The Investment Industry Regulatory Organization of Canada (IIROC) is proposing changes to the trading rules to address concerns that too many small orders are being traded in the dark without price improvement, the self-regulatory organization (SRO) announced Thursday.
Currently, the rules require that orders for more than 50 standard trading units (STUs), or orders worth more than $100,000, can execute with a dark order at the best bid or ask price; any order below these thresholds must execute at a better price when trading with a dark order.
IIROC is proposing to add a minimum order value of $30,000 to the current threshold of 50 STUs, so that orders could only execute against a dark order without receiving a better price “if it is sufficiently large in both volume (over 50 STUs) and value (over $30,000),” the SRO says in a notice.
After reviewing trading data for the past couple of years, and observing a notable increase in dark trading, IIROC has concluded that the existing threshold “does not effectively identify small orders of low-priced securities and therefore does not adequately meet the policy objective of the dark order requirements to preserve price discovery.”
The SRO that it believes that the combination of both a minimum dollar value, and a minimum volume, “will better capture small orders, especially those in low-priced securities.”
The proposals are out for comment until March 15, 2019.