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MarketAxess Canada Limited - NI 21-101 Marketplace Operation
Headnote
Exemptions from sections 6.3, and 6.7 of National Instrument 21-101 Marketplace Operation under certain terms and conditions.
IN THE MATTER OF
NATIONAL INSTRUMENT 21-101
MARKETPLACE OPERATION (NI 21-101)
AND
IN THE MATTER OF
MARKETAXESS CANADA LIMITED
ORDER
(s. 15.1 of NI 21-101)
UPON the application (the Application) of MarketAxess Canada Limited (the Applicant) to the Director for an order pursuant to section 15.1 of NI 21-101 exempting the Applicant from the restriction in section 6.3 of NI 21-101 relating to trading Non-Canadian Fixed Income Securities (defined below);
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Director as follows.
1. The Applicant is a corporation formed under the laws of the Province of Nova Scotia and is a wholly-owned subsidiary of MarketAxess Holdings Inc., a corporation formed under the State of Delaware and a publicly traded company listed on Nasdaq.
2. The Applicant is registered as an investment dealer in Ontario and is a member of the Investment Dealers Association of Canada.
3. MarketAxess Europe Limited is a corporation formed under the laws of England and Wales and is a wholly-owned subsidiary of MarketAxess Holdings Inc and has received regulatory approval from the Financial Services Authority (FSA) in the United Kingdom to operate an alternative trading system (ATS).
4. MarketAxess Corporation, an ATS in the United States, is a corporation formed under the laws of the State of Delaware and is a wholly-owned subsidiary of MarketAxess Holdings Inc, is registered as a broker-dealer under the United States Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority.
5. MarketAxess Corporation is also registered as an international dealer under the Securities Act (Ontario).
6. The Applicant offers access to a comprehensive fixed income trading platform operated by MarketAxess Corporation and MarketAxess Europe (the Platform) which is an alternative trading system under NI 21-101. The Platform permits Institutional Subscribers (defined in Appendix A) to simultaneously request bids and offers respecting debt securities from foreign dealers. Liquidity is provided to Institutional Subscribers using the Platforms by foreign dealers, each registered as an international dealer under the Securities Act (Ontario) (the Participating Dealers).
7. The Applicant will be the sole party furnishing access to the Platform in Ontario to Institutional Subscribers.
8. The following non-Canadian debt securities are offered through the Platform:
(a) high-grade and high-yield U.S. corporate bonds;
(b) U.S. Government sponsored agency bonds (e.g. Ginnie Mae, issued by the Government National Mortgage Association; Fannie Mae, issued by the Federal National Mortgage Association; and Freddie Mac, issued by the Federal Home Loan Mortgage Corporation);
(c) emerging market bonds, which are defined as U.S. dollar or Euro-denominated bonds issued by sovereign entities or corporations domiciled in a developing country, including both high grade and non-investment grade debt; and
(d) European high-grade corporate bonds, which are defined as corporate bonds issued by entities domiciled in Europe
(together, Non-Canadian Fixed Income Securities).
9. The Platform also offers credit default swaps.
10. Participating Dealers and the Institutional Subscribers are responsible for execution, clearing and settlement of trades through the Platform using their customary procedures.
11. Section 6.3 of NI 21-101 provides that an ATS can only execute trades in Corporate Debt Securities. The definition of Corporate Debt Security only includes debt securities issued in Canada by companies or corporations that are not listed on a recognized exchange or quoted on a recognized quotation and trade reporting system. The Applicant has requested an exemption from section 6.3 of NI 21-101 to be able to offer Non-Canadian Fixed Income Securities to Institutional Subscribers in Ontario.
AND UPON the Director being satisfied to do so would not be prejudicial to the public interest;
IT IS ORDERED pursuant to section 15.1 of NI 21-101 that the Applicant may trade Non-Canadian Fixed Income Securities provided that:
1. The Platform is only made available in Canada to Institutional Subscribers; and
2. Dealer Participants trading with Institutional Subscribers will be registered as, and maintain registration as, international dealers in Ontario.
April 2, 2008
"Brigitte Geisler"
SCHEDULE A
In this order, "Institutional Subscriber" means:
(a) a bank listed in Schedule I or II of the Bank Act (Canada), or an authorized foreign bank listed in Schedule III of that Act;
(b) the Business Development Bank incorporated under the Business Development Bank Act (Canada);
(c) a loan corporation, trust corporation, savings company or loan and investment society registered under the Loan and Trust Corporations Act (Ontario) or under the Trust and Loan Companies Act (Canada);
(d) a co-operative credit society, credit union central, federation of caisses populaires, credit union or league, or regional caisse populaire, or an association under the Cooperative Credit Associations Act (Canada), in each case, located in Canada;
(e) a company licensed to do business as an insurance company in a province of Canada;
(f) a subsidiary of any company referred to in paragraph (a), (b), (c), (d) or (e), where the company owns all of the voting shares of the subsidiary;
(g) a person or company registered under the securities legislation of the applicable province of Canada as an adviser or dealer, other than a limited market dealer;
(h) the government of Canada or Ontario, or any crown corporation, instrumentality or agency of the Canadian federal or Ontario government;
(i) any Ontario municipality or any instrumentality or agency thereof;
(j) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any instrumentality or agency thereof;
(k) a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a provincial pension commission or similar regulatory authority in Ontario;
(l) a registered charity under the Income Tax Act (Canada);
(m) a company, limited partnership, limited liability partnership, trust or estate, other than a mutual fund or non-redeemable investment fund, that had net assets of at least Cdn.$5,000,000 as reflected in its most recently prepared financial statements;
(n) a person or company, other than an individual, that is recognized by the Ontario Securities Commission as an "exempt purchaser" or "accredited investor" or, under National Instrument 45-106 as an "accredited investor";
(o) a mutual fund or non-redeemable investment fund that, in Ontario, distributes its securities only to persons or companies that are accredited investors;
(p) a mutual fund or non-redeemable investment fund that, in Ontario, distributes its securities under a prospectus for which a receipt has been granted;
(q) an account that is fully managed by a registered portfolio manager or an entity listed in paragraphs (a), (c), (d) or (e);
(r) an entity organized outside of Canada that is analogous to any of the entities referred to in paragraphs (a) through (f) and paragraph (k) in form and function; and
(s) a person or company in respect of which all of the owners of interests, direct or indirect, legal or beneficial, are persons or companies that are Institutional Investors; provided that:
(i) two or more persons who are the joint registered holders of one or more securities of the issuer shall be counted as one beneficial owner of those securities; and
(ii) a corporation, partnership, trust or other entity shall be counted as one beneficial owner of securities of the issuer unless the entity has been created or is being used primarily for the purpose of acquiring or holding securities of the issuer, in which event each beneficial owner of an equity interest in the entity or each beneficiary of the entity, as the case may be, shall be counted as a separate beneficial owner of those securities of the issuer.