Canadian securities regulators have issued a consultation paper on the development of dark pools in Canada.

Dark pools are marketplaces that offer no pre-trade transparency, while orders that have limited or no transparency are known as dark orders. Traders largely use dark pools to ensure anonymity and to minimize market impact costs.

The Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada published the joint consultation paper Wednesday, outlining some of the recent developments in Canadian market structure, including the introduction of dark pools, dark orders, the interaction of visible and dark orders on the same trading platform, and the introduction of smart order routers.

The paper, which is open for public comment until December 29, discusses the evolution of the Canadian market, and proposes a variety of specific issues for consultation, such as transparency, liquidity, fairness and information leakage. The regulators solicit comment on those issues, and promise to conduct a roundtable to discuss them in the future.

“It has become clear that there are different views on the potential impact of some recent developments. As a result, we have decided to solicit feedback to encourage discussion about some of these recent changes,” the paper explains.

The paper explicitly does not address a variety of other market issues, such as locked and crossed markets, trading fees, data fees, direct market access, high frequency trading, and proposed amendments to the ATS rules.

“New developments in market structure can have far reaching impact,” said Jean St-Gelais, chair of the CSA and president and chief executive officer of the Autorité des marchés financiers. “It is important that we engage all participants in the market including investors, both retail and institutional, in this important dialogue.”

IE