The Investment Industry Regulatory Organization of Canada has published a notice reminding members of their best execution obligations when trading junior stocks, which are now more widely traded on multiple marketplaces.
IIROC notice 09-0244 reminds market players of their best execution and best price obligations under the trading rules for securities that are listed on the TSX Venture Exchange that are also trading on other marketplaces. It stresses that this does not change the guidance that the IIROC has previously issued on how to comply with these obligations for securities trading on multiple marketplaces, it “simply reminds participants of their obligations given that securities listed on the TSXV now trade on other marketplaces.”
It reports that Liquidnet Canada Inc. was the first ATS to trade securities listed on the TSXV back in March 2007. Trading of TSXV-listed securities followed on MATCH Now and Omega ATS Limited in 2008, however, by December 31, 2008, only 223 trades in a security listed exclusively on TSXV had been made on an ATS.
This year, the full TSXV stock list became eligible for trading on Pure Trading and on Alpha Trading Systems. During the first quarter, a total of 1,884 trades with a volume of 26,655,998 shares in TSXV-listed securities occurred on these markets but, during the second quarter of 2009, the number of trades expanded significantly to 19,342 trades with a volume of 156,763,422.
“While more than 98% of trades and volume in TSXV-listed securities continued to be made through the TSXV during the first six months of 2009, the increase in trading activity in TSXV-listed securities on the ATSs indicates that trading opportunities in TSXV-listed securities are increasingly available on the ATSs,” it says. “Participants must take this increased liquidity on multiple marketplaces into account when making determinations with respect to their ‘best execution’ and ‘best price’ obligations.”
The IIROC says it expects each participant to monitor the changes in the liquidity available on each marketplace for securities listed on the TSXV and that each participant will review their policies and procedures for both ‘best execution’ and ‘best price’ to take account of any changes in the liquidity patterns.
Firms are expected to “take into account order and trade information from all marketplaces that trade the same securities when discharging their best execution obligations. Where appropriate, a participant who does not have trading access to a particular marketplace would be expected to make arrangements with another dealer who is a participant,” it says. “In the view of IIROC, a participant would be expected to make such arrangements if the particular marketplace had demonstrated that there is a reasonable likelihood that the marketplace will have liquidity for a specific security relative to the size of the client order.”
IE
IIROC issues reminder on best execution obligations when trading junior stocks
Firms expected to take into account order and trade information from all marketplaces that trade the same securities
- By: James Langton
- August 30, 2009 August 30, 2009
- 15:30