Securities Law & Instruments


National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – relief from sections 7.1 and 7.3 of National Instrument 21-101 Marketplace Operation (NI 21-101) to permit Liquidnet Canada, Inc. to implement a new functionality related to targeted invitations.

Applicable Legislative Provisions

National Instrument 21-101 Marketplace Operation, s. 15.1.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, s. 5.2(1)(a).


June 6, 2017






(s. 15.1 of NI 21-101)


The principal regulator in the Jurisdiction has received an application (Application) from the Applicant for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption pursuant to section 15.1 of National Instrument 21-101 Marketplace Operation (NI 21-101) from the pre-trade transparency requirements of s. 7.1 and s. 7.3 of NI 21-101 relating to the use of targeted invitation functionality by Canadian subscribers to trade both exchange-traded securities and foreign exchange-traded securities (each an “eligible security”);

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a)           the Ontario Securities Commission is the principal regulator for the Application, and

(b)           the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Manitoba, British Columbia, Saskatchewan, New Brunswick and Quebec.


Terms defined in National Instrument 14-101 Definitions and National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions (NP 11-203), National Instrument 21-101 Marketplace Operation (NI 21-101) and the Securities Act (Ontario) have the same meaning if used in this decision, unless otherwise defined.


The Decision is based on the following facts represented by Applicant:

1.1          The Applicant is a federal corporation formed under the laws of Canada and is a wholly-owned subsidiary of Liquidnet Holdings, Inc., a corporation formed under the laws of the State of Delaware.

1.2          The Applicant is an alternative trading system (ATS) under NI 21-101 that is registered as an investment dealer (or equivalent) with the Ontario Securities Commission (OSC), the Autorité des Marchés Financiers of Québec and the British Columbia, Alberta, Saskatchewan, Manitoba and New Brunswick Securities Commissions. The Applicant is also a member of and regulated by the Investment Industry Regulatory Organization of Canada (IIROC).

1.3          The Applicant’s affiliates include Liquidnet, Inc. in the United States, Liquidnet Europe Limited in the United Kingdom, Liquidnet Japan Inc., Liquidnet Asia Limited in Hong Kong, and Liquidnet Australia Pty Ltd., each of which operates a system for trading equity securities in its region (collectively, the Affiliate trading systems). The Affiliate trading systems are wholly-owned by Liquidnet Holdings, Inc. 

1.4          The Applicant, as an ATS, facilitates the execution of orders in Canadian equity securities by its subscribers, as defined in NI 21-101 and described in its Form 21-101F2 Information Statement Alternative Trading System. The ATS also facilitates the execution of orders in non-Canadian equity securities via the Affiliate trading systems.

1.5          The Applicant, as an ATS, intends to permit its institutional subscribers (“buy-side subscribers”) to utilize targeted invitation functionality to facilitate trading of eligible securities. The Applicant does not intend to permit registered dealers to utilize targeted invitation functionality.

1.6          Targeted invitations functionality is an optional feature. Subscribers must affirmatively consent to be eligible to receive targeted invitations and send targeted invitations.

1.7          Targeted invitation functionality enables a subscriber to anonymously send a targeted notification to one or more other subscriber recipients who have shown recent contra interest in trading a particular equity security. In addition to the notification component, a targeted invitation also represents a firm order available for matching and execution. The firm order associated with a targeted invitation can execute against buy-side contra orders regardless of whether the contra was actually a recipient of the targeted invitation notification.

1.8          The minimum order size for targeted invitations for eligible securities traded in Canada is the lesser of 25,000 shares and 15% of ADV where ADV (“Average Daily Volume”) for a particular eligible security is calculated as the 30 days rolling average of the volume of shares traded daily in that security on all the venues in Canada. The complete list of minimum order sizes that apply in different regions is as follows:

  • For Canadian, US and Mexican entities: The lesser of 25,000 shares and 15% of ADV
  • For EMEA (Europe, Middle East and Africa): The applicable large-in-scale threshold for the stock; or where a stock does not have a large-in-scale threshold, the lesser of 100K Euros and 20% of ADV
  • For APAC (Asia-Pacific) equities: The lesser of USD$2.5M and 50% of ADV.

The Applicant will provide written notice to buy-side subscribers prior to implementing any increase in the minimum order size for targeted invitations for eligible securities.

1.9          Sections 7.1 and 7.3 of NI 21-101 provide that when an ATS displays order information concerning eligible securities to those other than just employees or persons or companies retained by the ATS to assist in the operation of the ATS, the ATS must provide the same information to an information processor or to an information vendor if an information processor is not available.

1.10        The Applicant has requested an exemption from s. 7.1 and s.7.3 of NI 21-101 to be able to offer targeted invitation functionality to Canadian buy-side subscribers in Ontario, Alberta, New Brunswick, Quebec, British Columbia, Saskatchewan, and Manitoba.

1.11        While the transparency requirements are fundamental to the marketplace framework in NI 21-101 Marketplace Operation, there is benefit to the market to facilitate large block size trades by buy-side institutions.

1.12        The Applicant acknowledges that the impact of targeted invitations on the market will be monitored over time and any negative impact will be addressed.


The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the exemption sought is granted provided that:

(1)           The proposed functionality is only made available to buy-side subscribers who affirmatively consent to participate in the targeted invitations functionality.

(2)           All orders associated with targeted invitations are subject to the minimum order size in effect at the time of the trade in each jurisdiction where Liquidnet offers the targeted invitations functionality.

(3)           Liquidnet will test the targeted invitations functionality prior to implementation to ensure the functionality works as designed, including the application of the criteria used to determine the buy-side subscriber recipients who have shown recent contra interest in trading a particular equity security. On a quarterly basis for the first year from the implementation date and annually for the following two years, Liquidnet will review the application of the criteria for selecting who receives targeted invitations and confirm in writing that the functionality works as designed and counterparties receiving the targeted invitations do so in compliance with the set criteria. Liquidnet shall provide to the Commission the reports of its quarterly analyses in the first year after implementation and if requested by Commission staff thereafter. Each report will be provided 15 days after the end of the required period.

(4)           Liquidnet will analyze the impact of the targeted invitations and will share the results with the Commission. The manner and format of the analysis will be agreed to with Commission staff no later than 45 days after the signing of this decision.

Dated this 6th day of June 2017

“Susan Greenglass”
Director, Market Regulation
Ontario Securities Commission