Securities Law & Instruments

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CSA Staff Notice 23-326

Order Protection Rule: Market Share Threshold for the period April 1, 2020 to March 31, 2021

 

February 13, 2020

Introduction

On June 20, 2016, the Canadian Securities Administrators (the CSA or we) published a notice{1} (the 2016 Notice) regarding the implementation of the market share threshold. This notice updates the list of protected and unprotected marketplaces published on January 31, 2019. The updated list will be in effect from April 1, 2020 to March 31, 2021. We note that there are no changes compared to the list published last year.

The text of this notice is available on the websites of the CSA jurisdictions, including:

www.lautorite.qc.ca
www.albertasecurities.com
www.bcsc.bc.ca
www.fcnb.ca
nssc.novascotia.ca
www.osc.gov.on.ca
www.fcaa.gov.sk.ca
www.mbsecurities.ca

Purpose

The purpose of this notice is to provide the list of marketplaces that display protected orders (protected marketplaces) and marketplaces whose orders will not be protected (unprotected marketplaces) for the purposes of National Instrument 23-101 Trading Rules (NI 23-101) and the order protection rule (OPR) for the period April 1, 2020 to March 31, 2021 because they do not:

(i) provide automated trading functionality as they have an intentional order processing delay, and/or

(ii) meet the market share threshold.

The market share threshold has been set at 2.5%.{2}

OPR Requirements

Section 6.1 of NI 23-101 requires marketplaces to establish, maintain and ensure compliance with policies and procedures that are reasonably designed to prevent trade-throughs of better priced protected bids and offers. Section 6.4 of NI 23-101 imposes the same requirement on marketplace participants that assume responsibility for compliance with OPR by entering directed-action orders.

Section 1.1 of NI 23-101 defines protected bids and offers as bids and offers displayed on a marketplace offering automated trading functionality, and about which information is provided to an information processor.

Section 1.1.2.1 of Companion Policy 23-101 Trading Rules outlines the circumstances in which a marketplace that introduced an intentional order processing delay would not be considered to be providing automated trading functionality. In those circumstances, the orders on that marketplace would not be protected.

Orders on "dark" marketplaces are not protected as they are not displayed. Therefore, orders on ICX, LiquidNet, MATCHNow, NEO Exchange dark book (NEO-D) and Nasdaq CXD are unprotected for the purposes of OPR.

List of Protected and Unprotected Marketplaces

Below we have listed the protected and unprotected marketplaces.

The orders displayed on the marketplaces listed in Table 1 below are protected because either the marketplace meets the market share threshold and/or the orders are for securities that are listed by and traded on that marketplace:

Table 1 -- Marketplaces that Display Protected Orders

Marketplace

Market Share

Status

Reason Protected

NEO-L

3.84

Protected

Meets market share threshold

CSE

7.91

Protected

Meets market share threshold

Nasdaq CXC

11.94

Protected

Meets market share threshold

Nasdaq CX2

4.25

Protected

Meets market share threshold

Omega

4.66

Protected

Meets market share threshold

TSX

46.59

Protected

Meets market share threshold

TSX Venture

9.38

Protected

Meets market share threshold

Orders displayed on the marketplaces listed on Table 2 below will be unprotected because either the marketplace does not provide automated trading functionality, does not meet the market share threshold or does not display orders:

Table 2 -- Marketplaces whose Orders Are Unprotected

Marketplace

Market Share

Status

Reason Unprotected

NEO-N

3.60

Unprotected

Does not provide automated trading functionality

Alpha

7.74

Unprotected

Does not provide automated trading functionality

Lynx

0.07

Unprotected

Does not meet market share threshold

ICX

__________

Unprotected

Does not display orders

LiquidNet

__________

Unprotected

Does not display orders

MATCHNow

__________

Unprotected

Does not display orders

Nasdaq CXD

__________

Unprotected

Does not display orders

NEO-D

__________

Unprotected

Does not display orders

QUESTIONS

Please refer your questions to any of the following:

Alina Bazavan
Alex Petro
Senior Analyst, Market Regulation
Trading Specialist, Market Regulation
Ontario Securities Commission
Ontario Securities Commission
abazavan@osc.gov.on.ca
apetro@osc.gov.on.ca
Roland Geiling
Serge Boisvert
Derivatives Product Analyst
Senior Policy Analyst
Exchanges and SRO Oversight
Exchanges and SRO Oversight
Autorité des marchés financiers
Autorité des marchés financiers
Roland.Geiling@lautorite.qc.ca
serge.boisvert@lautorite.qc.ca
H. Zach Masum
Jesse Ahlan
Manager, Legal Services
Regulatory Analyst, Market Structure
British Columbia Securities Commission
Alberta Securities Commission
zmasum@bcsc.bc.ca
jesse.ahlan@asc.ca

{1} CSA Staff Notice 23-316 Order Protection Rule: Implementation of the Market Share Threshold and Amendments to Companion Policy 23-101 Trading Rules.

{2} CSA Staff Notice 23-316 includes a description of the calculation of the market share threshold.