Canadian regulators the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have published a paper setting out their joint position on the regulatory framework for dark pools and dark orders in Canada.
Entitled ’23-405 Dark Liquidity in the Canadian Market’, the paper is the next step in a process that began with a joint consultation paper on issues surrounding dark liquidity in 2009.
The CSA and IIROC are proposing that only orders that meet a minimum size threshold, still to be determined, would be exempt from the pre-trade transparency requirements imposed on marketplaces in Canada. In addition, the organisations are recommending that “meaningful price improvement” be required in certain circumstances and that, generally, visible orders should be executed before dark orders at the same price on the same marketplace.
“The recommendations aim to strike an appropriate balance between promoting marketplace competition and maintaining the quality of our markets,” said Jean St-Gelais, chair of the CSA and president and CEO of the Autorite des marches financiers (Quebec). “We are proactively establishing a framework that fosters development of dark liquidity without negative consequences to market integrity.”
Susan Wolburgh Jenah, IIROC CEO and president, added that the proposed changes would promote transparency and price discovery and enhance fair and equal access to liquidity for all investors.
The public comment period for the paper is open until 10 January 2011. Canadian alternative trading system Alpha Group recently delayed the launch of its new dark venue until February 2011, following a request from IIROC to implement a temporary freeze on market changes that might affect regulatory data feeds.