Market Regulation Services Inc. has applied to be recognized as a self-regulatory organization in Alberta, B.C., Manitoba, Ontario and Québec.

RS Inc. will operate as a regulatory services provider and will administer and enforce trading rules for the marketplaces that retain its services. The recognizing regulators are publishing the RS application for comment.

Following the comment process and resolution of all outstanding issues, each regulator expects to issue an order recognizing RS with terms and conditions based on the recognition criteria.

The exchanges that contract with RS will adopt the Universal Market Integrity Rules and RS will also adopt the UMIRs to govern the activities of ATSs that contract with it. The regulators will establish an oversight program for RS under a Memorandum of Understanding that includes a protocol for the joint review and approval of rules, policies and other similar instruments, the filing of significant changes to RSÕs operations, and the performance of examinations of RSÕs regulation services.

Initially, both the TSE and IDA would own 50% of RS Inc. This initial ownership structure could evolve with the addition of other marketplaces if and when they reach certain levels of Canadian equity market share.
Corporate governance rules are also proposed in order to ensure the appointment of independent directors and other marketplacesÕ representatives on the initial RS board. The initial RS board will be
composed of 11 directors: five independent directors; five non-independent directors and the president of MRS.

Among the issuers, commentators are asked to consider are possible conflicts of interest with RS regulating markets it owns, and those with which it competes. It asks whether the proposed ownership structure and corporate governance rules avoid or adequately manage conflicts of interest related to
its status as a self-regulatory organization.

The proposal states that RS will allocate the cost of regulation market-by-market. The fees for ATSs that facilitate trading in securities listed on an exchange in Canada will be based on RSÕs cost of regulating
that exchange. The TSE will provide certain services to RS (such as information systems) based on cost plus mark-up of up to 15%. RS has agreed to provide a report on cost allocation by November 10, once it has finalized its budget.