On April 8, the Canadian Securities Administrators (CSA) published for comment proposed National Instrument 23-103 Electronic Trading and Direct Electronic Access to Marketplaces. As we discussed inour post of March 11, the CSA and IIROC have been examining issues relating to direct electronic access and risks associated with electronic trading for some time.

The proposals are intended to regulate electronic trading generally by

  1. imposing requirements on marketplace participants that electronically access marketplaces. Specifically, the proposal addresses issues regarding marketplace participant controls, policies and procedures and the use of automated order systems;
  2. imposing a framework around the provision of direct electronic access. For example, participant dealers would have to establish appropriate standards for their clients before providing clients with direct electronic access. Client minimum standards would include appropriate financial resources and a knowledge and ability to comply with applicable regulatory requirements; and
  3. imposing additional requirements on marketplaces related to electronic trading. For example, the proposal addresses issues regarding reasonable access to a participant's own order and trade information, marketplace thresholds, and clearly erroneous trades.  

In developing its proposals, the CSA reviewed related initiatives in the U.S., Australia and the European Union and according to the CSA, its proposed requirements are in line with the principles found in the IOSCO report on direct electronic access. Comments are being accepted on the proposals until July 8, 2011