Notice 2013-005 - Notice of OSC Approval of Changes to Rule 12September 27, 2013
In accordance with the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits thereto (Exchange Protocol) for recognized exchanges, the Ontario Securities Commission (OSC) has approved amendments to the Rules of CNSX Markets Inc. (CNSX Rules) which are attached below.
The amendments are public interest amendments. In accordance with the Exchange Protocol. CNSX Markets Inc. (CNSX) requested and received a waiver of the requirement to publish the amendments for public comment. The OSC granted these waivers on the basis that the proposed Amendments would be in line with recently approved amendments to National Instrument 23-103 Electronic Trading and Direct Electronic Access to Marketplaces (NI 23-103) that were previously published for comment on October 25, 2012 at (2012) 35 OSCB 9627.
Reasons for the Amendments
The CSA have finalized amendments to NI 23-103 that relate to the offer and use of direct electronic access (DEA) which will come into effect on March 1, 2014. These amendments do not set out an "eligible client list" that imposes specific financial standards upon DEA clients as found in the current DEA rules and policies at the marketplace level. Rather the amendments allow a dealer providing DEA to have flexibility to determine the specific levels of the minimum standards of DEA clients in order to accommodate its business model and appetite for risk. This approach is in keeping with global standards related to DEA. The Amendments are also consistent with the requirement in section 4.7 of NI 23-103 that sets out the parameters under which entities that trade for the account of another person of company may receive DEA from a participant dealer.
As the amendments to NI 23-103 will not be in place until March 1, 2014, requests from the dealer member community have been made to various marketplaces to expand the list of eligible categories to accommodate potential DEA clients that do not currently qualify under the existing regime, but will qualify under the amendments to NI 23-103 once they come into effect.
CNSX Markets will revoke the rules related to DEA upon implementation of the amendments to NI 23-103 on March 1, 2014.
Effect of the Amendments
In general, the Amendments will provide for a new category of DEA client. Specifically, this client would be a non-individual that has a total amount of securities under administration or management that exceeds $10 million, that carries on business in a foreign jurisdiction and may trade under the laws of the foreign jurisdiction for the account of another person or company using DEA and is regulated in the foreign jurisdiction by a signatory to the International Organization of Securities Commissions' Multilateral Memorandum of Understanding.
This new category will expand the category of entities that are eligible to use DEA but is consistent with the requirements set out in NI 23-103.
Effective Date of the Amendments
The Amendments will become effective on September 30, 2013.
Text of the Amendments
12-101 Eligibility Requirements
(1) In this Rule,
"eligible client" means
(a) a client that falls within the definition of "acceptable counterparties" or "acceptable institutions" as defined in the General Notes and Definitions section of the Joint Regulatory Financial Questionnaire and Report;
(i) a client that is a non-individual with total securities under administration or management exceeding $10 million, where the client is resident in a jurisdiction that falls within the definition of "Basle Accord Countries" as defined in the General Notes and Definitions section of the Joint Regulatory Financial Questionnaire and Report; and
(j) a client that enters an order through an order execution account; and an "order execution account" is a client account in respect of which a CNSX Dealer is exempted, in whole or in part, from making a determination on the suitability of trades for the client in accordance with the requirements of a securities regulatory authority of a recognized self regulatory organization.; and
(k) a client that is a non-individual with total securities under administration or management exceeding $10 million, where the client carries on business in a foreign jurisdiction and may trade under the laws of the foreign jurisdiction for the account of another person or company using direct market access and is regulated in the foreign jurisdiction by a signatory of the International Organization of Securities Commissions' Multilateral Memorandum of Understanding.