The Investment Industry Regulatory Organization of Canada earlier this week published guidance reminding dealers that trades executed off-marketplace in reliance of the exemption to execute trades on a foreign organized regulated market (FORM) must meet the appropriate requirements. Specifically, the guidance states that U.S. broker-dealers that internalize orders by matching them with their own inventory do not satisfy the FORM definition as such dealers do not meet the relevant registration requirements. 

The guidance was released in response to concern that Canadian investment dealers have entered into, or are considering entering into, arrangements to route Canadian retail investor orders to U.S. dealers for execution. In a release supporting IIROC's guidance, the CSA stated that such off-marketplace orders are generally being executed without meeting the minimum price improvement requirement and, as such, may negatively impact the quality of the Canadian market.