Regulatory reforms designed to allow Canadian trading venues to guard against the loss of order flow in inter-listed stocks to U.S. venues by matching U.S. markets on minimum trading increments have been approved.
In late 2024, the Canadian Investment Regulatory Organization (CIRO) proposed changes to the trading rules to allow the self-regulatory organization (SRO) to set minimum trading increments for stocks that are inter-listed in the U.S. that differ from the minimums that apply to domestic stocks. Now, the Canadian Securities Administrators (CSA) have approved those changes.
The reforms were proposed in the wake of changes that were adopted by the U.S. Securities and Exchange Commission (SEC) — moving to sub-penny trading increments for stocks priced at more than US$1/share — in an effort to reduce trading costs and improve market quality.
The SEC’s move gave rise to concerns that Canadian trading venues would lose market share in trading inter-listed stocks if Canada didn’t follow suit on lower minimum increments. So, CIRO proposed trading rule changes that would enable it to match the requirements that apply in the U.S. markets on an ongoing (semi-annual) basis.
CIRO’s consultation on the proposals found that the industry firms and trade groups that provided feedback on the proposals were “generally supportive” of the SRO’s effort to align with U.S. markets, “and agreed that a failure to harmonize could result in negative impacts to the Canadian market.”
In response to some of the feedback — which suggested that regulators consider lowering trading increments for domestic stocks too — CIRO said that would only happen after further analysis, including a review of how a move to sub-penny increments works for inter-listed stocks.
“Any future proposals to apply narrower trading increments to all Canadian-listed securities would only be considered after an evaluation of the outcomes of the amendments,” the SRO said in a notice detailing the results of the consultation.
The SEC’s reforms were supposed to take effect on Nov. 3 of this year, but were later deferred until next year. The effective date for the CIRO reforms will match the U.S. compliance date, taking effect Nov. 2, 2026.
Guidance on implementation will be published before the changes take effect.