21-306 Notice of Filing of Forms 21-101F5 Initial Operation Report For Information Processor [CSA Staff Notice]

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CSA Notice Schedule A
Published: 2007-04-20


The Canadian Securities Administrators (CSA or we) are publishing this notice to seek comments from market participants on the summary of applications for the information processor role, included at Schedule A, and to solicit feedback on a number of specific issues.


1. Transparency

National Instrument 21-101 Marketplace Operation (NI 21-101) imposes transparency requirements onto marketplaces, dealers and inter-dealer bond brokers (IDBs) for exchange-traded securities and fixed income securities. Transparency facilitates the price discovery process and compliance with regulatory requirements, such as best execution and short selling. Transparency also supports competition between marketplaces by enabling market participants to have access to information regarding securities being traded.

Part 7 of NI 21-101 requires that marketplaces that display orders of exchange-traded securities provide information regarding these orders to an information processor or, if there is no information processor, to an information vendor. Part 8 of NI 21-101 requires that marketplaces that display orders of corporate debt securities1  provide order information for corporate debt securities to an information processor.  In addition, marketplaces, IDBs and dealers executing trades of corporate debt securities are required to provide information regarding details of trades to an information processor or, in the absence of an information processor, to an information vendor. Further details on the information to be reported to the information processor are included in Part 10 of Companion Policy 21-101CP to NI 21-101 (21-101CP).

1  Part 8 of NI 21-101 also sets out the transparency requirements applicable to government debt securities, however, these have been postponed until December 31, 2011.

At this time, CanPX Inc. (CanPX) is the approved information processor for corporate debt. There is currently no information processor for the equity securities. However, order and trade information is provided to information vendors.

2. Regulatory requirements, multiple marketplaces and information consolidation

The CSA initially proposed the creation of a data consolidator in 1999 with the introduction of the ATS Rules.2  However, based on recommendations by an industry committee struck to review data consolidation and market integration3  for the equity markets, we accepted the industry committee's view that a market-based solution would develop to achieve consolidation and removed the requirements for data consolidation and market integration.4  They also expressed views on market integration.

2  NI 21-101 together with National Instrument 23-101 Trading Rules are the ATS Rules. First published at (1999) 22 OSCB ATS Supp (the ATS Supplement). A discussion about the "Consolidated Plan" can be found on page 93.
3  Market integration enables a buyer or a seller of securities to access any order on any other marketplaces, regardless of whether they are a marketplace participant of that marketplace. See the ATS Supplement for a detailed description of market integration.
4  See the industry report at (2003) 26 OSCB 4385.

On July 14, 2006, we proposed several amendments5  to the ATS Rules and their companion policies (together, the proposed amendments). One of the amendments6, which has since been adopted, clarified our expectation that, in order to comply with best execution obligations, dealers should take into account order information from all marketplaces where a security is traded and should not just consider information from marketplaces where a dealer is a participant, as appropriate. Comments received to the proposed amendments indicated that such requirements would be more feasible with a market integrator or data consolidator/information processor. While we disagreed that market integration or data consolidation was necessary in order for dealers to comply with the best execution obligations, we agreed that the existence of an information processor7  that provides consolidated data could be a helpful tool for meeting best execution and other regulatory requirements. That is, an information processor would ensure the availability of a source of consolidated data that meets regulatory standards and which users, including dealers, could use, at their choice, to demonstrate how they met their best execution obligations. The existence of an information processor would not preclude marketplace participants from using data provided by other information sources such as data vendors or from obtaining direct data feeds from the marketplaces.

5 The proposed amendments were published in Ontario on July 14, 2006, at (2006) 29 OSCB 5735.
6 These amendments have subsequently been implemented in subsection 4.1(8) of Companion Policy to NI 23-101.
7 An information processor is defined as a company that receives and provides information under NI 21-101 and has filed Form 21-101F5.

As stated above, the purpose of data consolidation is to facilitate the price discovery process and regulatory compliance in a multiple marketplace environment. It enables market participants to use one source to see all prices and trades of a particular security and provides a benchmark for market participants and regulators to evaluate compliance with certain regulatory requirements like best execution, short selling and "best price" obligations, especially in a multiple marketplace environment. An information processor could ensure a central source of consolidated data that is consistent and meets standards approved by regulators.

For these reasons, we invited interested parties to apply for the role of the information processor and published a separate notice of request for this purpose.8  In response to our request, we received six filings of Form 21-101F5 for the information processor, as follows:

8 CSA Notice 21-304 Request for Filing of Form 21-101F5 Initial Operation Report for Information Processor by Interested Information Processors (Request for Filing of Form 21-101F5), published in Ontario on July 14, 2006 at (2006) 29 OSCB 5757.

  • Bourse de Montréal (MX) for fixed income and equity securities;
  • CanPX for fixed income securities;
  • CDS Inc. for fixed income and equity securities;
  • Gmarkets Inc. (Gmarkets) for fixed income securities;
  • TSX Inc. (TSX) in conjunction with CanDeal.ca Inc. (CanDeal) for fixed income securities; and
  • TSX for equity securities.

On October 27, 2006, we extended CanPX's approval as the information processor for corporate fixed income securities from December 31, 2006 until December 31, 2007 in order to allow sufficient time for market participants to transition to a new information processor, in case a different entity is selected to perform this role.9

9 CSA Staff Notice 21-305 Extension of Approval of Information Processor for Corporate Fixed Income Securities, published in Ontario at (2006) 29 OSCB 8364.


1. Criteria

Section 16.2 of 21-101CP states that the CSA will review Form 21-101F5 to determine whether it is contrary to the public interest for the filer to act as an information processor. We are considering a number of objective factors to evaluate the filings received. Specifically, we are looking for a financially viable entity that meets the following criteria:

a. Organization and governance - the applicant has a strong management team and board of directors with independent representation, if feasible; it has sufficient staff resources with adequate industry knowledge and expertise assigned to run the information processor business; if facing inherent conflicts of interest, such as those associated with the collection, handling and distribution of data provided by competing organizations, it has adequate processes to manage such conflicts.

b. Systems

  • Development and implementation - staff assigned to develop and implement the system necessary to perform the role of the information processor have adequate technical capability; the time required to go live by the system, if not already operational, is reasonable and connectivity is easy, in terms of standards, cost and time; in addition, the system has an adequate Central Processing Unit, network performance and capacity, an adequate testing plan that includes capacity stress tests, as well as adequate customer contract and Service Level Agreements.

  • Operations and data integrity - it has, or can develop, a system that has adequate hardware, software and network redundancy, physical and logical security, customer support activities and data validation processes; it has adequate backup procedures and a disaster recovery plan that ensures that the feed is re-established within a reasonable timeline in the event of a significant disaster; problem resolution and change management are given adequate priority and are handled by staff with the necessary capability.

c. Commitment to transparency

  • Fixed income securities - the applicant is committed to receiving data feeds of trade details for designated corporate securities reported by marketplaces, IDBs and dealers in accordance with the requirements of NI 21-101 and 21-101 CP,10  and to provide a consolidated data feed of such information, as required by NI 21-101; in addition, it has adequate, timely and transparent criteria and processes to select the designated corporate fixed income securities.

    10 Subsection 10.1(3) of 21-101CP requires marketplaces trading corporate debt securities, IDBs and dealers trading corporate debt securities outside of a marketplace to provide details of trades of all corporate debt securities designated by the information processor, including: the type of counterparty, issuer, type of security, class, series, coupon and maturity, price and time of the trade and, subject to certain volume caps, the volume traded, within one hour from the time of trade.
  • Equity securities - it is committed to receiving data feeds for orders and trades in exchange-traded securities reported by marketplaces in accordance with the requirements of NI 21-101 containing, at a minimum, information such as the marketplace, time of entry, price, volume and appropriate regulatory identifiers; it can provide a consolidated feed of the bid and ask prices, as well as trade information transmitted to it.

d. Fees and revenue sharing - the applicant has a competitive fee structure and revenue sharing plan and, if sharing revenue with the data contributors, the allocation is fair.
The summary of the filings received included as Schedule A to this notice is organized under the four general criteria listed above.11

11  Note that the summary does not include proprietary and commercial information provided by the applicants.

2. Specific requests for comment

In addition to written submissions with respect to the summary of filings included in Schedule A, we request specific comments in a number of areas, set out below.

a. General

We are requesting feedback on the proposals received and the criteria developed for evaluation.

Question #1: What are the advantages and disadvantages associated with each proposal summarized in Schedule A?

Question #2: Are the criteria used for evaluation of the applications adequate? Should other factors be considered by the CSA in reviewing the applications?

b. Feed versus display

One issue we considered was whether an information processor should disseminate a standardized display of data that would ensure that all market participants view the same consolidated information in the same way. Discussions with marketplace representatives indicated, however, that the specific information needs of market participants may be better met if the information processor disseminates data feeds that can be acquired by users, directly from the information processor or through information vendors, and can be varied and customized to meet their needs.

Question #3: Should an information processor be required to create and disseminate a standardized, consolidated display of data? Alternatively, should the information processor disseminate consolidated data feeds that may be accessed by market participants to create their own displays?

c. Multiple information processors

We note that, while NI 21-101 sets out the process to become an information processor and 21-101CP states that the CSA must make a determination whether it is contrary to the public interest for a filer to act as an information processor, there are no restrictions on the number of entities that may act as information processors, provided they meet the required criteria. Further, in CSA Notice 21-304 Request for Filing of Form 21-101F5, we recognize that an entity may apply to be the information processor for the fixed income market, for the equity market, or for both.

We acknowledge the synergies and advantages, both in terms of cost savings and ease of connectivity, associated with a single information processor. In addition, a single information processor would ensure the availability of a single source of consolidated information and uniformity of data distributed to the public. However, there may be advantages to having multiple information processors. For example, some believe that having different information processors for the fixed income and equity markets would ensure that the distinct needs of the participants of these two markets are better met. Further, there are views that the availability of multiple information processors may promote competitiveness and create efficiencies, both in terms of fees and operations.

Question #4: What would be the advantages and disadvantages of having one versus multiple information processors? For example, how would each alternative impact market participants' ability to achieve best execution or comply with trade-through or other obligations? Should the information processors for the fixed income and equity markets be different?


We are reviewing the filings received based on the criteria specified earlier. Subject to any comments received by June 4, 2007, we intend to make a final recommendation regarding the information processor to each Commission in July 2007 and publish the results shortly thereafter.

You should send submissions to all of the CSA listed below in care of the OSC, in duplicate, as indicated below:

Alberta Securities Commission
British Columbia Securities Commission
Manitoba Securities Commission
New Brunswick Securities Commission
Securities Commission of Newfoundland and Labrador
Registrar of Securities, Department of Justice, Government of the Northwest Territories
Nova Scotia Securities Commission
Registrar of Securities, Legal Registries Division, Department of Justice,
Government of Nunavut
Ontario Securities Commission
Prince Edward Island Securities Office
Saskatchewan Financial Services Commission
Registrar of Securities, Government of Yukon

c/o John Stevenson, Secretary
Ontario Securities Commission
20 Queen Street West
Suite 1900, Box 55
Toronto, Ontario M5H 3S8
e-mail: jstevenson@osc.gov.on.ca

Submissions should also be addressed to the Autorité des marchés financiers (Québec) as follows:

Madame Anne-Marie Beaudoin
Directrice du secrétariat
Autorité des marchés financiers
800, square Victoria, 22e étage
C.P. 246, tour de la Bourse
Montréal, Québec H4Z 1G3
e-mail: consultation-en-cours@lautorite.qc.ca

A diskette containing the submissions should also be submitted. As securities legislation in certain provinces requires a summary of written comments during the comment period be published, confidentiality of submissions cannot be maintained.

Questions may be referred to any of:

Shaun Fluker
Alberta Securities Commission
(403) 297-3308
Serge Boisvert
Autorité des marchés financiers
(514) 395-0558 X 4358
Tony Wong
British Columbia Securities Commission
(604) 899-6764
Doug Brown
Manitoba Securities Commission
(204) 945-0605
Randee Pavalow
Ontario Securities Commission
(416) 593-8257 
Tracey Stern
Ontario Securities Commission
(416) 593-8167