Trade matching and trade confirmation suppression practices

GN-3800-21-007
Type: Rules Notice> Guidance Note
Rule connection:
IIROC Rules
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Executive Summary

Effective Date: December 31, 2021

IIROC is publishing guidance to promote compliant trade matching and trade confirmation suppression practices.

Table of contents
  1. Broker-to-broker trade matching

The following guidance is intended to assist Dealer Members (Dealers) in complying with sections 4751 and 4753 to 4756 of the IIROC Rules1  and understanding IIROC staff’s interpretation of the Rules:

  1. How will a Dealer know its quarterly compliant trade percentage for its broker-to-broker trades?

CDS will make available an individual quarterly compliant trade percentage report to each Dealer that is a Direct Participant in CDS’s Direct Participant Trade Matching service. That report will include the Dealer’s quarterly compliant trade percentage for its broker-to-broker trades.

  1. How must a Dealer report to IIROC when its quarterly compliant trade percentage is less than 90% for its broker-to-broker trades?

If a Dealer’s quarterly compliant trade percentage is less than 90%, it must submit a report via e-mail to IIROC at [email protected] within two business days of its individual quarterly compliant trade percentage report being available to it from CDS. The report that is to be submitted to IIROC must be in a form similar to the template report provided in Appendix A and it must include the reason or reasons for the non-compliance during the quarter, its action plan to improve its compliant trade percentage, and the expected time it will take resolve the problem.

  1. What is meant by the word “promptly” in reporting to IIROC if a Dealer’s quarterly compliant trade percentage is less than 90% for its broker-to-broker trades?

“Promptly” means no more than two business days after the Dealer’s individual compliant trade percentage report for its broker-to-broker trades is available to the Dealer.

  1. Trade confirmation requirements – section 3816 and relationship with broker-to-broker trades

The following guidance on the amendments is to assist Dealers in complying with section 3816 in relation to broker-to-broker trades and understanding IIROC staff’s interpretation of the IIROC Rules:

  1. With the implementation of the trade confirmation and matching amendments, how can a Dealer suppress the sending of trade confirmations under section 3816 for broker-to-broker trades that are subject to sections 4751 and 4753 to 4756?

For broker-to-broker trades, a Dealer will be able to suppress the sending of trade confirmations under section 3816 if it satisfies the requirements in paragraph 3816(2)(x)(b)(VI). These requirements are as follows:

  • the Dealer for the last four quarters:
  1. has not filed more than two reports under section 4756 informing IIROC that it has not met the quarterly compliant trade percentage, and
  2. none of the reports it filed under section 4756 informing IIROC that it has not met the quarterly compliant trade percentage has a quarterly compliant trade percentage of less than 85%.
  1. Is a Dealer expected to notify IIROC that it will be suppressing trade confirmations for broker-to-broker trades as allowed under section 3816?

Yes, before a Dealer may suppress the sending of trade confirmations for broker-to-broker trades for the very first time, IIROC staff expects the Dealer to first notify its IIROC Financial and Operations Compliance manager by e-mail of its intention to suppress trade confirmations.

The purpose of the notification is to strengthen IIROC’s oversight of these activities and to minimize any possible confusion to other Dealers. That notification is only expected for the Dealer’s very first use of the suppression of trade confirmations for broker-to-broker trades and is not expected for subsequent suppressions of trade confirmation for broker-to-broker trades.

In the Dealer’s notification to IIROC, the Dealer must clearly state that it has the necessary procedures and systems in place to reliably meet the requirements to suppress trade confirmations for broker-to-broker trades and that it does not anticipate any repeated switching on and off of the sending of trade confirmations to Dealers as a result of it not consistently being able to meet those requirements.

  1. Will a Dealer have to resume sending trade confirmations for its broker-to-broker trades if its quarterly compliant trade percentage for broker-to-broker trades fall below the 85% threshold for the quarter?

Yes, a Dealer will be required to immediately resume sending trade confirmations for its broker-to-broker trades if it fails to satisfy the requirements set out in paragraph 3816(2)(x)(b)(VI) which includes the 85% threshold.

To manage this risk, a Dealer should monitor its compliant trade percentage for broker-to-broker trades within the quarter so that it can detect and correct any problems before they negatively impact its overall results for the quarter. Should the Dealer choose to again suppress the trade confirmation exemption for broker-to-broker trades at a later date, it would be required to re-satisfy the requirements undersection 3816.

In re-satisfying the requirements under section 3816 to be able to suppress trade confirmations for broker-to-broker trades, a Dealer does not need to obtain an updated written consent from each affected Dealer to waive the receipt of trade confirmations, if in the original written consent agreement the affected Dealer expressly gives further consent to allow the Dealer to resume suppression of trade confirmations for broker-to-broker trades when there is an interruption in the Dealer’s ability to suppress the sending of trade confirmations for broker-to-broker trades.

  1. Will there be an individual monthly compliant trade percentage report for trades subject to sections 4751 and 4753 to 4756 made available to a Dealer within the quarter to assist the Dealer in managing its trade confirmation exemptions for broker-to-broker trades?

Yes, CDS will make available an individual monthly compliant trade percentage report for broker-to-broker trades to each Dealer that is a Direct Participant in CDS’s Direct Participant Trade Matching service.

  1. What happens if a Dealer has a quarterly compliant trade percentage for broker-to-broker trades that is less than 90% because of don’t know (DK) trades and the underlying cause of those DKs results from another Dealer’s own problems, and how will that impact the Dealer’s ability to begin or continue to suppress trade confirmations for broker-to-broker trades?

Each Dealer that has a quarterly compliant trade percentage that is less than 90%, irrespective of the reason, must still promptly report to IIROC as required under section 4756 and as detailed in the guidance to section 1.2 of this guidance note. Regarding this impact on the Dealer’s ability to begin or continue to suppress trade confirmations for broker-to-broker trades, the Dealer must still satisfy the requirements set out in paragraph 3816(2)(x)(VI).

  1. Trade confirmation requirements – section 3816 and relationship with institutional trades

  1. How can a Dealer suppress the sending of trade confirmations for institutional trades ?

In 2020, IIROC staff published a notice of approval/implementation (Notice 20-0129) to remove references to filing an exception report under National Instrument 24-101 from the trade confirmation suppression rules. For institutional trades, a Dealer will be able to suppress the sending of trade confirmations if the Dealer has a quarterly compliant trade percentage of greater than or equal to 85% for at least two of the last four quarters, in accordance to paragraph 3816(2)(x)(b)(VII).

  1. Is a Dealer expected to notify IIROC that it will be suppressing trade confirmations for institutional trades as allowed under section 3816?

Yes, before a Dealer may suppress the sending of trade confirmations for institutional trades for the very first time IIROC staff expects the Dealer to first notify its IIROC Financial and Operations Compliance manager by e-mail of its intention to suppress trade confirmations.

The purpose of the notification is to give IIROC the opportunity to strengthen its oversight of these activities and to minimize any possible confusion to clients. That notification is only expected for the Dealer’s very first use of the suppression of trade confirmations for institutional trades and is not expected for subsequent suppressions of trade confirmations for institutional trades.

In the Dealer’s notification to IIROC, the Dealer must clearly state that it has the necessary procedures and systems in place to reliably meet the requirements to suppress trade confirmations for institutional trades that are subject to NI 24-101 and that it does not anticipate any repeated switching on and off of the sending of trade confirmations for institutional trades to clients as a result of it not consistently being able to meet those requirements.

  1. Applicable Rules

IIROC Rules this Guidance Note relates to:

  • section 3816, and
  • Rule 4700.
  1. Previous Guidance Note

This Guidance Note replaces Rules Notice 13-0231 - Trade Confirmation and Matching Requirements.

  1. Related documents

This Guidance Note was published under Notice 21-0190 - IIROC Rules, Form 1 and Guidance.

  1. Appendices

Appendix A – Template report for a Dealer to use for reporting to IIROC under section 4756 when the Dealer’s quarterly compliant trade percentage is less than 90%.

  • 1In this guidance, all rule references are to the IIROC Rules unless otherwise specified.

Appendix:

Report for Sub-Standard Quarterly Compliant Trade Percentage

Question

Answer

1. Calendar quarter period covered:

dd/mm/yyyy to dd/mm/yyyy

2. Name of Dealer:

 

3. CDS Participant CUID (if applicable):

 

4. Name of report preparer:

 

5. Title of report preparer:

 

6. Phone number of report preparer:

 

7. E-mail of report preparer:

 

8. Did the Dealer suppress trade confirmations under section 3816 for broker-to-broker non-exchange trades for the calendar period covered?

Yes or No

9. Exhibit A - Broker-to-broker non-exchange trade statistics for the quarter:

a. Quarterly compliant trade percentage (%)

b. # of compliant trades

c. # of DK trades

d. # of total trades

10. Exhibit B - Reasons for not meeting the quarterly compliant trade percentage threshold of 90%:

 

11. Exhibit C - Action plan to improve the Dealer’s quarterly compliant trade percentage:

 

Notes and Instructions - Report for Sub-Standard Quarterly Compliant Trade Percentage

Purpose of the report

The purpose of the Report for Sub-Standard Quarterly Compliant Trade Percentage (the report) is to assist a Dealer in meeting its broker-to-broker trade reporting requirements under section 4756, Trade matching quarterly compliant trade percentage, if the Dealer’s quarterly compliant trade percentage is less than 90%.

Submission of the report

If a Dealer’s quarterly compliant trade percentage is less than 90%, the Dealer must submit the report via e-mail to IIROC at [email protected] within two business days of receiving its individual quarterly trade matching summary report. The report submitted to IIROC must be in a form similar to the report provided and it must include the reason or reasons for the non-compliance during the quarter, its action plan to improve its compliant trade percentage and the expected time it will take resolve the problem.

Questions about the report

If you have any questions, please contact your IIROC Financial & Operations Compliance manager or IIROC Member Regulation Policy staff. For submission-related technical questions, please contact IIROC’s Financial and Operations Compliance Department at [email protected].