Proposed Guidance on Applicable Trading Increments

Questions

While comment is sought on all aspects of the Proposed Guidance, CIRO specifically requests comment on the following question:

Question 1

Rule 612 requires the primary listing exchange in the United States to measure the time weighted average quoted spread for each NMS stock, a measurement that determines the applicable minimum pricing increment. The primary listing exchange is also required to provide the applicable minimum pricing increment to various information processors for dissemination. We are soliciting feedback on the best approach to disseminating the applicable trading increment in Canada based on the data disseminated in the United States.

Appendix A

Guidance on Applicable Trading Increments

Executive Summary

The Canadian Investment Regulatory Organization (CIRO) is publishing guidance that establishes the process for determining and communicating the applicable trading increment for each security that is a U.S. inter-listed security,2 and clarifies that the applicable trading increment for certain U.S. inter-listed securities is harmonized with the applicable minimum pricing increment for the same securities in the United States as established in accordance with Rule 612 of Regulation National Market System (Regulation NMS). Pursuant to Rule 6.1(1.1) of the Universal Market Integrity Rules (UMIR), CIRO will designate the applicable trading increment for each U.S. inter-listed security on a semi-annual basis and will publish a technical rules bulletin that lists each U.S. inter-listed security and the applicable trading increment for the next 6 months.

In this guidance, all rule references are to UMIR unless otherwise specified.

1. Trading increments in UMIR

“Trading increment” is defined in UMIR 1.1 with reference to UMIR 6.1 Entry of Orders to a Marketplace.3 Correspondingly, UMIR 6.1 establishes the minimum increment at which an order can be entered to trade on a marketplace. This minimum trading increment applicable to the entry of an order is dependent on both the price of the order and whether the security is a U.S. inter-listed security.

For a security that is not a U.S. inter-listed security, UMIR 6.1 prohibits the entry of an order to trade on a marketplace at a price that is in an increment smaller than:

• $0.01 CAD for orders with a price equal to or greater than $0.50 CAD
• $0.005 CAD for orders with a price less than $0.50 CAD

For a security that is a U.S. inter-listed security, UMIR 6.1 prohibits the entry of an order to trade on a marketplace at a price that is an increment smaller than the applicable increment as designated by CIRO.

2. Co-ordination of trading increments with the United States for a U.S. inter-listed security

The Canadian and United States markets are highly integrated, notably due to the significant trading activity in securities that are listed on both a Canadian exchange and an exchange in the United States. Given the degree of interconnectivity and the ease with which a U.S. inter-listed security can be traded in either Canada or the United States, it is important that the Canadian market remains competitive relative to the United States.

On September 18, 2024, the United States Securities and Exchange Commission (SEC) adopted final rule amendments to Rule 612 of Regulation NMS, that establish variable minimum pricing increments for securities with a price equal to or greater than $1.00 USD. The SEC established November 3, 2025, as the compliance dates for these changes.

Pursuant to Rule 612 of Regulation NMS, the primary listing exchange in the United States is responsible for calculating and disseminating minimum pricing increments based on United States trading data during an evaluation period as set out in Rule 612. The applicable minimum pricing increment for each security in the United States with a price equal to or greater than $1.00 USD (including U.S. inter-listed securities), may change on a semi-annual basis.

To ensure harmonization with the United States where applicable, aligned with the SEC effective date of November 3, 2025, where the minimum pricing increment of a U.S. inter-listed security may change on a semi-annual basis pursuant to Rule 612 of Regulation NMS (i.e., for NMS stocks priced equal to or greater than $1.00 USD), CIRO will harmonize the applicable trading increment in Canada for that U.S. inter-listed security with the applicable minimum pricing increment in the United States. For purposes of harmonization, no currency conversion will be applied to Canadian trading increments (e.g., a $0.005 USD minimum pricing increment in the United States will harmonize to a $0.005 CAD trading increment in Canada).

2.1 Process for communication of applicable trading increments for U.S. inter-listed securities

Pursuant to UMIR 6.1(1.1), prior to November 3, 2025, and on a semi-annual basis thereafter, CIRO will publish a technical rules bulletin that lists each U.S. inter-listed security and the applicable trading increment for the next 6 months. This will include both U.S inter-listed securities that are subject to a variable minimum pricing increment pursuant to Rule 612 of Regulation NMS (meaning, priced equal to or greater than $1.00 USD in the United States) as well as those that are not.

• 2A “U.S. inter-listed security” is defined in UMIR 1.1 to mean “… a listed security that is also listed on an exchange that is registered as a “national securities exchange” in the United States of American under section 6 of the Securities Exchange Act of 1934.”
• 3UMIR 1.1 defines a “trading increment” to mean “… the minimum difference in price at which orders may be entered in accordance with Rule 6.1”.