The Position Paper is the next step in a process involving regulatory consultations with market participants on issues surrounding dark liquidity that began in 2009 with the publication for comment of Consultation Paper 23-404 Dark Pools, Dark Orders, and other developments in market structure in Canada.
In March 2010, the CSA and IIROC hosted a forum to further discuss the issues raised in the consultation paper and the feedback received. On 28 May 2010, the two organizations published a notice setting out the themes discussed at the forum and next steps.
The Position Paper deals with issues regarding dark liquidity, while other issues raised at the March 2010 forum are being addressed through separate CSA and IIROC projects.
The CSA and IIROC are proposing that only orders that meet a minimum size threshold be exempt from the pre-trade transparency requirements imposed on marketplaces in Canada.
In addition, the organizations are recommending that ‘meaningful price improvement’ be required in certain circumstances and that, generally, visible orders should be executed before Dark Orders at the same price on the same marketplace.
IIROC CEO and president Susan Jenah said that the proposed changes will promote transparency and price discovery and enhance fair and equal access to liquidity for all investors, while recognizing the role that Dark Pools play in facilitating the execution of large orders.
