CANADA: Proposed Amendments Respecting Trading Supervision Obligations

Friday December 9 2016

The Investment Industry Regulatory Organisation of Canada (IIROC) has published for comment proposed amendments that would introduce a more principles-based approach to trading supervision. These changes would provide Participants with enhanced flexibility to develop policies, procedures and systems of control that better address their particular compliance risks.

Specifically, the Proposed Amendments would:

• remove the “Minimum Compliance Procedures for Trading Supervision” table (“Minimum Supervision Table”) in Policy Part 3 of UMIR 7.1
• add new policies and requirements to address gaps created by the removal of the Minimum Supervision Table
• remove the requirement to tailor order parameters of every automated order system used by a Participant or client to not exceed marketplace thresholds in Policy Part 8 of UMIR 7.1
• add a new provision to UMIR 7.13 (3) (c) that would require client orders entered by an investment dealer or foreign dealer equivalent through a routing arrangement to be subject to reasonable risk management and supervisory controls, policies and IIROC Notice 16-0287– Rules Notice – Request for Comments – Proposed Amendments Respecting Trading Supervision Obligations 2 procedures established and maintained by the investment dealer or foreign dealer equivalent.

A special committee of industry stakeholders and IIROC staff provided their input on the drafting of the Proposed Amendments. We sincerely thank these individuals for their time and valuable contribution.

If implemented, IIROC expects that the most significant impacts of the Proposed Amendments on Participants would be to:

• review their current supervision and compliance policies and procedures and modify them where necessary to ensure they are reasonably designed to address compliance risks based on their size and the nature of business in which they are involved
• make appropriate changes to comply with proposed changes to UMIR 7.13 (3) (c) by ensuring orders entered by a client of an investment dealer or foreign dealer equivalent under a routing arrangement are subject to reasonable risk management and supervisory controls, policies and procedures established and maintained by the investment dealer or foreign dealer equivalent.

If approved, the Proposed Amendments would become effective approximately 180 days after publication of the notice of approval.

Click on the link above for further details.