Ontario’s Capital Market Tribunal will hold a hearing next week to consider a proposed settlement between the Ontario Securities Commission (OSC) and alternative trading system (ATS), Liquidnet Canada Inc., amid allegations that it breached securities rules by failing to implement adequate controls to protect the confidentiality of trade and order information on its trading facilities.
The tribunal scheduled a hearing for April 15 to determine whether to approve a proposed settlement to address allegations that the firm didn’t have adequate controls to protect its participants’ confidential order and trade information.
In its application for enforcement proceedings, the OSC alleged that in 2023, Liquidnet discovered that trading information on its fixed-income ATS was visible to certain employees of its foreign affiliates.
In response, the firm voluntarily suspended trading on the system so that it could fix the issue, and it reported the incident to the OSC — but the regulator alleged that it didn’t fully disclose the reason for the system shutdown.
“[Liquidnet’s] communications to the commission in fall 2023 were not as forthright as they could have been, and [the firm] ought to have advised the commission of the visibility issue earlier than it did,” it said.
Additionally, Liquidnet later (in 2024) discovered that trade information on its equities ATS was also exposed to its affiliates.
It’s not clear whether anyone did access the information, the filing said — however, it stressed the importance of protecting the confidentiality of trade information in any case.
“When marketplaces, including alternative trading systems, permit access to confidential participant order or trade information without consent, they undermine investor confidence and the fairness and efficiency of our markets,” the regulator said.
By failing to implement proper controls, and not having adequate oversight of its controls to ensure that safeguards were in place, the OSC alleged that the firm breached securities rules.
The details of any sanctions against the firm as a result of these alleged breaches will only be revealed if the settlement is approved by the tribunal.