CSA may revive plans for trading fee rebate pilot study

The Canadian Securities Administrators have published next steps regarding a pilot study that would examine the impacts of reducing marketplace trading fee rebate payments in Canada.

In CSA Staff Notice 23-322, the regulator says it’s providing the update because the U.S. Securities and Exchange Commission (SEC) announced proposed rules on March 14 that would establish a similar study south of the border. That study would seek to explore “the impacts of transaction fees and rebates on order routing behaviour, execution quality and market quality,” says CSA’s Friday release.

CSA’s notice also explains why it has long considered a test study in Canada. As background, the regulator points to proposed amendments to National Instrument 23-101 that were published in May 2014, in relation to to the Order Protection Rule (OPR).

CSA says in its release, “In the context of our OPR review, we heard concerns about both the level of trading fees in Canada, as well as the predominant trading fee model employed by marketplaces at the time. […] The 2014 notice further highlighted our intention to implement a pilot study that would examine the impact of prohibiting the payment of rebates by marketplaces.”

The study wasn’t done, it adds, because the regulator identified risks related to the “interconnected nature of North American markets.” Further, “[…] many commenters to the 2014 Notice expressed similar concerns,” says CSA.

In light of the SEC’s proposed rules and possible study, CSA says it will consider coordination with a SEC study, where appropriate. Also, if it proposes to introduce a pilot study, that will be published a separate notice with request for comment.

Read the full notice.

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