Canadian Regulators Rein in Dark Pools
By Chris KentourisThe Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada have just recommended that the IIROC establish a minimum size threshold for orders to go through dark pools.
The new regulatory framework the CSA has proposed for dark pools would also require that an order entered on a marketplace that trades with a dark order must receive meaningful price improvement, unless the former order exceeds a certain size threshold; require that orders entered on a market must trade with visible orders on that marketplace before trading with dark orders at the same price. The new rules would define a “better price” to be at least one trading increment, or, for securities with a difference between the best bid and best ask price of one trading increment, at least half a trading increment.
“The proposed framework will ensure that small orders that trade with dark liquidity obtain meaningful price improvement over liquidity offered in the transparent marketplaces,” said Susan Wolburgh Jenah, president and CEO of IIROC.
The new regulatory framework the CSA has proposed for dark pools would also require that an order entered on a marketplace that trades with a dark order must receive meaningful price improvement, unless the former order exceeds a certain size threshold; require that orders entered on a market must trade with visible orders on that marketplace before trading with dark orders at the same price. The new rules would define a “better price” to be at least one trading increment, or, for securities with a difference between the best bid and best ask price of one trading increment, at least half a trading increment.
“The proposed framework will ensure that small orders that trade with dark liquidity obtain meaningful price improvement over liquidity offered in the transparent marketplaces,” said Susan Wolburgh Jenah, president and CEO of IIROC.
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