Proposed Provisions Respecting Order Execution Only Service Eligibility and Adviser Identifiers

Summary/details:

IIROC is requesting comment on proposed amendments (Proposed Amendments) to Dealer Member Rule 3200 Minimum Requirements for Dealer Members Seeking Approval Under 1300(T) to Offer an Order-Execution Only Service (DMR 3200) that would:

  • 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.  

IIROC believes that the use of OES may present risks similar to other methods of third-party electronic access.  Prohibiting OES Dealers from providing OES to a registered dealer would help ensure registered dealers:

  • use an appropriate channel to access marketplaces for their registration category
  • do not have the ability to use marketplace access channels where they are not subject to the full set of IIROC rules when conducting dealer-type activity on a marketplace.

Identifying registered advisers and foreign adviser equivalents with control over an OES account would:

  1. improve our surveillance capability and help us better detect unusual orders and trading patterns
  2.  be consistent with the current requirements for direct electronic access (DEA) and routing arrangements (RA), thereby ensuring that similar requirements exist regardless of the marketplace access channel used
  3. better address the risks of electronic trading. 
  • 1Marketplace refers to any marketplace where IIROC is the regulation services provider.

Date opened: July 26, 2018

Date closed: October 24, 2018

Status: Concluded

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