Month: November 2022

CSA Consults on Access to Real-Time Market Data; No Pain, No Gain

Earlier this month, the Canadian Securities Administrators (CSA) released CSA Consultation Paper 21-403 Access to Real-Time Market Data, focusing on the costs of various types of access. As defined in the Consultation Paper, ‘real-time market data’ is order and trade information that is distributed immediately after an order has been entered, amended, or cancelled or a trade has been executed”. Issues have been raised about the cost of accessing data, particularly in Canada where there are multiple marketplaces, comprised of exchanges and alternative trading systems, competing for the same securities to trade. The Consultation Paper is of interest to anyone responsible for investment, order routing and execution decisions and sets out in a comprehensive manner the current regulatory regime, including the regulation of direct feeds and consolidated data, summarizes concerns that have been raised to date, and sets out potential initial and longer-term options under consideration by the CSA.

In its review, staff of the CSA considered:

  • Changes in core marketplace revenues to identify changes and trends;
  • Fees that impact the costs incurred by market participants that access and use real-time market data;
  • The need to access Level 2 consolidated real-time market data [depth-of-book, i.e. information on all visible orders in the marketplace and all trades] versus Level 1 consolidated real-time market data from listing markets only [top-of-book information for each security, generally the last sale, the best bid and offer and the aggregated volume available for purchase or sale at those prices]; and
  • The fees charged in Canada compared to those charged in the U.S. and other global markets.

The research indicated that fees differ across marketplaces for access and use of real-time market data and may include additional fees such as distribution fees if the data is redistributed, user display fees (or non-display fees), and charges associated with how participants connect to the data (e.g. co-location fees). The CSA’s research indicated that providing access to Level 2 data could as much as double the cost to consume data from all marketplaces when compared to only the listing markets.

Of note, the Consultation Paper stated that everyone interviewed by staff as part of their research indicated that the use of real-time market data should be tailored to a participant’s needs, and that not all participants needed access to the same data. However, most market participants were also of the view that they must acquire real-time market data from all marketplaces in order to comply with both their best execution obligations and the order protection rule.

The potential initial options focus on fair access to real-time market data for both direct marketplace and consolidated feeds. One suggestion is to impose standardized terminology to describe various products and how those products are accessed and enhance the transparency of any fee changes proposed by marketplaces by requiring them to publish proposed changes for public comment.

Longer-term options would instead propose an overhaul of the regulations applicable to accessing consolidated real-time market data. For example, consideration is being given to leveraging the current information processor model and imposing a cap on fees charged by marketplaces for marketplace order and trade data that is consumed through the consolidated products distributed by an enhanced information processor. The CSA is also contemplating introducing a new model for data consolidation through the use of a new administrative information processor that would be responsible for setting and managing the components of the model (including products, fees and revenue sharing).

A number of CSA considerations and areas for feedback are set out in the Consultation Paper, ranging from the need to enhance the transparency of any fee proposals related to real-time market data, any unintended consequences that could spring from the suggestions made, to how to incentivize market participants to provide consolidated real-time market data to all clients at reasonable prices.

Comments on the Consultation Paper are due by February 10, 2023. Any further regulatory proposals that result from the consultation will be published for further comment.

November 30, 2022

OSC Announces New Fee Rules as of April 2023 (or you Really Do Have to Pay to Play)

The Ontario Securities Commission (OSC) recently announced that new OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) Fees and their respective companion policies will come into effect on April 2, 2023. As noted in our January 2022 bulletin article, the OSC had been consulting on changes to the fee calculations for certain market participants to reflect the growth in Ontario’s over-the-counter (OTC) derivatives market activities. The revised rules will introduce a new fee for entities that enter into OTC derivatives transactions but will moderately reduce participation fees for certain reporting issuers and registrants.

The amendments will also eliminate certain activity and late fees, and permanently eliminate late fees on certain registration form updates, including outside activities. With respect to fees for exempt trade reports, the fees payable will be reduced to $350.

No changes have been made to the original proposals regarding the simplification of the annual capital markets participation fee, where it will no longer be necessary to estimate revenues that are later adjusted. The fee will be based instead on actual financial information from the most recently audited financial statements. In addition, the current rush that registrants face to file the fee forms by the deadline of December 1 will be alleviated by a requirement to file between September 1 and November 1. 

November 30, 2022

Shooting for the Stars – FSRA Proposes to Eliminate DSCs for Segregated Funds

On November 25, the Financial Services Regulatory Authority of Ontario (FSRA) proposed amendments to the existing Unfair or Deceptive Acts or Practices (UDAP) Rule. The amendments would eliminate deferred sales charges (DSC) on new segregated fund contracts effective June 1, 2023. DSCs are payable by clients when they withdraw money from a segregated fund contract before the end of the time period specified in the contract. New requirements would also be introduced with respect to existing DSCs, including customer disclosure and limits on the use of existing DSC options. Comments are the two sets of proposed amendments are due February 23, 2023.

September 28, 2022

CSA Formally Recognize New SRO and Approve New CIPF; One Team, One Dream

The CSA recently published notices that recognize the New Self-Regulatory Organization of Canada (New SRO) and approve the Canadian Investor Protection Fund (CIPF) both as of January 1, 2023. As set out in our May 2022 bulletin, the CSA released CSA Staff Notice and Request for Comment 25-304 Application for Recognition of New Self-Regulatory Organization and CSA Staff Notice and Request for Comment 25-305 Application for Approval of the New Investor Protection Fund seeking comment on a number of operational aspects relating to the New SRO and investor protection fund. The press release announcing the notices also indicated that the Autorité des marches financiers intends to publish a transition plan for mutual fund dealers registered in the Province of Québec before the end of the year.

The New SRO will be temporarily known as the “New Self-Regulatory Organization of Canada” until a new name is determined at a later date, and as noted above the combined contingency fund will be known as the “Canadian Investor Protection Fund”. The interim rules for the New SRO provide for the continued jurisdiction over persons subject to the current IIROC and MFDA rules and contain numerous transitional provisions. With respect to the registration of firms and individuals, the powers of the New SRO remain the same as the current powers of IIROC unless changed by the regulators. In response to public comments on the May consultations, a number of clarifications were made, including that there would be no changes to the current delegation of registration authority to IIROC (which applies to investment dealers only).

Firms and individuals currently regulated by IIROC or the MFDA may wish to consult the FAQs relating to the Interim Rules and the Integration Cost Recovery Fee Model Guideline, now found on the New SRO website.

November 30, 2022

Important Reminders: Upcoming Deadlines and Resources – Fast and Furious

A few impending filing deadlines that we thought would be helpful to note from past bulletins for your reference:

  • December 1 (yes, December 1) is the deadline for registrants in Ontario and foreign firms that rely on certain exemptions from the registration requirements to file their fee calculation forms (Form 13-502F4 Capital Markets Participation Fee Calculation under OSC Rule 13-502 Fees and Form 13-503F1 (Commodity Futures Act) Participation Fee Calculation under OSC Rule 13-503 (Commodity Futures Act) Fees).
  • January 30, 2023, is the deadline for filing exempt trade reports for issuers that are investment funds and that relied on specific prospectus exemptions under National Instrument 45-106 Prospectus Exemptions, namely the accredited investor exemption, the minimum investment of $150,000 (for non-individuals), and the exemption for additional investment in investment funds. Based on past experience, the processes of completing the forms and submitting the fees across the country can be time consuming and should be started as soon as possible to avoid a “filing crunch” in late January. Contact us and we can help you!
  • June 6, 2023, is when an individual registrant’s Form 33-109F4 must be filed to update their “other activities”, as required by amendments to National Instrument 33-109 Registration Information. While this seems eons away, as the whole form should be reviewed, updated and filed within the deadline, and if older forms were used, the new forms may require new information to be inputted, we continue to recommend that clients speak with us sooner rather than later to work through the forms in a systematic fashion to avoid filing delays.

Finally, we wanted to note in case you have not yet had an opportunity to visit the page, the Ontario Securities Commission has set up a number of helpful materials that can be used to assist with a registrant’s obligations regarding older and vulnerable investors. Resources include educational material, and some starter template forms. We would be pleased to discuss your strategies for addressing the needs of these investors in greater detail.

November 30, 2022

BLG’s Resource Corner

Our colleagues at BLG have provided the following insights we thought might interest our readers:

For more information, please visit the BLG website.

November 30, 2022

AUM Law Speaks at the PMAC AML and ATF Training Session – December 6

AUM Law’s Chris Tooley will be participating as a speaker for the second year in a row at the Anti-Money Laundering and Anti-Terrorist Financing Training Session hosted by PMAC. Chris will be covering core concepts around money laundering and terrorist financing, client identification, what information you must collect from clients, record keeping, and suspicious transactions. To register for the event, please click here, or contact our communications team here for more details.

November 30, 2022