compliance puzzle

The TMX Group Ltd. says it needs more time to respond to regulators’ plan to study curbs on maker-taker trading fee models, given the project’s potential significance.

Securities regulators in Canada and the U.S. are planning a coordinated study to consider the impact of imposing the curbs.

In a comment letter to the Ontario Securities Commission (OSC), the TMX is asking regulators to extend to 90 days the current 45-day comment period for its proposed trading fee rebate pilot study. As it stands, the CSA’s comment period is set to end on Feb. 1.

The TMX says it’s planning to submit a comprehensive response to the issues raised by the proposed study. For now, it’s pleading for more time, saying it’s facing an “inappropriately short” comment period—particularly given that regulators are considering a study that would demand trading venues and industry firms to participate, banning markets from paying trading fee rebates in certain securities.

The exchange argues that the regulators would effectively be imposing measures that would ordinarily require rule making, which are required to be published for a 90-day comment period under securities law.

“The proposed pilot has the potential to materially impact equity market structure and Canada’s capital markets, including marketplaces, dealers, investors and issuers,” the TMX says. “On this basis alone, it is important to ensure that industry stakeholders are afforded enough time to perform a comprehensive review of the [regulators’ proposals], prepare a thoughtful response, and satisfy their internal review requirements.”

An added complication in this case is the fact that the CSA is aiming to coordinate its efforts with the U.S. Securities and Exchange Commission (SEC), which is planning its own study. Regulators are planning to coordinate their studies due to the large number of inter-listed stocks that could be affected.

However, the TMX argues that the CSA doesn’t have to move in lockstep with the SEC, noting that “the SEC has already contemplated and accommodated for a delay period if a Canadian pilot were to begin after the US pilot.” And, it says that a later start in Canada would give the CSA the opportunity to observe the initial results of the U.S. study.