Provincial regulators have approved trading rule amendments regarding the “best price” obligation, the Investment Industry Regulatory Organization of Canada said Friday.

The amendments were implemented back on May 16, 2008, and are currently in force, however they still required approval of the provincial regulators.

The “best price” obligation requires a market participant to make “reasonable efforts” to fill better-priced orders displayed on a protected marketplace at the time the participant executes at an inferior price on another marketplace or foreign organized regulated market. Regulators will accept that a participant has made “reasonable efforts”if they: enter the order on a marketplace that will ensure compliance; use an acceptable order router; or provided the order to another participant for entry on a marketplace.

If a market participant uses another means to enter an order on a marketplace, the amendments expand the factors that may be taken into account by IIROC in determining whether they have made “reasonable efforts” to obtain the best available prices. They also remove transaction costs as a factor in determining the “best price” obligation and clarify that “reasonable efforts” do not require a participant to maintain a connection to each protected marketplace.

The IIROC notice points out that a trade-through protection rule is also under consideration, which may lead to the repeal of the “best price” obligations. However, until the trading rules are amended to provide for trade-through protection, market participants remain subject to the “best price” obligation, it says.

It also notes that, of the current marketplaces, only Alpha, Chi-X, CNSX (including Pure Trading), Omega, TSX and TSXV meet all four conditions to qualify as a protected marketplace. None of Bloomberg, Liquidnet and MATCH Now qualify as a “protected marketplace”.

IE