CSA Notice of Approval
Amendments to National Instrument 21-101 Marketplace Operation
October 23, 2014
I. Introduction
The Canadian Securities Administrators (CSA or we) have made amendments to National
Instrument 21-101 Marketplace Operation (NI 21-101) and its related Companion Policy 21-
101CP (21-101 CP) with respect to the transparency requirements of the trading of government
debt securities.
Provided all necessary ministerial approvals are obtained, the amendments to NI 21-101 and 21-
101CP (the Amendments) will come into force on December 31, 2014.
II. Substance and Purpose
Currently, section 8.6 of NI 21-101 provides for an exemption from transparency requirements
for government debt securities until January 1, 2015. The Amendments will extend this
exemption until January 1, 2018. The purpose of the Amendments is to maintain the regulatory
framework for government debt transparency but delay imposing regulatory requirements until
such time they are appropriate.
III. Background
Part 8 of NI 21-101 sets out transparency requirements for marketplaces dealing in debt
securities, inter-dealer bond brokers and dealers trading unlisted debt securities. Section 8.1 sets
out specific pre-trade and post-trade transparency requirements for government debt securities.
Section 8.6 contains an exemption from section 8.1 until January 1, 2015. This exemption was
last extended in 2011.
The Amendments were published for comment along with other proposed amendments on April
24, 2014 (2014 Proposed Amendments). The CSA are now finalizing the proposed change
applicable to the extension of the exemption from government debt transparency, and intend to
review and proceed with the other proposed amendments included in the 2014 Proposed
Amendments on a separate timetable.
Domestic Developments
Since the exemption was last extended, the CSA has continued to review regulatory
developments with respect to fixed income, including government debt transparency,
and the appropriateness of the exemption in section 8.6 of NI 21-101 and the alternatives for
transparency of government fixed income securities.
In Canada, some regulatory developments have occurred. For example, IIROC has implemented
Dealer Member Rule 3300 – Fair Pricing of Over-The-Counter Securities (the Fair Pricing Rule)
whose purpose is to ensure that dealers’ clients, in particular retail clients, are given prices for
over-the-counter securities that are fair and reasonable in relation to prevailing market
conditions. Furthermore, amendments to IIROC Dealer Member Rules 29 Business Conduct,
200 Minimum Records and 3500 Relationship Disclosure and Dealer Member Form 1 came into
force on July 15, 2014. These include requirements that dealers disclose to their retail clients, on
the debt security trade confirmations, the total compensation or the gross commission taken on a
trade, with additional disclosure required where gross commission is disclosed.
1
In addition, proposed IIROC Rule 2800C – Transaction Reporting for Debt Securities will
require dealers to report, on a post-trade basis, all debt market transactions executed by a dealer
member, including those executed on a marketplace or through an inter-dealer bond broker. This
proposed rule is expected to facilitate the creation of a database of transaction information that
would enable IIROC to carry out its responsibilities with respect to the surveillance and
oversight of over-the-counter debt market trading.
International Developments
A number of noteworthy regulatory developments have recently occurred in Europe.
Specifically, the final legislative texts of the new Markets in Financial Instruments Directive
(MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) were approved by the
European Parliament on April 15, 2014 and by the European Council on May 13, 2014, and
entered into force on June 12, 2014. When implemented, MiFIR will establish a new
transparency regime which extends to bonds, structured products, emission allowances and
derivatives (collectively, non-equity financial instruments).
This regime will include requirements for pre-trade transparency for non-equity financial
instruments and will apply to market operators and investment firms operating a trading venue.
2
Waivers from these requirements would apply, including for large orders.
3
There will also be
post-trade transparency requirements for non-equity financial instruments, which will also apply
to market operators and investment firms operating a trading venue.
4
The information to be made
public will be the price, volume and time of the transactions, and it may be delayed in certain
instances, for example, when executing large transactions or transactions in less liquid products.
5
1
New sub-clause 200.2(I)(v)(C) of IIROC Dealer Member Rule 200 Minimum Records.
2
MiFIR Article 8 Pre-Trade transparency requirements for trading venues in respect of bonds, structured finance
products, emission allowances and derivatives.
3
MiFIR Article 9 Waivers for non-equity instruments.
4
MiFIR Article 10 Post-trade transparency requirements for trading venues in respect of bonds, structured finance
products, emission allowances and derivatives.
5
MiFIR Article 11 Authorisation of deferred publication.
The European Securities and Markets Authority (ESMA) was tasked with drafting the regulatory
technical standards (RTS) that will specify the precise content of the pre and post-trade
information to be made transparent, including the conditions under which waivers from the pre
trade transparency requirements would be granted. ESMA was also required to develop RTS for
the implementation of the post-trade transparency regime, which would include conditions for
the deferred publication of transactions, and the content of the information to be made public.
ESMA is required to submit the draft RTSs to the European Commission by July 3, 2015, and
implementation would follow at a later date.
Final Amendments
We note that no other jurisdiction has mandated transparency requirements for government debt
securities, and we believe it would be appropriate to extend the existing exemption as we
continue to monitor international developments, including those described above.
Therefore, the Amendments will further defer the introduction of the transparency requirements
in section 8.1 until January 1, 2018, in order to allow the CSA an opportunity to consider
international and domestic regulatory and industry developments and to determine what, if any,
mandatory requirements are needed in this area.
IV. Summary of Written Comments Received by the CSA
We received eight comment letters in response to the 2014 Proposed Amendments and two
commenters specifically responded to the proposed amendment relating to the extension of the
government debt transparency exemption. Both commenters were in favour of the proposed
extension of the exemption. A list of those who submitted comments, as well as a summary of
the comments pertaining to the extension of the government debt transparency exemption and
our responses to them are contained in Annex D of this notice. Copies of the comment letters are
posted at www.osc.gov.on.ca and www.lautorite.qc.ca.
V. Contents of Annexes
Annex A – Amending Instrument for NI 21-101
Annex B – Blackline of Part 8 of NI 21-101 indicating the Amendments
Annex C – Blackline of Part 10 of 21-101CP indicating the Amendments
Annex D – Comment Summary and CSA Responses
VI. Local Matters
In Ontario, the Amendments to NI 21-101 and other required materials were delivered to the
Minister of Finance on October 17, 2014. The Minister may approve or reject the Amendments
or return them for further consideration. If the Minister approves the Amendments or does not
take any further action by December 17, 2014, the Amendments will come into force on
December 31, 2014.
In Québec, the Amendments will be delivered to the Minister of Finance for approval. The
Amendments will come into force on December 31, 2014.
Questions
The Amendments are available on certain websites of CSA members, including:
www.lautorite.qc.ca
www.albertasecurities.ca
www.bcsc.ca
www.osc.gov.on.ca
Please refer your questions to any of the following:
Ruxandra Smith
Senior Accountant
Ontario Securities Commission
416-593-8322
Alex Petro
Oversight Analyst
Ontario Securities Commission
416-263-3796
Serge Boisvert
Senior Policy Advisor
Autorité des marchés financiers
514-395-0337 ext. 4358
Maxime Lévesque
SRO Analyst
Autorité des marches financiers
514-395-0337 ext. 4324
Bonnie Kuhn
Manager, Legal
Alberta Securities Commission
403-355-3890
Meg Tassie
Senior Advisor
British Columbia Securities Commission
604-899-6819
ANNEX A
THE MANITOBA SECURITIES COMMISSION
MSC Rule No. 2014-18
(Section 149.1, The Securities Act)
AMENDMENTS TO
NATIONAL INSTRUMENT 21-101
MARKETPLACE OPERATION
1. National Instrument 21-101 Marketplace Operation is amended by this Instrument.
2. Section 8.6 is amended by replacing “2015” with “2018”.
3. This Instrument comes into force on December 31, 2014.
4. This Instrument may be cited as MSC Rule 2014-18.
ANNEX A
SCHEDULE
1.
The changes to Companion Policy 21-101CP to National Instrument 21-101 Marketplace
Operation are set out in this Schedule.
2.
Subsection 10.1(1) is amended by replacing “2015” with “2018”.
ANNEX B
NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION
PART 8
INFORMATION TRANSPARENCY REQUIREMENTS FOR
MARKETPLACES DEALING IN UNLISTED DEBT SECURITIES,
INTER-DEALER BOND BROKERS AND DEALERS
8.6
Exemption for Government Debt Securities - Section 8.1 does not apply until January
1, 20158.
ANNEX C
COMPANION POLICY 21-101 TO NATIONAL INSTRUMENT 21-101 MARKETPLACE
OPERATION
PART 10
INFORMATION TRANSPARENCY REQUIREMENTS FOR UNLISTED
DEBT SECURITIES
10.1
Information Transparency Requirements for Unlisted Debt Securities
(1)
The requirement to provide transparency of information regarding orders and trades of
government debt securities in section 8.1 of the Instrument does not apply until January
1, 20158. The Canadian securities regulatory authorities will continue to review the
transparency requirements, in order to determine if the transparency requirements
summarized in subsections (2) and (3) below should be amended.
ANNEX D
COMMENT SUMMARY AND CSA RESPONSES
Commenters:
Scotia Capital Inc.
Investment Industry Association of Canada
Topic
Summary of Comments
Response to Comments
Extension of
Both commenters supported the proposal to
We note the support for
exemption for the
extend the exemption for the transparency
the extension of the
transparency
requirements applicable to government debt
exemption for
requirements
securities in section 8.6 to January 1, 2018.
government debt
applicable to
transparency.
government debt
One commenter cited that as no other
securities in
international jurisdictions have mandated
section 8.6 of NI
transparency for government debt trading, it
21-101 to January
would not be appropriate to do so in Canada
1, 2018.
at this time.
Another commenter stated that there have
been significant advances in debt market
transparency delivered by the marketplace
since the original government debt
transparency exemption was put in place and
the prevalence of electronic trading in
government debt securities in Canada today
has contributed favourably to price
discovery. This commenter also noted that
CanPx, the designated information processor
for Canadian corporate debt markets,
continues to voluntarily provide
transparency on government debt
transactions.
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