Market Regulation Services Inc. (RS) has published an interim report detailing the progress of its strategic review of the trading rules.

The report sets out 10 strategic principles that RS proposes should guide the evolution of the trading rules. For example, the rules should promote competition, should be harmonized with other jurisdictions as much as possible, and should provide a level playing field by applying to all types of transactions and market players.

The report also proposes that RS should have sufficient sanctioning power at its disposal, and the means to enforce sanctions.

The report also provides an overview of the status of 10 strategic issues, such as best execution, trade-throughs, frontrunning, short selling, trade supervision, timely disclosure and sanctions. And, it notes that RS has initiated a research program that will combine internal and external empirical studies, international comparative analyses and academic literature reviews on various issues raised in the strategic review.

Some of the ongoing research includes:

  • plans to organize more focus groups to discuss trade supervision and compliance issues;
  • a review of uniform timely disclosure rules;
  • RS intends to commission an empirical analysis of order sizes, liquidity and market impact costs on the TSX and TSX Venture to assess the appropriateness of the current order exposure threshold;
  • RS is engaging in an analysis of the trading supervision practices of market participants over their direct access clients;
  • RS is conducting a comparative analysis of the sanctioning powers of market integrity regulators in other jurisdictions; and
  • RS intends to commission research on cross-market surveillance issues and practices, and to conduct an internal review of inter-jurisdictional issues with other markets and regulators.

    RS also notes in the report that it believes that, “there is considerable scope to better clarify and communicate its expectations for trading supervision and compliance”.

    In the fall, it plans to publish a position paper that will set out: the final set of strategic principles that RS has adopted; its proposals; and, a definitive timeline for the introduction of specific rule amendments.

    RS intends to introduce all of the amendments by the spring of 2006.