Market Regulation Services Inc. (RS) is seeking comment on a proposed new fee model.

RS has published a notice indicating that its board of directors has approved a new fee model that is designed to recover RS’s costs of providing regulation services to the marketplaces it serves.

According to RS Notice 2007-001, the proposed fee model will, “through the application of activity-based costing principles, ensure that the fees RS charges to provide UMIR regulation to marketplaces reflect RS’s costs of providing that service more accurately than RS’s current UMIR regulation fee model.”

RS says that it has tested the proposed fee model against actual activity levels for the months of August, September and October, 2006. This testing indicates that UMIR regulation fees in respect of trading on the TSX will decrease, while UMIR regulation fees in respect of trading on TSXV, CNQ and the ATSs will increase individually, and in the aggregate by a corresponding amount.

“This is a result of the fact that the current fee model is based solely on trading volume, even though a portion of RS’s costs to provide UMIR regulation services is fixed and therefore independent of trading volumes,” it explains. “The proposed fee model more accurately captures these fixed costs of providing UMIR regulation services, while also providing a mechanism to measure variable costs.”

“In addition, the current fee model does not assign the costs of trading review & analysis, investigations or enforcement to specific marketplaces. These costs can, however, be readily allocated to specific marketplaces (through time tracking), and in some months may be significant. Allocating these costs directly to the marketplace will eliminate a subsidy that otherwise might exist for marketplaces that have small trading volumes but that that nevertheless give rise to material – and costly – trading review & analysis, investigation and enforcement activity,” it adds.

RS also reports that it is developing a further proposal in relation to the costs to consolidate marketplace regulatory data and to develop displays and tools to provide effective cross-market monitoring. This further proposal is still subject to a board review and approval, and so will be published separately.

If the provincial regulators approve the proposed new fee model, RS will implement it as soon as possible. Comments are due by February 12.