The Ontario Securities Commission has ruled that marketplaces will no longer be allowed to follow the practice known as “jitney preferencing”, amid concerns about its impact on fair access to markets.
In today’s OSC Bulletin, the commission indicates that its staff has concerns about order allocation methodologies that allow for orders that are marked jitney to participate in firm priority order allocation methodologies.
Jitney orders allow dealers to submit trades under another dealer’s trading number. In the bulletin, the OSC indicates that its staff are concerned that, “by permitting two dealers to bypass committed orders in the book, jitney preferencing could lead to the formation of ‘liquidity consortiums’, where dealers can make their order flow available to a select group of market participants through jitneying.”
The regulator says that it believes jitney preferencing negatively impacts fair access to trading on marketplaces, and that marketplaces should not facilitate this activity through their order allocation methodologies.
There are currently three marketplaces that do support jitney preferencing, and the OSC reports that it has directed these firms to change their order allocation methodologies to no longer support it. It expects that the process of disabling this functionality will be completed by the end of the first quarter of 2013.