The Canadian Securities Administrators (CSA) has published CSA Notice 23-325, Update on Trading Fee Rebate Pilot Study (the Update) on its plans to proceed with the Trading Fee Rebate Pilot Study (the Pilot Study), which would analyze the effects of the prohibition of marketplace trading fee rebate payments on market participants.

The regulator notes that the launch of the Pilot Study is conditional on a similar study being implemented by the Securities and Exchange Commission in the United States (the SEC Fee Pilot).

The Pilot Study would apply temporary pricing restrictions on marketplace trading fee rebates payable for transactions in a sample set of securities. The sample securities would include highly liquid and medium liquidity securities. It is part of the regulator’s plan to identify and address issues concerning trading fee rebates.

Implementation of the Pilot Study is expected to occur on a staggered basis, in two stages:

  • interlisted securities in tandem with the implementation of the SEC Fee Pilot, if possible;  and,
  • non-interlisted securities and exchange-traded products (ETP) three months following the introduction of interlisted securities.

The Pilot Study will apply to all trading fee rebates paid by Canadian marketplaces, encompassing both exchanges and alternative trading systems (ATS), for the execution of orders concerning certain equity securities and ETPs.  The securities to be considered by the Pilot Study are:

  • a set of securities selected from a list of highly liquid securities that are prepared and published by the Investment Industry Regulatory Organization of Canada (IIROC); and,

a set of actively traded, medium liquidity securities that has been constructed by the Pilot Study’s authors.

It is important to note that the Pilot Study will prohibit the payment of trading fee rebates, including linked pricing, by marketplaces regarding the trading in treated securities. It is also important to note that if the SEC Fee Pilot does not go forward, the CSA will consider conducting the Pilot Study with only non-interlisted securities.

CSA Notice 23-325 Trading Fee Rebate Pilot Study is available for download from the websites of the Participating Jurisdictions.

For more information, please call Barbara Hendrickson at BAX Securities Law (416) 601 -1004.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.