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IROC Notice 12-

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34AA

IROC Notice 12-

Rules Noti

1.  Backgro1.1  Ele

1.1.1.1.

1.2  Pre2.  Discuss

2.1  Tra2.2.

2.2  Sp2.3  Va2.4  Ga2.5  Ed

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........ 24 

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IROC Notice 12-

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3 Under the A31-103 Regis

-0363 – Rules N

visions of icipant or A

lar post-tra

dments reqnt and supy applied,

2.1.2 AuPo

in certainf another d

w the Particadjustmen

13 Additionct to the depermitted te ParticipaETR, whet

to directly

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on control odealer sub

de any authity of the ins received

rationale foalf the setti

or Access Person ry, an order that c Provisions App

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Notice – Notice o

immediate Access Perso

ade monito

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circumstaealer, propcipant to ant of a spnally, the Aevelopmeno use the snt, other thther or no

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that uses an autis “clearly erron

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order andon; and

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d trade in

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terpreted as “anegistrant Obligat

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nformation

with Require

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k Managem

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ment or suthe same fof such co

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thorize an ry and risk

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n investment deations”.

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to compl

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at least annare adequadocument

ment and Su

be better e 7.1 woulto performpervisory lexibility prntrols, andr that is ind It is impoized, only visory and

ts if either ed. Either shird party frocedure. o a Participaich the inve

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IROC Notice 12-

recognitionnvestment having bettmore effectprovide for trading for the trading

Upon enterdisclosure oMarket Regwill allow enquiries asituations w

f the Particparty providanniversaryrisk manageand consispromptly, written agre

2.2

n addition Rule 7.1 deprovisions managememanage theof any auto

The Amendand undersclient of eitPerson to id

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-0363 – Rules N

n that situadealer has

ter access ttively set orr an authoran ultimateis being m

ring into a wof the nameulator, as wthe Marketbout the a

when additi

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y date of thement and stently appand that teement.

Specific

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ations exist a relations

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quire that eany autom

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t where a ship with thtion relatingcontrol, po

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may determch that the nt, would s such, the e investmehere is no

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10

another t dealer, sition to

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ormation to make trades in

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14

15

IROC Notice 12-

party servicsupervisory

n establishand the Ambeing empldefining suand trade pminimum, e

the ente

the lOfficregu

Generally, procedureswith the opadopted byhow the tesorder systeannual basi

Each Particiautomated any orders Participant where a syresponsibleexclude situSuch respoeven if the not be acce

4 For further i

for Commen5 For further

ImplementatGuidance on

-0363 – Rules N

ces utilizedy controls, p

ing the pamendments,

loyed by anch parameparametersensure they

marketplacred, or

imits publiccial under Rlatory inter

it is expec will be rea

peration of y a Participasting of cliem is testeds going for

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to employpolicies and

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ce threshol

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ted that thasonably defair and or

ant or Acceent orders ad assumingrward.

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marketplace thre

ce Thresholds (Ma

e IIROC Notice ock Circuit Breakervention for the V

of Approval – U

y the automd procedure

or the monant or Acceted order sropriately. and proced

prevent an

ds14 applic

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on must alsy themselveystem fromability to ind improped or any trtomated o

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IIROC Notice 1ers (February 2, 2Variation or Cance

UMIR – Provision

mated ordees.

nitoring of oss Person s

systems in uIn determiures the Pa

n order from

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aspect of ts Person for

OC Notice 12-01

2-0040 – Rules2012) and IIROCellation of Trades

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62 - Rules Notice

s Notice – GuidC Notice 12-0258s (August 20, 201

Electronic Tradin

or the risk

required usider the strhe potentiappropriate or Access Pg:

place on w

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dance Note – U8 – Rules Notice12).

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UMIR – Guidancee – Guidance No

11

ment and

the ETR trategies mpact of he order uld, at a

order is

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MIR – Request

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Pdrltm

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IROC Notice 12-

2.3

Previously, date of an erules detailanguage othe correctimarketplace

with corre

with or co

2.4

Under the nvestment managemeservices of acertain gateParticipant terms of suthat the invParticipant

2.5

The Amend

-0363 – Rules N

Variatio

Rule 7.11 executed tring when

of Rule 7.11on of a trade can only

the priorection is ne

a system

an indiv

notice to orrection:

prior to

thco

thse

after the party to

Gatekee

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uch arrangevestment dein its regula

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Notice – Notice o

on, Cancell

prevented rade excepta marketp has been

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the settlem

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16

IROC Notice 12-

addi

addiinterreguthe E

deletthe E

addimark

3. Sum

The followAmendmen

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ensuand their

requmonPartic

Under the Asupervisorymarketplaceon Access Pto one marequiremensubscriber t

There may flow. Any and the nat

6 For further

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ng a definit

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ETR;

ting phraseETR; and

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Amendmeny controls, e as an Acc

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tion of ETR

(c) to Rule the ETR (

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to Rule 1.1

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13

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IROC Notice 12-

additional ltrading. Pehave to re-e

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120

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atency mayersons empevaluate ho

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17

IROC Notice 12-

IIROC recowork with controls toorder whic

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ognizes tharespect to

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ed a compomated con313 issued

c.gov.on.ca

of Approval – U

pants andoduction, pr before en

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IROC Notice 12-

Appendi

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1. Rule

2. Rule

(a)

(b)

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3. Rule

-0363 – Rules N

ix A - Tex

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16

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meaning

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ment and

cific risk ning the

IIROC Notice 12-

-0363 – Rules N

seag

(a

(b

(c

(9) A P

(a

(b

(10) Th

(a

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ervices of agreement w

a) precluother manag

b) unlessParticiover tsupervwhichdealerthe coadmin

c) precluindepthe Pa

Participant

a) upon or thir

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a third pawith the inv

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arty under vestment de

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managemenes under su

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subsectionealer or thir

dealer or thver any ay control, p

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ting of a sor proced

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unt; and

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en agreemesubsection

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maintained and superve establishmhe date of t

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n (7) musrd party tha

hird party faspect of policy or pr

investmention to the specific risure respecated entity rest other t

ction or rea

y unless tticipant oth

t Regulator

ent with an(8), of:

ler or third

he investmthe Marketor third p

er or execuwants addit

ribed in cla

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and consisvisory contment of thethe last ann

ng

t be in a at;

rom providthe spec

rocedure;

t dealer thinvestmen

k managemting an accof the inv

than an intsonable fee

the third her than aff

r:

n investmen

party, and

ment dealert Regulatorparty imm

ution of a ttional infor

use (a).

ntrols, poliuate,

stently apptrols, police controls,

nual review,

17

written

ding any cific risk

hat is a nt dealer ment or count in

vestment terest in e for the

party is iliates of

nt dealer

r or the r to deal

mediately trade for rmation;

cies and

plied the cies and

policies , and

I

4

IROC Notice 12-

4. Rule

(a)

(b)

(c)

-0363 – Rules N

(b

7.11 is ame

inserting

inserting“varied”;

deleting

(d) wcabyeqm

(e) wca

Notice – Notice o

(iii)

b) if the on its or supof a twritte

(i)

(ii)

(iii)

(iv)

ended by:

in the title

g in clause (;

clause (d) a

ith the pancellation y a system quipment

marketplace;

ith notice tancellation

of Approval – U

any deficprocedure

Participantbehalf the

pervisory cothird party,en agreeme

the risk mprocedureunder sub

the investconsistentcontrols, pthe controannual rev

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the investthe writte

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to the Maror correcti

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the adequadocumente

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nt and supe by the inv) are adequ

ler or third the risk md procedurs and proce

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tor immeditrade in su

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acy of a ed and pro

nvestment of a specificedure or rey the annivnt dealer or

ervisory convestment deuate,

d party hamanagemenres since thedures or t

acy of a nted by thestment de

party is ine Participan

ter the word

mediately f

ses:

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iately followuch form an

ng

control, pmptly reme

dealer to c risk manaetained the versary dater third party

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as maintainnt and suphe establishthe date of

control, phe Participaealer or thir

n compliant.

d “Cancella

following th

if the vect an erroretplaces syson behalf

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18

olicy or edied;

perform agement services e of the y that:

cies and rd party

ned and pervisory hment of f the last

olicy or ant and rd party,

nce with

ation”;

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ariation, r caused stems or

of the

ariation, r as may

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1

IROC Notice 12-

5. Part

The Policies

1. Part

(a)

(b)

(c)

-0363 – Rules N

beva

(i)

(ii

10 is amen

Gatekee

(1) A pemofth

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1 of Policy

replacing“When”;

deleting systems Toronto

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e required bariation, can

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a) the whas be

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versal Mark

7.1 is amen

g at the sta;

in the sevinterconneStock Exch

at the end ient require

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by the Marncellation o

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the clearincleared an

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t that has, u its behat or supervgement or hall forthwi

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th the inve

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by a clienolicy 2-501

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19

en, if the

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dealer to cific risk provision ures to a that:

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t with a of the

e “other and

I

2

3

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IROC Notice 12-

(d)

2. Part 2

(a)

(b)

3. Part Proce

(a)

(b)

(c)

(d)

4. Polic

-0363 – Rules N

deleting “(unless affected

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mpliance

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must be umented ocedures tory and

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IIROC Notice 12-

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pR

po

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A Particithat theyPolicy 31

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o prevent tnts;

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mpliance mnt activity te securitiescable to thehich the accer entry” ct orders thao monitor t

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21

or other

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es of any res must art 1 of , and by of Policy nd other rson has

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IIROC Notice 12-

-0363 – Rules N

Participause of th

The Partiused by tested inleast anndetails tothe Partiautomatand proc

The scopshould border syssuch parthe markentered Regulato10.9 of U

The Marpolicies reasonabfair and trading bclient ordand at letested asautomatrequires “flag” wby an aulimits.

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nt or Accese automate

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by clients, iders and treast annuassuming vaed order sydevelopm

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ss Person toed order sy

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o identify astem.

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have the abed order sder system

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arketplace,

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y before usened with stem underted to provy controls,

es and prod by an auimpact of o as not towhich the

osed by theOfficial und

pervisory cding Rules

would interfnce proced on how teior to enga

tem is satisgular testinnd orderly ters to preexecution order, price

mediately d thereby ng entered

k managemsible for anany order

22

with the

r system cipant is e and at sufficient taken by vide the policies

ocedures utomatic defining

o exceed order is

e Market der Rule

controls, and be

ere with dures for esting of agement sfactorily ng of the

markets event or of trades or other

override prevent on any

ment and ny order or trade

I

IROC Notice 12-

-0363 – Rules N

resultingsystem. gave riseautomatPerson fo

Notice – Notice o

g from the This respo

e to a “runaed order syor testing.

of Approval – U

improper onsibility inaway” algoystem that

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Electronic Tradin

ction of thewhich the man aspect o

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23

ed order n which rithm or r Access

IIROC Noti

Appe

On Juntrading

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Text o(Revisi

1.1 D

“ElectroTrading a

1.2 In

(1) Unleis:

(a)

(b)

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ndix B - CoUM

e 28, 2012, IIRg (“Proposed A

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of the Provisionions to the Pro

Definitions

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ment letters rer the heading y of the comm1 of the table

ns Approval of posed Amendm

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uirement of an Exched to it in the applicab

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IIROC Noti

Text o(Revisi

7.1 Trad…

(6) NotwAccemanreasensuasso

(a)

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(7) A Pa

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ice 12-0363 – Rules

of the Provisionions to the Pro

ding Supervision O

withstanding any otess Person shall adonagement and supsonably designed, in ure the managemenociated with:

access to one or mo

if applicable, the usethe Access Person of

articipant may, on a re

authorize an investmor adjusting of a sppolicy or procedure;

use the services of asupervisory controls

authorization over nagement or superviservices of a third pa

eement with the inves

precludes the investother person conmanagement or sup

unless the authorizParticipant, precludover the setting orsupervisory control,which the investmedealer holds a directcommission chargeadministration of th

precludes the use independent of eacthe Participant.

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ns Approval of posed Amendm

bligations

ther provision of thisopt, document and pervisory controls, accordance with pru

nt of the financial, r

re marketplaces; and

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third party that prov, policies and proced

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ent dealer or a relatet or indirect interest o

ed on a transaction e account; and

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Approval – UMIR – P

the Amendmements Highligh

s Rule, a Participant maintain a system opolicies and procedent business practic

regulatory and othe

any client of Participsystem.

rm on its behalf the sent or supervisory co

vides risk managemenures.

usting of a specifior procedure or ret

n (7) must be in a wd party that;

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ed entity of the invesother than an interest

or reasonable fee fo

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The Amendmensystem of risk policies and prParticipant to auits behalf the management or the Participant ucontrols, policieauthorized invesmay set or adjuadjustment will IIROC has reviseclarify this point.

sponse to Comtional IIROC Co

ts require that the management and

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uses a third party to es and procedures, tment dealer must bst the controls evenbe effected by the

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mendments permit tnt dealer to perform ng of a specific rpolicy or procedure.

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be the only persons tn though the setting e third party providn Electronic Trading

25

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risk . If ory an

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der. to

IIROC Noti

Text o(Revisi

(9) A Pa

(a)

(b)

(10) The

(a)

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ice 12-0363 – Rules

of the Provisionions to the Pro

articipant shall forthw

upon entering into or third party describ

(i) the name of the

(ii) the contact infoparty which wiinvestment deaentry of an ordRegulator want

of any change in the

Participant shall revie

at least annually tha

(i) the risk managprocedures und

(ii) the Participantrisk managemprocedures sinand procedures

(iii) any deficiencyprocedure has

if the Participant hasits behalf the settingsupervisory control, retained the serviceanniversary date ofdealer or third party

(i) the risk managprocedures adunder subsectio

(ii) the investmenconsistently apcontrols, policithe controls, pannual review,

(iii) any deficiencyprocedure has

s Notice – Notice of A

ns Approval of posed Amendm

with notify the Market

a written agreement bed in subsection (8)

e investment dealer o

ormation for the inveill permit the Market aler or third party i

der or execution of a ts additional informat

e information describe

ew and confirm:

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gement and supervisder subsection (6) are

t has maintained andment and supervisornce the establishmens or the date of the la

y in the adequacy been documented an

s authorized an investg or adjusting of a sp

policy or procedure es of a third party, f the written agreemthat:

gement and supervisopted by the investmon (6) are adequate,

t dealer or third ppplied the risk manies and procedures s

policies and proceduand

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Approval – UMIR – P

the Amendmements Highligh

Regulator:

with an investment , of:

or third party, and

estment dealer or theRegulator to deal wimmediately followintrade for which the Mtion; and

ed in clause (a).

sory controls, policiee adequate,

d consistently appliery controls, policies

nt of the controls, pst annual review, and

of a control, polind promptly remedied

tment dealer to perfopecific risk managemto an investment deaat least annually b

ment with the inves

sory controls, policiement dealer or third

party has maintainedagement and supersince the establishmres or the date of th

of a control, polid by the Participan

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dealer

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orm on ent or aler or by the stment

es and party

d and rvisory ent of he last

icy or t and

ng Electronic Trading

mentator and SCommen

g

Summary of nt

IIROC ResAddit

sponse to Comtional IIROC Co

mentator and mmentary

26

IIROC Noti

Text o(Revisi

7.11 V

No trade trade, be

(a) canc

(b) varie

(i)

(ii)

(iii)

except:

(c) by t

(d) withcancby aor emar

(e) withcancbe rthe v

(i)

(ii)

10.17

(1) A Pato p

ice 12-0363 – Rules

of the Provisionions to the Pro

promptly remeand

(iv) the investmentwritten agreem

Variation, Cancellat

executed on a marke:

celled; or

ed or corrected with r

the price of the trad

the volume of the tr

the date for settleme

he Market Regulator

h the prior consentcellation or correctiona system or technoloequipment or causerketplace; or

h notice to the Marketcellation or correctionrequired by the Markvariation, cancellation

prior to the settleme

(A) the marketplarequest of a pParticipant and

(B) the clearing agcleared and set

after the settlementPerson that is a party

Gatekeeper Oblig

articipant that has, unperform on its beha

s Notice – Notice of A

ns Approval of posed Amendm

edied by the investm

t dealer or third partyment with the Particip

tion and Correctio

etplace shall, subsequ

respect to:

e,

rade, or

ent of the trade,

in accordance with U

t of the Market Ren would be necessarygical malfunction of

ed by an individual

t Regulator immediatn of the trade in suchket Regulator and sucn or correction is mad

ent of the trade, by:

ce on which the trarty to the trade and

d Access Person that is

gency through whichttled, and

t of the trade, by eay to the trade.

gations with Respe

nder Rule 7.1, authoalf the setting or ad

Approval – UMIR – P

the Amendmements Highligh

ment dealer or third

y is in compliance wiant.

on of Trades

uent to the execution

UMIR;

egulator, if the vary to correct an error cthe marketplace’s syacting on behalf o

tely following the varh form and manner ach notice shall be givde:

rade was executed ad with the consent os a party to the trade,

h the trade is or was

ach Participant and A

ct to Electronic Tra

rized an investment djusting of a specif

Provisions Respectin

ents hted)

Comm

party,

ith the

of the

iation, caused ystems of the

iation, as may ven, if

at the f each , or

to be

Access

IIAC – NoRegulator itrade whentechnologicsystems ormarketplace

ading

dealer ic risk

ng Electronic Trading

mentator and SCommen

ot clear why conseis required to vary, n the error is causcal malfunction or an individual actine. Would support a n

g

Summary of nt

nt from the Markecancel or correct a

sed by a system of the marketplace

ng on behalf of thenotice requirement.

IIROC ResAddit

et a

or e e

UMIR imposes a across marketpprevention of trRule). While a mmarketplace whcorrect, IIROC asoverall result is (such as ensurinor followed on marketplace havthe same fashionwould lead to undisposition of “marketplaces.

sponse to Comtional IIROC Co

number of obligatioplaces (e.g. provisrade-throughs undermarketplace may loohen making a decisis the Market Regulatoconsistent with a “fag that trades that mfrom the “erroneo

ve been dealt with atn. In the view of IIROncertainty and confus“affected” trades th

mentator and mmentary

ons which are measursions related to tr the Order Protect

ok at activity on its owion to vary, cancel or must ensure that tair and orderly markay have been triggerus” trade on the ot the same time andC, a notice requiremesion with respect to t

hat occurred on oth

27

red the ion wn or

the et” red one in ent the her

IIROC Noti

Text o(Revisi

maninvecontto th

(a)

(b)

Policy 7

Part 1 –

…

In perform“gatekeeRequirem

When antrader, thpolicies exposurehandled the Particorders thorders sa

In additiothe limitedirect accthat are entry” codirect acc

• has c

• is pathan

• is annot athe amark

ice 12-0363 – Rules

of the Provisionions to the Pro

nagement or supervstment dealer or thetrols, policies and prohe Market Regulator t

the written agreemebeen terminated; or

the Participant knowdealer or third partyidentified by the Part

.1 – Trading Super

– Responsibility for

ming the trading supper” to help pre

ments.

n order is entered onhe Participant retains and procedures sho

e which the Participaby staff of the Particcipant to sample fo

hat have been entermpled in other circum

on, the “post-order eed involvement of stacess client may restrinot in compliance w

ompliance testing macess client:

created an artificial pr

art of a “wash traden one account with th

n unmarked short salautomatically code aaccount of the client king exempt” designa

s Notice – Notice of A

ns Approval of posed Amendm

visory control, polie provision of risk mocedures to a third pthe fact that:

ent with the investmer

ws or has reason to by has failed to prompticipant.

rvision Obligations

r Supervision and C

pervision obligations, event and detect

n a marketplace withresponsibility for thatould adequately adant may have for oripant. For example,

or compliance testingred directly by clientmstances.

ntry” compliance tesaff of the Participant ct the ability of the Pwith specific rules.

ay be focused on whe

rice contrary to Rule 2

” (in circumstances e Participant);

e (if the trading systs “short” any sale of other than a client r

ation); and

Approval – UMIR – P

the Amendmements Highligh

icy or procedure tanagement or super

party shall forthwith

ent dealer or third par

believe that the invesptly remedy any defi

s

Compliance

the Participant will aviolations of appl

hout the involvement order and the super

ddress the additionarders that are not d it may be appropriag a higher percentats than the percenta

sting should recognizin the entry of order

Participant to detect For example, “post

ether an order entere

2.2;

when the client has

tem of the Participana security not then h

required to use the “

Provisions Respectin

ents hted)

Comm

to an rvisory report

rty has

stment ciency

ct as a licable

nt of a rvision al risk

directly ate for age of age of

ze that rs by a orders t-order d by a

more

t does held in “short-

ng Electronic Trading

mentator and SCommen

g

Summary of nt

IIROC ResAddit

sponse to Comtional IIROC Co

mentator and mmentary

28

IIROC Noti

Text o(Revisi

• has the share

Policy 7

Part 2 –

…

The Markwill be apterms of business training achieved type or mwith thisRequiremaccordanentered ba client Marketplon which

…

Policy 7

Part 3 - M

MinimumComplianProcedur

Restricted Security

Rule 2.2

Rule 7.7

Electronic to Marketp

Rules 7.1

Securities Legislation

ice 12-0363 – Rules

of the Provisionions to the Pro

complied with otherrequirement to mareholder.

.1 – Trading Super

– Minimum Elemen

ket Regulator recognippropriate for all Parttheir size, the naturein more than one

of its employees anin a variety of ways

method of supervisio Policy does not rel

ments that may appnce with subsection (2by a client, an investm

through an order ace Rules on which t

h the order is executed

.1 – Trading Super

Minimum CompliaMarketplace

m nce res

Compliance ReProcedures

• review for any trestricted issuesproprietary or eaccounts

Access places

n

pre-trade orde

prevent entry of oan order-by ordethat exceed pre-dprice and size pa

prevent entry of o

s Notice – Notice of A

ns Approval of posed Amendm

r order marking requrk an order as from

rvision Obligations

nt of a Supervision

izes that there is no oticipants. Given the of their business, whlocation or jurisdic

nd the fact that effs, this Policy does nn of trading activity. ieve Participants fromly in certain circum2) of Rule 10.1, orderment dealer under a

execution services)the order is entered d.

rvision Obligations

ance Procedures fo

eview Potential InfSources

trading of s done by employee

• order tickets

• the diary list

• trading blott

• firm trading

• monthly stat

er review:

orders on er basis defined rameters;

orders that

automatedcontrols

real-time al

immediate informationexecution r

Approval – UMIR – P

the Amendmements Highligh

uirements and in paran insider or desig

s

System

one supervision systemdifferences among fihether they are engagction, the experiencefective jurisdiction cot mandate any par Furthermore, comp

m complying with sstances. In particu

rs entered (including routing arrangement) must comply witand the Marketplace

s

or Trading on a

formation Frequeand SamSize

ters

restriction

tements

• daily

pre-trade

lert systems

order and trade n including reports.

•daily

Provisions Respectin

ents hted)

Comm

rticular gnated

m that rms in ged in e and an be ticular

pliance pecific lar, in orders t or by th the e Rules

ncy mple

ng Electronic Trading

mentator and SCommen

g

Summary of nt

IIROC ResAddit

sponse to Comtional IIROC Co

mentator and mmentary

29

IIROC Noti

Text o(Revisi

Policy 7

Part 7 -

Trading sperformedocumenand procfinancial, marketpla

The risk employed

automar

tc

a

t

f

prowit

provof th

regu

A Participthat they

ice 12-0363 – Rules

of the Provisionions to the Pro

do not comply wmarketplace andregulatory requir

-systematically preor more orders frexceeding pre-decredit and capitathresholds.

monitor for unauaccess to tradingof Participant or Person.

.1 – Trading Super

Specific Provisions

supervision related ted by a Participantnted system of risk mcedures reasonably regulatory and othaces.

management and sd by a Participant or A

omated controls torketplace to prevent t

the Participant or Acccapital thresholds,

a client of the Particilimits assigned by the

the Participant, Accepre-determined limitfor a particular securi

ovision to prevent thth Requirements;

vision of immediate ohe Participant or Acce

ular post-trade monito

pant or Access Person outsource to a servi

s Notice – Notice of A

ns Approval of posed Amendm

with

rements

vent one rom etermined l

uthorized g systems Access

rvision Obligations

s Applicable to Dir

to electronic access t or Access Person

management and supdesigned to ensure

her risks associated

supervisory controls,Access Persons must

o examine each orhe entry of an order w

cess Person exceedin

pant exceeding pre-de Participant to that c

ss Person or client ofs on the value or volity or class of securitie

he entry of an order

order and trade inforess Person; and

oring for compliance

is responsible and acce provider as set ou

Approval – UMIR – P

the Amendmements Highligh

s

rect Electronic Acce

to marketplaces mun in accordance wpervisory controls, p

the management owith electronic acce

, policies and proceinclude:

rder before entry which would result in

g pre-determined cre

determined credit orlient, or

f the Participant exceume of unexecuted o

es;

that is not in comp

mation to complianc

with Requirements.

ccountable for all funut in Part 11 of Comp

Provisions Respectin

ents hted)

Comm

ess

ust be with a policies of the ess to

edures

on a n:

edit or

r other

eeding orders

pliance

ce staff

nctions panion

Scotia – Care definedgenerally isusing the sm

RBC – Reqorder entryimplement requiremenunder Natimust be sat

ng Electronic Trading

mentator and SCommen

Concerned that whiled as an automated s not any capacity mart order router syst

quests that IIROC outy checks that dealeon a real-time basis

nt be standardized tional Instrument 23tisfied on a pre-order

g

Summary of nt

e smart order routersorder system there

to change an ordetem directly.

tline the specific preers are expected tos. Suggests that theto that provided fo3-103, namely “thaentry basis”.

IIROC ResAddit

rs e

er

The Amendmenevaluate orders “of the Amendmthrough” filters tor Access Personthrough automaParticipant priorautomated contsmart order rouorder routers in Without this capentered directly through automaParticipant.

IIROC has reviseclarify this point.

e-o e

or at

The minimum “asub-bullets contautomated contron a marketplaan order which w

the Particdetermined

a client ofcredit or otclient, or

the ParticParticipant

sponse to Comtional IIROC Co

nts will require au“before entry on a m

ments is to require othat are under the con entering the order.ated controls that hr to entry to a smtrols would have to uter. IIROC recogni

use in Canada do npacity, orders from

to a smart order rated controls that h

ed the Guidance on

automated controls” tained in the first burols must examine ea

ace [emphasis added]would result in:

ipant or Access Pd credit or capital thre

f the Participant excther limits assigned b

cipant, Access Perst exceeding pre-dete

mentator and mmentary

utomated controls marketplace”. The efforders to have “passontrol of the Participa. If orders do not phave been set by t

mart order router, tbe at the level of t

zes that current smnot have that capaca client could not

router without passihave been set by t

n Electronic Trading

are set out in the thullet. In particular, tach order before en] to prevent the entry

Person exceeding pesholds,

ceeding pre-determinby the Participant to t

on or client of termined limits on t

30

to ect sed ant ass the the the

mart ity. be

ing the

to

ree the try

y of

pre-

ned hat

the the

IIROC Noti

Text o(Revisi

Policy 31

Supervisodetect aRequiremof any serules andplace. Thenumeratcomplianactivity, amultiple person ha

ice 12-0363 – Rules

of the Provisionions to the Pro

-103CP Registration R

ory and compliance nd prevent accoun

ments which includeself-regulatory organizd policies of any mahese procedures musted under Part 1 of

nce with specific ruleas provided under Paccounts, with the

as an interest or over

s Notice – Notice of A

ns Approval of posed Amendm

Requirements and Exem

monitoring procedut activity that is os applicable securitieation applicable to th

arketplace on which t include “post-orderf Policy 7.1 to dete

es, and by addressingPart 5 of Policy 7.1Participant and othwhich the person ha

Approval – UMIR – P

the Amendmements Highligh

mptions.

ures must be designr may be a violatis legislation, requirehe account activity anthe account activity

r entry” compliance tect orders that are ng steps to monitor tr, of any person wher accounts in whics direction or control

Provisions Respectin

ents hted)

Comm

ned to on of ments nd the

y takes testing not in rading

ho has ch the .

TD – Wouorder is involvemento perform relying on aBelieves thapre-trade comargin reqasset classeproblems winternal trad

ng Electronic Trading

mentator and SCommen

ld like to confirm thentered on a ma

nt of a trader that thethe trade supervisionautomated controls fat it is not feasible toontrol to limit a clien

quirements on a reals or all electronic acc

would be encounteredders.

g

Summary of nt

hat in cases when anarketplace with thee trader may continuen function rather thanfor trade supervision

o apply an automatednt’s settlement risk o-time basis across al

cess channels. Similad for capital limits fo

IIROC ResAddit

value or vosecurity or

The second bullesupervisory conprovision to precompliance withrestatement of aIn particular, Rule

“Prior to thParticipant,

(a) applicareview

(b) the paccord

(c) all requ

The inclusion ofeffect of extendihave electronic a

n e e n

n. d

or ll

ar or

Policy 7.1 must Policy deal wit“received” by a those orders on the requirement orders that are employees of thelectronically by by the Participanregistered emplocontrols which rintermediated, tautomated pre-eorders being entthe appropriate afinger” checks an

The Amendmentcalculation acroasset classes. Thdetermined for e

sponse to Comtional IIROC Co

olume of unexecutedclass of securities.

et which requires thetrols, policies and

event the entry of ah Requirements is, in an existing UMIR proe 7.1(2) requires:

he entry of an order the Participant shall c

able regulatory standw, acceptance and app

policies and procdance with subsection

uirement of UMIR and

f this bullet in Part 7ng the requirement

access to a marketplac

be read in its entiretth different means

Participant and howa marketplace. Undfor enhanced supervnot inter-mediated bhe Participant. Orde

a Participant and ennt electronically withooyee will be subject treflect that fact. Nohe Amendments wilentry controls that atered by that trader.automated pre-entrynd value limits applica

ts do not require onss different electrone Amendments perm

each channel or asset

mentator and mmentary

d orders for a particu

e risk management aprocedures to inclu

an order that is not effect, for Participant

ovisions under Rule 7

on a marketplace bycomply with:

dards with respect to tproval of orders;

cedures adopted n (1); and

d each Policy.”

7 of Policy 7.1 has tto Access Persons w

ce.

ty. Various parts of tby which orders

w the Participant entderpinning the Policyvision and monitoringby traders or registerers which are receiv

ntered on a marketplaout intermediation bto automated pre-en

onetheless, if orders l require that there are appropriate to t. For example, amo

y controls would be “able to the trader.

ne aggregate client rnic access channels

mit a separate limit to t class. Participants

31

ular

and ude

in ts a 7.1.

y a

the

in

the who

the are ters y is g of red ved ace y a

ntry are be

the ong “fat

risk or be

are

IIROC Noti

Text o(Revisi

Policy 7

Part 8 -

Trading swith a dpolicies athe finanautomatethe Partic

Each ParunderstaAccess PeParticipanthe use o

The Partisystem uParticipanbefore umaintainautomateany thirdmanagem

The scoproceduran automimpact of

ice 12-0363 – Rules

of the Provisionions to the Pro

.1 – Trading Super

Specific Provisions

supervision by a Partiocumented system o

and procedures reasoncial, regulatory anded order system by thcipant.

rticipant or Access Pnding of any automerson or any client ont or Access Person t

of the automated orde

icipant or Access Peused by the Participnt is tested in accord

use and at least anned with sufficient ed order system undd party employed toment or supervisory c

pe of appropriate res should be tailoredmatic order system wf defining such param

s Notice – Notice of A

ns Approval of posed Amendm

rvision Obligations

s Applicable to Aut

icipant or Access Persof risk management onably designed to ed other risks associhe Participant, the Acc

Person must have aated order system usof the Participant thao identify and manager system.

rson must ensure thpant, the Access Perdance with prudent nually thereafter. Adetails to demons

dertaken by the Partio provide the automcontrols, policies and

order and trade d to the strategy or stwith due consideratiometers too broadly an

Approval – UMIR – P

the Amendmements Highligh

s

tomated Order Sys

son must be in accorand supervisory co

ensure the managemated with the use cess Person or any cli

a level of knowledgsed by the Participanat is sufficient to alloge the risks associated

hat every automated rson or any client obusiness practices in

A written record mutrate the testing oicipant, Access Perso

mated order system oprocedures.

parameters, policiestrategies being pursuon to the potential mnd in any event must

Provisions Respectin

ents hted)

Comm

stems

rdance ntrols, ent of of an ient of

e and nt, the ow the d with

order of the nitially ust be of the n and or risk

s and ued by market be set

ng Electronic Trading

mentator and SCommen

g

Summary of nt

IIROC ResAddit

able to continue trade basis. Theaccess channel icontinue to assebasis.

IIROC has modifclarify these poin

A drafting error “Direct” from ththe text of the prbut the draft oAppendix A cont

sponse to Comtional IIROC Co

to assess the aggrege Amendments permindependently and Pess aggregate marke

fied the Guidance onts.

has been correctedhe title of Part 7. In roposed provision waof the proposed amtained the word.

mentator and mmentary

ate client risk on a poit capital limits on eaParticipants are able et risk on a post-tra

n Electronic Trading

d by deleting the woIIROC Notice 12-020

as correct in Appendimendments set out

32

ost-ach

to ade

to

ord 00, x B in

IIROC Noti

Text o(Revisi

so as noton whichdisclosedIntegrity

The Markpolicies areasonabwith fairproceduron how tprior to esystem iaddition interferenprogramtime basisystem th

Each Paroverride prevent oon any m

Notwithsmanagemresponsibincludingmalfunctinstancesis attribuwas not “

General

ice 12-0363 – Rules

of the Provisionions to the Pro

t to exceed the markeh the order is enteredd by the Market ReguOfficial under Rule 10

ket Regulator expectsand procedures to cobly designed to prever and orderly markres for trading by clietesting of client ordeengagement and at lis satisfactorily teste

to regular testing nce with fair and omed internal parameis, the entry of ordershat exceed certain vo

rticipant or Access Por disable automatic

orders generated by tmarketplace.

tanding any outsoument and supervisioble for any order entg any order or tradion of the automate

s in which the malfunted to an aspect of “accessible” to the Pa

Comments

s Notice – Notice of A

ns Approval of posed Amendm

etplace thresholds appd or would otherwiseulator for the exercise0.9 of UMIR.

the risk managemenomply with the Electrent the entry of any kets. This includes ents, if applicable, cors and trades is to beeast annually thereaf

ed assuming variousof the automated o

orderly markets requeters to prevent or “f and execution of tradlume, order, price or

Person must have tcally any automated the automated order

urcing or permittedn controls, a Partictered or any trade ex

de resulting from thed order system. Tction which gave risethe algorithm or aut

articipant or Access Pe

Approval – UMIR – P

the Amendmements Highligh

plicable to the markee exceed the limits pue of the power of a M

nt and supervisory coronic Trading Rules aorder that would intadoption of comp

ntaining detailed guie conducted to ensurfter, each automateds market conditionsorder systems, preveuires development oflag” with alerts on ades by an automatedother limits.

the ability to immedorder system and thsystem from being en

d authorization oveipant or Access Persxecuted on a markethe improper operatiThis responsibility ince to a “runaway” algotomated order systemerson for testing.

Provisions Respectin

ents hted)

Comm

etplace ublicly Market

ntrols, and be terfere

pliance idance re that order s. In enting

of pre-a real-

d order

diately hereby ntered

er risk son is tplace, on or cludes orithm m that

CIBC – “Ex1, 2013 taInstrument longer implit took 13 mUS. CIBCdesigned oparticular, traded on t23-103 an

ng Electronic Trading

mentator and SCommen

xtremely challengingarget implementatio23-103. Encourages

lementation period. months to implemen

C sees “risks associor poorly implemenCIBC notes that optthe Montreal Exchan

nd they seek grea

g

Summary of nt

g” to meet the Marchon date of Nationas IIROC to allow for aPoints to the fact tha

nt Rule 15c3-5 in theated with a poorlynted solution”. Intions and derivatives

nge are subject to Nater clarity on the

IIROC ResAddit

h al a

at e y n s

NI e

Unlike NI 23-103single asset clasapplicable to the

While the amenIIROC recognizecomplete testingexpects that Partesting and implIIROC will permi

sponse to Comtional IIROC Co

3, the UMIR provisioss, namely listed eqe trading of fixed inco

ndments will be effs that additional timg of automated pre-rticipants will use belement such controlsit testing to continue

mentator and mmentary

ons will only apply toquities (as UMIR is nme or derivatives).

ective March 1, 20me may be required -trade controls. IIROest efforts to compls by March 1, 2013 be until May 31, 2013

33

o a not

13, to

OC ete but 3 at

IIROC Noti

Text o(Revisi

ice 12-0363 – Rules

of the Provisionions to the Pro

s Notice – Notice of A

ns Approval of posed Amendm

Approval – UMIR – P

the Amendmements Highligh

Provisions Respectin

ents hted)

Comm

implementathose asset by either asAs recognizissues, techhave a sevoverall marbe a “pausenhanceme

IIAC – GenProposed Aabout the members cmany diffeproprietary to develop,

Scotia – Bprotect agamarketplacethresholds enhanceme

order from awhole)

notionby the

automflexibleservice

Scotia – Papproximatdeploymenmargin for

ng Electronic Trading

mentator and SCommen

ation of pre-trade cclasses. Suggests a

sset class and/or typezed in the US withnical changes at the ere impact for bothrket integrity. Believe” in allowing marke

ents.

nerally supportive ofAmendment but haimplementation pericurrently conduct trent systems which and third party syste test and implement.

Believes that the mainst “flash crash” type level. The pare a good step but

ents:

activity limits (on thn individual trading I);

al limits (on each traParticipant); and

ated access to disabe functionality to the e that many marketpla

roject plans from ventely two months t. March 1st implemissues or delays and

g

Summary of nt

credit thresholds fo phased introduction

e of pre-trade controlh the Knight Capitamarketplace level can

h the participant andves that there shouldetplaces to introduce

f the objective of theas serious concernsod. Notes that IIACtheir business usingare combinations o

ems. Significant work

ost reliable place topes of events is at thelanned marketplacet suggests additiona

he number of ordersID or the markets as a

ading ID as specified

ble trading IDs (morecancel-on-disconnecaces already offer).

ndors generally leavefor testing and

mentation leaves “nowould be considered

IIROC ResAddit

or n l. al n d d e

which time IIROthe automated co

While IIROC is cbeing imposed Persons as a resdealt with devregulatory resporegulation servirespect to “marknot interfere with

e s

C g

of k

IIROC, in conjunIIAC members oETR on March additional testindesirable. The specific provisionnot be implemeCIBC above regcomplete testing

o e e

al

rs a

d

e ct

While marketplaposition to knowthe Participant aoverall.

“Individual” tradnumber of clientappropriate for limits at the accParticipant is beparticular client or orders are no“off side”.

e d o d

The Amendmentdate as the ETRsignificant systecontrols prior to

sponse to Comtional IIROC Co

C expects testing toontrols will be fully o

ognizant of the reguon marketplaces, P

sult of recent initiativvelopments in the onse was considereces provider, IIROC

ketplace enhancemenh a “fair and orderly”

nction with the CSA,n their preparedness1, 2013. The res

ng time may be responses confirme

ns of the Proposed Aented by March 1, 2arding the provision

g of automated pre-tra

ces have a role, the w if orders from a part

s well as to the integ

ding IDs often bundlets or sources. In the v

the Participant to ecount or client level. etter able to controbut the interests of o

ot compromised if a p

ts will be effective MR. However, IIROC ems impact of impo order entry on a

mentator and mmentary

o be complete and toperational.

ulatory burden whichParticipants and Accves, the initiatives ha

market for which ed appropriate. AsC’s primary role wnts” is to ensure they

market.

conducted a surveys for implementationsponses indicated tneeded or would

ed that there were Amendments that cou2013. See response n of additional time ade controls.

marketplace is not inticular client are a riskgrity of the marketpla

e together orders fromview of IIROC, it is moenforce these types

This ensures that tol their own risk toother clients or sourparticular account go

arch 1, 2013, the sahas acknowledged t

plementing automatmarketplace. IIROC

34

hat

h is ess ave

a s a

with do

y of of hat be no

uld to to

n a k to ace

m a ore

of the

o a ces oes

me the ted

C is

IIROC Noti

Text o(Revisi

ice 12-0363 – Rules

of the Provisionions to the Pro

s Notice – Notice of A

ns Approval of posed Amendm

Approval – UMIR – P

the Amendmements Highligh

Provisions Respectin

ents hted)

Comm

‘best case’ smonths is may be prother partic

ng Electronic Trading

mentator and SCommen

scenarios”. Believes tabsolutely necessary

rudent “depending ocipants”.

g

Summary of nt

that an extension of 3y and that 6 monthson feedback … from

IIROC ResAddit

3 s

m

therefore perminecessary until M

sponse to Comtional IIROC Co

tting a period for May 31, 2013.

mentator and mmentary

additional testing,

35

if