The Ontario Securities Commission will require stock exchanges and alternative trading systems to publish planned changes to various aspects of their operations. Details of the new policy are set out in a staff notice published by the OSC on Friday.

Effective October 9, exchanges and ATSs will publish notices describing new order types, changes to existing order types, and to other issues relating to trading, such as procedures governing the entry and display of orders on marketplace systems.

On proposing a change to these facets of their operations, at least 45 days prior to implementation, exchanges and ATSs will be required to file the proposed change with the commission and publish a notice of the proposed change in the OSC Bulletin.

“The marketplace’s notice should describe the proposed change, the rationale for the change, the expected impact of the change, any consultations the marketplace undertook in formulating the change, discussion of any alternatives considered by the marketplace and, if applicable, whether the proposed change currently exists in the market.”

“This new process recognizes the need for a similar degree of transparency for exchanges and ATSs in certain areas,” said Susan Greenglass, director of market regulation at the OSC.

The notice explains that OSC staff have been examining the regulatory requirements for stock exchanges and ATSs to consider ways to align the processes for both types of trading system, where appropriate. The first phase of this review has been focused on initiatives that can be taken in the short-term and on the transparency of filings by exchanges and ATSs in areas where their operations are similar. The next phase will be a review of the requirements set out in the CSA’s trading rules to ensure that they “provide for flexibility in a competitive environment while providing regulators with the information they need to meet their mandate”.

TMX Group welcomed the announcement, calling it an important step in the right direction: “For Canada’s capital markets to succeed and thrive in the long term, all trading venues – whether exchanges or ATSs – must have the same transparency requirements,” said Thomas Kloet, CEO of TMX Group, in a statement. “We welcome the OSC’s recognition of the need to bring more transparency to the trading activities of Canada’s alternative trading venues.”

But Kloet said the move falls short of the necessary transparency requirements. He noted that information about an ATS’s current operations, including existing order types, could continue to be hidden from the public.

“Canadians need access to the complete picture,” he said. “There is still a long way to go to establish a level playing field free of some of the conflicts of interest that exist in the current marketplace.”

TMX Group calls for the OSC to take further action on the transparency issue, and urges the regulators to act quickly.

IE