Use of Identifiers and Notification Requirements Respecting Certain Order Execution Only and Direct Electronic Access Clients and Advisers

21-0099
Type: Rules Notice> Guidance Note
Rule connection:
IIROC Rules
UMIR
Legacy DMR Rules
1.1 Definitions
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Contact:

Theodora Lam
Senior Policy Counsel, Market Policy
Telephone:
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Executive Summary

Effective July 26, 2021, Dealer Members must include client identifiers and/or certain designations on orders in listed securities that are sent to a marketplace (Client Identifiers Amendments1). On September 6, 2019, amendments to the Dealer Member Rules came into effect respecting, among other things, unique identifiers for registered advisers and foreign adviser equivalents that have control over an order execution services account (OES Amendments2).

This Notice provides guidance on how Dealer Members can comply with the separate notification requirements under the Client Identifiers Amendments and OES Amendments in addition to identifiers on orders that are sent to a marketplace for: (i) certain direct electronic access3 (DEA) clients, (ii) order execution only (OEO) clients, or (iii) advisers or foreign adviser equivalents.

Under the Client Identifiers Amendments and the OES Amendments, Dealer Members need to identify, among other things4:

  • DEA clients
  • “Active” OEO clients whose trading activity on marketplaces5 regulated by IIROC exceeds a daily average of 500 orders per trading day in any calendar month
  • Registered advisers6 or foreign adviser equivalents7 that:
    • hold OEO accounts, or
    • manage OEO accounts.

This Notice provides responses to frequently asked questions respecting the use of the identifiers noted above.

  • 1. IIROC Notice 19-0071 – Rule Notice – Notice of Approval – UMIR and DMR – Amendments Respecting Client Identifiers (April 18, 2019) and IIROC Notice 20-0251 – Rules Notice - Technical Notice - UMIR and DMR/IIROC Rules - Upcoming Implementation of Client Identifier Amendments for Listed Securities (November 25, 2020).
  • 2. IIROC Notice 19-0101 – Rules Notice – Notice of Approval – Dealer Member Rules – Amendments to Provisions Respecting Order Execution Service Eligibility and Adviser Identifiers (June 6, 2019).
  • 3. “Direct electronic access” is defined under UMIR 1.1 to mean an arrangement between a Participant that is a member, user or subscriber and a client that permits the client to electronically transmit an order relating to a security containing the identifier of the Participant:
    (a) through the systems of the Participant for automatic onward transmission to a marketplace; or
    (b) directly to a marketplace without being electronically transmitted through the systems of the Participant.
  • 4. This is not a complete list of the requirements under the Client Identifiers Amendments and the OES Amendments. For the full set of requirements, please see IIROC Notices 19-0071 and 19-0101.
  • 5. For a list of marketplaces regulated by IIROC, please see Markets We Regulate
  • 6. An “adviser” is defined under DMR 3200 [subsection 3201(3) of the IIROC Rules] to mean a person that is not an individual and, is registered or is exempted from registration, as an adviser in accordance with applicable securities legislation. See Notice 19-0144 and Notice 20-0079 for more information on the IIROC Rules. To assist readers, we have included references in this Guidance to the IIROC Rules provisions that correspond to the DMRs provisions. Since the IIROC Rules are not yet effective, we have included the reference to the IIROC Rules provisions inside square brackets and highlighted in grey. Upon implementation of IIROC Rules, the references to the IIROC Rules will replace the corresponding references to the DMRs and we will delete this footnote.
  • 7. A “foreign adviser equivalent” is defined under DMR 3200 [subsection 3201(3) of the IIROC Rules] to mean a person that is not an individual and is in the business of trading securities in a foreign jurisdiction in a manner analogous to an adviser.
  1. Questions and Answers

The following are specific questions and IIROC’s response to each question.

  1. The following entities require a separate notification to IIROC in addition to using the correct identifier on the order. What form of identifier is IIROC requiring on the order and how it is transmitted on each applicable order?

Who is the identifier for?

What identifier is required on orders sent to a marketplace?

Effective date

DEA clients that are ineligible to obtain an LEI under GLEIF standards

client account number8

July 26, 2021

‘Active’ OEO clients9 that are ineligible to obtain an LEI under GLEIF standards

client account number10

July 26, 2021

Adviser or foreign adviser equivalent that:

 

 

or

  • manages an OEO account and is entering an order for the OEO client

client account number11

 

 

unique identifier of the adviser or foreign adviser equivalent12

July 26, 2021

 

 

September 6, 2019

  1. What kind of unique identifier should be used for an adviser or foreign adviser equivalent that manages an OEO account?

The unique identifier for the adviser or foreign adviser equivalent can be one of the following:

  • Legal Entity Identifier (LEI) of the adviser or foreign adviser equivalent,
  • trading account number of the adviser or foreign adviser equivalent13,
  • a unique identifier created and assigned by the OEO Dealer to the adviser or foreign adviser equivalent, or
  • account number of the OEO client managed by the adviser or foreign adviser equivalent.

If the OEO Dealer uses the LEI of the adviser or foreign adviser equivalent as the unique identifier on orders sent to a marketplace, there is no need to separately report the name of the adviser/foreign adviser equivalent using the “DEA & OES Notice Form” in Appendix A.

If the OEO Dealer creates and assigns a unique identifier to the adviser or foreign adviser equivalent to be included on orders sent to a marketplace, the OEO Dealer must use the same identifier for all OEO accounts at the OEO Dealer that are managed by the adviser or foreign adviser equivalent.

  1. How does a Participant or OEO Dealer notify IIROC of the identifiers and corresponding identity for the entities listed in Item 1.1 of this Notice?

Participants and OEO Dealers should use the DEA & OES Notice Form in Appendix A, which is available through the Regulatory Reporting tab on the IIROC website. Once completed, Participants and OEO Dealers can submit the form to IIROC via ShareFile.14 Participants and OEO Dealers must submit a completed form each time a new identifier is required. IIROC continues to expect that Participants and OEO Dealers would report the identifier no later than 10 days following the month during which use of a new identifier is required.

  1. Applicable Rules

UMIR and DMRs/IIROC Rules this Guidance Note relates to:

  • UMIR 1.1
  • UMIR 6.2
  • UMIR 7.13
  • DMR 3200 [section 3241 of the IIROC Rules]
  1. Previous Guidance Note(s)

This Guidance repeals and replaces the following Guidance or sections of the following Guidance as shown:

  • IIROC Notice 13-0290 – Rules Notice – Technical – UMIR – Gatekeeper and Notice Requirements For Direct Electronic Access and Routing Arrangements (December 3, 2013); Part A in reference to Rule 7.13(6): Notification of DEA or Routing Arrangement.
  • IIROC Notice 14-0264 – Rules Notice – Guidance Note – UMIR and Dealer Member Rules – Guidance Respecting Order Execution Services as a Form of Third-Party Electronic Access to Marketplaces (November 13, 2014); Item 4 in reference to client account numbers in ACCOUNT_ID field of each order; Q. 1 in Item 5.
  • IIROC Notice 19-0133 – Rules Notice – Technical – DMR – Use of Identifiers and Notification Requirements Respecting Certain Order Execution Only Client Accounts (August 6, 2019).
  1. Related Documents

This Guidance Note is related to the following Notices:

  • IIROC Notice 19-0071 – Rule Notice – Notice of Approval – UMIR and DMR – Amendments Respecting Client Identifiers (April 18, 2019).
  • IIROC Notice 19-0101 – Rules Notice – Notice of Approval – Dealer Member Rules – Amendments to Provisions Respecting Order Execution Service Eligibility and Adviser Identifiers (June 6, 2019).
  • IIROC Notice 20-0251 – Rules Notice - Technical Notice - UMIR and DMR/IIROC Rules - Upcoming Implementation of Client Identifier Amendments for Listed Securities (November 25, 2020).
  1. Appendix A – DEA & OES Notice Form

Form for Identification of Direct Electronic Access Client (DEA), Active Order Execution Only Client, or Registered Adviser/Foreign Adviser Equivalent
(Please submit via ShareFile)

Instructions:

If you used a Legal Entity Identifier (LEI) on orders sent to a marketplace, you do not need to complete this form.

If you did not use an LEI on orders sent to a marketplace, please use this form to report:

  1. Direct Electronic Access client that is ineligible to obtain an LEI under GLEIF standards
  2. "Active" order execution only (OEO) client whose trading activity on marketplaces regulated by IIROC exceeds a daily average of 500 orders per trading day in any calendar month.
  3. Adviser or foreign adviser equivalent that either holds an OEO account, or has control over /manages an OEO account.

 

Tab 1 – DEA Client

Information about Submitter

Information about DEA client

Name of individual filing this report

Name of Participant

Participant Number

Name of DEA client

Client Account Number provided on order (Tag 8025)

Addition/
Modification/ Deletion

Effective Date

             

 

Tab 2 – Active OEO Client

Information about Submitter

Information about "Active" OEO client

Name of individual filing this report

Name of submitter's Dealer Member

If submitter is filing on behalf of OEO Dealer other than themselves: Name of OEO Dealer

Name of OEO client

Client Account Number provided on order (Tag 8025)

Addition/
Modification/ Deletion

Effective Date

             

 

Tab 3 – Adviser or Foreign Adviser Equivalent

Information about Submitter

If the adviser or foreign adviser equivalent is the OEO client:

If the adviser or foreign adviser equivalent manages an OEO account:

Type of Change and Effective Date

Name of individual filing this report

Name of submitter's Dealer Member

If submitter is filing on behalf of OES Dealer other than themselves: Name of OES Dealer

Name of OEO client

Client Account Number provided on order
(Tag 8025)

Name of adviser or foreign adviser equivalent

Adviser/Foreign Adviser Equivalent's Unique Identifier on order (Tag 1)

Addition/
Modification/ Deletion

Effective Date

                 

 

 

  • 8. Client account number to be included in Tag 8025 (non-crosses) or Tag 2021 and 20202 (crosses) on the order. Please see the FIX Specifications for Client Identifiers for more information. Dealer to separately report name of the DEA client to IIROC using Appendix A.
  • 9. OEO clients whose trading activity on marketplaces regulated by IIROC exceeds a daily average of 500 orders per trading day in any calendar month.
  • 10. Client account number to be included in Tag 8025 (non-crosses) or Tag 2021 and 20202 (crosses) on the order. Please see the FIX Specifications for Client Identifiers for more information. Dealer to separately report name of the “active” OEO client to IIROC using Appendix A.
  • 11. Client account number to be included in Tag 8025 (non-crosses) or Tag 2021 and 20202 (crosses) on the order. Please see the FIX Specifications for Client Identifiers for more information. Dealer to separately report name of adviser or foreign adviser equivalent to IIROC using Appendix A.
  • 12. Unique identifier of adviser or foreign adviser equivalent to be included in Tag 1 on the order.
  • 13. Trading accounts would not include proprietary accounts of the Adviser or Foreign Adviser Equivalent.
  • 14. See IIROC Notice 14-0186 – Rules Notice – UMIR and DMR – Technical – Requirements for Secure Electronic Regulatory Communication (July 24, 2014).