The Canadian Securities Administrators (CSA), the coordinating body for the 13 provincial securities regulators in Canada, has proposed a new regulatory framework for electronic trading practices.
The proposed rules, known as ”National Instrument 23-103: Electronic trading and direct electronic access to marketplaces', will obligate Canadian market participants to establish and maintain appropriate controls, policies and procedures, to properly control direct electronic access (DEA) to markets, algorithmic trading and high-frequency trading. They also place a responsibility on market operators to ensure that they take an active role in managing the risks associated with electronic trading.
The proposed rules for market participants include procedures to prevent erroneous orders, or those that exceed pre-determined credit or capital thresholds, measures to give markets power to cancel electronic orders and DEA relationships with members, and restrict the ability of brokers using DEA to offer sponsored access services.
“Technological innovations in the Canadian marketplace underscore the importance of ensuring the risks associated with electronic trading are effectively managed and supervised,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission. “The framework proposed today is an important step in managing these risks and maintaining investor confidence in our markets.”
The new rules were devised in conjunction with markets, their participants and service vendors. According to the CSA, the rules are consistent with a report issued by the International Organization of Securities Commissions last year titled ”Principles for direct electronic access to markets'.
The deadline for submitting comments to the CSA proposal is 8 July 2011.