CANADA: OSC Releases results of Electronic Trading Risk Analysis

Wednesday December 18 2013

The Ontario Securities Commission (OSC) have published Staff Notice 23-702, an update on the OSC’s ongoing review of the risks associated with electronic trading, including a review of National Instrument 23-103 Electronic Trading. NI 23-103 came into effect on March 1, 2013, establishing the regulatory framework that oversees and manages risks associated with the use of electronic trading in Canadian marketplaces.

The OSC undertook the review to ensure the current regulatory framework continues to be effective and robust. The review included an analysis of the tools and controls on electronic trading in Canada, as well as an assessment as to whether there are any deficiencies in NI 23-103.

As part of the OSC’s review process, an independent consultant was retained to conduct a third-party assessment of the risks posed by electronic trading. This involved an interview process with market participants to gather information regarding electronic trading practices, procedures and controls, risks posed by electronic trading, sufficiency of the current regulatory framework and how to best mitigate electronic trading risks. The assessment concluded that no deficiencies exist in NI 23-103 and that NI 23-103 provides a good framework from which industry can work. The report includes observations and recommendations, which OSC Staff are reviewing to determine next steps.

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