(April 4 – 12:55 ET) – The Toronto Stock Exchange is separating its market regulation function from its for-profit business operations. TSE Regulation Services will be created as a separate division of TSE Inc.
“Market regulation—ensuring a fair and well regulated market—is critical to the reputation and credibility of the TSE market,” says Barbara Stymiest, president and CEO of the Toronto Stock Exchange. “With demutualization, we recognize that establishing a separate regulation division of the TSE will help to reassure our customers that regulatory services will continue to be provided without conflict of interest and in a fair and unbiased manner.”
TSE RS will provide regulation services for the TSE market, as well as alternative trading systems (ATSs) that choose to contract for services. ATSs are expected to commence operations in Canada later this year when the Canadian securities commissions introduce a new regulatory regime for ATSs.
TSE RS will operate on a cost recovery basis and its costs and revenues will be segregated from those of the for-profit arm of TSE Inc. In the near future, Participating Organizations will be charged for regulatory services separately and the revenue for these services will be reported separately. Trading fees will be adjusted to reflect the change and charged separately.
TSE RS is independent and structurally separate from the for-profit business operations of TSE Inc. Although the Board of Directors of TSE Inc. has ultimate corporate authority over TSE RS, a Regulation Committee of the Board oversees TSE RS. To reflect the broader investment community, the majority of the members of the Committee will be directors who are not associated with a Participating Organization; other members may be non-directors drawn from Participating Organizations.
The new organization is comprised of five departments responsible for different aspects of market regulation: Corporate Finance Services; Market Surveillance; Investigations & Enforcement; Regulatory & Market Policy; Mining Services.
Concerns have been raised about potential conflicts of interest in the TSE Inc.’s regulation of the market as a for-profit company in a competitive environment. The effective management of conflicts is the rationale for the establishment of TSE RS. Within TSE RS, potential conflicts of interest will be managed through internal procedural restrictions, says the TSE. Regulatory information is classified as confidential and “firewall” policies and procedures have been implemented to ensure that regulatory information is not shared inappropriately with the business side of TSE Inc. or any other market participant.
-IE Staff