Canadian securities regulators are proposing a series of fundamental amendments to trading rules. The proposed changes are designed to enhance market fairness and efficiency, and to address industry concerns about trading fees and market data fees.

The Canadian Securities Administrators (CSA) Thursday published for comment proposed amendments to National Instrument 23-101 Trading Rules (NI 23-101).

The amendments include: revisions to the Order Protection Rule (OPR); a cap on trading fees; plans to study a ban on market rebates; and, requirements for markets to seek annual approval for market data fees; among other things.

The CSA says that its proposals aim to address costs and inefficiencies that are related to the way order protection currently works, and to deal with concerns related to trading fees and market data fees.

Under the proposed amendments, orders would only be protected when they are displayed on a marketplace that has met certain criteria — orders only would be protected on markets that have a 5% share of trading volume in a particular security, and on exchanges that do not meet the threshold orders will only be protected for their listed securities. The proposals also introduce new requirements for specific dealer disclosure relating to their best execution policies.

The proposals also include an interim measure to cap trading fees. For equities and exchange-traded funds (ETFs) that are trading at prices of at least $1.00, the cap will be set at the same level as in the U.S. (0.30¢ per share). For penny stocks, a 0.04¢ per share cap is proposed. Additionally, the CSA plans to introduce a pilot study to examine the impact of outlawing the payment of rebates, in order to address concerns about so-called maker-taker fee models.

In terms of data fees, the CSA is proposing to require marketplaces to seek approval of these fees on an annual basis. It would also implement a transparent methodology for regulators to assess the reasonableness of real-time market data fees for professional market data subscribers, and says that it will consider additional action on these fees for non-professional market data subscribers.

“The primary objective of OPR is to promote confidence in the fairness and integrity of the market by supporting both liquidity and efficiency of the price discovery process,” said Bill Rice, chair of the CSA and president and CEO of the Alberta Securities Commission (ASC). “After identifying a number of issues associated with the current framework, the proposed amendments are intended to strike a better balance between costs and benefits, while reaffirming the CSA’s commitment to investor protection, innovation and a competitive trading environment.”

The CSA notes that it has worked closely with staff of the Investment Industry Regulatory Organization of Canada (IIROC) in developing the proposed amendments. The proposals are out for comment until September 19.