CSA finalize requirements for provision of direct electronic access

4 juillet 2013

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The Canadian Securities Administrators today released final amendments to NI 23-103 Electronic Trading intended to impose requirements on participant dealers that provide direct electronic access (DEA). Proposed amendments were initially released in October 2012, and the final version of the amendments take into account comments received from stakeholders.

Under the amendments, only a participant dealer may provide DEA, and DEA may not be provided to a client that is acting and registered as a dealer with a securities regulatory authority. In clarifying the type of entities that are excluded from DEA access, the CSA state that the exclusion extends to mutual fund dealers, scholarship plan dealers, exempt market dealers and restricted dealers.

The amendments also require that, before providing DEA, a participant dealer must (i) establish, maintain and apply appropriate standards designed to manage associated risks; (ii) enter into written agreements with DEA clients; and (iii) satisfy itself that clients have reasonable knowledge of applicable marketplace and regulatory requirements and the dealer's standards. Further, on providing DEA, participant dealers must ensure that clients have unique DEA client identifiers. DEA clients may also generally only trade for their own accounts.

According to the CSA, a consistent framework for the offering and use of DEA "reduces the risk of arbitrage among participant dealers providing DEA and also among marketplaces that have differing DEA standards or requirements." As the final amendments are considered substantially similar to the initial proposals, no further comment period is required. Assuming ministerial approvals are obtained, the amendments are set to come into force on March 1, 2014.

The Investment Industry Regulatory Organization of Canada today also announced amendments to UMIR and Dealer Member Rules to complement the CSA amendments. Specifically, the UMIR amendments are intended to address the other identified types of electronic access to marketplaces provided  to third parties, such as in respect of routing arrangements and order execution services. IIROC also issued guidance to provide examples relating to the requirements for order identification and designation and to highlight specific changes respecting order execution services, direct access and routing arrangements. For more information, see IIROC Notices 13-0184 and 13-0185.

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