Securities Law & Instruments

Headnote

Commission made a decision under subsection 21.1(4) of the Securities Act (Ontario), subject to terms and conditions.

June 29, 2005.

IN THE MATTER OF

THE SECURITIES ACT, R.S.O. 1990, CHAPTER S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

MARKET REGULATION SERVICES INC.

 

DECISION

(Subsection 21.1(4) of the Act)

The Commission is making a decision under subsection 21.1(4) of the Act.

1. The Canadian Securities Administrators (CSA) approved and implemented National Instrument 21-101 Marketplace Operation and National Instrument 23-101 Trading Rules and related companion policies (together, the ATS Rules) to allow new marketplaces to be established and to foster competition.

2. NI 21-101 establishes that an alternative trading system (ATS) shall not act as a regulator but will be regulated by a regulation services provider (RSP). NI 23-101 requires a regulation services provider to set requirements governing an ATS and its subscribers, including requirements that the ATS and its subscribers will conduct trading activities in compliance with NI 23-101 and that the RSP monitor and enforce the requirements against the ATS and its subscribers.

3. Market Regulation Services Inc. (RS) is an RSP under the ATS Rules that was recognized by the British Columbia Securities Commission, the Alberta Securities Commission, the Manitoba Securities Commission, the Ontario Securities Commission and the Autorité des marchés financiers.

4. RS has included in the agreements between RS and ATSs required by NI 23-101 (the RSP Agreements) the requirement that subscribers sign an "RS confirmation and representation form in substantially the form attached as Schedule B to the RSP Agreement and acknowledgements set forth in substantially the form attached as Schedule C to the RSP Agreement" (section 3.6 of the RSP Agreements).

5. Potential subscribers have raised questions about the content of the RSP Agreements.

6. The content of the RSP Agreements should be reconsidered in light of market developments through a public comment process; however, such process would cause unnecessary delay and would act as a barrier to ATSs beginning operations.

7. Under the ATS Rules, RS has the jurisdiction and the responsibility to monitor and enforce its rules and requirements against subscribers and their directors, officers and employees.

8. Based on these facts, the Commission is satisfied that to make a decision under section 21.1(4) would be in the public interest.

Commission Decision

9. The Commission makes the following decision under subsection 21.1(4) of the Act:

(A) RS shall waive the requirement for a subscriber of an ATS to execute the RS confirmation and representation forms and the acknowledgements described in section 3.6 of the RSP Agreements, if

(i) the subscriber signs a release made and executed in favour of, and delivered to, RS in the form of the following:

RS, its directors, officers, employees, agents and any other person acting under its authority shall not be liable to the Subscriber or any of its Regulated Persons (as defined in the UMIR) for any loss, damage, cost, expense or other liability or claim arising from any act or omission, in good faith, in connection with RS's performance of services as a Regulation Services Provider (as defined in NI 21-101); or

(ii) the ATS has executed an indemnity that is consistent with the language in section 11.10 of UMIR and has taken steps, satisfactory to RS acting reasonably, to ensure that it will be able to satisfy the indemnity, and

(B) RS shall continue to monitor and enforce its rules and requirements against subscribers to an ATS with which it has agreed to act as the RSP and against their directors, officers and employees.

"David A. Brown"

"Paul M. Moore"