The fallout for Canada from U.S. market reforms

With the U.S. Securities and Exchange Commission (SEC) contemplating a series of major market structure reforms, Canadian regulators are now seeking feedback on how those reforms could impact Canadian markets — and whether some of the SEC’s proposals should be adopted here too.

In December 2022, the SEC proposed fundamental revisions to U.S. market structure — including changes to trading increments, access fees, order competition, transparency and best-execution requirements.

In a notice published Thursday, the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) said they’re reviewing the SEC’s proposals and considering their potential impact on the Canadian markets.

They’re seeking public feedback on these issues, including whether to introduce similar measures in the domestic market.

Specifically, the Canadian regulators aim to understand how the SEC’s proposals to allow trading in sub-penny increments, and to reduce access fee caps to reflect sub-penny pricing, would impact Canadian markets, compliance costs and trading in inter-listed securities — and whether, given these effects, Canadian regulators should pursue reforms of their own.

The CSA and CIRO suggested some of the SEC’s other proposals — such as measures designed to address concerns with trading competition, and the practice of paying for retail order flow — aren’t as relevant to the Canadian market. Still, they’re seeking feedback on these proposals too.

At this point, the Canadian regulators stress they aren’t proposing any rule changes. They also noted that whether the SEC will be proceeding with their proposed reforms is unclear. However, the SEC aims to finalize its policies in April 2024.

“We will continue to engage in dialogue with stakeholders and endeavour to discuss and coordinate any potential rule changes with our U.S. colleagues, where appropriate. Any proposals to introduce or amend requirements under securities law or CIRO rules will be published in separate notices for comment,” they said.

Comments on the SEC’s proposals are due by December 4.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.