Source: http://www.osc.gov.on.ca/en/SecuritiesLaw_rule_20120614_21-101_amendments.htm
Timestamp: 2018-02-24 14:20:15
Document Index: 401073052

Matched Legal Cases: ['art 1', 'art 3', 'art 3', 'art 3', 'ART 3', 'art 4', 'ART 4', 'art 5', 'ART 5', 'art 6', 'art 7', 'art 10', 'ART 10', 'art 11', 'art 3', 'art 12', 'ART 12', 'art 13', 'ART 13', 'art 14', 'art 1', 'art 1', 'art 2', 'art 2', 'art 3', 'art 3', 'art 4', 'art 4', 'art 5', 'art 5', 'art 6', 'art 6', 'art 7', 'art 7', 'art 8', 'art 8', 'art 9', 'art 9', 'art 10', 'art 10', 'art 11', 'art 12', 'art 11', 'art 12', 'art 13', 'art 13', 'art 14', 'art 14', 'art 15', 'art 15', 'art 16', 'art 16', 'art 17', 'art 17', 'art 18', 'art 18', 'art 2', 'art 3', 'art 4', 'art 5', 'art 6', 'ART 6', 'art 4', 'art 7', 'ART 7', 'art 6', 'art 8', 'ART 8', 'art 9', 'art 10', 'art 12', 'ART 12', 'art 13', 'ART 14', 'art 15', 'art 16']

2. Part 1 is amended by
(a) adding the following definitions in section 1.1:
"private enterprise" means a private enterprise as defined in Part 3 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
"publicly accountable enterprise" means a publicly accountable enterprise as defined in Part 3 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;;
(b) replacing the definition of "alternative trading system" in section 1.1 with the following:
"alternative trading system",
(b) in Ontario has the meaning set out in subsection 1(1) of the Securities Act (Ontario);;
(c) adding "or municipal body"after "municipal corporation" in paragraph (b) of the definition of "government debt security"in section 1.1;
(d) replacing paragraph (c) of the definition of "government debt security" in section 1.1 with the following:
(c) a debt security issued or guaranteed by a crown corporation or public body,;
(e) replacing the definition of "marketplace" in section 1.1 with the following:
(a) in every jurisdiction other than Ontario, means
(i) an exchange,
(ii) a quotation and trade reporting system,
(iii) a person or company not included in clause (i) or (ii) that
(A) constitutes, maintains or provides a market or facility for bringing together buyers and sellers of securities,
(B) brings together the orders for securities of multiple buyers and sellers, and
(C) uses established, non-discretionary methods under which the orders interact with each other, and the buyers and sellers entering the orders agree to the terms of a trade, or
(iv) a dealer that executes a trade of an exchange-traded security outside of a marketplace, but does not include an inter-dealer bond broker; and
(f) replacing paragraph (a) of the definition of "recognized exchange" in section 1.1 with the following:
(a) in Ontario, a recognized exchange as defined in subsection 1(1) of the Securities Act (Ontario),;
(g) replacing the definition of "recognized quotation and trade reporting system" in section 1.1 with the following:
"recognized quotation and trade reporting system" means
(a) in every jurisdiction other than British Columbia, Ontario and Québec, a quotation and trade reporting system recognized by the securities regulatory authority under securities legislation to carry on business as a quotation and trade reporting system,
(b) in British Columbia, a quotation and trade reporting system recognized by the securities regulatory authority under securities legislation as a quotation and trade reporting system or as an exchange,
(b.1) in Ontario, a recognized quotation and trade reporting system as defined in subsection 1(1) of the Securities Act (Ontario), and
(c) in Québec, a quotation and trade reporting system recognized by the securities regulatory authority under securities or derivatives legislation as an exchange or a self-regulatory organization;; and
(h) adding the following:
1.5 Interpretation -- NI 23-101 -- Terms defined or interpreted in NI 23-101 and used in this Instrument have the respective meanings ascribed to them in NI 23-101..
3. Part 3 is replaced with the following:
PART 3 MARKETPLACE INFORMATION
3.1 Initial Filing of Information
(1) A person or company must file as part of its application for recognition as an exchange or a quotation and trade reporting system Form 21-101F1.
(2) A person or company must not carry on business as an ATS unless it has filed Form 21-101F2 at least 45 days before the ATS begins to carry on business as an ATS.
3.2 Change in Information
(1) Subject to subsection (2), a marketplace must not implement a significant change to a matter set out in Form 21-101F1 or in Form 21-101F2 unless the marketplace has filed an amendment to the information provided in Form 21-101F1 or in Form 21-101F2 in the manner set out in the Form at least 45 days before implementing the change.
(2) A marketplace must file an amendment to the information provided in Exhibit L -- Fees of Form 21-101F1 or Exhibit L -- Fees of Form 21-101F2, as applicable, at least seven business days before implementing a change to the information provided in Exhibit L -- Fees.
(3) For any change involving a matter set out in Form 21-101 F1 or Form 21-101F2 other than a change referred to in subsection (1) or (2), a marketplace must file an amendment to the information provided in the Form by the earlier of
(a) the close of business on the 10th day after the end of the month in which the change was made, and
(b) if applicable, the time the marketplace discloses the change publicly.
A marketplace must file Form 21-101F3 within 30 days after the end of each calendar quarter during any part of which the marketplace has carried on business.
3.4 Ceasing to Carry on Business as an ATS
(1) An ATS that intends to cease carrying on business as an ATS must file a report on Form 21-101F4 at least 30 days before ceasing to carry on that business.
(2) An ATS that involuntarily ceases to carry on business as an ATS must file a report on Form 21-101F4 as soon as practicable after it ceases to carry on that business.
3.5 Forms Filed in Electronic Form
A person or company that is required to file a form or exhibit under this Instrument must file that form or exhibit in electronic form..
4. Part 4 is replaced with the following:
PART 4 MARKETPLACE FILING OF AUDITED FINANCIAL STATEMENTS
4.1 Filing of Initial Audited Financial Statements
(1) A person or company must file as part of its application for recognition as an exchange or a quotation and trade reporting system, together with Form 21-101F1, audited financial statements for its latest financial year that
(a) are prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises or IFRS,
(b) include notes to the financial statements that identify the accounting principles used to prepare the financial statements, and
(c) are audited in accordance with Canadian GAAS or International Standards on Auditing and are accompanied by an auditor's report.
(2) A person or company must not carry on business as an ATS unless it has filed, together with Form 21-101F2, audited financial statements for its latest financial year.
4.2 Filing of Annual Audited Financial Statements
(1) A recognized exchange and a recognized quotation and trade reporting system must file annual audited financial statements within 90 days after the end of its financial year in accordance with the requirements outlined in subsection 4.1(1).
(2) An ATS must file annual audited financial statements..
5.Part 5 is amended by
(a) replacing the portion before section 5.2 with the following:
PART 5 MARKETPLACE REQUIREMENTS
(1) A marketplace must not unreasonably prohibit, condition or limit access by a person or company to services offered by it.
(a) establish written standards for granting access to each of its services; and
(i) each grant of access including the reasons for granting access to an applicant, and
(3) A marketplace must not
(a) permit unreasonable discrimination among clients, issuers and marketplace participants; or
(b) impose any burden on competition that is not reasonably necessary and appropriate.;
(b) replacing "recognized exchange or recognized quotation and trade reporting system" in section 5.2 with "marketplace";
(c) replacing "member or user" in section 5.2 with "marketplace participant";
(d) repealing subsection 5.3(2);
(e) repealing section 5.6; and
(f) adding the following:
5.7 Fair and Orderly Markets
A marketplace must take all reasonable steps to ensure that its operations do not interfere with fair and orderly markets.
5.8 Discriminatory Terms
A marketplace must not impose terms that have the effect of discriminating between orders that are routed to the marketplace and orders that are entered on that marketplace for execution.
5.9 Risk Disclosure for Trades in Foreign Exchange-Traded Securities
(1) A marketplace that is trading foreign exchange-traded securities must provide each marketplace participant with disclosure in substantially the following words:
"The securities traded by or through the marketplace are not listed on an exchange in Canada and may not be securities of a reporting issuer in Canada. As a result, there is no assurance that information concerning the issuer is available or, if the information is available, that it meets Canadian disclosure requirements."
(2) Before the first order for a foreign exchange-traded security is entered onto the marketplace by a marketplace participant, the marketplace must obtain an acknowledgement from the marketplace participant that the marketplace participant has received the disclosure required in subsection (1).
5.10 Confidential Treatment of Trading Information
(1) A marketplace must not release a marketplace participant's order or trade information to a person or company other than the marketplace participant, a securities regulatory authority or a regulation services provider unless
(a) the marketplace participant has consented in writing to the release of the information;
(b) the release of the information is required by this Instrument or under applicable law; or
(c) the information has been publicly disclosed by another person or company, and the disclosure was lawful.
(2) A marketplace must not carry on business unless it has implemented reasonable safeguards and procedures to protect a marketplace participant's order or trade information, including
(a) limiting access to order or trade information of marketplace participants to
(i) employees of the marketplace, or
(ii) persons or companies retained by the marketplace to operate the system or to be responsible for compliance by the marketplace with securities legislation; and
(b) implementing standards controlling trading by employees of the marketplace for their own accounts.
(3) A marketplace must not carry on business as a marketplace unless it has implemented adequate oversight procedures to ensure that the safeguards and procedures established under subsection (2) are followed.
5.11 Management of Conflicts of Interest
A marketplace must establish, maintain and ensure compliance with policies and procedures that identify and manage any conflicts of interest arising from the operation of the marketplace or the services it provides.
5.12 Outsourcing
If a marketplace outsources any of its key services or systems to a service provider, which includes affiliates or associates of the marketplace, the marketplace must:
(a) establish and maintain policies and procedures for the selection of service providers to which key services and systems may be outsourced and for the evaluation and approval of such outsourcing arrangements,
(b) identify any conflicts of interest between the marketplace and the service provider to which key services and systems are outsourced, and establish and maintain policies and procedures to mitigate and manage such conflicts of interest,
(c) enter into a contract with the service provider to which key services and systems are outsourced that is appropriate for the materiality and nature of the outsourced activities and that provides for adequate termination procedures,
(d) maintain access to the books and records of the service providers relating to the outsourced activities,
(e) ensure that the securities regulatory authorities have access to all data, information and systems maintained by the service provider on behalf of the marketplace, for the purposes of determining the marketplace's compliance with securities legislation,
(f) take appropriate measures to determine that service providers to which key services or systems are outsourced establish, maintain and periodically test an appropriate business continuity plan, including a disaster recovery plan,
(g) take appropriate measures to ensure that the service providers protect the marketplace participants' proprietary, order, trade or any other confidential information, and
(h) establish processes and procedures to regularly review the performance of the service provider under any such outsourcing arrangement..
7. Part 6 is amended by
(a) repealing sections 6.4 to 6.6;
(b) replacing section 6.7 with the following:
6.7 Notification of Threshold
(1) An ATS must notify the securities regulatory authority in writing if,
(a) during at least two of the preceding three months of operation, the total dollar value of the trading volume on the ATS for a month in any type of security is equal to or greater than 10 percent of the total dollar value of the trading volume for the month in that type of security on all marketplaces in Canada;
(b) during at least two of the preceding three months of operation, the total trading volume on the ATS for a month in any type of security is equal to or greater than 10 percent of the total trading volume for the month in that type of security on all marketplaces in Canada; or
(c) during at least two of the preceding three months of operation, the number of trades on the ATS for a month in any type of security is equal to or greater than 10 percent of the number of trades for the month in that type of security on all marketplaces in Canada.
(2) An ATS must provide the notice referred to in subsection (1) within 30 days after the threshold referred to in subsection (1) is met or exceeded.; and
(c) repealing sections 6.8, 6.10, 6.12 and 6.13.
8. Part 7 is amended by
(a) replacing "displayed on" with "displayed by" in subsection 7.1(1);
(b) replacing "of the marketplace" with "of the marketplace and if the orders posted on the marketplace meet the size threshold set by a regulation services provider" in subsection 7.1(2);
(c) replacing "displayed on" with "displayed by" in subsection 7.3(1);
(d) replacing "of the marketplace" with "of the marketplace and if the orders posted on the marketplace meet the size threshold set by a regulation services provider" in subsection 7.3(2); and
(e) replacing "A marketplace" with "A marketplace that is subject to this Part" in section 7.6.
(a) replacing "displayed on" with "displayed by" in subsection 8.1(1);
(b) replacing "displayed on" with "displayed by" in subsection 8.2(1);
(c) repealing section 8.5; and
(d) replacing "2012" with "2015" in section 8.6.
10. Part 10 is amended by
(a) replacing the portion before section 10.3 with the following:
PART 10 TRANSPARENCY OF MARKETPLACE OPERATIONS
10.1 Disclosure by Marketplaces
A marketplace must publicly disclose on its website information reasonably necessary to enable a person or company to understand the marketplace's operations or services it provides, including but not limited to information related to:
(a) all fees, including any listing, trading, data, co-location and routing fees charged by the marketplace, an affiliate or by a party to which services have directly or indirectly been outsourced or which directly or indirectly provides those services;
(b) how orders are entered, interact and execute;
(c) all order types;
(d) access requirements;
(e) the policies and procedures that identify and manage any conflicts of interest arising from the operation of the marketplace or the services it provides;
(f) any referral arrangements between the marketplace and service providers;
(g) where routing is offered, how routing decisions are made; and
(h) when indications of interest are disseminated, the information disseminated and the types of recipients of such indications of interest.; and
(b) repealing section 10.3.
11. Part 11 is amended by
(a) replacing paragraph 11.2(1)(c) with the following:
(i) the order identifier assigned to the order by the marketplace,
(ii) the marketplace participant identifier assigned to the marketplace participant transmitting the order,
(iii) the identifier assigned to the marketplace where the order is received or originated,
(iv) each unique client identifier assigned to a client accessing the marketplace using direct electronic access,
(v) the type, issuer, class, series and symbol of the security,
(vi) the number of securities to which the order applies,
(vii) the strike date and strike price, if applicable,
(viii) whether the order is a buy or sell order,
(ix) whether the order is a short sale order, if applicable,
(x) whether the order is a market order, limit order or other type of order, and if the order is not a market order, the price at which the order is to trade,
(xii) whether the account is a retail, wholesale, employee, proprietary or any other type of account,
(xiii) the date and time the order expires,
(xiv) whether the order is an intentional cross,
(xv) whether the order is a jitney and if so, the identifier of the underlying broker,
(xvi) the currency of the order,
(xvii) whether the order is routed to another marketplace for execution, and the date, time and name of the marketplace to which the order was routed, and
(xviii) whether the order is a directed-action order, and whether the marketplace marked the order as a directed-action order or received the order marked as a directed-action order, and;
(b) replacing subparagraph 11.2(1)(d)(ix) with the following:
(ix) the marketplace trading fee for each trade, and
(x) each unique client identifier assigned to a client accessing the marketplace using direct electronic access.
(c) deleting "or 6.13" in subparagraph 11.3(1)(b);
(d) replacing "section 12.1" with "sections 12.1 and 12.4" in subparagraph 11.3(1)(c);
(e) replacing "6.10(2)" with "5.9(2)" in subparagraph 11.3(1)(e);
(f) replacing subparagraphs 11.3(2)(b) to (d) with the following:
(b) copies of all forms filed under Part 3; and
(c) in the case of an ATS, copies of all notices given under section 6.7.;
(g) repealing section 11.4; and
(h) deleting "with the clock used by a regulation services provider monitoring the activities of marketplaces, inter-dealer bond brokers or dealers trading those securities" in subsection 11.5(2).
12. Part 12 is amended by
(a) replacing the title with "PART 12 MARKETPLACE SYSTEMS AND BUSINESS CONTINUITY PLANNING";
(b) replacing paragraph 12.1(a) with the following:
(i) an adequate system of internal control over those systems; and
(ii) adequate information technology general controls, including without limitation, controls relating to information systems operations, information security, change management, problem management, network support and system software support;;
(c) replacing paragraph 12.1(b) with the following:
(ii) conduct capacity stress tests to determine the ability of those systems to process transactions in an accurate, timely and efficient manner; and;
(d) replacing "paragraph 12.1(a)" with "paragraph 12.1(a) and section 12.4" in subsection 12.2(1);
(e) replacing "Subsections" with "Paragraphs" in subsection 12.3(4); and
(1) A marketplace must develop and maintain reasonable business continuity plans, including disaster recovery plans.
(2) A marketplace must test its business continuity plans, including disaster recovery plans, on a reasonably frequent basis and, in any event, at least annually..
13. Part 13 is amended by
(a) replacing the title with "PART 13 CLEARING AND SETTLEMENT";
(b) replacing "through an ATS" with "on a marketplace" in subsection 13.1(1); and
(c) replacing "reported" with "reported to" in subsection 13.1(1).
14. Part 14 is amended by
(a) repealing subsection 14.1(2);
(b) adding the following after subsection 14.4(5):
(6) An information processor must file annual audited financial statements within 90 days after the end of its financial year that
(a) are prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, Canadian GAAP applicable to private enterprises or IFRS,
(7) An information processor must file its financial budget within 30 days after the start of a financial year.
(8) An information processor must file, within 30 days after the end of each calendar quarter, the process and criteria for the selection of government debt securities, as applicable, and designated corporate debt securities and the list of government debt securities, as applicable, and designated corporate debt securities.
(9) An information processor must file, within 30 days after the end of each calendar year, the process to communicate the designated securities to the marketplaces, inter-dealer bond brokers and dealers providing the information required by the Instrument, including where the list of designated securities can be found.;
(c) replacing paragraph 14.5(a) with the following:
(i) an adequate system of internal controls over its critical systems; and
(ii) adequate information technology general controls, including, without limitation, controls relating to information systems operations, information security, change management, problem management, network support, and system software support;;
(d) adding "and" at the end of subparagraph 14.5(b)(i);
(e) deleting "and" at the end of subparagraph 14.5(b)(ii);
(f) repealing subparagraph 14.5.(b)(iii);
(g) adding "and section 14.6" after "paragraph (a)" in paragraph 14.5(c); and
(1) An information processor must develop and maintain reasonable business continuity plans, including disaster recovery plans.
(2) An information processor must test its business continuity plans, including disaster recovery plans, on a reasonably frequent basis and, in any event, at least annually.
14.7 Confidential Treatment of Trading Information
An information processor must not release order and trade information to a person or company other than the marketplace, inter-dealer bond broker or dealer that provided this information in accordance with this Instrument, or other than a securities regulatory authority, unless:
(a) the release of that information is required by this Instrument or under applicable law; or
(b) the information processor received prior approval from the securities regulatory authority.
14.8 Transparency of Operations of an Information Processor
An information processor must publicly disclose on its website information reasonably necessary to enable a person or company to understand the information processor's operations or services it provides including, but not limited to:
(a) all fees charged by the information processor for the consolidated data;
(b) a description of the process and criteria for the selection of government debt securities, as applicable, and designated corporate debt securities and the list of government debt securities, as applicable, and designated corporate debt securities;
(c) access requirements; and
(d) the policies and procedures to manage conflicts of interest that may arise in the operation of the information processor.
15. Form 21-101F1 -- Information Statement Exchange or Quotation and Trade Reporting system is replaced with the following:
FORM 21-101F1
EXCHANGE OR QUOTATION AND TRADE REPORTING SYSTEM
Full name of exchange or quotation and trade reporting system:
Name(s) under which business is conducted, or name of market or facility, if different from item 1:
If this filing makes a name change on behalf of the exchange or quotation and trade reporting system in respect of the name set out in item 1 or item 2, enter the previous name and the new name:
Market Regulation is being conducted by:
[ ] the quotation and trade reporting system
[ ] regulation services provider other than the filer (see Exhibit M)
File all Exhibits with the Filing. For each Exhibit, include the name of the exchange or quotation and trade reporting system, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit.
Except as provided below, if the filer, recognized exchange or recognized quotation and trade reporting system files an amendment to the information provided in its Filing and the information relates to an Exhibit filed with the Filing or a subsequent amendment, the filer, recognized exchange or recognized quotation and trade reporting system, must, in order to comply with subsections 3.2(1), 3.2(2) or 3.2(3) of National Instrument 21-101, provide a description of the change, the expected date of the implementation of the change, and file a complete and updated Exhibit. The filer must provide a clean and a blacklined version showing changes from the previous filing.
If the filer, recognized exchange or recognized quotation and trade reporting system has otherwise filed the information required by the previous paragraph pursuant to section 5.5 of National Instrument 21-101, it is not required to file the information again as an amendment to an Exhibit. However, if supplementary material relating to a filed rule is contained in an Exhibit, an amendment to the Exhibit must also be filed.
2. Except where the exchange or quotation and trade reporting system is a sole proprietorship, indicate the following:
3. Statute under which exchange or quotation and trade reporting system was organized.
4. Provide the policies and procedures to address potential conflicts of interest arising from the operation of the marketplace or the services it provides, including those related to the commercial interest of the marketplace, the interests of its owners and its operators, the responsibilities and sound functioning of the marketplace, and those between the operations of the marketplace and its regulatory responsibilities.
A list of the registered or beneficial holders of securities of, partnership interests in, or other ownership interests in, the exchange or recognized quotation and trade reporting system. For each of the persons listed in the Exhibit, please provide the following:
5. Whether the person has control (as interpreted in subsection 1.3(2) of National Instrument 21-101 Marketplace Operation).
In the case of an exchange or quotation and trade reporting system that is publicly traded, if the exchange or quotation and trade reporting system is a corporation, please only provide a list of each shareholder that directly owns five percent or more of a class of a voting security of the exchange or quotation and trade reporting system.
1. For each affiliated entity of the exchange or quotation and trade reporting system provide the name, head office address and describe the principal business of the affiliate.
2. For each affiliated entity of the exchange or quotation and trade reporting system
(i) to which the exchange or quotation and trade reporting system has outsourced any of its key services or systems affecting the market or facility described in Exhibit E -- Operations of the Marketplace, including order entry, trading, execution, routing and data, or
(ii) with which the exchange or quotation and trade reporting system has any other material business relationship, including loans, cross-guarantees, etc.,
3. A description of the nature and extent of the contractual and other agreements with the exchange and quotation and trade reporting system, and the roles and responsibilities of the affiliate under the arrangement.
6. For the latest financial year of the affiliated entity, financial statements, which may be unaudited, prepared in accordance with:
a. Canadian GAAP applicable to publicly accountable enterprises; or
b. Canadian GAAP applicable to private enterprises; or
c. IFRS.
Where the affiliated entity is incorporated or organized under the laws of a foreign jurisdiction, such financial statements may also be prepared in accordance with:
a. U.S. GAAP; or
b. accounting principles of a designated foreign jurisdiction as defined under National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards.
Exhibit E -- Operations of the Marketplace
Describe in detail the manner of operation of the market or facility and its associated functions. This should include, but not be limited to, a description of the following:
7. Description of how orders interact, including, but not limited to, the priority of execution for all order types.
8. Description of order routing procedures.
9. Description of order and trade reporting procedures.
10. Description of procedures for clearance and settlement of transactions.
Where the exchange or quotation and trade reporting system has outsourced the operation of key services or systems affecting the market or facility described in Exhibit E -- Operations of the Marketplace to an arms-length third party, including any function associated with the routing, trading, execution, data, clearing and settlement and, if applicable, surveillance, provide the following information:
1. Name and address of person or company to which the function has been outsourced.
2. A description of the nature and extent of the contractual or other agreement with the exchange or quotation and trade reporting system and the roles and responsibilities of the arms-length party under the arrangement.
For each of the systems that support order entry, order routing, execution, trade reporting, trade comparison, data feed, market surveillance, and trade clearing, describe:
Exhibit H -- Custody of Assets
1. If the exchange or quotation and trade reporting system proposes to hold funds or securities of a marketplace participant on a regular basis, a description of the controls that will be implemented to ensure the safety of the funds or securities.
2. If any other person or company, other than the exchange or quotation and trade reporting system, will hold or safeguard funds or securities of a marketplace participant on a regular basis, provide the name of the person or company and a description of the controls that will be implemented to ensure the safety of the funds or securities.
Exhibit I -- Securities
1. List the types of securities listed on the exchange or quoted on the quotation and trade reporting system. If this is an initial filing, list the types of securities the Filer expects to list or quote.
2. List the types of any other securities that are traded on the marketplace or quoted on the quotation and trade reporting system, indicating the exchange(s) on which such securities are listed. If this is an initial filing, list the types of securities the Filer expects to trade.
Exhibit J -- Access to Services
1. A complete set of all forms, agreements or other materials pertaining to access to the services of the marketplace described in Exhibit E.4, including trading on the exchange or quotation and trade reporting system.
2. Describe the classes of marketplace participants.
3. Describe the exchange or quotation and trade reporting service's criteria for access to the services of the marketplace.
5. Describe conditions under which marketplace participants may be subject to suspension or termination with regard to access to the services of the exchange or quotation and trade reporting system.
7. Describe the exchange or quotation and trade reporting system's arrangements for permitting clients of marketplace participants to have access to the marketplace. Provide a copy of any agreements or documentation relating to these arrangements.
Exhibit K -- Marketplace Participants
3. Describe the type of trading activities engaged in by the marketplace participant (e.g., agency trading, proprietary trading, registered trading, market making).
5. Provide a list of all persons or entities that were denied or limited access to the marketplace, indicating for each:
(ii) the date the marketplace took such action;
Exhibit L -- Fees
A description of the fee model and all fees charged by the marketplace, or by a party to which services have been directly or indirectly outsourced, including, but not limited to, fees relating to connecting to the market or facility, access, data, regulation (if applicable), trading, routing, and co-location, how such fees are set, and any fee rebates or discounts and how the rebates and discounts are set.
Exhibit M -- Regulation
[ ] the exchange or QTRS
1. Provide a description of the regulation performed by the exchange or QTRS, including the structure of the department performing regulation, how the department is funded, policies and procedures in place to ensure confidentiality and the management of conflicts of interest, and policies and procedures relating to conducting an investigation.
2. If more than one entity is performing regulation services for a type of security and the filer is conducting market regulation for itself and its members, provide the contract between the filer and the regulation services provider providing for co-ordinated monitoring and enforcement under section 7.5 of National Instrument 23-101 Trading Rules.
[ ] a regulation services provider other than the filer (provide a copy of the contract between the filer and the regulation services provider.)
Exhibit N -- Acknowledgement
The form of acknowledgement required by subsection 5.9(2) of National Instrument 21-101.
CERTIFICATE OF EXCHANGE OR QUOTATION AND TRADE REPORTING SYSTEM
DATED at __________________this _________ day of ________________ 20____
(Name of exchange or quotation and trade reporting system)
16. Form 21-101F2 -- Initial Operation Report Alternative Trading System is replaced with the following:
Full name of alternative trading system:
If this filing makes a name change on behalf of the alternative trading system in respect of the name set out in Item 1 or Item 2, enter the previous name and the new name.
The ATS is
[ ] a member of _____________________ (name of the recognized self-regulatory entity)
[ ] a registered dealer
If this is an initial operation report, the date the alternative trading system expects to commence operation:
The ATS has contracted with [regulation services provider] to perform market regulation for the ATS and its subscribers.
File all Exhibits with the Initial Operation Report. For each Exhibit, include the name of the ATS, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit.
(i) to which the ATS has outsourced any of its key services or systems affecting the market or facility described in Exhibit E -- Operations of the Marketplace, including order entry, trading, execution, routing and data, or
(ii) with which the ATS has any other material business relationship, including loans, cross-guarantees, etc.
3. A description of the nature and extent of the contractual and other agreements with the ATS and the roles and responsibilities of the affiliate under the arrangement.
Describe in detail the manner of operation of the market and its associated functions. This should include, but not be limited to, a description of the following:
Where the ATS has outsourced the operation of key services or systems affecting the market or facility described in Exhibit E -- Operations of the Marketplace to an arms-length third party, including any function associated with the routing, trading, execution, clearing and settlement, and co-location, provide the following information:
List the types of securities that are traded on the ATS, indicating the exchange(s) on which such securities are listed. If this is an initial filing, the types of securities the ATS expects to trade.
1. A complete set of all forms, agreements or other materials pertaining to access to the services of the marketplace described in Exhibit E.4, including trading on the ATS.
2. Describe the classes of marketplace participants (i.e. dealer, institution, or retail).
3. Describe the ATS's criteria for access to the services of the marketplace.
7. Describe the ATS's arrangements for permitting clients of marketplace participants to have access to the marketplace. Provide a copy of any agreements or documentation relating to these arrangements.
A description of the fee model and all fees charged by the marketplace, or by a party to which services have been directly or indirectly outsourced, including, but not limited to, fees relating to connecting to the market or facility, access, data, regulation (if applicable), trading, routing, and co-location, how such fees are set and any fee rebates or discounts and how the rebates and discounts are set.
The ATS has contracted with regulation services provider __________________ to perform market regulation for ATS and its subscribers. Provide a copy of the contract between the filer and the regulation services provider.
The form of acknowledgement required by subsections 5.9(2) and 6.11(2) of National Instrument 21-101.
DATED at _____________this _______ day of _____________ 20___
(Official capacity -- please type or print).
17. Form 21-101F3 Quarterly Report of Alternative Trading System Activities is replaced with the following:
FORM 21-101F3
QUARTERLY REPORT OF MARKETPLACE ACTIVITIES
A. General Marketplace Information
A. Full name of marketplace (if sole proprietor, last, first and middle name):
C. Marketplace main street address:
4. Attach as Exhibit A a current list of all marketplace participants at the end of the period covered by this report, identifying those marketplace participants that are using the marketplace's co-location services, if any. For each marketplace participant, indicate the number of trader IDs that may access the marketplace.
5. Attach as Exhibit B a list of all marketplace participants granted, denied or limited access to the marketplace during the period covered by this report, indicating for each marketplace participant: (a) whether they were granted, denied or limited access; (b) the date the marketplace took such action; (c) the effective date of such action; and (d) the nature of any denial or limitation of access.
6. A list of all amendments in the information in Form 21-101F1 or 21-101F2 that were filed with the Canadian securities regulatory authorities and implemented during the period covered by the report. The list must include a brief description of each amendment, the date filed and the date implemented.
7. A list of all amendments in the information in Form 21-101F1 or 21-101F2 that have been filed with the Canadian securities regulatory authorities but not implemented as of the end of the period covered by the report. The list must include a brief description of each amendment, the date filed and the reason why it was not implemented.
8. Systems -- If any outages occurred at any time during the period for any system relating to trading activity, including trading, routing or data, provide the date, duration and reason for the outage.
B. Marketplace Activity Information
Section 1 -- Marketplaces Trading Exchange-Listed Securities
1. General trading activity -- For each type of security traded on the marketplace, provide the details (where appropriate) requested in the form set out in Chart 1. The information should be provided for transactions executed at the opening of the market, during regular trading hours, and after hours during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 1 -- General trading activity for marketplaces trading exchange-listed securities
1. Equity (includes preferred shares)
Foreign Exchange-Traded Securities
2. Crosses -- Provide the details (where appropriate) requested in the form set out in Chart 2 below for each type of cross executed on the marketplace for trades executed at the opening of the market, during regular trading and after hours during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 2 -- Crosses
% Number of Trades
% of exchange-traded securities that are
1. Intentional Crosses{1}
2. Internal crosses
3. Other crosses
3. Order information -- Provide the details (where appropriate) requested in the form set out in Chart 3 below for each type of order in exchange traded securities executed on the marketplace for orders entered at the opening of the market, during regular trading and after hours during the quarter. Enter "none", "N/A" or "0" where appropriate.
Chart 3 -- Order information
% Orders Executed
% Orders Cancelled{2}
1. Anonymous{3}
3. Pegged Orders
4. Fully hidden
5. Separate dark facility of a transparent market
6. Partially hidden (reserve)
7. Total number of orders entered during the quarter
4. Trading by security -- Provide the details requested in the form set out in Chart 4 below for the 10 most traded securities on the marketplace (based on the volume of securities traded) for trades executed at the opening of the market, during regular trading and after hours during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 4 -- Most traded securities
[Name of Securities]
[Enter issuer, maturity and coupon]
5. Trading by marketplace participant -- Provide the details requested in the form set out in Chart 5 below for the top 10 marketplace participants (based on the volume of securities traded). The information should be provided for the total trading volume, including for trades executed at the opening of the market, during regular trading and after hours during the quarter. Enter "None", "N/A", or "0" where appropriate. Where a marketplace's marketplace participants are dealers and non-dealers, the marketplace should complete a separate chart for each.
Chart 5 -- Concentration of trading by marketplace participant
Marketplace Participant Name
Total Passive Volume
6. Routing activities -- Indicate the percentage of marketplace participants that used marketplace-owned or third-party or affiliated routing services during the reporting period. In addition, provide the information in Chart 6 below.
Chart 6 -- Routing of marketplace orders
Number of orders executed on the reporting marketplace
Number of orders routed to away marketplaces (list all marketplaces where orders were routed)
Number of orders that are marked and treated as Directed Action Orders (DAO)
7. Co-location -- Indicate the percentage of marketplace participants that are using the marketplace's co-location services, if any.
Section 2 -- Fixed Income Marketplaces
1. General trading activity -- Provide the details (where appropriate) requested in the form set out in Chart 7 below for each type of fixed income security traded on the marketplace for transactions executed during regular trading hours. Enter "None", "N/A", or "0" where appropriate.
Chart 7 -- Fixed income activity
2. Trading by security -- Provide the details requested in the form set out in Chart 8 below for the 10 most traded fixed income securities on the marketplace (based on the value of the volume traded) for trades executed during regular trading hours during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 8 -- Most traded fixed income securities
3. Trading by marketplace participant -- Provide the details requested in the form set out in Chart 9 below for the top 10 marketplace participants for trades executed during regular trading hours during the quarter. Enter "None", "N/A", or "0" where appropriate. If marketplace participants are dealers and non-dealer institutions, the marketplace should complete a separate chart for each.
Chart 9 -- Concentration of trading by marketplace participant
Section 3 -- Securities Lending Marketplaces
1. General lending activity -- Please provide details (where appropriate) requested in the form set out inChart 10 below for each type of securities loaned on the marketplace. Enter "None", "N/A" or "0" where appropriate.
Chart 10 -- Lending activity
Quantity of Securities Lent During the Quarter
Aggregate Value of Securities Lent During the Quarter
1. Corporate Equity Securities
1.1. Common Shares
1.2. Preferred Shares
2. Non-Corporate Equity Securities (e.g. trust units, partnership units, etc.) (please specify)
3. Government Debt Securities
4. Corporate Debt Securities
5. Other Fixed Income Securities (please specify)
2. Non-Corporate Equity Securities (e.g. trust units, partnership units, etc.)(please specify)
2. Trading by marketplace participant -- Provide the details requested in the form set out in Chart 11 and Chart 12 below for the top 10 borrowers and lenders based on their aggregate value of securities borrowed or loaned, respectively, during the quarter.
Chart 11 -- Concentration of activity by borrower
Aggregate Value of Securities Borrowed During the Quarter
Chart 12 -- Concentration of activity by lender
Aggregate Value of Securities Loaned During the Quarter
3. Lending activity by security -- Provide the details requested in the form set out in Chart 13 below for the 10 most loaned securities on the marketplace (based on the quantity of securities loaned during the quarter). Enter "None", "N/A" or "0" where appropriate.
Chart 13 -- Most loaned securities
[Name of Security]
3. Non-Corporate Equity Securities
4. Government Debt Securities
5. Corporate Debt Securities
6. Other Fixed Income Securities
Section 4 -- Derivatives Marketplaces in Quebec
1. General trading activity -- For each category of product traded on the marketplace, provide the details (where appropriate) requested in the form set out in Chart 14 below. For products other than options on ETFs and equity options, provide the details on a product-by-product basis in the appropriate category. Details for options on ETFs and equity options should be provided on an aggregate basis (one total for options on ETFs and one for options on equities). The information should be provided for transactions executed in the early session, during the regular session, and in the extended session during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 14 -- General trading activity
Open Interest (Number/End of Quarter)
1(a) Interest rate -- short term
1(b) Interest rate -- long term
7. Others, please specify
1(a) Interest rate -short term
2. Trades resulting from pre-negotiation discussions -- Provide the details (where appropriate) requested in the form set out in Chart 15 below by product and for each type of trade resulting from pre-negotiation discussions. For products other than options on ETFs and equity options, provide the details on a product-by-product basis in the appropriate category. Details for options on ETFs and equity options should be provided on an aggregate basis (one total for options on ETFs and one for options on equities). The information should be provided for trades executed in the early session, during the regular session and in the extended session during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 15 -Trades resulting from pre-negotiation discussions
B. Pre-arranged
D. Exchange for physical
E. Exchange for risk
F. Riskless basis cross
G. Others, please specify
3. Order information -- Provide the details (where appropriate) requested in the form set out in Chart 16 below by product and for each type of order in exchange traded contracts executed on the marketplace. For products other than options on ETFs and equity options, provide the details on a product-by-product basis in the appropriate category. Details for options on ETFs and equity options should be provided on an aggregate basis (one total for options on ETFs and one for options on equities).The information should be provided for orders entered in the early session, during the regular session and in the extended session during the quarter. Enter "none", "N/A" or "0" where appropriate.
Chart 16 -- Order information
6. Partially hidden (reserve, for example, iceberg orders)
4. Trading by product -- Provide the details requested in the form set out in Chart 17 below. For each product other than options on ETFs and equity options, list the most actively-traded contracts (by volume) on the marketplace that in the aggregate constitute at least 75% of the total volume for each product during the quarter. The list must include at least 3 contracts. For options on ETFs and equity options, list the 10 most actively traded classes by volume. Details for options on ETFs and equity options should be provided on an aggregate basis (one total for options on ETFs and one for options on equities). The information should be provided for trades executed in the early session, during the regular session and in the extended session during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 17 -- Most traded contracts
1. Name of products -- 3 most-traded contracts (or more as applicable)
4. Other listed options (specify for each) -- 3 most traded contracts (or more as applicable)
5. Concentration of trading by marketplace participant -- Provide the details requested in the form set out in Chart 18 below. For each product other than options on ETFs and equity options, list the top marketplace participants whose aggregate trading (by volume) constituted at least 75% of the total volume traded. The list must include at least 3 marketplace participants. For options on ETFs and equity options, provide the top 10 most active marketplace participants (by volume). The information should be provided on an aggregate basis (one total for options on ETFs and one for options on equities). The information should be provided for trades executed in the early session, during the regular session and in the extended session during the quarter. Enter "None", "N/A", or "0" where appropriate.
Chart 18 -- Concentration of trading by marketplace participant
Product Name (specify for each)
3.(more if necessary)
Other options (specify for each)
3. (more if necessary)
Indicate the percentage of marketplace participants that are using the marketplace's co-location services, if any.
C. Certificate of Marketplace
The undersigned certifies that the information given in this report relating to the marketplace is true and correct.
DATED at_________________this_____day of________________20___
(Name of Marketplace)
(Official capacity -- please type or print)"
18. Form 21-101F5 Initial Operation Report for Information Processor is replaced with the following:
FORM 21-101F5
INITIAL OPERATION REPORT FOR INFORMATION PROCESSOR
Full name of information processor:
If this filing makes a name change on behalf of the information processor in respect of the name set out in item 1 or item 2, enter the previous name and the new name:
10. List of all marketplaces, dealers or other parties for which the information processor is acting or for which it proposes to act as an information processor. For each marketplace, dealer or other party, provide a description of the function(s) which the information processor performs or proposes to perform.
11. List all types of securities for which information will be collected, processed, distributed or published by the information processor. For each such marketplace, dealer or other party, provide a list of all securities for which information with respect to quotations for, or transactions in, is or is proposed to be collected, processed, distributed or published.
File all Exhibits with the Initial Form. For each Exhibit, include the name of the information processor, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit.
If the information processor files an amendment to the information provided in its Initial Form, and the information relates to an Exhibit filed with the Initial Form or a subsequent amendment, the information processor must, in order to comply with sections 14.1 and 14.2 of National Instrument 21-101 provide a description of the change, the expected date of the implementation of the change, and file a complete and updated Exhibit. The information processor must provide a clean and a blacklined version showing changes from the previous filing.
2. Except where the information processor is a sole proprietorship, indicate the date and place where the information processor obtained its legal status (e.g., place of incorporation, place where partnership agreement was filed or where information processor was formed):
3. Statute under which the information processor was organized.
3. Provide a copy of the constating documents (including corporate by-laws), shareholder agreements, partnership agreements and other similar documents, and all subsequent documents.
4. Provide the policies and procedures which promote independence of the information processor from the marketplaces, inter-dealer bond brokers and dealers that provide data.
5. Provide the policies and procedures which address the potential conflicts of interest between the interests of the information processor and its owners, partners, directors and officers.
List any person or company who owns 10 percent or more of the information processor's outstanding shares or who, either directly or indirectly, through agreement or otherwise, in any other manner, may control or direct the management or policies of the information processor. Provide the full name and address of each such person and attach a copy of the agreement or, if there is none written, describe the agreement or basis through which such person exercises or may exercise such control or direction.
1. A list of the partners, directors, governors, and members of the board of directors and any standing committees of the board or persons performing similar functions who presently hold or have held their offices or positions during the previous year identifying those individuals with overall responsibility for the integrity and timeliness of data reported to and displayed by the system (the "System") of the information processor, indicating the following for each:
7. A list of the committees of the board, including their mandates.
8. A narrative or graphic description of the organizational structure of the information processor.
Exhibit D -- Staffing
A description of the personnel qualifications for each category of professional, non-professional and supervisory employee employed by the information processor. Detail whether the personnel are employed by the information processor or a third party, identifying the employees responsible for monitoring the timeliness and integrity of data reported to and displayed by the System.
Exhibit E -- Affiliates
For each affiliated entity of the information processor, and for any person or company with whom the information processor has a contractual or other agreement relating to the operations of the information processor, including loans or cross-guarantees, provide the following information:
2. Form of organization (e.g., association, corporation, partnership, etc.).
5. Description of nature and extent of affiliation and/or contractual or other agreement with the information processor.
6. Description of business or functions of the affiliates.
7. If a person or company has ceased to be an affiliated entity of the information processor during the previous year or ceased to have a contractual or other agreement relating to the operation of the information processor during the previous year, provide a brief statement of the reasons for termination of the relationship.
Exhibit F -- Services
A description in narrative form of each service or function performed by the information processor. Include a description of all procedures utilized for the collection, processing, distribution, validation and publication of information with respect to orders and trades in securities.
Exhibit G -- System and Operations
1. Describe the manner of operation of the System of the information processor that collects, processes, distributes and publishes information in accordance with National Instruments 21-101 and 23-101. This description should include the following:
1. The means of access to the System.
2. Procedures governing entry and display of quotations and orders in the System including data validation processes.
3. A description of any measures used to verify the timeliness and accuracy of information received and disseminated by the system, including the processes to resolve data integrity issues identified.
4. The hours of operation of the System.
5. Description of the training provided to users of the System and any materials provided to the users.
2. Include a list of all computer hardware utilized by the information processor to perform the services or functions listed in Exhibit F, indicating:
1. Manufacturer, and manufacturer's equipment and identification number.
2. Whether purchased or leased (if leased, duration of lease and any provisions for purchase or renewal).
3. Where such equipment (exclusive of terminals and other access devices) is physically located.
3. Provide a description of the measures or procedures implemented by the information processor to provide for the security of any system employed to perform the functions of an information processor. This should include a general description of any physical and operational safeguards designed to prevent unauthorized access to the system.
4. Provide a description of all backup systems which are designed to prevent interruptions in the performance of any information providing functions as a result of technical malfunctions or otherwise in the system itself, in any permitted input or output system connection or as a result of any independent source.
5. Describe the business continuity and disaster recovery plans of the information processor, and provide any relevant documentation.
6. List each type of interruption which has lasted for more than two minutes and has occurred within the six (6) months preceding the date of the filing, including the date of each interruption, the cause and duration. Provide the total number of interruptions which have lasted two minutes or less.
7. Describe the procedures for reviewing system capacity, and indicate current and future capacity estimates.
8. Quantify in appropriate units of measure the limits on the information processor's capacity to receive, collect, process, store or display the data elements included within each function.
9. Identify the factors (mechanical, electronic or other) which account for the current limitations on the capacity to receive, collect, process, store or display the data elements included within each function described in section 8 above.
10. Describe the procedures for conducting stress tests.
Exhibit H -- Outsourcing
Where the information processor has outsourced the operation of any aspect of the services listed in Exhibit F to an arms-length third party, including any function related to the collection, consolidation, and dissemination of data, provide the following information:
2. A description of the nature and extent of the contractual or other agreement with the information processor, and the roles and responsibilities of the arms-length third party under the arrangement.
Exhibit I -- Financial Viability
1. Provide a business plan with pro forma financial statements and estimates of revenue.
2. Discuss the financial viability of the information processor in the context of having sufficient financial resources to properly perform its functions.
Exhibit J -- Fees and Revenue Sharing
1. Provide a complete list of all fees and other charges imposed, or to be imposed, by or on behalf of the information processor for its information services. This would include all fees to provide data and fees to receive the data from the information processor.
2. Where arrangements exists to share revenue from the sale of data disseminated by the information processor with marketplaces, inter-dealer bond brokers and dealers that provide data to the information processor in accordance with National Instrument 21-101, a complete description of the arrangements and the basis for these arrangements.
Exhibit K -- Reporting to the Information Processor
1. List all persons and entities that provide data to the information processor in accordance with the requirements of National Instrument 21-101.
2. Provide a complete set of all forms, agreements and other materials pertaining to the provision of data to the information processor.
3. A description of any specifications or criteria required of marketplaces, inter-dealer bond brokers or dealers who provide securities information to the information processor for collection, processing for distribution or publication. Identify those specifications or criteria which limit, are interpreted to limit or have the effect of limiting access to or use of any services provided by the information processor and state the reasons for imposing such specifications or criteria.
4. For each instance during the past year in which any person or entity has been prohibited or limited to provide data by the information processor, indicate the name of each such person or entity and the reason for the prohibition or limitation.
Exhibit L -- Access to the Services of the Information Processor
1. A list of all persons and entities who presently subscribe or who have notified the information processor of their intention to subscribe to the services of the information processor.
2. The form of contract governing the terms by which persons may subscribe to the services of an information processor.
3. A description of any specifications or criteria which limit, are interpreted to limit or have the effect of limiting access to or use of any services provided by the information processor and state the reasons for imposing such specifications or criteria. This applies to limits relating to providing information to the information processor and the limits relating to accessing the consolidated feed distributed by the information processor.
4. For each instance during the past year in which any person has been prohibited or limited in respect of access to services offered by the information processor, indicate the name of each such person and the reason for the prohibition or limitation.
Exhibit M -- Selection of Securities for which Information Must Be Reported to the Information Processor
1. The criteria used to determine the securities for which information must be reported and the data which must be reported to the information processor.
3. The process to communicate the securities selected and data to be reported to the marketplaces, inter-dealer bond brokers and dealers providing the information as required by National Instrument 21-101. The description should include where this information is located.
CERTIFICATE OF INFORMATION PROCESSOR
DATED at ________________this _____ day of __________________ 20 _____
(Name of information processor )
(Official capacity -- please type or print)".
(1) Subject to subsection (2), this Instrument comes into force on July 1, 2012.
(2) Section 17 of this Instrument comes into force on December 31, 2012.
REPEAL OF OSC RULE 21-501
Deferral of Information Transparency Requirements for Government Debt Securities in National Instrument 21-101 Marketplace Operation
1. Ontario Securities Commission Rule 21-501 Deferral of Information Transparency Requirements for Government Debt Securities in National Instrument 21-101 Marketplace Operation is repealed by this Instrument.
2. This Instrument comes into force on July 1, 2012.
{1}See definition of an Internal and Intentional Cross in Section 1.1 of the Universal Market Integrity Rules.
{2}By cancellations, we mean "pure" cancellations, i.e cancellations that do not result in a new and amended order.
{3}Orders executed under ID 001.
(a) replacing section 1.1 with the following:
1.1 Introduction -- Exchanges, quotation and trade reporting systems and ATSs are marketplaces that provide a market facility or venue on which securities can be traded. The areas of interest from a regulatory perspective are in many ways similar for each of these marketplaces since they may have similar trading activities. The regulatory regime for exchanges and quotation and trade reporting systems arises from the securities legislation of the various jurisdictions. Exchanges and quotation and trade reporting systems are recognized under orders from the Canadian securities regulatory authorities, with various terms and conditions of recognition. ATSs, which are not recognized as exchanges or quotation and trade reporting systems, are regulated under National Instrument 21-101 Marketplace Operation (the Instrument) and National Instrument 23-101 Trading Rules (NI 23-101). The Instruments, which were adopted at a time when new types of markets were emerging, provide the regulatory framework that allows and regulates the operation of multiple marketplaces.
(b) the interpretation of various terms and provisions in the Instrument.;
(b) replacing section 1.2 with the following:
1.2 Definition of Exchange-Traded Security -- Section 1.1 of the Instrument defines an "exchange-traded security" as a security that is listed on a recognized exchange or is quoted on a recognized quotation and trade reporting system or is listed on an exchange or quoted on a quotation and trade reporting system that is recognized for the purposes of the Instrument and NI 23-101.
If a security trades on a recognized exchange or recognized quotation and trade reporting system on a "when issued" basis, as defined in IIROC's Universal Market Integrity Rules, the security would be considered to be listed on that recognized exchange or quoted on that recognized quotation and trade reporting system and would therefore be an exchange-traded security.
If no "when issued" market has been posted by a recognized exchange or recognized quotation and trade reporting system for a security, an ATS may not allow this security to be traded on a "when issued" basis on its marketplace.
A security that is inter-listed would be considered to be an exchange-traded security. A security that is listed on a foreign exchange or quoted on a foreign quotation and trade reporting system, but is not listed or quoted on a domestic exchange or quotation and trade reporting system, falls within the definition of "foreign exchange-traded security"..
3. Part 2 is amended by
(a) in subsection 2.1(5) replacing "1." with "(a)", "2." with "(b)" and "3." with "(c)";
(b) deleting "trading for the purposes of securities legislation and is" from subsection 2.1(6);
(c) replacing "Inter-dealer bond brokers" with "Inter-dealer bond brokers that conduct traditional inter-dealer bond broker activity" in subsection 2.1(7); and
(d) adding the following:
(8) Section 1.2 of the Instrument contains an interpretation of the definition of "marketplace". The Canadian securities regulatory authorities do not consider a system that only routes unmatched orders to a marketplace for execution to be a marketplace. If a dealer uses a system to match buy and sell orders or pair orders with contra-side orders outside of a marketplace and route the matched or paired orders to a marketplace as a cross, the Canadian securities regulatory authorities may consider the dealer to be operating a marketplace under paragraph (c) of the definition of "marketplace". The Canadian securities regulatory authorities encourage dealers that operate or plan to operate such a system to meet with the applicable securities regulatory authority to discuss the operation of the system and whether the dealer's system falls within the definition of "marketplace"..
4. Part 3 is amended by
(a) replacing "Canadian securities legislation" with "Securities legislation" in subsection 3.1(1);
(b) replacing the first instance of "Canadian securities legislation" with "Securities legislation" and the second instance of "Canadian securities legislation" with "securities legislation" in subsection 3.2(1);
(c) replacing "subsection" with "paragraph" in subsection 3.4(3);
(d) replacing "Canadian securities legislation" with "securities legislation" in subsection 3.4(3);
(e) replacing "subsection 6.1(a) of the Instrument" with "paragraph 6.1(a) and all other requirements in the Instrument and in NI 23-101" in subsection 3.4(4);
(f) replacing "Subsection" with "Paragraph" in subsection 3.4(5);
(g) replacing subsection 3.4(7) with the following:
(7)Subsection 6.7(1) of the Instrument requires an ATS to notify the securities regulatory authority if one of three thresholds is met or exceeded. Upon being informed that one of the thresholds is met or exceeded, the securities regulatory authority intends to review the ATS and its structure and operations in order to consider whether the person or company operating the ATS should be considered to be an exchange for purposes of securities legislation or if additional terms and conditions should be placed on the registration of the ATS. The securities regulatory authority intends to conduct this review because each of these thresholds may be indicative of an ATS having significant market presence in a type of security, such that it would be more appropriate that the ATS be regulated as an exchange. If more than one Canadian securities regulatory authority is conducting this review, the reviewing jurisdictions intend to coordinate their review. The volume thresholds referred to in subsection 6.7(1) of the Instrument are based on the type of security. The Canadian securities regulatory authorities consider a type of security to refer to a distinctive category of security such as equity securities, debt securities or options.; and
(h) repealing subsection 3.4(9).
5. Part 4 is amended by
(a) replacing "In exercising this discretion" in subsection 4.1(2) with "In determining whether it is in the public interest to recognize an exchange or quotation and trade reporting system";
(b) deleting "and" at the end of paragraph 4.1(2)(c);
(c) replacing "." with ";" at the end of paragraph 4.1(2)(d);
(d) adding the following after paragraph 4.1(d):
(e) whether the exchange or quotation and trade reporting system has policies and procedures to effectively identify and manage conflicts of interest arising from its operation or the services it provides;
(f) whether the requirements of the exchange or quotation and trade reporting system relating to access to its services are fair and reasonable; and
(g) whether the exchange or quotation and trade reporting system's process for setting fees is fair, transparent and appropriate, and whether the fees are equitably allocated among the participants, issuers and other users of services, do not have the effect of creating barriers to access and at the same time ensure that the exchange or quotation and trade reporting system has sufficient financial resources for the proper performance of its functions.; and
(e) adding the following:
Although the basic requirements or criteria for recognition of an exchange or quotation and trade reporting system may be similar in various jurisdictions, the precise requirements and the process for seeking a recognition or an exemption from recognition in each jurisdiction is determined by that jurisdiction..
6. Part 5 is amended by
(a) adding "However, if those prices or quantities are implied and determinable, for example, by knowing the features of the marketplace, the indications of interest may be considered an order." at the end of subsection 5.1(1);
(b) replacing subsection 5.1(2) with the following:
(2) The terminology used is not determinative of whether an indication of interest constitutes an order. Instead, whether or not an indication is "firm" will depend on what actually takes place between the buyer and seller. At a minimum, the Canadian securities regulatory authorities will consider an indication to be firm if it can be executed without further discussion between the person or company entering the indication and the counterparty (i.e. the indication is "actionable"). The Canadian securities regulatory authorities would consider an indication of interest to be actionable if it includes sufficient information to enable it to be executed without communicating with the marketplace participant that entered the order. Such information may include the symbol of the security, side (buy or sell), size, and price. The information may be explicitly stated, or it may be implicit and determinable based on the features of the marketplace. Even if the person or company must give its subsequent agreement to an execution, the Canadian securities regulatory authorities will still consider the indication to be firm if this subsequent agreement is always, or almost always, granted so that the agreement is largely a formality. For instance, an indication where there is a clear or prevailing presumption that a trade will take place at the indicated or an implied price, based on understandings or past dealings, will be viewed as an order.;
(c) renumbering subsection 5.1(4) as subsection 5.1(5); and
(d) adding the following after subsection 5.1(3):
(4) The securities regulatory authority may consider granting an exemption from the pre-trade transparency requirements in sections 7.1, 7.3, 8.1 and/or 8.2 of the Instrument to a marketplace for orders that result from a request for quotes or facility that allows negotiation between two parties provided that
(a) order details are shown only to the negotiating parties,
(b) other than as provided by paragraph (a), no actionable indication of interest or order is displayed by either party or the marketplace, and
(c) each order entered on the marketplace meets the size threshold set by a regulation services provider as provided in subsection 7.1(2) of the Instrument..
7. Part 6 is replaced with the following:
PART 6 MARKETPLACE INFORMATION AND FINANCIAL STATEMENTS
(1) The definition of marketplace includes exchanges, quotation and trade reporting systems and ATSs. The legal entity that is recognized as an exchange or quotation and trade reporting system, or registered as a dealer in the case of an ATS, owns and operates the market or trading facility. In some cases, the entity may own and operate more than one trading facility. In such cases the marketplace may file separate forms in respect of each trading facility, or it may choose to file one form covering all of the different trading facilities. If the latter alternative is chosen, the marketplace must clearly identify the facility to which the information or changes apply.
(2) The forms filed by a marketplace under the Instrument will be kept confidential. The Canadian securities regulatory authorities are of the view that the forms contain proprietary financial, commercial and technical information and that the interests of the filers in non-disclosure outweigh the desirability of adhering to the principle that the forms be available for public inspection.
(3) While initial Forms 21-101F1 and 21-101F2 and amendments thereto are kept confidential, certain Canadian securities regulatory authorities may publish a summary of the information included in the forms filed by a marketplace, or information related to significant changes to the forms of a marketplace, where the Canadian securities regulatory authorities are of the view that a certain degree of transparency for certain aspects of a marketplace would allow investors and industry participants to be better informed as to how securities trade on the marketplace.
(4) Under subsection 3.2(1) of the Instrument, a marketplace is required to file an amendment to the information provided in Form 21-101F1 or Form 21-101F2, as applicable, at least 45 days prior to implementing a significant change. The Canadian securities regulatory authorities consider a significant change to be a change that could significantly impact a marketplace, marketplace participants, investors, or the Canadian capital markets. The Canadian securities regulatory authorities would consider significant changes to include:
(b) new or changes to the services provided by the marketplace, including the hours of operation;
(c) new or changes to the means of access to the market or facility and its services;
(d) new or changes to order types;
(e) new or changes to types of securities traded on the marketplace;
(f) new or changes to types of securities listed on exchanges or quoted on quotation and trade reporting systems;
(g) new or changes to types of marketplace participants;
(h) changes to the systems and technology used by the marketplace that support order entry, order routing, execution, trade reporting, trade comparison, data feeds, co-location and, if applicable, market surveillance and trade clearing, including those affecting capacity;
(i) changes to the governance of the marketplace, including the structure of its board of directors and changes in the board committees and their mandates;
(j) changes in control over marketplaces;
(k) changes in affiliates that provide services to or on behalf of the marketplace;
(l) new or changes in and outsourcing arrangements for key marketplace services or systems;
(m) new or changes in custody arrangements; and
(n) changes in fees and the fee model of the marketplace.
(5) Significant changes would not include changes to information in Form 21-101F1 or Form 21-101F2 that
(a) would not have an impact on the marketplace's market structure or marketplace participants on investors, issuers or the capital markets; or
(i) changes in the routine processes, policies, practices or administration of the marketplace,
(iv) necessary changes to conform to applicable regulatory or legal requirements, and
Such changes would be filed in accordance with the requirements outlined in subsection 3.2(3) of the Instrument.
(6) The Canadian securities regulatory authorities generally consider a change in a marketplace's fees or fee structure to be a significant change. However, the Canadian securities regulatory authorities recognize that in the current, competitive multiple marketplace environment, which may at times require that frequent changes be made to the fees or fee structure of marketplaces, marketplaces may need to implement fee changes within tight timeframes. To facilitate this process, subsection 3.2(2) of the Instrument provides that marketplaces may provide information describing the change in fees or fee structure in a shorter timeframe, at least seven business days before the expected implementation date of the change in fees or fee structure.
(7) For the changes referred to in subsection 3.2(3) of the Instrument, the Canadian securities regulatory authorities may review these filings to ascertain the appropriateness of the categorization of such filings. The marketplace will be notified in writing if there is disagreement with respect to the categorization of the filing.
(8) The Canadian securities regulatory authorities will make best efforts to review amendments to Forms 21-101F1 and 21-101F2 within the timelines specified in subsections 3.2(1) and (2) of the Instrument. However, where the changes are complex, raise regulatory concerns, or when additional information is required, the period for review may exceed these timeframes. The Canadian securities regulatory authorities will review changes to the information in Forms 21-101F1 and 21-101F2 in accordance with staff practices in each jurisdiction.
(9) Section 3.3 of the Instrument requires a marketplace to file Form 21-101F3 by the following dates: April 30 (for the quarter ending March 31), July 30 (for the quarter ending June 30), October 30 (for the quarter ending September 30) and January 30 (for the quarter ending December 31).
6.2 Filing of Financial Statements
Part 4 of the Instrument sets out the financial reporting requirements applicable to marketplaces. Subsections 4.1(2) and 4.2(2) respectively require an ATS to file audited financial statements initially, together with Form 21-101F2, and on an annual basis thereafter. These financial statements may be in the same form as those filed with IIROC. The annual audited financial statements may be filed with the Canadian securities regulatory authorities at the same time as they are filed with IIROC..
8. Part 7 is replaced with the following:
PART 7 MARKETPLACE REQUIREMENTS
(1) Section 5.1 of the Instrument sets out access requirements that apply to a marketplace. The Canadian securities regulatory authorities note that the requirements regarding access for marketplace participants do not restrict the marketplace from maintaining reasonable standards for access. The purpose of these access requirements is to ensure that rules, policies, procedures, and fees, as applicable, of the marketplace do not unreasonably create barriers to access to the services provided by the marketplace.
(2) For the purposes of complying with the order protection requirements in Part 6 of NI 23-101, a marketplace should permit fair and efficient access to
(a) a marketplace participant that directly accesses the marketplace,
(b) a person or company that is indirectly accessing the marketplace through a marketplace participant, or
(c) another marketplace routing an order to the marketplace.
The reference to "a person or company" in paragraph (b) includes a system or facility that is operated by a person or company.
(3) The reference to "services" in section 5.1 of the Instrument means all services that may be offered to a person or company and includes all services relating to order entry, trading, execution, routing, data and includes co-location.
(4) Marketplaces that send indications of interest to a selected smart order router or other system should send the information to other smart order routers or system to meet the fair access requirements of the Instrument.
(5) Marketplaces are responsible for ensuring that the fees they set are in compliance with section 5.1 of the Instrument. In assessing whether its fees unreasonably condition or limit access to its services, a marketplace should consider a number of factors, including
(d) with respect to market data fees, the amount of market data fees charged relative to the market share of the marketplace, and,
(e) with respect to order execution terms, including fees, whether the outcome of their application is consistent with the policy goals of order protection.
The Canadian securities regulatory authorities will consider these factors, among others, in determining whether the fees charged by a marketplace unreasonably condition or limit access to its services. With respect to trading fees, it is the view of the Canadian securities regulatory authorities that a trading fee equal to or greater than the minimum trading increment as defined in IIROC's Universal Market Integrity Rules, as amended, would unreasonably condition or limit access to a marketplace's services as it would be inconsistent with the policy goals of order protection. Trading fees below the minimum trading increment may also unreasonably condition or limit access to a marketplace's services when taking into account factors including those listed above.
7.2 Public Interest Rules -- Section 5.3 of the Instrument sets out the requirements applicable to the rules, policies and similar instruments adopted by recognized exchanges and recognized quotation and trade reporting systems. These requirements acknowledge that recognized exchanges and quotation and trade reporting systems perform regulatory functions. The Instrument does not require the application of these requirements to an ATS's trading requirements. This is because, unlike exchanges, ATSs are not permitted to perform regulatory functions, other than setting requirements regarding conduct in respect of the trading by subscribers on the marketplace, i.e. requirements related to the method of trading or algorithms used by their subscribers to execute trades in the system. However, it is the expectation of the Canadian securities regulatory authority that the requirement in section 5.7 of the Instrument that marketplaces take reasonable steps to ensure they operate in a manner that does not interfere with the maintenance of fair and orderly markets, applies to an ATS's requirements. Such requirements may include those that deal with subscriber qualification, access to the marketplace, how orders are entered, interact, execute, clear and settle.
7.3 Compliance Rules -- Section 5.4 of the Instrument requires a recognized exchange and recognized quotation and trade reporting system to have appropriate procedures to deal with violations of rules, policies or other similar instruments of the exchange or quotation and trade reporting system. This section does not preclude enforcement action by any other person or company, including the Canadian securities regulatory authorities or the regulation services provider.
7.4 Filing of Rules -- Section 5.5 of the Instrument requires a recognized exchange and recognized quotation and trade reporting system to file all rules, policies and other similar instruments and amendments as required by the securities regulatory authority. Initially, all rules, policies and other similar instruments will be reviewed before implementation by the exchange or quotation and trade reporting system. Subsequent to recognition, the securities regulatory authority may develop and implement a protocol that will set out the procedures to be followed with respect to the review and approval of rules, policies and other similar instruments and amendments.
7.5 Review of Rules -- The Canadian securities regulatory authorities review the rules, policies and similar instruments of a recognized exchange or recognized quotation and trade reporting system in accordance with the recognition order and rule protocol issued by the jurisdiction in which the exchange or quotation and trade reporting system is recognized. The rules of recognized exchanges and quotation and trade reporting systems are included in their rulebooks, and the principles and requirements applicable to these rules are set out in section 5.3 of the Instrument. For an ATS, whose trading requirements, including any trading rules, policies or practices, are incorporated in Form 21-101F2, any changes would be filed in accordance with the filing requirements applicable to changes to information in Form 21-101F2 set out in subsections 3.2(1) and 3.2(3) of the Instrument and reviewed by the Canadian securities regulatory authorities in accordance with staff practices in each jurisdiction.
7.6 Fair and Orderly Markets -- (1)Section 5.7 of the Instrument establishes the requirement that a marketplace take reasonable steps to ensure it operates in a way that does not interfere with the maintenance of fair and orderly markets. This applies both to the operation of the marketplace itself and to the impact of the marketplace's operations on the Canadian market as a whole.
(2) This section does not impose a responsibility on the marketplace to oversee the conduct of its marketplace participants, unless the marketplace is an exchange or quotation and trade reporting system that has assumed responsibility for monitoring the conduct of its marketplace participants directly rather than through a regulation services provider. However, marketplaces are expected in the normal course to monitor order entry and trading activity for compliance with the marketplace's own operational policies and procedures. They should also alert the regulation services provider if they become aware that disorderly or disruptive order entry or trading may be occurring, or of possible violations of applicable regulatory requirements.
(3) Part of taking reasonable steps to ensure that a marketplace's operations do not interfere with fair and orderly markets necessitates ensuring that its operations support compliance with regulatory requirements including applicable rules of a regulation services provider. This does not mean that a marketplace must system-enforce all regulatory requirements. However, it should not operate in a manner that to the best of its knowledge would cause marketplace participants to breach regulatory requirements when trading on the marketplace.
7.7 Confidential Treatment of Trading Information -- (1) Subsection 5.10 (2) of the Instrument provides that a marketplace shall not carry on business as a marketplace unless it has implemented reasonable safeguards and procedures to protect a marketplace participant's trading information. These include
(a) limiting access to the trading information of marketplace participants, such as the identity of marketplace participants and their orders, to those employees of, or persons or companies retained by, the marketplace to operate the system or to be responsible for its compliance with securities legislation; and
(b) having in place procedures to ensure that employees of the marketplace cannot use such information for trading in their own accounts.
(2) The procedures referred to in subsection (1) should be clear and unambiguous and presented to all employees and agents of the marketplace, whether or not they have direct responsibility for the operation of the marketplace.
(3) Nothing in section 5.10 of the Instrument prohibits a marketplace from complying with National Instrument 54-101Communication with Beneficial Owners of Securities of a Reporting Issuer. This statement is necessary because an investment dealer that operates a marketplace may be an intermediary for the purposes of National Instrument 54-101, and may be required to disclose information under that Instrument.
7.8 Management of Conflicts of Interest -- (1) Marketplaces are required under section 5.11 of the Instrument to maintain and ensure compliance with policies and procedures that identify and manage conflicts of interest arising from the operation of the marketplace or the services it provides. These may include conflicts, actual or perceived, related to the commercial interest of the marketplace, the interests of its owners or its operators, referral arrangements and the responsibilities and sound functioning of the marketplace. For an exchange and quotation and trade reporting system, they may also include potential conflicts between the operation of the marketplace and its regulatory responsibilities.
(2) The marketplace's policies should also take into account conflicts for owners that are marketplace participants. These may include inducements to send order flow to the marketplace to obtain a larger ownership position or to use the marketplace to trade against the clients' order flow. These policies should be disclosed as provided in paragraph 10.1(e) of the Instrument.
7.9 Outsourcing -- Section 5.12 of the Instrument sets out the requirements that marketplaces that outsource any of their key services or systems to a service provider, which may include affiliates or associates of the marketplace, must meet. Generally, marketplaces are required to establish policies and procedures to evaluate and approve these outsourcing agreements. Such policies and procedures would include assessing the suitability of potential service providers and the ability of the marketplace to continue to comply with securities legislation in the event of the service provider's bankruptcy, insolvency or termination of business. Marketplaces are also required to monitor the ongoing performance of the service provider to which they outsourced key services, systems or facilities. The requirements under section 5.12 of the Instrument apply regardless of whether the outsourcing arrangements are with third-party service providers, or with affiliates of the marketplaces..
9. Part 8 is replaced with the following:
PART 8 RISK DISCLOSURE TO MARKETPLACE PARTICIPANTS
8.1 Risk disclosure to marketplace participants - Subsections 5.9(2) and 6.11(2) of the Instrument require a marketplace to obtain an acknowledgement from its marketplace participants. The acknowledgement may be obtained in a number of ways, including requesting the signature of the marketplace participant or requesting that the marketplace participant initial an initial box or check a check-off box. This may be done electronically. The acknowledgement must be specific to the information required to be disclosed under the relevant subsection and must confirm that the marketplace participant has received the required disclosure. The Canadian securities regulatory authorities are of the view that it is the responsibility of the marketplace to ensure that an acknowledgement is obtained from the marketplace participant in a timely manner..
10. Part 9 is amended by replacing subsection 9.1(1) with the following:
(1) Subsection 7.1(1) of the Instrument requires a marketplace that displays orders of exchange-traded securities to any person or company to provide accurate and timely information regarding those orders to an information processor as required by the information processor or, if there is no information processor, to an information vendor that meets the standards set by a regulation services provider. The Canadian securities regulatory authorities consider that a marketplace that sends information about orders of exchange-traded securities, including indications of interest that meet the definition of an order, to a smart order router is "displaying" that information. The marketplace would be subject to the transparency requirements of subsection 7.1(1) of the Instrument. The transparency requirements of subsection 7.1(1) of the Instrument do not apply to a marketplace that displays orders of exchange-traded securities to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace, as long as these orders meet a minimum size threshold set by the regulation services provider. In other words, the only orders that are exempt from the transparency requirements are those meeting the minimum size threshold. Section 7.2 requires a marketplace to provide accurate and timely information regarding trades of exchange-traded securities that it executes to an information processor as required by the information processor or, if there is no information processor, to an information vendor that meets the standards set by a regulation services provider. Some marketplaces, such as exchanges, may be regulation services providers and will establish standards for the information vendors they use to display order and trade information to ensure that the information displayed by the information vendors is timely, accurate and promotes market integrity. If the marketplace has entered into a contract with a regulation services provider under NI 23-101, the marketplace must provide information to the regulation services provider and an information vendor that meets the standards set by that regulation services provider..
11. Part 10 is amended by replacing "2012" with "2015" in subsection 10.1(1).
12. Part 12 is replaced with the following:
PART 12 TRANSPARENCY OF MARKETPLACE OPERATIONS
12.1 Transparency of Marketplace Operations
(1) Section 10.1 of the Instrument requires that marketplaces make publicly available certain information pertaining to their operations and services. While section 10.1 sets out the minimum disclosure requirements, marketplaces may wish to make publicly available other information, as appropriate. Where this information is included in a marketplace's rules, regulations, policies and procedures or practices that are publicly available, the marketplace need not duplicate this disclosure.
(2) Paragraph 10.1(a) requires marketplaces to disclose publicly all fees, including listing, trading, co-location, data and routing fees charged by the marketplace, an affiliate or by a third party to which services have been directly or indirectly outsourced or which directly or indirectly provides those services. This means that a marketplace is expected to publish and make readily available the schedule(s) of fees charged to any and all users of these services, including the basis for charging each fee (e.g., a per share basis for trading fees, a per subscriber basis for data fees, etc.) and would also include any fee rebate or discount and the basis for earning the rebate or discount. With respect to trading fees, it is not the intention of the Canadian securities regulatory authorities that a commission fee charged by a dealer for dealer services be disclosed in this context.
(3) Paragraph 10.1(b) requires marketplaces to disclose information on how orders are entered, interact and execute. This would include a description of the priority of execution for all order types and the types of crosses that may be executed on the marketplace. A marketplace should also disclose whether it sends information regarding indications of interest or order information to a smart order router.
(4) Paragraph 10.1(e) requires a marketplace to disclose its conflict of interest policies and procedures. For conflicts arising from the ownership of a marketplace by marketplace participants, the marketplace should include in its marketplace participant agreements a requirement that marketplace participants disclose that ownership to their clients at least quarterly. This is consistent with the marketplace participant's existing obligations to disclose conflicts of interest under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Requirements. A marketplace should disclose if a marketplace or affiliated entity of a marketplace intends to trade for its own account on the marketplace against or in competition with client orders.
(5) Paragraph 10.1(f) requires marketplaces to disclose a description of any arrangements where the marketplace refers its participants to the services of a third-party provider where the marketplace receives some benefit (fee rebate, payment, etc.) if the marketplace participant uses the services of the third-party service provider, and has a potential conflict of interest.
(6) Paragraph 10.1(g) requires marketplaces that offer routing services to disclose a description of how routing decisions are made. The subsection applies whether routing is done by a marketplace-owned smart order router, by an affiliate of a marketplace, or by a third-party to which routing was outsourced.
(7) Paragraph 10.1(h) applies to marketplaces that disseminate indications of interest or any information in order to attract order flow. The Instrument requires that these marketplaces make publicly available information regarding their practices regarding the dissemination of information. This would include a description of the type of information included in the indication of interest displayed, and the types of recipients of such information. For example, a marketplace would describe whether the recipients of an indication of interest are the general public, all of its subscribers, particular categories of subscribers or smart order routers operated by their subscribers or by third party vendors..
13. Part 13 is amended by replacing "Canadian securities legislation" with "securities legislation" and "Canadian securities regulatory authorities" with "securities regulatory authorities" in section 13.1.
(a) replacing the title with "PART 14 MARKETPLACE SYSTEMS AND BUSINESS CONTINUITY PLANNING";
(b) deleting ", business continuity" in subsection 14.1(2);
(c) replacing subsection 14.1(3) with the following:
Subsection 12.2(1) of the Instrument requires a marketplace to engage a qualified party to conduct an annual independent assessment of the internal controls referred to in paragraph 12.1(a) of the Instrument. A qualified party is a person or company or a group of persons or companies with relevant experience in both information technology and in the evaluation of related internal controls in a complex information technology environment, such as external auditors or third party information system consultants. Before engaging a qualified party, a marketplace should discuss its choice with the regulator or, in Québec, the securities regulatory authority.;
(d) replacing subsection 14.1(4) with the following:
(4) Paragraph 12.1(c) of the Instrument requires the marketplace to notify the regulator or, in Québec, the securities regulatory authority of any material systems failure. The Canadian securities regulatory authorities consider a failure, malfunction or delay to be "material" if the marketplace would in the normal course of operations escalate the matter to or inform its senior management ultimately accountable for technology. The Canadian securities regulatory authorities also expect that, as part of this notification, the marketplace will provide updates on the status of the failure, the resumption of service and the results of its internal review of the failure.
(5) Under section 15.1 of the Instrument, a regulator or the securities regulatory authority may consider granting a marketplace an exemption from the requirements to engage a qualified party to conduct an annual independent systems review and prepare a report under subsection 12.2(1) of the Instrument provided that the marketplace prepare a control self-assessment and file this self-assessment with the regulator or in Québec, the securities regulatory authority. The scope of the self-assessment would be similar to the scope that would have applied if the marketplace underwent an independent systems review. Reporting of the self-assessment results and the timeframe for reporting would be consistent with that established for an independent systems review.
In determining if the exemption is in the public interest and the length of the exemption, the regulator or securities regulatory authority may consider a number of factors including: the market share of the marketplace, the timing of the last independent systems review, changes to systems or staff of the marketplace and whether the marketplace has experienced material systems failures, malfunction or delays.; and
Section 12.4 of the Instrument requires that marketplaces develop and maintain reasonable business continuity plans, including disaster recovery plans. Business continuity planning should encompass all policies and procedures to ensure uninterrupted provision of key services regardless of the cause of potential disruption. The Canadian securities regulatory authorities expect that, in order for a marketplace to have a reasonable business continuity plan, including a disaster recovery plan, it test it on a periodic basis, and at least annually and it should participate in industry-wide tests..
15. Part 15 is amended by replacing "all trades executed through an ATS" with "all trades executed through a marketplace" in section 15.1.
16. Part 16 is amended by
(a) replacing "subsection 14.5(b)" with "paragraph 14.5(c)" in paragraph 16.2(1)(f);
(b) replacing section 16.3 with the following:
16.3 Change to Information -- Under subsection 14.2(1) of the Instrument, an information processor is required to file an amendment to the information provided in Form 21-101F5 at least 45 days before implementing a significant change involving a matter set out in Form 21-101F5, in the manner set out in Form 21-101F5. The Canadian securities regulatory authorities would consider significant changes to include:
(a) changes to the governance of the information processor, including the structure of its board of directors and changes in the board committees and their mandates;
(b) changes in control over the information processor;
(c) changes affecting the independence of the information processor, including independence from the marketplaces, inter-dealer bond brokers and dealers that provide their data to meet the requirements of the Instrument;
(d) changes to the services or functions performed by the information processor;
(e) changes to the data products offered by the information processor;
(f) changes to the fees and fee structure related to the services provided by the information processor;
(g) changes to the revenue sharing model for revenues from fees related to services provided by the information processor;
(h) changes to the systems and technology used by the information processor, including those affecting its capacity;
(i) new arrangements or changes to arrangements to outsource the operation of any aspect of the services of the information processor;
(j) changes to the means of access to the services of the information processor; and
(k) where the information processor is responsible for making a determination of the data which must be reported, including the securities for which information must be reported in accordance with the Instrument, changes in the criteria and process for selection and communication of these securities.
These would not include housekeeping or administrative changes to the information included in Form 21-101F5, such as changes in the routine processes, practice or administration of the information processor, changes due to standardization of terminology, or minor system or technology changes that do not significantly impact the system of the information processor or its capacity. Such changes would be filed in accordance with the requirements outlined in subsection 14.2(2) of the Instrument.; and
(c) replacing section 16.4 with the following:
16.4 System Requirements -- The guidance in section 14.1 of this Companion Policy applies to the systems requirements for an information processor..
17. These changes become effective on July 1, 2012.