trading equity securities.

In its report, the TREATS Committee proposed an open model whereby marketplaces would be free to choose which protocol they wish to use to report their pre- and post-trade information. However, there would be common standards for regulatory and transparency requirements. RS would determine and set a common standard for its regulatory feed regarding what data elements would have to be provided and common standards for data integrity and delivery service levels for the data feed provided to it. RS would also determine and set certain minimum standards for data feeds from marketplaces to information vendors with respect to the required data elements and with respect to timeliness and operability.

The CSA says that its amendments clarify that the regulatory feed and the data feeds must meet minimum standards set by a regulation services provider. If a marketplace has executed a contract with RS, then the marketplace may only use an information vendor that meets the standards set by RS.

Electronic audit trail requirements were set to coincide with the implementation of T+1 in June 2004. “However, after consultation with market participants, and due to the delay in implementation of T+1, we have amended the ATS Rules to postpone the implementation of these requirements until the earlier of January 1, 2007 and the date upon which a self-regulating organization or a regulation services provider implements an electronic audit trail requirement,” it says.

“In the meantime, we have asked the TREATS Committee to identify and discuss issues, options and recommendations regarding the technology standards and an implementation plan for the electronic audit trail requirements for orders and trades in securities, including equity securities, options and debt securities,” the CSA says.

The CSA also wishes to clarify that the IDA qualifies as a regulation services provider for marketplaces that trade unlisted debt securities, inter-dealer bond brokers and dealers executing trades of unlisted debt securities outside of a marketplace in jurisdictions where it has been recognized as an SRO. RS Inc. is a recognized self-regulatory organization and is the regulation services provider for marketplaces that trade exchange-traded and foreign exchange-traded securities.

The CSA notes that CanPX has currently been approved to act as the information processor for corporate debt securities until December 31, 2006 in Ontario, British Columbia, Alberta, Quebec, and New Brunswick.

http://www.osc.gov.on.ca/en/Regulation/Rulemaking/Rules/rule_20031031_21-101-note-amend.htm