The Investment Industry Regulatory Organization of Canada has launched a new surveillance system for all equity markets in Canada, the regulator said Wednesday.

IIROC says that the new system, known as the Surveillance Technology Enhancement Platform (STEP), gives it the ability to conduct cross-market surveillance, enabling it to keep up with the proliferation of markets, and the growth in the speed and volume of trading that has followed. The new platform is directly managed and maintained by IIROC, which it says will give it more flexibility to respond to changing market conditions and changing market structure.

IIROC notes that it has seen a dramatic growth in the speed and volume of trading, largely due to the advent of automated or algorithmic trading and high frequency trading strategies. Four years ago, Canadian equity markets handled an average of 10 million messages per day, it reports. Now, it generates, on average, approximately 800,000 trades and 180 million messages daily.

IIROC says that, based on forecasts from market participants, the Canadian marketplace may see message volumes escalate as high as 725 million per day by mid 2011. The new platform can currently process up to 400 million trades, orders, quotes and cancellation messages per day, and IIROC says it is planning to upgrade STEP shortly, building capacity to handle up to 1 billion messages per day.

“In fulfilling our market surveillance responsibilities in a multi-market environment, we face the challenges of higher volumes, faster trading, new trading strategies and order types and more complex technologies,” says Susan Wolburgh Jenah, IIROC’s president and CEO.

“The new STEP system consolidates regulatory feeds from all marketplaces, providing a centralized view of trading activity on the three exchanges and six alternative trading systems currently operating in Canada. The STEP system will allow us to conduct more effective cross-market surveillance and analysis,” she adds.

IIROC says that it continues to use the surveillance system licensed from TSX Inc. to generate single-market alerts for the Toronto Stock Exchange and TSX Venture Exchange. All single-market alerts for the other regulated marketplaces in Canada are now handled by the new platform

IE