IIROC publishes final guidance for Order Execution Services as a form of third-party electronic access

Strengthens market integrity

November 13, 2014 (Toronto, Ontario) – The Investment Industry Regulatory Organization of Canada (IIROC) today issued final guidance and rule amendments to ensure consistent regulatory oversight of Order Execution Service accounts when third parties access marketplaces electronically.

With today’s announcement, Dealer Members that offer Order Execution Services (OES) to retail investors – sometimes referred to as “discount brokers” – are required to:

• identify clients with trading activity that exceeds established thresholds; and
• have controls in place to address the increased risks that arise when an electronic order is not handled directly by the Dealer Member’s staff.

In addition, participants that execute on behalf of an OES Dealer Member must carry the identity of the identified client on each order message.

“This initiative is part of IIROC’s overall framework to manage the risks, regardless of channel, associated with third-party electronic access to marketplaces,” said IIROC Senior VP of Market Regulation, Wendy Rudd. “The guidance and amendments published today complement existing supervisory requirements and provide greater clarity to Dealer Members.”

In April 2013 IIROC published revised proposed guidance related to the supervision of OES account activity, and a proposed rule for supervision of OES and related issues. The final guidance and rule amendments take effect on June 1, 2015.

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IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. Created in 2008 through the consolidation of the Investment Dealers Association of Canada and Market Regulation Services Inc., IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.

IIROC carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.

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