By Dermot Harriss
Canada has taken another step in its long, slow shuffle towards creating a national securities regulator. On November 9th, the Supreme Court ruled that such a regulator would be constitutional (in a 2011 ruling, it took the opposite position). Of course, it would be un-Canadian to create a new federal administration without endless provincial bickering, so the court stressed that it was up to the provinces to decide whether they would participate.
Québec promptly said ‘absolument pas,’ No surprise there. With Québec, ‘mais non,’ is the answer to anything remotely federal. In Québec, securities rules should have a distinctly Québécois cultural flavor.
So far, British Columbia, Saskatchewan, Ontario, New Brunswick, Prince Edward Island, Yukon and the federal government have signed a memorandum of agreement to create the new regulator.
Most legal and compliance experts feel that Canada should have a national regulator. Canada has long been the ‘wild North’ for trading. For some time, its lack of an equivalent of the US National Market System meant it blithely relied on US HFT’s to close spreads by intermediating between exchanges and other pools whose prices would differ wildly. Things have calmed down in past years. There's an OPR that protects all levels of depth, and an IIROC rule book that is a model of readability. The recently updated Rule 3300 is a hesitant step toward Best Ex requirements similar to those long in place in the US, and in Europe since MiFID II came into force.
The CSA, a cosy dinner club of provincial regulators that has had no real examination or practical enforcement ability, grumbles that a national regulator is unnecessary (indeed, it would make the CSA less relevant).
Pundits on the Left and Right respectively enthuse and fret that a national regulator will push a Liberal Agenda such as more women on boards and climate change.
Regardless, regulatory change is in the wind. Canadian spoofers could soon have a Canadian federal watchdog on their tails.
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Dermot Harriss is responsible for delivering solutions that help firms meet their regulatory compliance needs. Dermot brings over twenty years of financial industry experience from roles at Goldman Sachs, Morgan Stanley, and D.E. Shaw that included futures trading, quantitative strategy development, derivatives risk management, program trading, execution services, and technology management.
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