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Nasdaq Canada has received regulatory approval that will allow it to introduce “broker preferencing” for anonymous orders on its dark CXD trading book.

The exchange expects to launch the new functionality — which enables incoming orders to trade first with orders from the same dealer, ahead of orders from other dealers at the same price — in the second quarter.

“This change is being introduced to provide Nasdaq Canada exchange members with more opportunities to benefit from the lower trading costs and best execution opportunities that can result from internalizing orders,” Nasdaq CXC Ltd. said when it announced its plans last December.

The exchange acknowledged that the change will create new opportunities for traders to internalize orders, but said that it is adding the feature as a competitive response to other markets that already allow it.

The exchange also said that the change will have a minimal impact on the Canadian markets because its CXD is a dark book and an unprotected market under the regulators’ order protection rule, and it is only used by a subset of traders.

“We would be supportive of a decision by the [Ontario Securities Commission] to not permit broker preferencing for anonymous orders across all marketplaces and would be happy to remove this feature at the time a decision was made,” Nasdaq CXC said in its original notice.