The Ontario Securities Commission is seeking comments on a Toronto Stock Exchange Inc. plan to allow for the execution of certain specialty price crosses during the Regular Session and the Special Trading Session.

The TSX says that the need to pursue a Specialty Price crossing facility at the exchange is based on significant feedback from institutional clients requesting that it offer participants in the Canadian marketplace the ability to execute volume-weighted average price trades and basis trades.

A VWAP trade is a transaction executed at a volume-weighted average price of the security traded for a continuous period on or during a trading day. These types of trades are popular among foreign institutions looking to transact in Canadian securities markets. A basis trade means a transaction whereby a basket of securities or an index participation unit is transacted at prices achieved through the execution of related exchange-traded derivative instruments, which may include index futures, index options and index participation units in an amount that will correspond to an equivalent market exposure.

Basis trades involve sourcing liquidity from both futures and equity markets to create (or offset) a position in an underlying security or index. To execute a basis trade, a trader must be able to print the trade at the average price paid for all futures and equities. Although a relatively sophisticated form of trading, institutional demand to execute this type of trade in the Canadian market is increasing.

These types of trades are currently permitted in the U.S. and certain European markets but are not possible in the Canadian market at this time. In order to implement changes to allow Specialty Price Crosses, the exchange proposes to introduce amendments to its rules. Implementation is anticipated for the second quarter 2003.

Comments on the proposed amendments are due within 30 days.