Securities Law & Instruments

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This document is an unofficial consolidation of all amendments to National Instrument 21-101- Marketplace Operation and its Companion Policy and applies from January 1, 2011. This document is for reference purposes. The unofficial consolidation of the Instrument is not an official statement of the law.


National Instrument 21-101
Marketplace Operation



Table of Contents


PART TYPE
PART 1
1.1
1.2
1.3
1.4		 DEFINITIONS AND INTERPRETATION
Definitions
Interpretation - Marketplace
Interpretation - Affiliated Entity, Controlled Entity and Subsidiary Entity
Interpretation - Security
PART 2
2.1		 APPLICATION
Application
PART 3
3.1
3.2		 EXCHANGE - RECOGNITION
Application for Recognition
Change in Information After Recognition
PART 4
4.1
4.2		 QUOTATION AND TRADE REPORTING SYSTEM - RECOGNITION
Application for Recognition
Change in Information After Recognition
PART 5 REQUIREMENTS APPLICABLE ONLY TO RECOGNIZED EXCHANGES AND RECOGNIZED QUOTATION AND TRADE REPORTING SYSTEMS
5.1
5.2
5.3
5.4
5.5
5.6		 Access Requirements
No Restrictions on Trading on Another Marketplace
Public Interest Rules
Compliance Rules
Filing of Rules
Filing of Annual Audited Financial Statements
PART 6
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
6.12
6.13		 REQUIREMENTS APPLICABLE ONLY TO ATSs
Registration
Registration Exemption Not Available
Securities Permitted to be Traded on an ATS
Reporting Requirements
Ceasing to Carry on Business as an ATS
Notification of Intent to Carry on Exchange Activities
Notification of Threshold
Confidential Treatment of Trading Information
Name
Risk Disclosure for Trades in Foreign Exchange-Traded Securities
Risk Disclosure to Non-Registered Subscribers
No Restrictions on Trading on Another Marketplace
Access Requirements
PART 7 INFORMATION TRANSPARENCY REQUIREMENTS FOR MARKETPLACES DEALING IN EXCHANGE-TRADED SECURITIES AND FOREIGN EXCHANGE-TRADED SECURITIES
7.1
7.2
7.3
7.4
7.5
7.6		 Pre-Trade Information Transparency - Exchange-Traded Securities
Post-Trade Information Transparency - Exchange-Traded Securities
Pre-Trade Information Transparency - Foreign Exchange-Traded Securities
Post-Trade Information Transparency- Foreign Exchange-Traded Securities
Consolidated Feed - Exchange-Traded Securities
Compliance with Requirements of an Information Processor
PART 8 INFORMATION TRANSPARENCY REQUIREMENTS FOR MARKETPLACES DEALING IN UNLISTED DEBT SECURITIES, INTER-DEALER BOND BROKERS AND DEALERS
8.1
8.2
8.3
8.4
8.5
8.6		 Pre-Trade and Post-Trade Information Transparency Requirements - Government Debt Securities
Pre-Trade and Post-Trade Information Transparency Requirements - Corporate Debt Securities
Consolidated Feed - Unlisted Debt Securities
Compliance with Requirements of an Information Processor
Filing Requirements for the Information Processor
Exemption for Government Debt Securities
PART 9 [Repealed]
PART 10
10.1
10.2
10.3		 TRADING FEES FOR MARKETPLACES
Disclosure of Trading Fees by Marketplaces
[Repealed]
Discriminatory Terms
PART 11
11.1
11.2
11.2.1
11.3
11.4
11.5		 RECORDKEEPING REQUIREMENTS FOR MARKETPLACES
Business Records
Other Records
Transmission in Electronic Form
Record Preservation Requirements
Means of Record Preservation
Synchronization of Clocks
PART 12
12.1
12.2
12.3		 CAPACITY, INTEGRITY AND SECURITY OF MARKETPLACE SYSTEMS
System Requirements
System Reviews
Availability of Technology Specifications and Testing Facilities
PART 13
13.1		 CLEARING AND SETTLEMENT
Clearing and Settlement
PART 14
14.1
14.2
14.3
14.4
14.5		 REQUIREMENTS FOR AN INFORMATION PROCESSOR
Filing Requirements for an Information Processor
Change in Information
Ceasing to Carry on Business as an Information Processor
Requirements Applicable to an Information Processor
System Requirements
PART 15
15.1		 EXEMPTION
Exemption
PART 16
16.1		 EFFECTIVE DATE
Effective Date
FORM 21-101 F1 INFORMATION STATEMENT - EXCHANGE OR QUOTATION AND TRADE REPORTING SYSTEM
FORM 21-101 F2 INITIAL OPERATION REPORT - ALTERNATIVE TRADING SYSTEM
FORM 21-101 F3 QUARTERLY REPORT OF ALTERNATIVE TRADING SYSTEM ACTIVITIES
FORM 21-101 F4 CESSATION OF OPERATIONS REPORT FOR ALTERNATIVE TRADING SYSTEM
FORM 21-101 F5 INITIAL OPERATION REPORT FOR INFORMATION PROCESSOR
FORM 21-101 F6 CESSATION OF OPERATIONS REPORT FOR INFORMATION PROCESSOR

 

National Instrument 21-101
Marketplace Operation 

 

PART 1 DEFINITIONS AND INTERPRETATION 

1.1 Definitions - In this Instrument 

"alternative trading system" means a marketplace that 

  1. is not a recognized quotation and trade reporting system or a recognized exchange, and
  2. does not
    1. require an issuer to enter into an agreement to have its securities traded on the marketplace,
    2. provide, directly, or through one or more subscribers, a guarantee of a two-sided market for a security on a continuous or reasonably continuous basis,
    3. set requirements governing the conduct of subscribers, other than conduct in respect of the trading by those subscribers on the marketplace, and
    4. discipline subscribers other than by exclusion from participation in the marketplace;

"ATS" means an alternative trading system;

"corporate debt security" means a debt security issued in Canada by a company or corporation that is not listed on a recognized exchange or quoted on a recognized quotation and trade reporting system or listed on an exchange or quoted on a quotation and trade reporting system that has been recognized for the purposes of this Instrument and NI 23-101, and does not include a government debt security;

"exchange-traded security" means a security that is listed on a recognized exchange or is quoted on a recognized quotation and trade reporting system or is listed on an exchange or quoted on a quotation and trade reporting system that is recognized for the purposes of this Instrument and NI 23-101;

"foreign exchange-traded security" means a security that is listed on an exchange, or quoted on a quotation and trade reporting system, outside of Canada that is regulated by an ordinary member of the International Organization of Securities Commissions and is not listed on an exchange or quoted on a quotation and trade reporting system in Canada;

"government debt security" means

  1. a debt security issued or guaranteed by the government of Canada, or any province or territory of Canada,
  2. a debt security issued or guaranteed by any municipal corporation in Canada, or secured by or payable out of rates or taxes levied under the law of a jurisdiction of Canada on property in the jurisdiction and to be collected by or through the municipality in which the property is situated,
  3. a debt security of a crown corporation,
  4. in Ontario, a debt security of any school board in Ontario or of a corporation established under section 248(1) of the Education Act (Ontario), or
  5. in Québec, a debt security of the Comité de gestion de la taxe scolaire de I'île de Montréal

    that is not listed on a recognized exchange or quoted on a recognized quotation and trade reporting system or listed on an exchange or quoted on a quotation and trade reporting system that has been recognized for the purposes of this Instrument and NI 23-101;

“IIROC” means the Investment Industry Regulatory Organization of Canada;

"information processor" means any person or company that receives and provides information under this Instrument and has filed Form 21-101F5;

"inter-dealer bond broker" means a person or company that is approved by IIROC under IIROC Rule 36 Inter-Dealer Bond Brokerage Systems, as amended, and is subject to IIROC Rule 36 and IIROC Rule 2100 Inter-Dealer Bond Brokerage Systems, as amended;

"market integrator" [repealed]

"marketplace" means

  1. an exchange,
  2. a quotation and trade reporting system,
  3. a person or company not included in paragraph (a) or (b) that
    1. constitutes, maintains or provides a market or facility for bringing together buyers and sellers of securities,
    2. brings together the orders for securities of multiple buyers and sellers, and
    3. uses established, non-discretionary methods under which the orders interact with each other, and the buyers and sellers entering the orders agree to the terms of a trade, or
  4. a dealer that executes a trade of an exchange-traded security outside of a marketplace,

    but does not include an inter-dealer bond broker;

"marketplace participant" means a member of an exchange, a user of a quotation and trade reporting system, or a subscriber of an ATS; 

“member” means, for a recognized exchange, a person or company 

  1. holding at least one seat on the exchange, or
  2. that has been granted direct trading access rights by the exchange and is subject to regulatory oversight by the exchange,

    and the person or company’s representatives;

"NI 23-101" means National Instrument 23-101 Trading Rules; 

"order" means a firm indication by a person or company, acting as either principal or agent, of a willingness to buy or sell a security;

"recognized exchange" means 

  1. in Ontario, an exchange recognized by the securities regulatory authority to carry on business as a stock exchange,
  2. in Québec, an exchange recognized by the securities regulatory authority under securities or derivatives legislation as an exchange or self-regulatory organization;
  3. in every other jurisdiction, an exchange recognized by the securities regulatory authority as an exchange, self-regulatory organization or self-regulatory body;

"recognized quotation and trade reporting system" means

  1. in every jurisdiction other than British Columbia and Québec, a quotation and trade reporting system recognized by the securities regulatory authority under securities legislation to carry on business as a quotation and trade reporting system,
  2. in British Columbia, a quotation and trade reporting system recognized by the securities regulatory authority under securities legislation as a quotation and trade reporting system or as an exchange; and
  3. in Québec, a quotation and trade reporting system recognized by the securities regulatory authority under securities or derivatives legislation as an exchange or a self-regulatory organization;

"regulation services provider" means a person or company that provides regulation services and is

  1. a recognized exchange,
  2. a recognized quotation and trade reporting system, or
  3. a recognized self-regulatory entity;

"self-regulatory entity" means a self-regulatory body or self-regulatory organization that

  1. is not an exchange, and
  2. is recognized as a self-regulatory body or self-regulatory organization by the securities regulatory authority;

"subscriber" means, for an ATS, a person or company that has entered into a contractual agreement with the ATS to access the ATS for the purpose of effecting trades or submitting, disseminating or displaying orders on the ATS, and the person or company’s representatives; 

"trading fee" means the fee that a marketplace charges for execution of a trade on that marketplace;

"trading volume" means the number of securities traded; 

"unlisted debt security" means a government debt security or corporate debt security; and  

"user" means, for a recognized quotation and trade reporting system, a person or company that quotes orders or reports trades on the recognized quotation and trade reporting system, and the person or company’s representatives. 

1.2 Interpretation - Marketplace - For the purpose of the definition of "marketplace" in section 1.1, a person or company is not considered to constitute, maintain or provide a market or facilities for bringing together buyers and sellers of securities, solely because the person or company routes orders to a marketplace or a dealer for execution. 

1.3 Interpretation - Affiliated Entity, Controlled Entity and Subsidiary Entity 

  1. In this Instrument, a person or company is considered to be an affiliated entity of another person or company if one is a subsidiary entity of the other or if both are subsidiary entities of the same person or company, or if each of them is a controlled entity of the same person or company.
  2. In this Instrument, a person or company is considered to be controlled by a person or company if
    1. in the case of a person or company,
      1. voting securities of the first-mentioned person or company carrying more than 50 percent of the votes for the election of directors are held, otherwise than by way of security only, by or for the benefit of the other person or company, and
      2. the votes carried by the securities are entitled, if exercised, to elect a majority of the directors of the first-mentioned person or company;
    2. in the case of a partnership that does not have directors, other than a limited partnership, the second-mentioned person or company holds more than 50 percent of the interests in the partnership; or
    3. in the case of a limited partnership, the general partner is the second-mentioned person or company.
  3. In this Instrument, a person or company is considered to be a subsidiary entity of another person or company if
    1. it is a controlled entity of,
      1. that other,
      2. that other and one or more persons or companies each of which is a controlled entity of that other, or
      3. two or more persons or companies, each of which is a controlled entity of that other; or
    2. it is a subsidiary entity of a person or company that is the other's subsidiary entity.

1.4 Interpretation – Security 

  1. In Alberta and British Columbia, the term "security", when used in this Instrument, includes an option that is an exchange contract but does not include a futures contract.
  2. In Ontario, the term "security", when used in this Instrument, does not include a commodity futures contract or a commodity futures option that is not traded on a commodity futures exchange registered with or recognized by the Commission under the Commodity Futures Act or the form of which is not accepted by the Director under the Commodity Futures Act.
  3. In Québec, the term “security”, when used in this Instrument, includes a standardized derivative as this notion is defined in the Derivatives Act.

PART 2 APPLICATION 

2.1 Application - This Instrument does not apply to a marketplace that is a member of a recognized exchange or a member of an exchange that has been recognized for the purposes of this Instrument and NI 23-101. 

PART 3 EXCHANGE - RECOGNITION 

3.1 Application for Recognition 

  1. An applicant for recognition as an exchange shall file Form 21-101F1.
  2. An applicant for recognition as an exchange shall inform in writing the securities regulatory authority immediately of any change to the information provided in Form 21-101F1, and the applicant shall file an amendment to the information provided in Form 21-101F1 in the manner set out in Form 21-101F1 no later than seven days after the change takes place.

3.2 Change in Information After Recognition 

  1. At least 45 days before implementing a significant change to a matter set out in Form 21-101F1, a recognized exchange shall file
    1. if the exchange was recognized before this Instrument came into force, the information describing the change in the manner set out in Form 21-101F1; or
    2. if the exchange is recognized after this Instrument comes into force, an amendment to the information provided in Form 21-101F1 in the manner set out in Form 21-101F1.
  2. If a recognized exchange implements a change involving a matter set out in Form 21 101F1, other than a change referred to in subsection (1), the recognized exchange shall, within 30 days after the end of the calendar quarter in which the change takes place, file
    1. if the exchange was recognized before this Instrument came into force, the information describing the change in the manner set out in Form 21-101F1; or
    2. if the exchange is recognized after this Instrument comes into force, an amendment to the information provided in Form 21-101F1 in the manner set out in Form 21-101F1.
  3. Subsection (2) does not apply to a change to a matter set out in Exhibits F and 0 of Form 21-101F1.

PART 4 QUOTATION AND TRADE REPORTING SYSTEM – RECOGNITION 

4.1 Application for Recognition 

  1. An applicant for recognition as a quotation and trade reporting system shall file Form 21-101F1.
  2. An applicant for recognition as a quotation and trade reporting system shall inform in writing the securities regulatory authority immediately of any change to the information provided in Form 21-101F1 and the applicant shall file an amendment to the information provided in Form 21-¬101F1 in the manner set out in Form 21-101F1 no later than seven days after the change takes place.

4.2 Change in Information After Recognition

  1. At least 45 days before implementing a significant change to a matter set out in Form 21-101F1, a recognized quotation and trade reporting system shall file an amendment to the information provided in Form 21-101F1 in the manner set out in Form 21-101F1.
  2. If a recognized quotation and trade reporting system implements a change involving a matter set out in Form 21-101F1, other than a change referred to in subsection (1), the recognized quotation and trade reporting system shall, within 30 days after the end of the calendar quarter in which the change takes place, file an amendment to the information provided in Form 21-101F1 in the manner set out in Form 21-101F1.

PART 5 REQUIREMENTS APPLICABLE ONLY TO RECOGNIZED EXCHANGES AND RECOGNIZED QUOTATION AND TRADE REPORTING SYSTEMS

5.1 Access Requirements - A recognized exchange and a recognized quotation and trade reporting system shall

  1. establish written standards for granting access to trading on it;
  2. not unreasonably prohibit, condition or limit access by a person or company to services offered by it; and
  3. keep records of
    1. each grant of access including, for each member in the case of an exchange and for each user in the case of a quotation and trade reporting system, the reasons for granting access to an applicant, and
    2. each denial or limitation of access, including the reasons for denying or limiting access to an applicant.

5.2 No Restrictions on Trading on Another Marketplace - A recognized exchange or recognized quotation and trade reporting system shall not prohibit, condition, or otherwise limit, directly or indirectly, a member or user from effecting a transaction on any marketplace.

5.3 Public Interest Rules

  1. Rules, policies and other similar instruments adopted by a recognized exchange or a recognized quotation and trade reporting system
    1. shall not be contrary to the public interest; and
    2. shall be designed to
      1. ensure compliance with securities legislation,
      2. prevent fraudulent and manipulative acts and practices,
      3. promote just and equitable principles of trade, and
      4. foster co-operation and co-ordination with persons or companies engaged in regulating, clearing, settling, processing information with respect to, and facilitating, transactions in securities.
  2. A recognized exchange or a recognized quotation and trade reporting system shall not
    1. permit unreasonable discrimination among clients, issuers and members or among clients, issuers and users; or
    2. impose any burden on competition that is not reasonably necessary and appropriate.

5.4 Compliance Rules - A recognized exchange or a recognized quotation and trade reporting system shall have rules or other similar instruments that

  1. require compliance with securities legislation; and
  2. provide appropriate sanctions for violations of the rules or other similar instruments of the exchange or quotation and trade reporting system.

5.5 Filing of Rules - A recognized exchange or a recognized quotation and trade reporting system shall file all rules, policies and other similar instruments, and all amendments thereto.

5.6 Filing of Annual Audited Financial Statements - A recognized exchange or a recognized quotation and trade reporting system shall file annual audited financial statements within 90 days after the end of its latest financial year.

PART 6 REQUIREMENTS APPLICABLE ONLY TO ATSs

6.1 Registration - An ATS shall not carry on business as an ATS unless

  1. it is registered as a dealer;
  2. it is a member of a self-regulatory entity; and
  3. it complies with the provisions of this Instrument and NI 23-101.

6.2 Registration Exemption Not Available - Except as provided in this Instrument, the registration exemptions applicable to dealers under securities legislation are not available to an ATS.

6.3 Securities Permitted to be Traded on an ATS - An ATS shall not execute trades in securities other than

  1. exchange-traded securities;
  2. corporate debt securities;
  3. government debt securities; or
  4. foreign exchange-traded securities.

6.4 Reporting Requirements

  1. An ATS shall file an initial operation report on Form 21-101F2 at least 30 days before the ATS begins to carry on business as an ATS.
  2. At least 45 days before implementing a significant change to a matter set out in Form 21-101F2, an ATS shall file an amendment to the information provided in Form 21-101F2 in the manner set out in Form 21-101F2.
  3. If an ATS implements a change involving a matter set out in Form 21-101F2, other than a change referred to in subsection (2), the ATS shall, within 30 days after the end of the calendar quarter in which the change takes place, file an amendment to the information provided in Form 21-101F2 in the manner set out in Form 21-101F2.
  4. An ATS shall file Form 21-101F3 within 30 days after the end of each calendar quarter during any part of which the ATS has carried on business.

6.5 Ceasing to Carry on Business as an ATS

  1. An ATS that intends to cease carrying on business as an ATS shall file a report on Form 21-101F4 at least 30 days before ceasing to carry on that business.
  2. An ATS that involuntarily ceases to carry on business as an ATS shall file a report on Form 21-101F4 as soon as practicable after it ceases to carry on that business.

6.6 Notification of Intent to Carry on Exchange Activities - An ATS shall notify the securities regulatory authority in writing at least six months before it first

  1. requires an issuer to enter into an agreement before the issuer's securities can trade on the ATS;
  2. provides, directly, or through one or more subscribers, a guarantee of a two-sided market for a security on a continuous or reasonably continuous basis;
  3. sets requirements governing the conduct of subscribers, other than conduct in respect of the trading by those subscribers on the ATS; or
  4. establishes procedures for disciplining subscribers other than by exclusion from trading.

6.7 Notification of Threshold 

  1. An ATS shall notify the securities regulatory authority in writing if,
    1. during at least three of the preceding four calendar quarters, the average daily dollar value of the trading volume on the ATS for a calendar quarter in any type of security is equal to or greater than 20 percent of the average daily dollar value of the trading volume for the calendar quarter in that type of security on all marketplaces in Canada;
    2. during at least three of the preceding four calendar quarters, the total trading volume on the ATS for a calendar quarter in any type of security is equal to or greater than 20' percent of the total trading volume for the calendar quarter in that type of security on all marketplaces in Canada; or
    3. during at least three of the preceding four calendar quarters, the number of trades on the ATS for a calendar quarter in any type of security is equal to or greater than 20 percent of the number of trades for the calendar quarter in that type of security on all marketplaces in Canada.
  2. An ATS shall provide the notice referred to in subsection (1) within 90 days after the threshold referred to in subsection (1) is met or exceeded.

6.8 Confidential Treatment of Trading Information

  1. An ATS shall not release a subscriber's trading information to a person or company, other than the subscriber, unless
    1. the subscriber has consented in writing to the release of the information;
    2. the release of the information is required by this Instrument or under applicable law; or
    3. the information has been publicly disclosed by another person or company, and the disclosure was lawful.
  2. An ATS shall not carry on business as an ATS unless it has implemented reasonable safeguards and procedures to protect a subscriber's trading information, including
    1. limiting access to the trading information of subscribers to
      1. employees of the ATS, or
      2. persons or companies retained by the ATS to operate the system or to be responsible for compliance by the ATS with Canadian securities legislation; and
    2. implementing standards controlling trading by employees of the ATS for their own accounts.
  3. An ATS shall not carry on business as an ATS unless it has implemented adequate oversight procedures to ensure that the safeguards and procedures established under subsection (2) are followed.

6.9 Name - An ATS shall not use in its name the word "exchange", the words "stock market', the word "bourse" or any derivations of those terms. 

6.10 Risk Disclosure for Trades in Foreign Exchange-Traded Securities 

  1. When opening an account for a subscriber, an ATS that is trading foreign exchange-traded securities shall provide that subscriber with disclosure in substantially the following words:

    The securities traded by or through the ATS are not listed on an exchange in Canada and may not be securities of a reporting issuer in Canada. As a result, there is no assurance that information concerning the issuer is available or, if the information is available, that it meets Canadian disclosure requirements.
  2. Before the first order for a foreign exchange-traded security is entered onto the ATS by a subscriber, the ATS shall obtain an acknowledgement from the subscriber that the subscriber has received the disclosure required in subsection (1).

6.11 Risk Disclosure to Non-Registered Subscribers 

  1. When opening an account for a subscriber that is not registered as a dealer under securities legislation, an ATS shall provide that subscriber with disclosure in substantially the following words:

    Although the ATS is registered as a dealer under securities legislation, it is a marketplace and therefore does not ensure best execution for its subscribers.
  2. Before the first order submitted by a subscriber that is not registered as a dealer under securities legislation is entered onto the ATS by the subscriber, the ATS shall obtain an acknowledgement from that subscriber that the subscriber has received the disclosure required in subsection (1).

6.12 No Restrictions on Trading on Another Marketplace - An ATS shall not prohibit, condition, or otherwise limit, directly or indirectly, a subscriber from effecting a transaction on any marketplace. 

6.13 Access Requirements - An ATS shall 

  1. establish written standards for granting access to trading on it;
  2. not unreasonably prohibit, condition or limit access by a person or company to services offered by it; and
  3. keep records of
    1. each grant of access, including, for each subscriber, the reasons for granting access to an applicant, and
    2. each denial or limitation of access, including the reasons for denying or limiting access to an applicant.

PART 7 INFORMATION TRANSPARENCY REQUIREMENTS FOR MARKETPLACES DEALING IN EXCHANGE-TRADED SECURITIES AND FOREIGN EXCHANGE¬-TRADED SECURITIES 

7.1 Pre-Trade Information Transparency - Exchange-Traded Securities 

  1. A marketplace that displays orders of exchange-traded securities to a person or company shall provide accurate and timely information regarding orders for the exchange-traded securities displayed on the marketplace to an information processor as required by the information processor or, if there is no information processor, to an information vendor that meets the standards set by a regulation services provider.
  2. Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.

7.2 Post-Trade Information Transparency - Exchange-Traded Securities - A marketplace shall provide accurate and timely information regarding trades for exchange-traded securities executed on the marketplace to an information processor as required by the information processor or, if there is no information processor, to an information vendor that meets the standards set by a regulation services provider. 

7.3 Pre-Trade Information Transparency - Foreign Exchange-Traded Securities 

  1. A marketplace that displays orders of foreign' exchange-traded securities to a person or company shall provide accurate and timely information regarding orders for the foreign exchange-traded securities displayed on the marketplace to an information vendor.
  2. Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.

7.4 Post-Trade Information Transparency - Foreign Exchange-Traded Securities - A marketplace shall provide accurate and timely information regarding trades for foreign exchange-traded securities executed on the marketplace to an information vendor. 

7.5 Consolidated Feed - Exchange-Traded Securities - An information processor shall produce an accurate consolidated feed in real-time showing the information provided to the information processor under sections 7.1 and 7.2. 

7.6 Compliance with Requirements of an Information Processor - A marketplace shall comply with the reasonable requirements of the information processor to which it is required to provide information under this Part. 

PART 8 INFORMATION TRANSPARENCY REQUIREMENTS FOR MARKETPLACES DEALING IN UNLISTED DEBT' SECURITIES, INTER-DEALER BOND BROKERS AND DEALERS 

8.1 Pre-Trade and Post-Trade Information Transparency Requirements - Government Debt Securities 

  1. A marketplace that displays orders of government debt securities to a person or company shall provide to an information processor accurate and timely information regarding orders for government debt securities displayed on the marketplace as required by the information processor.
  2. Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.
  3. A marketplace shall provide to an information processor accurate and timely information regarding details of trades of government debt securities executed on the marketplace as required by the information processor.
  4. An inter-dealer bond broker shall provide to an information processor accurate and timely information regarding orders for government debt securities executed through the inter-dealer bond broker as required by the information processor.
  5. An inter-dealer bond broker shall provide to an information processor accurate and timely information regarding details of trades of government debt securities executed through the inter¬dealer bond broker as required by the information processor.

8.2 Pre-Trade and Post-Trade Information Transparency Requirements - Corporate Debt Securities 

  1. A marketplace that displays orders of corporate debt securities to a person or company shall provide accurate and timely information regarding orders for designated corporate debt securities displayed on the marketplace to an information processor, as required by the information processor, or if there is no information processor, to an information vendor that meets the standards set by a regulation services provider, as required by the regulation services provider.
  2. Subsection (1) does not apply if the marketplace only displays orders to its employees or to persons or companies retained by the marketplace to assist in the operation of the marketplace.
  3. A marketplace shall provide accurate and timely information regarding details of trades of designated corporate debt securities executed on the marketplace to an information processor, as required by the information processor, or if there is no information processor, to an information vendor that meets the standards set by a regulation services provider, as required by the regulation services provider.
  4. An inter-dealer bond broker shall provide accurate and timely information regarding details of trades of designated corporate debt securities executed through the inter-dealer bond broker to an information processor, as required by the information processor, or if there is no information processor, to an information vendor that meets the standards set by a regulation services provider, as required by the regulation services provider.
  5. A dealer executing trades of corporate debt securities outside of a marketplace shall provide accurate and timely information regarding details of trades of designated corporate debt securities traded by or through the dealer to an information processor, as required by the information processor, or if there is no information processor, to an information vendor that meets the standards set by a regulation services provider, as required by the regulation services provider.

8.3 Consolidated Feed - Unlisted Debt Securities - An information processor shall produce an accurate consolidated feed in real-time showing the information provided to the information processor under sections 8.1 and 8.2. 

8.4 Compliance with Requirements of an Information Processor - A marketplace, inter¬dealer bond broker or dealer that is subject to this Part shall comply with the reasonable requirements of the information processor to which it is required to provide information under this Part. 

8.5 Filing Requirements for the Information Processor

  1. The information processor shall file, within 30 days after the end of each calendar quarter, the process and criteria for the selection of government debt securities, as applicable, and designated corporate debt securities and the list of government debt securities, as applicable, and designated corporate debt securities.
  2. The information processor shall file, within 30 days after the end of each calendar year, the process to communicate the designated securities to the marketplaces, inter-dealer bond brokers and dealers providing the information as required by the Instrument, including where the list of designated securities can be found.

8.6 Exemption for Government Debt Securities - Section 8.1 does not apply until January 1, 2012.

PART 9 [repealed]

PART 10 TRADING FEES FOR MARKETPLACES

10.1 Disclosure of Trading Fees by Marketplaces - A marketplace shall make its schedule of trading fees publicly available.

10.2 [repealed]

10.3 Discriminatory Terms - With respect to the execution of an order, a marketplace shall not impose terms that have the effect of discriminating between orders that are routed to that marketplace and orders that are entered on that marketplace.

PART 11 RECORDKEEPING REQUIREMENTS FOR MARKETPLACES

11.1 Business Records - A marketplace shall keep such books, records and other documents as are reasonably necessary for the proper recording of its business in electronic form.

11.2 Other Records

  1. As part of the records required to be maintained under section 11.1, a marketplace shall include the following information in electronic form:
    1. a record of all marketplace participants who have been granted access to trading in the marketplace;
    2. daily trading summaries for the marketplace including
      1. a list of securities traded,
      2. transaction volumes

        (A) for securities other than debt securities, expressed as the number of issues traded, number of trades, total unit volume and total dollar value of trades and, if the price of the securities traded is quoted in a currency other than Canadian dollars, the total value in that other currency, and

        (B) for debt securities, expressed as the number of trades and total dollar value traded and, if the price of the securities traded is quoted in a currency other than Canadian dollars, the total value in that other currency,
    3. a record of each order which shall include
      1. the order identifier assigned to the order by the marketplace,
      2. the marketplace participant identifier assigned to the marketplace participant transmitting the order,
      3. the identifier assigned to the marketplace where the order is received or originated,
      4. the type, issuer, class, series and symbol of the security,
      5. the number of securities to which the order applies,
      6. the strike date and strike price, if applicable,
      7. whether the order is a buy or sell order,
      8. whether the order is a short sale order, if applicable,
      9. whether the order is a market order, limit order or other type of order, and if the order is not a market order, the price at which the order is to trade,
      10. the date and time the order is first originated or received by the marketplace,
      11. whether the account is a retail, wholesale, employee, proprietary or any other type of account,
      12. [repealed]
      13. the date and time the order expires,
      14. whether the order is an intentional cross,
      15. whether the order is a jitney and if so, the identifier of the underlying broker,
      16. [repealed]
      17. the currency of the order; and
      18. [repealed]
    4. in addition to the record maintained in accordance with paragraph (c), all execution report details of orders, including
      1. the identifier assigned to the marketplace where the order was executed,
      2. whether the order was fully or partially executed,
      3. the number of securities bought or sold,
      4. the date and time of the execution of the order,
      5. the price at which the order was executed,
      6. the identifier assigned to the marketplace participant on each side of the trade,
      7. whether the transaction was a cross,
      8. time-sequenced records of all messages sent to or received from an information processor, an information vendor or a marketplace,
      9. the marketplace transaction fee for each trade.

11.2.1 Transmission in Electronic Form – A marketplace shall transmit  

  1. to a regulation services provider, if it has entered into an agreement with a regulation services provider in accordance with NI 23-101, the information required by the regulation services provider, within ten business days, in electronic form; and
  2. to the securities regulatory authority the information required by the securities regulatory authority under securities legislation, within ten business days, in electronic form.

11.3 Record Preservation Requirements 

  1. For a period of not less than seven years from the creation of a record referred to in this section, and for the first two years in a readily accessible location, a marketplace shall keep
    1. all records required to be made under sections 11.1 and 11.2;
    2. at least one copy of its standards for granting access to trading, if any, all records relevant to its decision to grant, deny or limit access to a person or company and, if applicable, all other records made or received by the marketplace in the course of complying with section 5.1 or 6.13;
    3. at least one copy of all records made or received by the marketplace in the course of complying with section 12.1, including all correspondence, memoranda, papers, books, notices, accounts, reports, test scripts, test results, and other similar records;
    4. all written notices provided by the marketplace to marketplace participants generally, including notices addressing hours of system operations, system malfunctions, changes to system procedures, maintenance of hardware and software, instructions pertaining to access to the marketplace and denials of, or limitation to, access to the marketplace;
    5. the acknowledgement obtained under subsection 6.10(2) or 6.11(2);
    6. a copy of any agreement referred to in section 8.4 of NI 23-101; and
    7. a copy of any agreement referred to in subsections 13.1(2) and 13.1(3).
  2. During the period in which a marketplace is in existence, the marketplace shall keep
    1. all organizational documents, minute books and stock certificate books;
    2. in the case of a recognized exchange, copies of all forms filed under Part 3;
    3. in the case of a recognized quotation and trade reporting system, copies of all forms filed under Part 4; and
    4. in the case of an ATS, copies of all forms filed under sections 6.4 and 6.5 and notices given under sections 6.6 and 6.7.

11.4 Means of Record Preservation - A marketplace may keep all records, documents and forms referred to in this Part by means of mechanical, electronic or other devices, if 

  1. the method of recordkeeping is not prohibited under other applicable law;
  2. the marketplace takes reasonable precautions, appropriate to the means used, to govern against the risk of falsification of the information recorded; and
  3. the marketplace provides a means for making the information available in an accurate and intelligible form, capable of being printed, within a reasonable time to any person or company lawfully entitled to examine the records.

11.5 Synchronization of Clocks 

  1. A marketplace trading exchange-traded securities or foreign exchange-traded securities, an information processor receiving information about those securities, and a dealer trading those securities shall synchronize the clocks used for recording or monitoring the time and date of any event that must be recorded under this Part and under NI 23-101 with the clock used by a regulation services provider monitoring the activities of marketplaces and marketplace participants trading those securities.
  2. A marketplace trading corporate debt securities or government debt securities, an information processor receiving information about those securities, a dealer trading those securities, and an inter-dealer bond broker trading those securities shall synchronize the clocks used for recording or monitoring the time and date of any event that must be recorded under this Part and under NI 23-101 with the clock used by a regulation services provider monitoring the activities marketplaces, inter-dealer bond brokers or dealers trading those securities.

PART 12 CAPACITY, INTEGRITY AND SECURITY OF MARKETPLACE SYSTEMS  

12.1 System Requirements - For each of its systems that support order entry, order routing, execution, trade reporting, trade comparison, data feeds, market surveillance and trade clearing, a marketplace shall 

  1. develop and maintain
    1. reasonable business continuity and disaster recovery plans;
    2. an adequate system of internal control over those systems; and
    3. adequate information technology general controls, including without limitation, controls relating to information systems operations, information security, change management, problem management, network support and system software support;
  2. in accordance with prudent business practice, on a reasonably frequent basis and, in any event, at least annually,
    1. make reasonable current and future capacity estimates;
    2. conduct capacity stress tests to determine the ability of those systems to process transactions in an accurate, timely and efficient manner; and
    3. test its business continuity and disaster recovery plans; and
  3. promptly notify the regulator or, in Québec, the securities regulatory authority and, if applicable, its regulation services provider, of any material systems failure, malfunction or delay.

12.2 System Reviews  

  1. For each of its systems that support order entry, order routing, execution, trade reporting, trade comparison, data feeds, market surveillance and trade clearing, a marketplace shall annually engage a qualified party to conduct an independent systems review and prepare a report in accordance with established audit standards to ensure that it is in compliance with paragraph 12.1 (a).
  2. A marketplace shall provide the report resulting from the review conducted under subsection (1) to
    1. its board of directors, or audit committee, promptly upon the report’s completion, and
    2. to the regulator or, in Québec, the securities regulatory authority, within 30 days or providing the report to its board of directors or the audit committee.

12.3 Availability of Technology Requirements and Testing Facilities  

  1. A marketplace shall make publicly available all technology requirements regarding interfacing with or accessing the marketplace in their final form,
    1. if operations have not begun, for at least three months immediately before operations begin; and
    2. if operations have begun, for at least three months before implementing a material change to its technology requirements.
  2. After complying with subsection (1), a marketplace shall make available testing facilities for interfacing with or accessing the marketplace,
    1. if operations have not begun, for at least two months immediately before operations begin; and
    2. if operations have begun, for at least two months before implementing a material change to its technology requirements.
  3. A marketplace shall not begin operations until it has complied with paragraphs (1)(a) and (2)(a).
  4. Subsections 12.3(1)(b) and (2)(b) do not apply to a marketplace if the change must be made immediately to address a failure, malfunction or material delay of its systems or equipment if
    1. the marketplace immediately notifies the regulator, or in Québec, the securities regulatory authority, and, if applicable, its regulation services provider of its intention to make the change; and
    2. the marketplace publishes the changed technology requirements as soon as practicable.

PART 13 CLEARING AND SETTLEMENT 

13.1 Clearing and Settlement 

  1. All trades executed through an ATS shall be reported and settled through a clearing agency.
  2. For a trade executed through an ATS by a subscriber that is registered as a dealer under securities legislation, the ATS and its subscriber shall enter into an agreement that specifies whether the trade shall be reported and settled by
    1. the ATS;
    2. the subscriber; or
    3. an agent for the subscriber that is a clearing member of a clearing agency.
  3. For a trade executed through an ATS by a subscriber that is not registered as a dealer under securities legislation, an ATS and its subscriber shall enter into an agreement that specifies whether the trade shall be reported and settled by
    1. the ATS; or
    2. an agent for the subscriber that is a clearing member of a clearing agency.

PART 14 REQUIREMENTS FOR AN INFORMATION PROCESSOR

14.1 Filing Requirements for an Information Processor

  1. A person or company that intends to carry on business as an information processor shall file Form 21-101F5 at least 90 days before the information processor begins to carry on business as an information processor.
  2. During the 90 day period referred to in subsection (1), a person or company that files Form 21-101F5 shall inform in writing the securities regulatory authority immediately of any change to the information provided in Form 21-101F5 and the person or company shall file an amendment to the information provided in Form 21-101F5 in the manner set out in Form 21-101F5 no later than seven days after a change takes place.

14.2 Change in Information

  1. At least 45 days before implementing a significant change involving a matter set out in Form 21-101F5, an information processor shall file an amendment to the information provided in Form 21-101F5 in the manner set out in Form 21-101F5.
  2. If an information processor implements a change involving a matter set out in Form 21-101F5, other than a change referred to in subsection (1), the information processor shall, within 30 days after the end of the calendar quarter in which the change takes place, file an amendment to the information provided in Form 21-101F5 in the manner set out in Form 21-101F5.

14.3 Ceasing to Carry on Business as an Information Processor

  1. If an information processor intends to cease carrying on business as an information processor, the information processor shall file a report on Form 21-101F6 at least 30 days before ceasing to carry on that business.
  2. If an information processor involuntarily ceases to carry on business as an information processor, the information processor shall file a report on Form 21-101F6 as soon as practicable after it ceases to carry on that business.

14.4 Requirements Applicable to an Information Processor

  1. An information processor shall enter into an agreement with each marketplace, inter¬dealer bond broker and dealer that is required to provide information to the information processor that the marketplace, inter-dealer bond broker or dealer
    1. provide information to the information processor in accordance with Part 7 or 8, as applicable; and
    2. comply with any other reasonable requirements set by the information processor.
  2. An information processor shall provide timely, accurate, reliable and fair collection, processing, distribution and publication of information for orders for, and trades in, securities.
  3. An information processor shall keep such books, records and other documents as are reasonably necessary for the proper recording of its business.
  4. An information processor shall establish in a timely manner an electronic connection to a marketplace, inter-dealer bond broker or dealer that is required to provide information to the information processor.
  5. An information processor shall provide prompt and accurate order and trade information and shall not unreasonably restrict fair access to such information.

14.5 System Requirements - An information processor shall,

  1. develop and maintain
    1. reasonable business continuity and disaster recovery plans;
    2. an adequate system of internal controls over its critical systems; and
    3. adequate information technology general controls, including, without limitation, controls relating to information systems operations, information security, change management, problem management, network support, and system software support;
  2. in accordance with prudent business practice, on a reasonably frequent basis and in any event, at least annually,
    1. make reasonable current and future capacity estimates for each of its systems;
    2. conduct capacity stress tests of its critical systems to determine the ability of those systems to process information in an accurate, timely and efficient manner; and
    3. test its business continuity and disaster recovery plans;
  3. annually engage a qualified party to conduct an independent systems review and prepare a report in accordance with established audit standards to ensure that it is in compliance with paragraph (a);
  4. provide the report resulting from the review conducted under paragraph (c) to
    1. its board of directors or the audit committee promptly upon the report’s completion, and
    2. the regulator or, in Québec, the securities regulatory authority, within 30 days of providing it to the board of directors or the audit committee; and
  5. promptly notify the following of any failure, malfunction or material delay of its systems or equipment
    1. the regulator or, in Québec, the securities regulatory authority; and
    2. any regulation services provider, recognized exchange or recognized quotation and trade reporting system monitoring trading of the securities about which information is provided to the information processor.

PART 15 EXEMPTION

15.1 Exemption

  1. The regulator or the securities regulatory authority may grant an exemption from this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
  2. Despite subsection (1), in Ontario, only the regulator may grant such an exemption.

PART 16 EFFECTIVE DATE

16.1 Effective Date - This Instrument comes into force on December 1, 2001.





NATIONAL INSTRUMENT 21-101

FORM 21-101F1
INFORMATION STATEMENT
EXCHANGE OR QUOTATION AND TRADE REPORTING SYSTEM

 

 

Filer: ∅ EXCHANGE ∅ QUOTATION AND TRADE REPORTING SYSTEM
         
Type of Filing: ∅ INITIAL ∅ AMENDMENT
  1. Full name:
  2. Main street address (do not use a P.O. box):
  3. Mailing address (if different):
  4. Address of head office (if different from address in item 2):
  5. Business telephone and facsimile number:

    (Telephone) (Facsimile)
  6. Website address:
  7. Contact employee:

    (Name and Title) (Telephone Number) (Facsimile) (E-mail address)
  8. Counsel:

    (Firm Name) (Contact Name) (Telephone Number) (Facsimile) (E-mail address)
  9. Date of financial year-end:
  10. Legal status:
∅ Corporation ∅ Sole Proprietorship
         
∅ Partnership ∅ Other (specify):

Except where the exchange or quotation and trade reporting system is a sole proprietorship, indicate the date and place where the exchange or quotation and trade reporting system obtained its legal status (e.g., place of incorporation, place where partnership agreement was filed or where exchange or quotation and trade reporting system entity was formed): 

  1. Date (DD/MM/YYYY):
  2. Place of formation:
  3. Statute under which exchange or quotation and trade reporting system was organized:

11.  Market Regulation is being conducted by:

  ∅ the exchange
  ∅ the quotation and trade reporting system
  ∅ regulation services provider other than the filer (see exhibit O)

EXHIBITS 

File all Exhibits with the Filing. For each Exhibit, include the name of the exchange or quotation and trade reporting system, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit.  

If the filer, recognized exchange or recognized quotation and trade reporting system files an amendment to the information provided in its Filing and the information relates to an Exhibit filed with the Filing or a subsequent amendment, the filer, recognized exchange or recognized quotation and trade reporting system, must, in order to comply with subsection 3.1(2), section 3.2, subsection 4.1(2) or 4.2 of National Instrument 21-101, provide a description of the change and file a complete and updated Exhibit. 

1. Corporate Governance 

Exhibit A 

A copy of the constating documents, including corporate by-laws and other similar documents, and all subsequent amendments.  

Exhibit B 

For each affiliated entity of the exchange or quotation and trade reporting system, and for any person or company with whom the exchange or quotation and trade reporting system has a contractual or other agreement relating to the operation of an electronic trading system (the "System") to be used to effect transactions on the exchange or quotation and trade reporting system, provide the following information: 

  1. Name and address of person or company.
  2. Form of organization (e.g., association, corporation, partnership, etc.).
  3. Location and statute citation under which organized. Date of incorporation in present form.
  4. Brief description of nature and extent of affiliation or contractual or other agreement with exchange or quotation and trade reporting system.
  5. Brief description of business or functions. Description should include responsibilities with respect to operation of the System and/or execution, reporting, clearance, or settlement of transactions in connection with operation of the System.
  6. If a person or company has ceased to be an affiliated entity of the exchange or quotation and trade reporting system during the previous year or ceased to have a contractual or other agreement relating to the operation of a System during the previous year, provide a brief statement of the reasons for termination of the relationship.

Exhibit C 

A list of partners, directors, officers, governors, members of all standing committees, or persons performing similar functions, who presently hold or have held their offices or positions during the previous year, indicating the following for each: 

  1. Name.
  2. Title.
  3. Dates of commencement and expiry of present term of office or position and length of time position held.
  4. Type of business in which each is primarily engaged (e.g., sales, trading, market making, etc.) and current employer.
  5. Type of business in which each was primarily engaged in the preceding five years, if different from that set out in item 4.
  6. Whether the person is considered to be an independent director.

Exhibit D 

For each affiliated entity of the exchange or quotation and trade reporting system, provide the following information: 

  1. A copy of the constating documents, including corporate by-laws and other similar documents.
  2. A copy of existing by-laws or corresponding rules or instruments.
  3. The name and title of the present officers, governors, members of all standing committees or persons performing similar functions.
  4. For the latest financial year of the affiliated entity, unconsolidated financial statements, which may be unaudited. If the affiliated entity is required by securities legislation to file annual financial statements, a statement to that effect with a reference to the relevant securities legislation may be provided instead of the financial statements required here.

Exhibit E 

This Exhibit is applicable only to exchange or quotation and trade reporting systems that have one or more owners, shareholders, or partners that are not also marketplace participants. If the exchange or quotation and trade reporting system is a corporation, please provide a list of each shareholder that directly owns five percent or more of a class of a voting security of the exchange or quotation and trade reporting system. If the exchange or quotation and trade reporting system is a partnership, please provide a list of all general partners and those limited partners that have the right to receive upon dissolution, or have contributed, five percent or more of the partnership's capital. For each of the persons listed in this Exhibit, please provide the following: 

  1. Full legal name.
  2. Title or status.
  3. Date title or status was acquired.
  4. Approximate ownership interest.
  5. Whether the person has control (as interpreted in subsection 1.3(2) of National Instrument 21 101 Marketplace Operation).

2. Rules

Exhibit F  

A copy of all by-laws, rules, policies and other similar instruments of the exchange or quotation and trade reporting system that are not included in Exhibit A. 

3. Systems and Operations

Exhibit G 

Describe the manner of operation of the System. This description should include the following: 

  1. 1. A detailed description of the market, including how orders will be entered and trades executed (e.g., call market, auction market, dealer market). If more than one method of order entry or trade execution is being used, please describe.
  2. 2. The means of access to the System.
  3. 3. Procedures governing entry and display of quotations and orders in the System.
  4. Detailed description of the procedures governing the execution, reporting, clearance and settlement of transactions in connection with the System.
  5. The hours of operation of the System, and the date on which the exchange or quotation and trade reporting system intends to commence operation of the System.
  6. If the exchange or quotation and trade reporting system proposes to hold funds or securities on a regular basis, a description of the controls that will be implemented to ensure the safety of those funds or securities.
  7. Description of training provided to users of the System and any materials provided to the users.
  8. Description of current and future capacity estimates, contingency and business continuity plans and the procedures to review and test methodology of the system and to perform stress testing.

Exhibit H 

Provide a schedule for each of the following:

  1. The securities listed on the exchange or quoted on the quotation and trade reporting system, indicating for each the name of the issuer and a description of the security and whether or not the issuer is suspended from trading. After the initial filing of this form, please provide a list of the changes to the securities listed on the exchange or quoted on the quotation and trade reporting system on a quarterly basis.
  2. Other securities traded on the marketplace including, for each, the name of the issuer and a description of the security.

4. Access

Exhibit I 1

A complete set of all forms pertaining to:

  1. Filing required for participation in the exchange or quotation and trade reporting system.
  2. Any other similar materials.

Exhibit J2

A complete set of all forms, reports or questionnaires required of marketplace participants relating to financial responsibility or minimum capital requirements or other eligibility requirements for such marketplace participants. Provide a table of contents listing the forms included in this Exhibit and a narrative of the requirements.

Exhibit K

Describe the exchange's or quotation and trade reporting system's criteria for participation in the exchange or quotation and trade reporting system. Describe conditions under which marketplace participants may be subject to suspension or termination with regard to access to the exchange or quotation and trade reporting system. Describe any procedures that will be involved in the suspension or termination of a member.

Exhibit L

Provide an alphabetical list of all marketplace participants, including the following information:

  1. Name.
  2. Date of becoming a marketplace participant.
  3. Principal business address and telephone number.
  4. If a marketplace participant is an individual, the name of the entity with which such individual is associated and the relationship of such individual to the entity (e.g., partner, officer, director, employee, etc.).
  5. Describe the type of trading activities primarily engaged in by the marketplace participant (e.g., agency trader, proprietary trader, registered trader, market maker). A person shall be "primarily engaged" in an activity or function for purposes of this item when that activity or function is the one in which that person is engaged for the majority of their time. When more than one type of person at an entity engages in any of the activities or functions enumerated in this item, identify each type (e.g., agency trades, registered trader and market maker) and state the number of marketplace participants in each.
  6. The class of participation or other access.

5. Listing Criteria

Exhibit M3

A complete set of documents comprising the exchange's or quotation and trade reporting system's listing or quotation filings, including any agreements required to be executed in connection with listing or quotation and a schedule of listing or quotation fees. If the exchange or quotation and trade reporting system does not list securities, provide a brief description of the criteria used to determine what securities may be traded on the exchange or quotation and trade reporting system. Provide a table of contents listing the forms included in this Exhibit and a narrative description of the listing requirements.

6. Fees

Exhibit N

A description of all fees to be paid by members to the exchange, including fees relating to connection to the system, access, data, regulation (if applicable) and how such fees are set.

7. Financial Viability

Exhibit O4

For the latest financial year of the exchange or quotation and trade reporting system, audited financial statements of the exchange or quotation and trade reporting system and a report prepared by an independent auditor.

8. Regulation

Exhibit P

A description of the regulation performed by the exchange or quotation and trade reporting system, including the structure of the department performing regulation, how the department is funded, policies and procedures in place to ensure confidentiality and policies and procedures relating to conducting an investigation.

Exhibit Q

If market regulation is conducted by a regulation services provider other than the filer, provide the contract between the filer and the regulation services provider.

Exhibit R

If more than one entity is performing regulation services for a type of security and if the filer is conducting market regulation for itself and its members, provide the contract between the filer and the regulation services provider providing for co-ordinated monitoring and enforcement under section 7.5 of National Instrument 23-101.



CERTIFICATE OF EXCHANGE OR QUOTATION AND TRADE REPORTING SYSTEM

The undersigned certifies that the information given in this report is true and correct.

DATED at_________________________this________ day of_______________________________20______

_________________________
(Name of exchange or quotation and trade reporting system)

_________________________
(Name of director, officer or partner - please type or print)

_________________________
(Signature of director, officer or partner)

_________________________
(Official capacity - please type or print)





* For periods relating to financial years beginning before January 1, 2011, the following sentence is included here as part of item 4 of Exhibit D: “Such financial statements shall consist, at a minimum, of a balance sheet and an income statement prepared in accordance with, or if the affiliated entity is organized under the laws of a foreign jurisdiction, reconciled with Canadian GAAP.”

1 Exhibit I is to be provided only if not otherwise provided with Exhibit F.

2 Exhibit J is to be provided only if not otherwise provided with Exhibit F or Exhibit I.

3 The forms described in Exhibit M are to be provided only if not otherwise provided with Exhibit F.

4 For a new exchange, future oriented financial information should be provided instead of the information specified in Exhibit O.



NATIONAL INSTRUMENT 21-101

FORM 21-101F2
INITIAL OPERATION REPORT
ALTERNATIVE TRADING SYSTEM

 

 

TYPE OF FILING: 

∅ INITIAL OPERATION REPORT ∅ AMENDMENT

Identification:

A. Full name of alternative trading system (if sole proprietor, last, first and middle name):



B. Name(s) under which business is conducted, if different from item A:



C. If this filing makes a name change on behalf of the alternative trading system in respect of the name set out in Item A or Item B, enter the previous name and the new name.


Previous name:

New name:

D. Alternative trading system's main street address:



E. Mailing address (if different):



F. Address of head office (if different from address in item D):



G. Business telephone and facsimile number:

(Telephone) (Facsimile)

H. Website address:



I. Contact Employee:

(Name and Title) (Telephone Number) (Facsimile) (E-mail address)

J. The ATS is

∅ a member of  
    name of the recognized self-regulatory entity
∅ a registered dealer  

K. If this is an initial operation report, the date the alternative trading system expects to commence operation:

L. The ATS has contracted with [regulation services provider] to perform market regulation for the ATS and its subscribers.

EXHIBITS

File all Exhibits with the Initial Operation Report. For each Exhibit, include the name of the ATS, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit.

If the ATS files an amendment to the information provided in its Initial Operation Report and the information relates to an Exhibit filed with the Initial Operation Report or a subsequent amendment, the ATS must, in order to comply with subsection 6.4(2) or 6.4(3) of National Instrument 21-101, provide a description of the change and file a complete and updated Exhibit.

Exhibit A

 

A description of classes of subscribers (e.g., dealer, institution, or retail). Also describe any differences in access to the services offered by the alternative trading system to different groups or classes of subscribers.

Exhibit B:

  1. A list of the types of securities the alternative trading system trades (e.g., equity, debt) or if this is an initial operation report, the types of securities it expects to trade.
  2. A list of each of the securities the alternative trading system trades, or if this is an initial operation report, the securities it expects to trade.

Exhibit C

A detailed description of the market structure of the alternative trading system (e.g., call market, auction market, dealer market).

Exhibit D

The name, address, telephone number, facsimile number and e-mail address of counsel for the alternative trading system.

Exhibit E

A copy of the constating documents, including corporate by-laws and other similar documents, and all subsequent amendments.

Exhibit F

The name of any person or company, other than the alternative trading system, that will be involved in the operation of the alternative trading system, including the execution, trading, clearing and settling of transactions on behalf of the alternative trading system. Provide a description of the role and responsibilities of each person or company.

Exhibit G

The following information:

  1. The manner of operation of the alternative trading system.
  2. Procedures governing entry of orders into the alternative trading system.
  3. The means of access to the alternative trading system.
  4. Fees charged by the alternative trading system.
  5. The procedures governing execution, reporting, clearance and settlement of transactions effected through the alternative trading system. Where applicable, the description should include, at a minimum: the parties involved in settling the trades; the trades being settled; and the procedures to manage counterparty and settlement risk.
  6. Procedures for ensuring subscriber compliance with requirements of the alternative trading system.
  7. A description of safeguards and procedures implemented by the alternative trading system to protect subscribers' trading information.
  8. Description of the training to be provided to users of the System and a copy of any materials provided.

Exhibit H

A brief description of the alternative trading system's procedures for reviewing system capacity, security and contingency planning procedures.

Exhibit I

If any other person or company, other than the alternative trading system, will hold or safeguard subscriber funds or securities on a regular basis, attach the name of the person or company and a brief description of the controls that will be implemented to ensure the safety of the funds and securities.

Exhibit J

A list of the full legal name of registered holders and beneficial owners of securities of the alternative trading system.

Exhibit K

A description of all material contracts executed by the alternative trading system.

Exhibit L

A copy of the contract executed between the ATS and the regulation services provider.

Exhibit M

The form of contract executed between the ATS and its subscribers.

Exhibit N

The form of acknowledgement required by subsections 6.10(2) and 6.11(2) of National Instrument 21-101.

Exhibit O

Description of the training to be provided to subscribers relating to the requirements set by the regulation services provider and a copy of any materials provided.



CERTIFICATE OF ALTERNATIVE TRADING SYSTEM

The undersigned certifies that the information given in this report is true and correct.

DATED at_________________________this________ day of_______________________________20______

_________________________
(Name of alternative trading system)

_________________________
(Name of director, officer or partner - please type or print)

_________________________
(Signature of director, officer or partner)

_________________________
(Official capacity - please type or print)

 

 

[Amended March 1, 2007]



NATIONAL INSTRUMENT 21-101

FORM 21-101F3
QUARTERLY REPORT OF ALTERNATIVE TRADING SYSTEM ACTIVITIES

 

 

Alternative Trading System Name:______________________________

Period covered by this report:____________________ to________________________

1. Identification:

  1. Full name of alternative trading system (if sole proprietor, last, first and middle name):
  2. Name(s) under which business is conducted, if different from item 1A:
  3. Alternative trading system's main street address:

2. Attach as Exhibit A, a list of all subscribers at any time during the period covered by this report. 

3. Attach as Exhibit B, a list of all securities that were traded on the alternative trading system at any time during the period covered by this report. 

4.  

  1. Provide the details requested in the form set out in the chart below for each type of security traded on the alternative trading system for transactions during regular trading hours during the quarter. Enter "None", "N/A" or "0" where appropriate.
  2. Provide the details requested in the form set out in the chart below for each type of security traded on the alternative trading system for transactions during after hours trading sessions during the quarter. Enter "None", "N/A" or "0" where appropriate.
Category of Securities Average Daily Dollar Value of Trading Volume Total Trading Volume Total Number of Trades
A. Exchange-traded securities

Equity securities
Preferred securities
Debt securities
Options		      
B. Unlisted debt securities -
Government debt
securities

Domestic
Foreign		      
C. Unlisted debt securities -
Corporate debt securities

Domestic		      
D. Foreign Exchange-Traded
Securities

Equity securities
Preferred securities
Debt securities
Options		      
E. Other

Specify types of securities		      

5. Provide the total trading volume for each security traded on the alternative trading system in the form set out in the chart below. Enter "None", "N/A" or "0" where appropriate. 

Category of Securities Total Trading Volume for Each Security
A. Exchange-traded securities

Equity securities
[name of securities]
Preferred securities
[name of securities]
Debt securities
[name of securities]
Options
[name of securities]		  
B. Unlisted debt securities – Government debt
securities

Domestic
[by issuer and maturity]
Foreign
[by issuer and maturity]		  
C. Unlisted debt securities – Corporate debt
securities

Domestic
[by issuer and maturity]		  
D. Foreign Exchange-Traded Securities

Equity securities
[name of securities]
Preferred securities
[name of securities]
Debt securities
[name of securities]
Options
[name of securities]		  
E. Other

Specify securities		  

6. Attach as Exhibit C, a list of all persons granted, denied, or limited access to the alternative trading system during the period covered by this report, designating for each person (a) whether they were granted, denied, or limited access; (b) the date the alternative trading system took such action; (c) the effective date of such action; and (d) the nature of any denial or limitation of access. 



CERTIFICATE OF ALTERNATIVE TRADING SYSTEM

The undersigned certifies that the information given in this report relating to the alternative trading system is true and correct. 

DATED at ____________ this ____________ day of _____________________ 20 _____ 

_________________________
(Name of alternative trading system)

_________________________
(Name of director, officer or partner - please type or print)

_________________________
(Signature of director, officer or partner)

_________________________
(Official capacity - please type or print)

 

 

NATIONAL INSTRUMENT 21-101

FORM 21-101F4
CESSATION OF OPERATIONS REPORT FOR
ALTERNATIVE TRADING SYSTEM

 

1. Identification: 

  1. Full name of alternative trading system (if sole proprietor, last, first and middle name):
  2. Name(s) under which business is conducted, if different from item 1A:

2. Date alternative trading system proposes to cease carrying on business as an ATS:  

3. If cessation of business was involuntary, date alternative trading system has ceased to carry on business as an ATS:

4. Please check the appropriate box: 

∅   the ATS intends to carry on business as an exchange and has filed Form 21-101F1.
∅   the ATS intends to cease to carry on business.
∅   the ATS intends to become a member of an exchange.

Exhibits

File all Exhibits with the Cessation of Operations Report. For each exhibit, include the name of the ATS, the date of filing of the exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit. 

Exhibit A

The reasons for the alternative trading system ceasing to carry on business as an ATS. 

Exhibit B

A list of each of the securities the alternative trading system trades. 

Exhibit C

The amount of funds and securities, if any, held for subscribers by the alternative trading system, or another person or company retained by the alternative trading system to hold funds and securities for subscribers and the procedures in place to transfer or to return all funds and securities to subscribers. 

 

 

CERTIFICATE OF ALTERNATIVE TRADING SYSTEM

The undersigned certifies that the information given in this report is true and correct. 

DATED at ____________ this ____________ day of _____________________ 20 _____

_________________________
(Name of alternative trading system)

_________________________
(Name of director, officer or partner - please type or print)

_________________________
(Signature of director, officer or partner)

_________________________
(Official capacity - please type or print)

 

 

NATIONAL INSTRUMENT 21-101

FORM 21-101F5
INITIAL OPERATION REPORT FOR INFORMATION PROCESSOR

 

TYPE OF FILING:

∅ INITIAL FORM ∅ AMENDMENT

GENERAL INFORMATION

1. Full name of information processor:

 

2. Main street address (do not use a P.O. box):

 

3. Mailing address (if different):

 

4. Address of head office (if different from address in item 2):

 

5. Business telephone and facsimile number:
(Telephone) (Facsimile)
 

6. Website address:

 

7. Contact employee:
(Name and Title) (Telephone Number) (Facsimile) (E-mail address)

8. Counsel:
(Firm Name) (Contact Name) (Telephone Number) (Facsimile) (E-mail address)

9. Date of financial year-end:

10. List of all marketplaces, dealers or other parties for which the information processor is acting or for which it proposes to act as an information processor. For each marketplace, dealer or other party, provide a description of the function(s) which the information processor performs or proposes to perform.

11. List all types of securities for which information will be collected, processed, distributed or published by the information processor. For each such marketplace, dealer or other party, provide a list of all securities for which information with respect to quotations for, or transactions in, is or is proposed to be collected, processed, distributed or published.

BUSINESS ORGANIZATION

12. Legal status:  

∅ Corporation ∅ Sole Proprietorship
∅ Partnership ∅ Other (specify):

Except where the information processor is a sole proprietorship, indicate the date and place where the information processor obtained its legal status (e.g., place of incorporation, place where partnership agreement was filed or where information processor was formed): 

(a) Date (DD/MM/YYYY): (b) Place of formation:  

Exhibits

File all Exhibits with the Initial Form. For each Exhibit, include the name of the information processor, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit.

If the information processor files an amendment to the information provided in its Initial Form, and the information relates to an Exhibit filed with the Initial Form or a subsequent amendment, the information processor must, in order to comply with sections 14.1 and 14.2 of National Instrument 21-101 provide a description of the change and file a complete and updated Exhibit.

1. Corporate Governance

Exhibit A

A copy of the constating documents, including corporate by-laws and other similar documents, and all subsequent amendments identifying the processes and procedures which promote independence from the marketplaces, inter-dealer bond brokers and dealers that provide data.

Exhibit B

List any person or company who owns 10 percent or more of the information processor' s stock or who, either directly or indirectly, through agreement or otherwise, in any other manner, may control or direct the management or policies of the information processor. Provide the full name and address of each such person and attach a copy of the agreement or, if there is none written, describe the agreement or basis through which such person exercises or may exercise such control or direction.

Exhibit C

A list of the partners, officers, directors, governors, members of all standing committees or persons performing similar functions who presently hold or have held their offices or positions during the previous year identifying those individuals with overall responsibility for the integrity and timeliness of data reported to and displayed by the system (the "System") of the information processor, indicating the following for each:

  1. Name.
  2. Title.
  3. Dates of commencement and expiry of present term of office or position and length of time the office or position held.
  4. Type of business in which each is primarily engaged and current employer.
  5. Type of business in which each was primarily engaged in the preceding five years, if different from that set out in item 4.
  6. Whether the person is considered to be an independent director.
Exhibit D

A narrative or graphic description of the organizational structure of the information processor.

Exhibit E

A description of the personnel qualifications for each category of professional, non-professional and supervisory employee employed by the information processor. Detail whether the personnel are employed by the information processor or a third party identifying the employees responsible for monitoring the timeliness and integrity of data reported to and displayed by the System.

Exhibit F

For each affiliated entity of the information processor, and for any person or company with whom the information processor has a contractual or other agreement relating to the operations of the information processor, provide the following information:

  1. Name and address of person or company.
  2. Form of organization (e.g., association, corporation, partnership, etc.)
  3. Name of location and statute citation under which organized. Date of incorporation in present form.
  4. Brief description of nature and extent of affiliation or contractual or other agreement with the information processor.
  5. Brief description of business or functions.
  6. If a person or company has ceased to be an affiliated entity of the information processor during the previous year or ceased to have a contractual or other agreement relating to the operation of the information processor during the previous year, provide a brief statement of the reasons for termination of the relationship.

2. Systems and Operations

Exhibit G

Describe the manner of operation of the System of the information processor that collects, processes, distributes and publishes information in accordance with National Instruments 21-101 and 23-101. This description should include the following:

  1. The means of access to the System.
  2. Procedures governing entry and display of quotations and orders in the System including data validation processes.
  3. The hours of operation of the System.
  4. Description of the training provided to users of the System and any materials provided to the users.
  5. Description of current and future capacity estimates, contingency and business continuity plans and the procedures to review and test methodology of the system and to perform stress testing.
Exhibit H

A description in narrative form of each service or function performed by the information processor. Include a description of all procedures utilized for the collection, processing, distribution, validation and publication of information with respect to orders and trades in securities.

Exhibit I

A list of all computer hardware utilized by the information processor to perform the services or functions listed in Item 10, indicating:

  1. Manufacturer, and manufacturer's equipment and identification number.
  2. Whether purchased or leased (if leased, duration of lease and any provisions for purchase or renewal).
  3. Where such equipment (exclusive of terminals and other access devices) is physically located.
Exhibit J

A description of the measures or procedures implemented by the information processor to provide for the security of any system employed to perform the functions of an information processor. Include a general description of any physical and operational safeguards designed to prevent unauthorized access to the system. Describe any measures used to verify the timeliness and accuracy of information received and disseminated by the system, including the processes to resolve data integrity issues identified.

Exhibit K

Where the functions of an information processor are performed by automated facilities or systems, attach a description of:

  1. All backup systems which are designed to prevent interruptions in the performance of any information providing functions as a result of technical malfunctions or otherwise in the system itself, in any permitted input or output system connection or as a result of any independent source,
  2. Business continuity and contingency plans for the ongoing operations of the facilities or systems in the event of a catastrophe,
  3. Each type of interruption which has lasted for more than two minutes and has occurred within the six (6) months preceding the date of the filing, including the date of each interruption, the cause and duration, and
  4. The total number of interruptions which have lasted two minutes or less.
Exhibit L

For each service or function listed in Item 10,

  1. Quantify in appropriate units of measure the limits on the information processor's capacity to retrieve, collect, process, store or display the data elements included within each function.
  2. Identify the factors (mechanical, electronic or other) which account for the current limitations reported in answer to 1. on the capacity to receive, collect, process, store or display the data elements included within each function.

3. Financial Viability

Exhibit M

Audited financial statements for the latest financial year of the information processor and a report prepared by an independent auditor. Please discuss the financial viability of the information processor in the context of having sufficient financial resources to properly perform its functions.

Exhibit N

A business plan with pro forma financial statements and estimates of revenue.

4. Fees and Revenue Sharing

Exhibit O

A complete list of all fees and other charges imposed, or to be imposed, by or on behalf of the information processor for its information services, including the cost of establishing a connection that will provide information to the information processor. Where arrangements to share revenue from the sale of data disseminated by the information processor with marketplaces, inter-dealer bond brokers and dealers that provide data to the information processor in accordance with National Instrument 21-101 are in place, a complete description of the arrangements and the basis for these arrangements.

5. Access

Exhibit P

Attach the following:

  1. State the number of persons who presently subscribe or who have notified the information processor of their intention to subscribe to the services of the information processor.
  2. For each instance during the past year in which any person has been prohibited or limited in respect of access to services offered by the information processor, indicate the name of each such person and the reason for the prohibition or limitation.
Exhibit Q

The form of contract governing the terms by which persons may subscribe to the services of an information processor.

Exhibit R

A description of any specifications, qualifications or other criteria which limit, are interpreted to limit or have the effect of limiting access to or use of any services provided by the information processor and state the reasons for imposing such specifications, qualifications or other criteria. This applies to limits relating to providing information to the information processor and the limits relating to accessing the consolidated feed distributed by the information processor.

Exhibit S

Attach any specifications, qualifications or other criteria required of participants who supply securities information to the information processor for collection, processing for distribution or publication by the information processor.

6. Selection of Securities Reported to the Information Processor

Exhibit T

Where the information processor is responsible for making a determination of the data which must be reported, including the securities for which information must be reported in accordance with National Instrument 21-101, describe the manner of selection and communication of these securities. This description should include the following:

  1. The criteria used to determine which securities should be reported to the information processor.
  2. The process for selection of the securities, including a description of the parties consulted in the process and the frequency of the selection process.
  3. The process to communicate the securities selected to the marketplaces, inter-dealer bond brokers and dealers providing the information as required by National Instrument 21-101. The description should include where this information is located.

CERTIFICATE OF INFORMATION PROCESSOR

The undersigned certifies that the information given in this report is true and correct.

DATED at ____________ this ____________ day of _____________________ 20 _____

_________________________
(Name of information processor )

_________________________
(Name of director, officer or partner - please type or print)

_________________________
(Signature of director, officer or partner)

_________________________
(Official capacity - please type or print)

 

 

 

[Amended March 1, 2007]

 

 

 

NATIONAL INSTRUMENT 21-101

FORM 21-101F6
CESSATION OF OPERATIONS REPORT FOR
INFORMATION PROCESSOR

 

 

1. Identification:

A. Full name of information processor:

B. Name(s) under which business is conducted, if different from item 1A:

2. Date information processor proposes to cease carrying on business:

3. If cessation of business was involuntary, date information processor ceased to carry on business:

Exhibits

File all Exhibits with the Cessation of Operations Report. For each Exhibit, include the name of the information processor, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect shall be furnished instead of such Exhibit. 

Exhibit A

The reasons for the information processor ceasing to carry on business.

Exhibit B

A list of each of the securities the information processor displays. 

 

CERTIFICATE OF INFORMATION PROCESSOR

The undersigned certifies that the information given in this report is true and correct. 

DATED at ____________ this ____________ day of _____________________ 20 _____

_________________________
(Name of information processor )

_________________________
(Name of director, officer or partner - please type or print)

_________________________
(Signature of director, officer or partner)

_________________________
(Official capacity - please type or print)

 

 

 

Companion Policy 21-101 CP
to National Instrument 21-101
Marketplace Operation

Table of Contents

 

PART TYPE
PART 1
1.1
1.2
1.3
1.4		 INTRODUCTION
Introduction
Definition of Exchange-Traded Security
Definition of Foreign Exchange-Traded Security
Definition of Regulation Services Provider
PART 2
2.1		 MARKETPLACE
Marketplace
PART 3
3.1
3.2
3.3
3.4		 CHARACTERISTICS OF EXCHANGES, QUOTATION AND TRADE REPORTING SYSTEMS AND ATSs
Exchange
Quotation and Trade Reporting System
Definition of an ATS
Requirements Applicable to ATSs
PART 4
4.1		 RECOGNITION AS AN EXCHANGE OR QUOTATION AND TRADE REPORTING SYSTEM
Recognition as an Exchange or Quotation and Trade Reporting System
PART 5 ORDERS
5.1 Orders
PART 6
6.1
6.2		 FORMS FILED BY MARKETPLACES
Forms Filed by Marketplaces
Forms Filed in Electronic Format
PART 7 CERTAIN REQUIREMENTS APPLICABLE ONLY TO EXCHANGES AND QUOTATION AND TRADE
REPORTING SYSTEMS
7.1
7.2
7.3		 Access Requirements
Compliance Rules
Filing of Rules
PART 8 REQUIREMENTS ONLY APPLICABLE TO ATSs
8.1
8.2		 Confidential Treatment of Trading Information by ATSs
Access Requirements
PART 9 INFORMATION TRANSPARENCY REQUIREMENTS FOR EXCHANGE-TRADED SECURITIES
9.1
9.2		 Information Transparency Requirements for Exchange-Traded Securities
[Repealed]
PART 10
10.1
10.2
10.3		 INFORMATION TRANSPARENCY REQUIREMENTS FOR UNLISTED DEBT SECURITIES
Information Transparency Requirements for Unlisted Debt Securities
Availability of Information
Consolidated Feed
PART 11
11.1
11.2
11.3
11.4
11.5		 MARKET INTEGRATION
[Repealed]
[Repealed]
[Repealed]
[Repealed]
Market Integration
PART 12
12.1
12.2		 DISCLOSURE OF TRADING FEES FOR MARKETPLACES
Disclosure of Trading Fees by Marketplaces
Discriminatory Terms
PART 13
13.1
13.2		 RECORDKEEPING REQUIREMENTS FOR MARKETPLACES
Recordkeeping Requirements for Marketplaces
Synchronization of Clocks
PART 14
14.1
14.2		 CAPACITY, INTEGRITY AND SECURITY OF MARKETPLACE SYSTEMS
System Requirements
Availability of Technology Specifications and Testing Facilities
PART 15
15.1		 CLEARING AND SETTLEMENT
Clearing and Settlement
PART 16
16.1
16.2
16.3
16.4		 INFORMATION PROCESSOR
Information Processor
Selection of an Information Processor
Change to Information
System Requirements



Companion Policy 21-101 CP
to National Instrument 21-101
Marketplace Operation



PART 1 INTRODUCTION

1.1 Introduction - Traditionally, the Canadian securities regulatory authorities have regulated securities markets by regulating dealers, exchanges and, in some jurisdictions, quotation and trade reporting systems. In recent years, particularly in the United States, new types of markets have emerged that take different forms and trade securities in a different manner than on those markets. These entities are referred to as alternative trading systems. While the existing regulatory system will generally apply to the activities of these markets, there are instances where the existing regulatory system needs to be supplemented. Accordingly, the Canadian securities regulatory authorities have adopted National Instrument 21-101 Marketplace Operation (the "Instrument") to create an appropriate regulatory regime to deal with these new types of markets and to supplement the regime applicable to exchanges and quotation and trade reporting systems. 

The purpose of this Companion Policy is to state the views of the Canadian securities regulatory authorities on various matters related to the Instrument, including: 

  1. a discussion of the general approach taken by the Canadian securities regulatory authorities in, and the general regulatory purpose for, the Instrument; and
  2. the interpretation of various terms and provisions in the Instrument.

1.2 Definition of Exchange-Traded Security - Section 1.1 of the Instrument defines an "exchange-traded security" as a security that is listed on a recognized exchange or is quoted on a recognized quotation and trade reporting system or is listed on an exchange or quoted on a quotation and trade reporting system that is recognized for the purposes of NI 21-101 and NI 23¬-101. A security that is inter-listed would be considered to be an exchange-traded security. A security that is listed on a foreign exchange or quoted on a foreign quotation and trade reporting system, and is not listed or quoted on a domestic exchange or quotation and trade reporting system, falls within the definition of “foreign exchange-traded security”.

1.3 Definition of Foreign Exchange-Traded Security - The definition of foreign exchange¬-traded security includes a reference to ordinary members of the International Organization of Securities Commissions (IOSCO). To determine the current list of ordinary members, reference should be made to the IOSCO website at www.iosco.org.

1.4 Definition of Regulation Services Provider - The definition of regulation services provider is meant to capture a third party provider that provides regulation services to marketplaces. A recognized exchange or recognized quotation and trade reporting system would not be a regulation services provider if it only conducts these regulatory services for its own marketplace or an affiliated marketplace.

PART 2 MARKETPLACE

2.1 Marketplace

(1) The Instrument uses the term "marketplace" to encompass the different types of trading systems that match trades. A marketplace is an exchange, a quotation and trade reporting system or an ATS. Paragraphs (c) and (d) of the definition of "marketplace" describe marketplaces that the Canadian securities regulatory authorities consider to be ATSs. A dealer that internalizes its orders of exchange-traded securities and does not execute and print the trades on an exchange or quotation and trade reporting system in accordance with the rules of the exchange or the quotation and trade reporting system (including an exemption from those rules) is considered to be a marketplace pursuant to paragraph (d) of the definition of "marketplace" and an ATS.

(2) Two of the characteristics of a "marketplace" are

  1. that it brings together orders for securities of multiple buyers and sellers; and
  2. that it uses established, non-discretionary methods under which the orders interact with each other.

(3) The Canadian securities regulatory authorities consider that a person or company brings together orders for securities if it

  1. displays, or otherwise represents to marketplace participants, trading interests entered on the system; or
  2. receives orders centrally for processing and execution (regardless of the level of automation used).

(4) The Canadian securities regulatory authorities are of the view that "established, non¬discretionary methods" include any methods that dictate the terms of trading among the multiple buyers and sellers entering orders on the system. Such methods include providing a trading facility or setting rules governing trading among marketplace participants. Common examples include a traditional exchange and a computer system, whether comprised of software, hardware, protocols, or any combination thereof, through which orders interact, or any other trading mechanism that provides a means or location for the bringing together and execution of orders. Rules imposing execution priorities, such as time and price priority rules, would be "established, non-discretionary methods."

(5) The Canadian securities regulatory authorities do not consider the following systems to be marketplaces for purposes of the Instrument:

  1. A system operated by a person or company that only permits one seller to sell its securities, such as a system that permits issuers to sell their own securities to investors.
  2. A system that merely routes orders for execution to a facility where the orders are executed.
  3. A system that posts information about trading interests, without facilities for execution.

In the first two cases, the criteria of multiple buyers and sellers would not be met. In the last two cases, routing systems and bulletin boards do not establish non-discretionary methods under which parties entering orders interact with each other.

(6) A person or company operating any of the systems described in subsection (5) should consider whether the person or company is trading for the purposes of securities legislation and is required to be registered as a dealer under securities legislation.

(7) Inter-dealer bond brokers have a choice as to how to be regulated under the Instrument and NI 23-101. Each inter-dealer bond broker can choose to be subject to IIROC Rule 36 and IIROC Rule 2100, fall within the definition of inter-dealer bond broker in the Instrument and be subject to the transparency requirements of Part 8 of the Instrument. Alternatively, the inter-dealer bond broker can choose to be an ATS and comply with the provisions of the Instrument and NI 23¬-101 applicable to a marketplace and an ATS. An inter-dealer bond broker that chooses to be an ATS will not be subject to Rule 36 or IIROC Rule 2100, but will be subject to all other IIROC requirements applicable to a dealer.

PART 3 CHARACTERISTICS OF EXCHANGES, QUOTATION AND TRADE REPORTING SYSTEMS AND ATSs

3.1 Exchange

(1) Canadian securities legislation of most jurisdictions does not define the term "exchange".

(2) The Canadian securities regulatory authorities generally consider a marketplace, other than a quotation and trade reporting system, to be an exchange for purposes of securities legislation, if the marketplace

  1. requires an issuer to enter into an agreement in order for the issuer's securities to trade on the marketplace, i.e., the marketplace provides a listing function;
  2. provides, directly, or through one or more marketplace participants, a guarantee of a two¬-sided market for a security on a continuous or reasonably continuous basis, i.e., the marketplace has one or more marketplace participants that guarantee that a bid and an ask will be posted for a security on a continuous or reasonably continuous basis. For example, this type of liquidity guarantee can be carried out on exchanges through traders acting as principal such as registered traders, specialists or market makers;
  3. sets requirements governing the conduct of marketplace participants, in addition to those requirements set by the marketplace in respect of the method of trading or algorithm used by those marketplace participants to execute trades on the system (see subsection (3); or
  4. disciplines marketplace participants, in addition to discipline by exclusion from trading, i.e., the marketplace can levy fines or take enforcement action.

(3) An ATS that requires a subscriber to agree to comply with the requirements of a regulation services provider as part of its contract with that subscriber is not setting "requirements governing the conduct of subscribers". In addition, marketplaces are not precluded from imposing credit conditions on subscribers or requiring subscribers to submit financial information to the marketplace.

(4) The criteria in subsection 3.1(2) are not exclusive and there may be other instances in which the Canadian securities regulatory authorities will consider a marketplace to be an exchange.

3.2 Quotation and Trade Reporting System

(1) Canadian securities legislation in certain jurisdictions contains the concept of a quotation and trade reporting system. A quotation and trade reporting system is defined under Canadian securities legislation in those jurisdictions as a person or company, other than an exchange or registered dealer, that operates facilities that permit the dissemination of price quotations for the purchase and sale of securities and reports of completed transactions in securities for the exclusive use of registered dealers. A person or company that carries on business as a vendor of market data or a bulletin board with no execution facilities would not normally be considered to be a quotation and trade reporting system.

(2) A quotation and trade reporting system is considered to have "quoted" a security if

  1. the security has been subject to a listing or quoting process, and
  2. the issuer issuing the security or the dealer trading the security has entered into an agreement with the quotation and trade reporting system to list or quote the security.

3.3 Definition of an ATS

(1) In order to be an ATS for the purposes of the Instrument, a marketplace cannot engage in certain activities or meet certain criteria such as

  1. requiring listing agreements,
  2. having one or more marketplace participants that guarantee that a two-sided market will be posted for a security on a continuous or reasonably continuous basis,
  3. setting requirements governing the conduct of subscribers, in addition to those requirements set by the marketplace in respect of the method of trading or algorithm used by those subscribers to execute trades on the system, and
  4. disciplining subscribers.

A marketplace, other than a quotation and trade reporting system, that engages in any of these activities or meets these criteria would, in the view of the Canadian securities regulatory authorities, be an exchange and would have to be recognized as such in order to carry on business, unless exempted from this requirement by the securities regulatory authorities.

(2) An ATS can establish trading algorithms that provide that a trade takes place if certain events occur. These algorithms are not considered to be "requirements governing the conduct of subscribers".

(3) A marketplace that would otherwise meet the definition of an ATS in the Instrument may apply to the Canadian securities regulatory authorities for recognition as an exchange.

3.4 Requirements Applicable to ATSs

(1) Part 6 of the Instrument applies only to an ATS that is not a recognized exchange or a member of a recognized exchange or an exchange recognized for the purposes of the Instrument and NI 23-101. If an ATS is recognized as an exchange, the provisions of the Instrument relating to marketplaces and recognized exchanges apply.

(2) If the ATS is a member of an exchange, the rules, policies and other similar instruments of the exchange apply to the ATS.

(3) Under subsection 6.1(a) of the Instrument, an ATS that is not a member of a recognized exchange or an exchange recognized for the purposes of the Instrument and NI 23-101 must register as a dealer if it wishes to carry on business. Unless otherwise specified, an ATS registered as a dealer is subject to all of the requirements applicable to dealers under Canadian securities legislation, including the requirements imposed by the Instrument and NI 23-101. An ATS will be carrying on business in a local jurisdiction if it provides direct access to subscribers located in that jurisdiction.

(4) If an ATS registered as a dealer in one jurisdiction in Canada provides access in another jurisdiction in Canada to subscribers who are not registered dealers under securities legislation, the ATS must be registered in that other jurisdiction. However, if all of the ATS's subscribers in the other jurisdiction are registered as dealers in that other jurisdiction, the securities regulatory authority in the other jurisdiction may consider granting the ATS an exemption from the requirement to register as a dealer under subsection 6.1(a) of the Instrument and from the registration requirements of securities legislation. In determining if the exemption is in the public interest, a securities regulatory authority will consider a number of factors, including whether the ATS is registered in another jurisdiction and whether the ATS deals only with registered dealers in that jurisdiction.

(5) Subsection 6.1(b) of the Instrument prohibits an ATS to which the provisions of the Instrument apply from carrying on business unless it is a member of a self-regulatory entity. Membership in a self-regulatory entity is required for purposes of membership in the Canadian Investor Protection Fund, capital requirements and clearing and settlement procedures. At this time, the IIROC is the only entity that would come within the definition.

(6) Any registration exemptions that may otherwise be applicable to a dealer under securities legislation are not available to an ATS, even though it is registered as a dealer (except as provided in the Instrument), because of the fact that it is also a marketplace and different considerations apply.

(7) Subsection 6.7(1) of the Instrument requires an ATS to notify the securities regulatory authority if one of three thresholds is met or exceeded. Upon being informed that one of the thresholds is met or exceeded, the securities regulatory authority intends to review the ATS, its structure and operations in order to consider whether the person or company operating the ATS should be considered to be an exchange for purposes of securities legislation. The securities regulatory authority intends to conduct this review because each of these thresholds may be indicative of an ATS having market dominance over a type of security, such that it would be more appropriate that the ATS be regulated as an exchange. If more than one Canadian securities regulatory authority is conducting this review, the reviewing jurisdictions intend to coordinate their review. The volume thresholds referred to in subsection 6.7(1) and section 12.2 of the Instrument are based on the type of security. The Canadian securities regulatory authorities consider a type of security to refer to a distinctive category of security such as equity securities, preferred securities, debt securities or options.

(8) Any marketplace that is required to provide notice under section 6.7 of the Instrument will determine the calculation based on publicly available information.

(9) Subsections 6.10(2) and 6.11(2) of the Instrument require an ATS to obtain an acknowledgement from its subscribers. The acknowledgement may be obtained in a number of ways, including requesting the subscriber's signature or requesting that the subscriber initial an initial box or check a check-off box. This may be done electronically. The acknowledgement must be specific to the information required to be disclosed under the relevant subsection and must confirm that the subscriber has received the required disclosure. The Canadian securities regulatory authorities are of the view that it is the responsibility of the ATS to ensure that an acknowledgement is obtained from the subscriber in a timely manner.

PART 4 RECOGNITION AS AN EXCHANGE OR QUOTATION AND TRADE REPORTING SYSTEM

4.1 Recognition as an Exchange or Quotation and Trade Reporting System

(1) In determining whether to recognize an exchange or quotation and trade reporting system, the Canadian securities regulatory authorities must determine whether it is in the public interest to do so.

(2) In exercising this discretion, the Canadian securities regulatory authorities will look at a number of factors, including

  1. the manner in which the exchange or quotation and trade reporting system proposes to comply with the Instrument;
  2. whether the exchange or quotation and trade reporting system has fair and meaningful representation on its governing body, in the context of the nature and structure of the exchange or quotation and trade reporting system;
  3. whether the exchange or quotation and trade reporting system has sufficient financial resources for the proper performance of its functions; and
  4. whether the rules, policies and other similar instruments of the exchange or quotation and trade reporting system ensure that its business is conducted in an orderly manner so as to afford protection to investors.

PART 5 ORDERS

5.1 Orders

(1) The term "order" is defined in section 1.1 of the Instrument as a firm indication by a person or company, acting as either principal or agent, of a willingness to buy or sell a security. By virtue of this definition, a marketplace that displays good faith, non-firm indications of interest, including, but not limited to, indications of interest to buy or sell a particular security without either prices or quantities associated with those indications, is not displaying "orders".

(2) The label put on a transaction is not determinative of whether the transaction constitutes an order. Instead, whether or not an indication is "firm" will depend on what actually takes place between the buyer and seller. At a minimum, the Canadian securities regulatory authorities will consider an indication to be firm if it can be executed without further discussion between the person or company entering the indication and the counterparty. Even if the person or company must give its subsequent agreement to an execution, the Canadian securities regulatory authorities will still consider the indication to be firm if this subsequent agreement is always, or almost always, granted so that the agreement is largely a formality. For instance, an indication where there is a clear or prevailing presumption that a trade will take place at the indicated price, based on understandings or past dealings, will be viewed as an order.

(3) A firm indication of a willingness to buy or sell a security includes bid or offer quotations, market orders, limit orders and any other priced orders. For the purpose of sections 7.1, 7.3, 8.1 and 8.2 of the Instrument, the Canadian securities regulatory authorities do not consider special terms orders that are not immediately executable or that trade in special terms books, such as all-or-none, minimum fill or cash or delayed delivery, to be orders that must be provided to an information processor or, if there is no information processor, to an information vendor for consolidation.

(4) The determination of whether an order has been placed does not turn on the level of automation used. Orders can be given over the telephone, as well as electronically.

PART 6 FORMS FILED BY MARKETPLACES

6.1 Forms Filed by Marketplaces

(1) Subsection 3.1(1) of the Instrument requires an applicant for recognition as an exchange to file Form 21-101F1. This subsection does not apply to an exchange that was recognized before the Instrument came into force.

(2) The forms filed by a marketplace under the Instrument will be kept confidential. The Canadian securities regulatory authorities are of the view that the forms contain intimate financial, commercial and technical information and that the interests of the filers in non-disclosure outweigh the desirability of adhering to the principle that the forms be available for public inspection.

(3) Under subsection 3.2(1) of the Instrument, at least 45 days prior to implementing a significant change to a matter set out in Form 21-101F1, a recognized exchange must file information describing the change or an amendment to the information provided in Form 21-101F1, in each case, in the manner set out in Form 21-101F1 . In the view of the Canadian securities regulatory authorities, a significant change includes a change to the information contained in Exhibits A, B, G, I, J, K, M, N, P and Q of Form 21-101F1. This is also applicable to recognized quotation and trade reporting systems under subsection 4.2(1) of the Instrument.

(4) A recognized exchange or recognized quotation and trade reporting system that files amendments to the information provided in Form 21-101F1 should number each filing consecutively.

(5) Securities legislation or the terms and conditions of the recognition of the exchange or quotation and trade reporting system may require that a recognized exchange or recognized quotation and trade reporting system that is voluntarily surrendering its recognition file a notice or application with the securities regulatory authority.

(6) Under subsection 6.4(2) of the Instrument, at least 45 days prior to implementing a significant change to a matter set out in Form 21-101F2, an ATS is required to file an amendment to the information provided in Form 21-101F2 in the manner set out in Form 21-101F2. The Canadian securities regulatory authorities consider that a significant change includes a change to the information in Exhibits A, B, C, F, G, I, and J of Form 21-101F2.

(7) Subsection 6.4(4) of the Instrument requires an ATS to file Form 21-101F3 by the following dates: April 30 (for the quarter ending March 31), July 30 (for the quarter ending June 30), October 30 (for the quarter ending September 30) and January 30 (for the quarter ending December 31).

(8) If an ATS files notice of its intention to carry on exchange activities pursuant to section 6.6 of the Instrument, and the ATS intends to begin to carry on business as an exchange, the ATS is required to file Form 21-101F1.

6.2 Forms Filed in Electronic Format - The Canadian securities regulatory authorities request that all forms and exhibits required to be filed under the Instrument be filed in electronic format, where possible.

PART 7 CERTAIN REQUIREMENTS APPLICABLE ONLY TO EXCHANGES AND QUOTATION AND TRADE REPORTING SYSTEMS

7.1 Access Requirements

(1) Section 5.1 of the Instrument sets out access requirements that apply to a recognized exchange and a recognized quotation and trade reporting system. The Canadian securities regulatory authorities note that the requirements regarding access for members do not restrict the authority of a recognized exchange or recognized quotation and trade reporting system to maintain reasonable standards for access. The purpose of these access requirements is to ensure that rules, policies, procedures, fees and practices of the exchange or quotation and trade reporting system do not unreasonably create barriers to access to the services provided by the exchange or quotation and trade reporting system.

(2) For the purposes of complying with the order protection requirements in Part 6 of NI 23-101, a recognized exchange or recognized quotation and trade reporting system should permit fair and efficient access to

  1. a member or user that directly accesses the exchange or quotation and trade reporting system,
  2. a person or company that is indirectly accessing the exchange or quotation and trade reporting system through a member or user, or
  3. a marketplace routing an order to the exchange or quotation and trade reporting system.

The reference to “a person or company” in subsection (b) includes a system or facility that is operated by a person or company and a person or company that obtains access through a member or user.

(3) The reference to “services” in paragraph 5.1(b) of the Instrument means all services that may be offered to a person or company and includes all services relating to order entry, trading, execution, routing and data.

(4) Recognized exchanges and recognized quotation and trade reporting systems are responsible for ensuring that the fees they set are in compliance with section 5.1 of the Instrument. In assessing whether its fees unreasonably condition or limit access to its services, a recognized exchange or recognized quotation and trade reporting system should consider a number of factors, including

  1. the value of the security traded,
  2. the amount of the fee relative to the value of the security traded,
  3. the amount of fees charged by other marketplaces to execute trades in the market,
  4. with respect to market data fees, the amount of market data fees charged relative to the market share of the exchange or quotation and trade reporting system, and,
  5. with respect to order - execution terms, including fees, whether the outcome of their application is consistent with the policy goals of order protection.

The Canadian securities regulatory authorities will consider these factors, among others, in determining whether the fees charged by a recognized exchange or recognized quotation and trade reporting system unreasonably condition or limit access to its services. With respect to trading fees, our view is that a trading fee equal to or greater than the minimum trading increment as defined in IIROC’s Universal Market Integrity Rules, as amended, would unreasonably condition or limit access to a recognized exchange’s or recognized quotation and trade reporting system’s services as it would be inconsistent with the policy goals of order protection. Trading fees below the minimum trading increment may also unreasonably condition or limit access to a recognized exchange’s or recognized quotation and trade reporting system’s services when taking into account factors including those listed above.

7.2 Compliance Rules - Section 5.4 of the Instrument requires a recognized exchange and recognized quotation and trade reporting system to have appropriate procedures to deal with violations of rules, policies or other similar instruments of the exchange or quotation and trade reporting system. This section does not preclude enforcement action by any other person or company, including the Canadian securities regulatory authorities or the regulation services provider.

7.3 Filing of Rules - Section 5.5 of the Instrument requires a recognized exchange and recognized quotation and trade reporting system to file all rules, policies and other similar instruments and amendments as required by the securities regulatory authority. Initially, all rules, policies and other similar instruments will be reviewed before implementation by the exchange or quotation and trade reporting system. It is the intention of the securities regulatory authority to develop and implement a protocol that will set out the procedures to be followed with respect to the review and approval of rules, policies and other similar instruments and amendments.

PART 8 REQUIREMENTS ONLY APPLICABLE TO ATSs

8.1 Confidential Treatment of Trading Information by ATSs

(1) Subsection 6.8(2) of the Instrument provides that an ATS shall not carry on business as an ATS unless it has implemented reasonable safeguards and procedures to protect a subscriber's trading information. These include

  1. limiting access to the trading information of subscribers, such as the identity of subscribers and their orders, to those employees of, or persons or companies retained by, the ATS to operate the system or to be responsible for its compliance with Canadian securities legislation; and
  2. having in place procedures to ensure that employees of the ATS cannot use such information for trading in their own accounts.

(2) The procedures referred to in subsection (1) should be clear and unambiguous and presented to all employees and agents of the ATS, whether or not they have direct responsibility for the operation of the ATS.

(3) Nothing in section 6.8 of the Instrument prohibits an ATS from complying with National Policy 41 Shareholder Communication, or its successor instrument. This statement is necessary because an investment dealer that operates an ATS may be an intermediary for the purposes of National Policy 41, or its successor instrument, and may be required to disclose information under that Instrument

8.2 Access Requirements

(1) Section 6.13 of the Instrument sets out access requirements that apply to an ATS. The Canadian securities regulatory authorities note that the requirements regarding access do not prevent an ATS from setting reasonable standards for access. The purpose of these access requirements is to ensure that the policies, procedures, fees and practices of the ATS do not unreasonably create barriers to access to the services provided by the ATS.

(2) For the purposes of complying with the order protection requirements in section 6 of NI 23-101, an ATS should permit fair and efficient access to

  1. a subscriber that directly accesses the ATS,
  2. a person or company that is indirectly accessing the ATS through a subscriber, or
  3. a marketplace routing an order to the ATS.

In addition, the reference to “a person or company” in subsection (b) includes a system or facility that is operated by a person or company and a person or company that obtains access through a subscriber that is a dealer.  

(3) The reference to “services” in paragraph 6.13(b) of the Instrument means all services that may be offered to a person or company and includes all services related to order entry, trading, execution, routing and data.  

(4) ATSs are responsible for ensuring that the fees they set are in compliance with section 6.13 of the Instrument. In assessing whether its fees unreasonably condition or limit access to its services, an ATS should consider a number of factors, including 

  1. the value of the security traded,
  2. the amount of the fee relative to the value of the security traded,
  3. the amount of fees charged by other marketplaces to execute trades in the market,
  4. with respect to market data fees, the amount of market data fees charged relative to the market share of the ATS, and,
  5. with respect to order-execution terms, including fees, whether the outcome of their application is consistent with the policy goals of order protection.

The Canadian securities regulatory authorities will consider these factors, among others, in determining whether the fees charged by an ATS unreasonably condition or limit access to its services. With respect to trading fees, our view is that a trading fee equal to or greater than the minimum trading increment as defined in IIROC’s Universal Market Integrity Rules, as amended, would unreasonably condition or limit access to an ATS’s services as it would be inconsistent with the policy goals of order protection. Trading fees below the minimum trading increment may also unreasonably condition or limit access to an ATS’s services when taking into account factors including those listed above. 

PART 9 INFORMATION TRANSPARENCY REQUIREMENTS FOR EXCHANGE-TRADED SECURITIES

9.1 Information Transparency Requirements for Exchange-Traded Securities

(1) Subsection 7.1(1) of the Instrument requires a marketplace that displays orders of exchange-traded securities to any person or company to provide accurate and timely information regarding those orders to an information processor or, if there is no information processor, to an information vendor that meets the standards set by a regulation services provider. Section 7.2 requires a marketplace to provide accurate and timely information regarding trades of exchange-traded securities to an information processor or, if there is no information processor, an information vendor that meets the standards set by a regulation services provider. Some marketplaces, such as exchanges, may be regulation services providers and will establish standards for the information vendors they use to display order and trade information to ensure that the information displayed by the information vendors is timely, accurate and promotes market integrity. If the marketplace has entered into a contract with a regulation services provider under NI 23-101, the marketplace must provide information to the regulation services provider and an information vendor that meets the standards set by that regulation services provider. 

(2) In complying with sections 7.1 and 7.2 of the Instrument, a marketplace should not make the required order and trade information available to any other person or company on a more timely basis than it makes that information available to the information processor or information vendor. In addition, any information provided by a marketplace to an information processor or information vendor must include identification of the marketplace and should contain all relevant information including details as to volume, symbol, price and time of the order or trade.

(3) [Repealed] 

(4) [Repealed] 

(5) It is expected that if there are multiple regulation service providers, the standards of the various regulation service providers must be consistent. In order to maintain market integrity for securities trading in different marketplaces, the Canadian securities regulatory authorities will, through their oversight of the regulation service providers, review and monitor the standards established by all regulation service providers so that business content, service level standards, and other relevant standards are substantially similar for all regulation service providers. 

9.2 [Repealed] 

PART 10 INFORMATION TRANSPARENCY REQUIREMENTS FOR UNLISTED DEBT SECURITIES

10.1 Information Transparency Requirements for Unlisted Debt Securities

(1) The requirement to provide transparency of information regarding orders and trades of government debt securities in section 8.1 of the Instrument does not apply until January 1, 2012. The Canadian securities regulatory authorities will continue to review the transparency requirements, in order to determine if the transparency requirements summarized in subsections (2) and (3) below should be amended. 

(2) The requirements of the information processor for government debt securities are as follows: 

  1. Marketplaces trading government debt securities and inter-dealer bond brokers are required to provide in real time quotation information displayed on the marketplace for all bids and offers with respect to unlisted debt securities designated by the information processor, including details as to type, issuer, coupon and maturity of security, best bid price, best ask price and total disclosed volume at such prices; and
  2. Marketplaces trading government debt securities and inter-dealer bond brokers are required to provide in real time details of trades of all government debt securities designated by the information processor, including details as to the type, issuer, series, coupon and maturity, price and time of the trade and the volume traded.

(3) The requirements of the information processor for corporate debt securities are as follows: 

  1. Marketplaces trading corporate debt securities, inter-dealer bond brokers and dealers trading corporate debt securities outside of a marketplace are required to provide details of trades of all corporate debt securities designated by the information processor, including details as to the type of counterparty, issuer, type of security, class, series, coupon and maturity, price and time of the trade and, subject to the caps set out below, the volume traded, no later than one hour from the time of the trade or such shorter period of time determined by the information processor. If the total par value of a trade of an investment grade corporate debt security is greater than $2 million, the trade details provided to the information processor are to be reported as "$2 million+". If the total par value of a trade of a non-investment grade corporate debt security is greater than $200,000, the trade details provided to the information processor are to be reported as "$200,000+".
  2. Although subsection 8.2(1) of the Instrument requires marketplaces to provide information regarding orders of corporate debt securities, the information processor has not required this information to be provided.
  3. A marketplace, an inter-dealer bond broker or a dealer will satisfy the requirements in subsections 8.2(1), 8.2(3), 8.2(4) and 8.2(5) of the Instrument by providing accurate and timely information to an information vendor that meets the standards set by the regulation services provider for the fixed income markets.

(4) The marketplace upon which the trade is executed will not be shown, unless the marketplace determines that it wants its name to be shown. 

(5) The information processor is required to use transparent criteria and a transparent process to select government debt securities and designated corporate debt securities. The information processor is also required to make the criteria and the process publicly available.

(6) An "investment grade corporate debt security" is a corporate debt security that is rated by one of the listed rating organizations at or above one of the following rating categories or a rating category that preceded or replaces a category listed below:

Rating Organization Long Term Debt Short Term Debt
Fitch, Inc. BBB F3
Dominion Bond Rating Service Limited BBB R-2
Moody's Investors Service, Inc. Baa Prime-3
Standard & Poors Corporation BBB A-3

(7) A "non-investment grade corporate debt security" is a corporate debt security that is not an investment grade corporate debt security.

(8) The information processor will publish the list of designated government debt securities and designated corporate debt securities. The information processor will give reasonable notice of any change to the list.

(9) The information processor may request changes to the transparency requirements by filing an amendment to Form 21-101F5 with the Canadian securities regulatory authorities pursuant to subsection 14.2(1) of the Instrument. The Canadian securities regulatory authorities will review the amendment to Form 21-101F5 to determine whether the proposed changes are contrary to the public interest, to ensure fairness and to ensure that there is an appropriate balance between the standards of transparency and market quality (defined in terms of market liquidity and efficiency) in each area of the market. The proposed changes to the transparency requirements will also be subject to consultation with market participants.

10.2 Availability of Information - In complying with the requirements in sections 8.1 and 8.2 of the Instrument to provide accurate and timely order and trade information to an information processor or an information vendor that meets the standards set by a regulation services provider, a marketplace, an inter-dealer bond broker or dealer should not make the required order and trade information available to any other person or company on a more timely basis than it makes that information available to the information processor or information vendor.

10.3 Consolidated Feed - Section 8.3 of the Instrument requires the information processor to produce a consolidated feed in real-time showing the information provided to the information processor.

PART 11 MARKET INTEGRATION

11.1 [Repealed]

11.2 [Repealed]

11.3 [Repealed]

11.4 [Repealed]

11.5 Market Integration - Although the Canadian securities regulatory authorities have removed the concept of a market integrator, we continue to be of the view that market integration is important to our marketplaces. We expect to achieve market integration by focusing on compliance with fair access and best execution requirements. We will continue to monitor developments to ensure that the lack of a market integrator does not unduly affect the market.

PART 12 DISCLOSURE OF TRADING FEES FOR MARKETPLACES

12.1 Disclosure of Trading Fees by Marketplaces - Section 10.1 of the Instrument requires that each marketplace make its schedule of trading fees publicly available. The schedule should include all trading fees and provide the minimum and maximum fees payable for certain representative transactions. It is not the intention of the Canadian securities regulatory authorities that a commission fee charged by a dealer for dealer services be disclosed. Each marketplace is required to publicly post a schedule of all trading fees that are applicable to outside marketplace participants that are accessing an order and executing a trade displayed through an information processor or information vendor. The requirement to disclose trading fees does not require a combined price calculation by each marketplace.

12.2 Discriminatory Terms - Section 10.2 of the Instrument prohibits a marketplace from imposing terms that have the effect of discriminating between orders that are routed to that marketplace and orders that are entered on that marketplace.

PART 13 RECORDKEEPING REQUIREMENTS FOR MARKETPLACES

13.1 Recordkeeping Requirements for Marketplaces - Part 11 of the Instrument requires a marketplace to maintain certain records. Generally, under provisions of Canadian securities legislation, the Canadian securities regulatory authorities can require a marketplace to deliver to them any of the records required to be kept by them under securities legislation, including the records required to be maintained under Part 11.

13.2 Synchronization of Clocks - Subsections 11.5(1) and (2) of the Instrument require the synchronization of clocks with a regulation services provider that monitors the trading of the relevant securities on marketplaces, and by, as appropriate, inter-dealer bond brokers or dealers. The Canadian securities regulatory authorities are of the view that synchronization requires continual synchronization using an appropriate national time standard as chosen by a regulation services provider. Even if a marketplace has not retained a regulation services provider, its clocks should be synchronized with any regulation services provider monitoring trading in the particular securities traded on that marketplace. Each regulation services provider will monitor the information that it receives from all marketplaces, dealers and, if appropriate, inter-dealer bond brokers, to ensure that the clocks are appropriately synchronized. If there is more than one regulation services provider, in meeting their obligation to coordinate monitoring and enforcement under section 7.5 of NI 23-101, regulation services providers are required to agree on one standard against which synchronization will occur. In the event there is no regulation services provider, a recognized exchange or recognized quotation and trade reporting system are also required to coordinate with other recognized exchanges or recognized quotation and trade reporting systems regarding the synchronization of clocks.

PART 14 CAPACITY, INTEGRITY AND SECURITY OF MARKETPLACE SYSTEMS

14.1 Systems Requirements - This section applies to all the systems of a particular marketplace that are identified in the introduction to section 12.1 of the Instrument.

(1) Paragraph 12.1(a) of the Instrument requires the marketplace to develop and maintain an adequate system of internal control over the systems specified. As well, the marketplace is required to develop and maintain adequate general computer controls. These are the controls which are implemented to support information technology planning, acquisition, development and maintenance, computer operations , information systems support, and security. Recognized guides as to what constitutes adequate information technology controls include ‘Information Technology Control Guidelines’ from the Canadian Institute of Chartered Accountants (CICA) and ‘COBIT’ from the IT Governance Institute.

(2) Paragraph 12.1(b) of the Instrument requires a marketplace to meet certain systems capacity, performance, business continuity and disaster recovery standards. These standards are consistent with prudent business practice. The activities and tests required in this paragraph are to be carried out at least once a year. In practice, continuing changes in technology, risk management requirements and competitive pressures will often result in these activities being carried out or tested more frequently.

(3) Subsection 12.2(1) of the Instrument requires a marketplace to engage a qualified party to conduct an annual independent assessment of the internal controls referred to in paragraph 12.1(a) of the Instrument. A qualified party is a person or company or a group of persons or companies with relevant experience in both information technology and in the evaluation of related internal controls in a complex information technology environment. Before engaging a qualified party, a marketplace should discuss its choice with the regulator or, in Québec, the securities regulatory authority.

(4) Under section 15.1 of the Instrument, a regulator or the securities regulatory authority may consider granting a marketplace an exemption from the requirements to engage a qualified party to conduct an annual independent systems review and prepare a report under subsection 12.2(1) of the Instrument provided that the marketplace prepare a control self-assessment and file this self-assessment with the regulator or in Québec, the securities regulatory authority. The scope of the self-assessment would be similar to the scope that would have applied if the marketplace underwent an independent systems scope that would have applies if the marketplace underwent an independent systems review. Reporting of the self-assessment results and the timeframe for reporting would be consistent with that established for an independent systems review.

In determining if the exemption is in the public interest, the regulator or securities regulatory authority may consider a number of factors including: the market share of the marketplace, the timing of the last independent systems review, and changes to systems or staff of the marketplace.

14.2 Availability of Technology Specifications and Testing Facilities

(1) Subsection 12.3(1) of the Instrument requires marketplaces to make their technology requirements regarding interfacing with or accessing the marketplace publicly available in their final form for at least three months. If there are material changes to these requirements after they are made publicly available and before operations begin, the revised requirements should be made publicly available for a new three month period prior to operations. The subsection also requires that an operating marketplace make its technology specifications publicly available for at least three months before implementing a material change to its technology requirements.

(2) Subsection 12.3(2) of the Instrument requires marketplaces to provide testing facilities for interfacing with or accessing the marketplace for at least two months immediately prior to operations once the technology requirements have been made publicly available. Should the marketplace make its specifications publicly available for longer than three months, it may make the testing available during that period or thereafter as long as it is at least two months prior to operations. If the marketplace, once it has begun operations, proposes material changes to its technology systems, it is required to make testing facilities publicly available for at least two months before implementing the material systems change.

(3) Subsection 12.3(4) of the Instrument provides that if a marketplace must make a change to its technology requirements regarding interfacing with or accessing the marketplace to immediately address a failure, malfunction or material delay of its systems or equipment, it must immediately notify the regulator or, in Québec, the securities regulatory authority, and, if applicable, its regulation services provider. We expect the amended technology requirements to be made publicly available as soon as practicable, either while the changes are being made or immediately after.

PART 15 CLEARING AND SETTLEMENT

15.1 Clearing and Settlement - Subsection 13.1(1) of the Instrument requires that all trades executed through an ATS shall be reported and settled through a clearing agency. Subsections 13.1(2) and (3) of the Instrument require that an ATS and its subscriber enter into an agreement that specifies which entity will report and settle the trades of securities. If the subscriber is registered as a dealer under securities legislation, either the ATS, the subscriber or an agent for the subscriber that is a member of a clearing agency may report and settle trades. If the subscriber is not registered as a dealer under securities legislation, either the ATS or an agent for the subscriber that is a clearing member of a clearing agency may report and settle trades. The ATS is responsible for ensuring that an agreement with the subscriber is in place before any trade is executed for the subscriber. If the agreement is not in place at the time of the execution of the trade, the ATS is responsible for clearing and settling that trade if a default occurs.

PART 16 INFORMATION PROCESSOR

16.1 Information Processor

(1) The Canadian securities regulatory authorities believe that it is important for those who trade to have access to accurate information on the prices at which trades in particular securities are taking place (i.e., last sale reports) and the prices at which others have expressed their willingness to buy or sell (i.e., orders).

(2) An information processor is required under subsection 14.4(2) of the Instrument to provide timely, accurate, reliable and fair collection, processing, distribution and publication of information for orders for, and trades in, securities. The Canadian securities regulatory authorities expect that in meeting this requirement, an information processor will ensure that all marketplaces, inter-dealer bond brokers and dealers that are required to provide information are given access to the information processor on fair and reasonable terms. In addition, it is expected that an information processor will not give preference to the information of any marketplace, inter-dealer bond broker or dealer when collecting, processing, distributing or publishing that information.

(3) An information processor is required under subsection 14.4(5) of the Instrument to provide prompt and accurate order and trade information, and to not unreasonably restrict fair access to the information. As part of the obligation relating to fair access, an information processor is expected to make the disseminated and published information available on terms that are reasonable and not discriminatory. For example, an information processor will not provide order and trade information to any single person or company or group of persons or companies on a more timely basis than is afforded to others, and will not show preference to any single person or company or group of persons or companies in relating to pricing.

16.2 Selection of an Information Processor

(1) The Canadian securities regulatory authorities will review Form 21-101F5 to determine whether it is contrary to the public interest for the person or company who filed the form to act as an information processor. The Canadian securities regulatory authorities will look at a number of factors when reviewing the form filed, including,

  1. the performance capability, standards and procedures for the collection, processing, distribution, and publication of information with respect to orders for, and trades in, securities;
  2. whether all marketplaces may obtain access to the information processor on fair and reasonable terms;
  3. personnel qualifications;
  4. whether the information processor has sufficient financial resources for the proper performance of its functions;
  5. the existence of another entity performing the proposed function for the same type of security;
  6. the systems report referred to in subsection 14.5(b) of the Instrument.

(2) The Canadian securities regulatory authorities request that the forms and exhibits be filed in electronic format, where possible.

(3) The forms filed by an information processor under the Instrument will be kept confidential. The Canadian securities regulatory authorities are of the view that they contain intimate financial, commercial and technical information and that the interests of the filers in non-disclosure outweigh the desirability of adhering to the principle that all forms be available for public inspection.

16.3 Change to Information - Under subsection 14.2(1) of the Instrument, an information processor is required to file an amendment to the information provided in Form 21-101F5 at least 45 days before implementing a significant change involving a matter set out in Form 21-101F5, in the manner set out in Form 21-101F5. In the view of the Canadian securities regulatory authorities, a significant change includes a change to the information contained in Exhibits A, B, F, G, H, 0, P, Q, R and S and Item 10 of Form 21-101F5.

16.4 System Requirements - Section 14.1 of this Companion Policy contains guidance on the systems requirements as it applies to an information processor.