On May 28, 2019, the applicable securities regulatory authorities approved amendments to Dealer Member Rule 3200 (Amendments). The Amendments will:
- prohibit a Dealer Member that provides order execution only services (OES Dealer) from providing an order execution only service (OES) to a client that is acting and, registered or exempted from registration as a dealer (registered dealer)
- expand the requirement for identifiers by requiring OES Dealers to assign unique identifiers to:
- an entity that is registered or exempted from registration as an adviser in accordance with securities laws (registered adviser) and has been granted trading authority, direction or control over an OES account (control)
- an entity that is in the business of trading securities in a foreign jurisdiction in a manner analogous to an adviser (foreign adviser equivalent) and that has control over an OES account
- require OES Dealers to ensure that the unique identifiers are included on all orders sent to a marketplace1 for an account over which the registered adviser or foreign adviser equivalent has control.
The Amendments were published for comment on July 26, 2018 in IIROC Rules Notice 18-0141 – Rules Notice – Request for Comments – DMR – Proposed Provisions Respecting Order Execution Only Service Eligibility and Adviser Identifiers (July 2018 Proposal). All relevant background information, including the description and impact of the Amendments, is set out in Notice 18-0141.
- 1 “Marketplace” refers to any marketplace where IIROC is the regulation services provider.
We received two comment letters in response to Notice 18-0141. Attachment C to this Notice provides a summary of the public comments received and our responses. As a result of the comments, we have made non-material revisions to the July 2018 Proposal, as set out in Attachment C and summarized below.
Description of the Non-Material Changes
Limitation to Dealer Members that trade on a Marketplace
We received a comment that certain order execution only services do not provide for execution on a marketplace and that these types of order execution only services would not raise the same regulatory arbitrage or market integrity concerns that the Amendments are meant to address.
We agree with this view and have modified the Amendments to clarify that Dealer Members are prohibited from providing an order execution only services to registered dealers that trade on a marketplace for which IIROC acts as a regulation services provider.
Potential Conflict with Section 8.4 of NI 31-103
We received a comment from the CSA that there may be a potential conflict between the requirements in the July 2018 Proposal and the requirements set under section 8.4 of NI 31-103. We have added a provision to carve out persons that are subject to section 8.4 of NI 31-103 from the Amendments to eliminate this conflict.
Attachment A – Amendments to Dealer Member Rule (DMR) 3200
Attachment B – Amendments to Proposed Dealer Member Plain Language Rule (PLR) 3200
Attachment C – Summary of comments received and IIROC’s responses
The Amendments will come into force on September 6, being 3 months after the publication of this Notice.