The Investment Industry Association of Canada is calling on the Department of Finance to automatically designate stock exchanges that are approved by securities regulators so that investors can hold the products they trade in registered accounts.
In a letter to Finance dated May 24, the IIAC recommends that once they are approved by securities regulators for operation, Canadian exchanges “should be qualified automatically as designated exchanges on which many trade investments can be held in Canadian investors’ RRSPs, RRIFs, DPSPs and TFSAs.”
Income tax rules require that the holdings of registered accounts trade on “well-governed, regulated and transparent markets”.
In its letter, the IIAC says that it supports the creation of new exchanges that will promote liquidity, and thereby encourage economic growth. And, it says, that to receive regulatory approval these exchanges will have been subject to extensive due diligence by the regulators, and will be face ongoing oversight, too. While the IIAC concedes that new exchanges will initially lack the liquidity of more established venues, it maintains that three factors mitigate this concern: extensive disclosure requirements, market pressure from sophisticated investors, and the suitability obligations of retail advisors.
It says that expediting designation “will more quickly contribute to liquidity, promote capital formation and enhance the competitiveness of Canadian capital markets.”
The IIAC also specifically, supports the request of Alpha Exchange Inc. for designation of its markets, and a request from the TMX Group for the addition of NEX to the TSX Venture Exchange’s designation.