Provincial securities regulators are cutting down on the fee relief they’ve given firms with market maker obligations.

Market Integrity Notice 2004-028 from Market Regulation Services Inc. (RS) reports that regulators in Alberta, British Columbia , Manitoba, Ontario and Quebec have agreed to continue exempting trades made due to market maker obligations from the payment of the regulation fee charged by RS.

However, effective October 1, the exemption will be limited to a 70% reduction of the fee that would otherwise be payable for such trades.

The exemption was initially granted in June 2003, subject to the following conditions:

  1. RS would review the effect of the exemption;
  2. the exemption expires July 31, 2004, unless the review finds the exemption is justified in light of the regulatory function performed by market makers; and
  3. the exemption only applies to market makers who are obliged to provide both a reasonably continuous two-sided market and to execute trades in amounts less than a specified minimum number, and to perform a regulatory function.

RS prepared and submitted a report on the contribution of market makers and the market making system to market integrity and the ability of RS to perform its functions as a regulation services provider to regulators in July.

In order to allow the regulators time to evaluate the report, the initial exemption was extended until September 30. Following a review of the report, the regulators concluded that the exemption should be continued, but limited to a 70% reduction.