Specifically, the amendments would: (i) limit the
registrants that may provide DEA to fully registered dealers,
and limit those that may use DEA to portfolio managers and
restricted portfolio managers (thereby excluding exempt market
dealers); (ii) require dealers to establish, maintain and
apply appropriate standards for providing
DEA and assess and document whether each client meets the
standards; (iii) require that dealers have a written agreement
with each DEA client ; (iv) require dealers to determine
what training their clients need to understand the marketplace and
regulatory requirements; (v) require that dealers assign each
DEA client a unique identifier; and (vi) generally only allow
a DEA client to trade for its own account.
Meanwhile, the Investment Industry Regulatory Organization
of Canada (IIROC) yesterday released proposed amendments to UMIR and its Dealer Member Rules intended
to provide a comprehensive framework to regulate third-party
electronic access to marketplaces. Specifically, IIROC's
proposals would amend UMIR to introduce (i) requirements
for participants providing direct electronic access;
(ii) provisions regarding participants' routing
arrangements with investment dealers; (iii) requirements for
supervision of orders entered by an order execution client by a
participant that provides order execution services; and
(iv) gatekeeper obligations on a marketplace that provides
access to a participant or access person and on a participant that
provides direct electronic access to clients or investment dealers
under routing arrangements.
IIROC's Dealer Member Rules would also be amended to
provide an exemption from the suitability obligations under certain
circumstances where a dealer accepts an order from a client or
transmits an order for a client that has been provided with direct
electronic access and that would prohibit dealers that offer order
execution only services to retail customers from allowing clients
to use automated order systems or allowing clients to manually send
orders that exceed thresholds set by IIROC.
IIROC also released draft
guidance with respect to IIROC's expectations for
supervision of trading when a participant has provided electronic
access to marketplaces to third parties and the marketing of orders
entered on a marketplace by a person with third-party access.
Comments on all the proposed amendments and draft guidance are
being accepted until January 23, 2013. For more information, see
IIROC Notices 12-0315 and 12-0316.
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