The Investment Industry Regulatory Organization of Canada has re-published proposed rules that aim to require dealers to set fair prices for over-the-counter securities.

The proposed rules were previously published for a 90-day comment period in April 2009.

In response to the comments received and input from the Canadian Securities Administrators, the rule was re-published Friday to exclude primary market transactions and OTC derivatives.

The revised amendments are now out for another 30-day comment period, due July 5.



The proposed amendments will require dealers to fairly and reasonably price securities traded in OTC markets, except primary market transactions and OTC derivatives. The amendments would also require dealers to disclose yield to maturity on trade confirmations for fixed-income securities and notations for callable and variable rate securities; and, also disclose on trade confirmations sent to retail clients a statement indicating that they have earned remuneration on those transactions.

IIROC says that the general purpose of the proposed amendments “is to enhance the fairness of pricing and transparency of OTC market transactions.” In particular, they are intended to ensure that retail clients are being provided fair prices for OTC securities, and that there is sufficient disclosure to enable clients and their brokers to confirm that the price being offered is reasonable in relation to prevailing market conditions.

“By placing an obligation for fair pricing of OTC traded securities squarely on the [dealer], IIROC is ensuring that the [dealer] has in place, and supervises and enforces, policies and procedures that ensure that the price paid or received by the end client is a fair and reasonable one, taking into account the surrounding contextual factors, including the price prevailing in the market at that time for that security and similar or comparable securities,” it says.

IIROC also plans to implement a system to monitor dealers’ OTC securities trading which would allow it to identify circumstances where trade prices do not correspond with the prevailing market.

IE