Regulation Services Inc. has released for public comment a proposal to exempt trades made on a marketplace under market-maker obligations from the payment of the regulation fee charged by RS.

The Universal Market Integrity Rules define “Market Maker Obligations” as obligations imposed by the rules of a recognized exchange on a member or user or a person employed by a member or user to guarantee a two-sided market for a particular security on a continuous or reasonably continuous basis; and the execution of orders for a particular security which are less than a minimum number of units of the security as designated by the marketplace.

In order to provide market makers with the ability to fulfil their obligations, UMIR exempts trades made by a market maker in fulfillment of their Market Maker Obligations from the restrictions on making a short sale below the last sale price. UMIR also exempts market maker trades that are automatically generated by the trading system of a marketplace from the rules on client priority. The TSX is proposing to: exempt trades made pursuant to Market Maker Obligations from the payment of the regulation fee; and, to recover the cost of providing the exemption by increasing in the regulation fee to other participants.

Based on recent trading volumes for market makers as provided by the TSX and TSX Venture Exchange, it is estimated that market makers pay regulation fees of approximately $850,000 to $925,000 annually in respect of trades in their stocks of responsibility. If the exemption requested in the proposal is granted and the amount of the exemption is recovered from other participants, the Regulation Fee for a Participant that is not a Specialist or Odd Lot Dealer and with no RTs would increase approximately 4.2%.

The exemption would be effective as of January 1, 2003. Comments are due within 30 days.