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IIROC “Tips For Traders”Mont Tremblant
August 22, 2015
Mike Prior
Vice-President, SurveillanceKevin McCoy
Acting Vice-President, Market Regulation Policy
IIROC Presenters
• Surveillance Rulings• Dark Anti-Avoidance• Un-protected Transparent
Marketplaces
Topics
IIROC Trade Rulings (per 100M Trades)
Surveillance Rulings
What is the better approach to an erroneous trade?
A. No rulings – trade remains on tape and dealer must settle trade
B. Erroneous trades beyond a tolerable threshold are cancelled from public record but dealers are required to settle
C. US Approach – erroneous trades beyond a tolerable threshold are cancelled
D. Current IIROC approach – erroneous trades beyond a tolerable threshold are price adjusted
A. B. C. D.
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SSCB Rulings
How should IIROC deal with unreasonable trades that occur after an SSCB is triggered but prior to the halt?A. No ruling – all trades stand regardless
of price
B. Trades beyond tolerable threshold are cancelled regardless of price movement following resumption (status quo)
C. Trades beyond tolerable threshold are price adjusted regardless of price movement following resumption
D. Wait until trading resumes then cancel if price has reverted; no ruling if price continues to move in the same direction
A. B. C. D.
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• Intended to further the policy objective of pre-trade transparency
supported by the Order Exposure Rule and to achieve consistency
in the application of the requirement to obtain a “better price” under
the Canadian dark liquidity framework
• Re-Publication was intended to foster public debate regarding the
best approach to balance the effects that an increase in order
routing away from Canadian markets would have on the health of
our markets as a whole
IIROC Dark Rule Anti-Avoidance
• IIROC hosted a roundtable to discuss alternatives to the dark rules
anti-avoidance provisions and solutions respecting routing of retail
orders to U.S Dealers
• 8 proposals were presented
• A summary of the roundtable discussions will be included in future
IIROC policy publications on this topic
IIROC Dark Rule Anti-Avoidance
What do you think would be the more effective solution in dealing with the threat of increased southbound order flow?
A. Eliminate or reduce maker/taker fees
B. Let marketplaces develop solutions
C. Re-evaluate or repeal dark rules
D. Enhance best execution requirements
E. No solution needed – there is no problem A. B. C. D. E.
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What would be the greatest negative impact if the Dark Rules Anti-Avoidance Proposal were to be implemented?
A. Not able to achieve best execution for clients
B. Technology build to comply with Proposal
C. Discourage northbound order flow
D. No material negative impact
A. B. C. D.
0 000
In your opinion, how material of an impact does southbound routing of retail flow have on the Canadian market?
A. Significant impact
B. Moderate impact
C. Small impact
D. No impact
A. B. C. D.
0 000
• Will accommodate the terms and conditions of the OSC approval of
amendments to Alpha Exchange Inc.'s trading policies
• Align with proposed amendments by the CSA to CP 23-101
regarding the interpretation of “protected order”
Un-Protected Transparent Marketplace
• Revise the definition of “protected marketplace”
• “Best bid price” and “best ask price”
• Best execution considerations
• Client-principal trading considerationso “Best Available Price”
Un-Protected Transparent Marketplaces
If the proposed changes related to unprotected transparent marketplaces and OPR are approved, what will be your firm’s approach in implementing these changes?A. Will disconnect immediately from
unprotected marketplaces
B. Will remain connected to unprotected marketplaces and make no revisions to routing tables
C. Will remain connected to unprotected marketplaces but lower their priority in the routing table A. B. C.
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What do you believe would be the more significant challenge associated with protected and unprotected lit marketplaces?
A. Dual quotes to consider (protected NBBO and consolidated NBBO)
B. On-going monitoring of un-protected marketplaces for compliance with Best-Execution
C. Managing client-principal trading compliance (UMIR 8.1)
A. B. C.
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• As a result of the NYSE system outage on July 8, 2015, regulators are looking at ways to respond should a similar incident occur in Canada
• While NYSE market share is now less than 25%, the TSX retains about 60% of market share by volume
• Is price discovery efficient when the TMX is off line?• Is it fair to continue trading while 60% of investors orders are captive
in an inaccessible market?• Is it feasible to move orders from a disabled market to other
marketplaces?
Preamble to bonus question eight
If a major marketplace shuts down as a result of technical problems, what is the more reasonable regulatory response?A. Do nothing. All remaining marketplaces
continue to trade. Captive orders are not protected and increased volatility is tolerated.
B. All remaining marketplaces continue to trade. Unreasonable trades that result from reduced liquidity are subject to IIROC rulings.
C. Halt trading on remaining marketplaces for the remainder of the day (or duration of the interruption). Trading on interlisted securities can continue on US markets.
A. B. C.
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Questions?