IIROC is a self-regulatory organization recognized by Canadian securities laws. These laws also require a marketplace to have a self-regulatory organization such as IIROC monitor its trading. IIROC will require the marketplace to become an IIROC marketplace member and/or a dealer member.
Regulated Marketplaces in Canada
In National Instruments 21-101 and 23-101 and their Companion Policies, the Canadian Securities Administrators (CSA) set out certain requirements for marketplaces in Canada. The National Instruments may require marketplaces such as alternative trading systems (ATSs) and exchanges to be regulated by a self-regulatory organization such as IIROC.
Membership and Fees
An ATS must be an IIROC Dealer Member. There is no requirement for an Exchange to be an IIROC Dealer Member.
A new marketplace (ATS or Exchange) must be an IIROC Marketplace Member if IIROC will oversee trading on the marketplace. Marketplaces become IIROC Marketplace Members when they enter into a Regulation Services Agreement (“RSA”) with IIROC.
Regulation Services Agreement and Fees
RSAs require IIROC Board approval. IIROC charges all prospective Marketplace Members a minimum RSA fee of $25,000. IIROC staff will track its time spent on the RSA drafting and negotiations. If staff’s time cost is greater than $25,000, IIROC will bill the marketplace for the remainder.
Information Technology Connectivity and Testing and Fees
IIROC requires a new marketplace (ATS or Exchange) to connect to and test with the IIROC surveillance systems. This process generally takes a minimum of 65 work days. IIROC’s availability for testing is often dependent upon third parties. Testing windows may not be available until 90-180 days after a request for testing is made. IIROC charges a minimum connectivity and testing fee of $66,500. IIROC staff will track its time spent on the connectivity and testing process. If the time cost spent is greater than $66,500, IIROC will bill the marketplace for the remainder.
Information Technology Development and Fees
IIROC requires all new marketplaces to provide a detailed written description of the proposed marketplace model. If the model contains new functionality for the IIROC surveillance systems, IIROC will require IT development and testing. Marketplaces are responsible for all costs of IT development, including any third-party costs. IIROC may require a deposit before any development work begins and IIROC will bill the marketplace for the remainder upon completion. All new functionality must be tested. IIROC’s availability for development and testing is often dependent upon third parties. Development and testing windows may not be available until 90-180 days after IIROC receives a request for development or testing.
The Marketplace Member Application Process
- Applicant and IIROC initial meeting.
- IIROC will deliver a letter requesting a detailed written description of the marketplace model and a $45,000 deposit ($10,000 non-refundable new Dealer Member deposit (not applicable to Exchanges), plus non-refundable $10,000 IT fee deposit, plus non-refundable $25,000 RSA fee).
- IIROC receives the deposit and a written description of the marketplace model, including copies of any forms, filings and final technology specifications required by the CSA and the National Instruments.
- IIROC provides IT build documentation.
- IIROC reviews the marketplace model and application and provides written comments.
- IIROC identifies whether marketplace model requires new surveillance functionality, including estimated costs and timeline.
- IIROC provides Applicant with testing window availability.
- IIROC provides the first draft of RSA.
- IIROC receives the Applicant’s written responses to IIROC comments and draft RSA.
- IIROC receives the Applicant’s written confirmation that the CSA is in final review of its forms, filings and technology specifications.
- IIROC receives written authorization from Applicant to proceed with build for new surveillance functionality, if necessary, based on costs/time estimates received from IIROC.
- IIROC receives the non-refundable $56,500 IT fee, plus additional funds for development of new surveillance functionality.
- IIROC schedules testing.
- IIROC commences development of new surveillance functionality.
- IIROC receives Applicant’s written confirmation of CSA publication for comment.
- Applicant delivers to IIROC copies of comment letters.
- Applicant provides IIROC with written confirmation of CSA notice of completion of review.
- Surveillance system testing completed.
- Applicant pays remaining fees and costs, over any deposit payments.
- IIROC Board approves draft RSA and, if required, Dealer Member application.
- Applicant and IIROC agree on proposed launch date.
- IIROC and Applicant sign RSA.
- IIROC issues Market Policy notice and, if required, new Dealer Member Notice.
- Applicant and IIROC coordinate launch.
All fees and cost amounts are subject to applicable taxes. All timing statements are estimates only. For further information, contact Karen Green, Senior Corporate Counsel, at [email protected].