In the wake of the U.S. Securities and Exchange Commission’s (SEC) decision to allow trading in sub-penny increments, Canadian regulators are planning reforms to keep pace with the U.S. markets.
Earlier this week, the SEC announced a series of significant market structure reforms, including a planned reduction in the minimum trading increment from one cent to 0.5 cents; along with a reduction in access fee caps (from 0.3 cents to 0.1 cents) to reflect the lower minimum trading increment.
The new rules, which will take effect Nov. 3, are intended to reduce trading costs and improve market quality, the SEC said.
On Friday, Canadian provincial regulators signalled that they intend to follow the SEC’s lead.
Earlier this year, while the U.S. reforms were under consideration, the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) carried out a consultation into the expected implications of the SEC’s proposed changes for Canadian markets.
The regulators reported that “commenters were generally of the view that, given the interconnectedness of U.S. and Canadian equity markets, Canadian trading increments for inter-listed securities … should be harmonized with the finalized SEC minimum pricing increments.” They added that commenters also supported harmonizing equity trading fee caps with the U.S. too.
As a result, the Canadian regulators “are currently finalizing work on their respective rule amendments and will publish them for comment,” they said Friday. “This is to ensure trading in Canadian inter-listed securities remains competitive, in light of the adoption of the [SEC’s final rules].”
The CSA and CIRO will not be seeking to make any changes to the rules around the transparency of certain odd-lot orders, they said, noting that there was “little support for a similar change in Canada” in the consultation.