Ontario Securities Commission Bulletin
Issue 43/37 - September 10, 2020
Ont. Sec. Bull. Issue 43/37
• Notice of Ministerial Approval of Amendments to National Instrument 21-101 -- Marketplace Operation
• First Global Data Ltd. et al.
• TMX Group Limited et al. -- ss. 21, 144
• Aequitas Innovations Inc. and Neo Exchange Inc. -- ss. 21, 144
• CNSX Markets Inc. -- ss. 21, 144
• Nasdaq CXC Limited and Ensoleillement Inc. -- ss. 21, 144
• CanDeal.ca Inc. et al. -- s. 144
• Temporary, Permanent & Rescinding Issuer Cease Trading Orders
• Temporary, Permanent & Rescinding Management Cease Trading Orders
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Notice of Ministerial Approval of Amendments to National Instrument 21-101 -- Marketplace Operation
On August 21, 2020, the Minister of Finance approved amendments made by the Commission to National Instrument 21-101 -- Marketplace Operation (NI 21-101).
The primary purpose of the amendments is to reduce the regulatory burden associated with the reporting requirements for marketplaces and information processors (IPs) in NI 21-101. The amendments streamline these requirements by eliminating duplicative reporting as well as reporting that does not materially contribute to the Commission's oversight of marketplaces and IPs, while maintaining a robust reporting framework that supports the objectives of the Commission's oversight, including providing protection to investors and fostering fair and efficient capital markets and investor confidence. The amendments also enhance the requirements in relation to the IT systems maintained by marketplaces and IPs, including clarifying testing and reporting requirements and establishing an appropriate focus on cyber resilience.
The amendments were published in the Bulletin on June 18, 2020 at (2020) 43 OSCB 5066. No changes have been made to the amendments since that publication. The amendments are reproduced in Chapter 5 of this Bulletin and at www.osc.gov.on.ca.
The amendments come into force on September 14, 2020.
Notice -- Variation of Exchange Recognition Orders, ATS Protocol, and Revocation of OSC Staff Notice 21-706
On August 31, 2020, the Commission made orders under subsection 144(1) of the Securities Act (Ontario) varying the Commission's orders recognizing TMX Group Limited, TSX Inc., Alpha Exchange Inc., Neo Exchange Inc., CNSX Markets Inc., and Nasdaq CXC Limited as exchanges.
The variation orders are the outcome of the Commission's initiative to reduce regulatory burden for the various regulated entities that it oversees. As indicated in the Commission's report Reducing Regulatory Burden in Ontario's Capital Markets, published November 19, 2019, the Commission committed to streamlining oversight of various regulated entities through revising and updating recognition orders with the goal of eliminating unduly burdensome and duplicative regulatory requirements.{1}
As part of this process, the Commission consulted with stakeholders to identify appropriate burden reduction opportunities for regulated entities. Several exchanges submitted comment letters following publication of OSC Staff Notice 11-784 -- Burden Reduction on January 14, 2019 and opportunities for burden reduction for regulated entities were further identified and discussed during the Commission's burden reduction roundtable on May 27, 2019. Many of the changes made to the recognition orders respond to stakeholder feedback raised through these consultations.
The burden reduction changes to the Commission's orders recognizing TMX Group Limited, TSX Inc., Alpha Exchange Inc., Neo Exchange Inc., CNSX Markets Inc., and Nasdaq CXC Limited (Exchange Recognition Orders) are also tied to the Commission's commitment to reduce regulatory burden for regulated entities through revisiting burdensome or unnecessary requirements in certain rules. The Commission has recently amended National Instrument 21-101 Marketplace Operation (NI 21-101) to remove burdensome and duplicative reporting requirements for marketplaces.{2} The changes to the Exchange Recognition Orders and the amendments to NI 21-101 will work together to streamline regulatory requirements for marketplaces and eliminate the duplication of requirements for exchanges, while maintaining a robust regulatory framework for the Commission's oversight of marketplaces.
The changes to the Exchange Recognition Orders are described in further detail below. Also described are corresponding changes made to the Process for the Review and Approval of the Information Contained in Form 21-101F2 and the Exhibits Thereto (ATS Protocol) as well as the revocation of OSC Staff Notice 21-706 -- Marketplaces' Initial Operations and Material System Changes.
The variations of the Exchange Recognition Orders and the ATS Protocol, together with the revocation of OSC Staff Notice 21-706, will take effect on September 14, 2020.
The changes to the Exchange Recognition Orders are intended to reduce regulatory burden by streamlining reporting and other requirements that do not sufficiently support the Commission's oversight of the exchanges, eliminating requirements duplicated by the requirements for marketplaces in NI 21-101, and eliminating unnecessary constraints on the operations of the exchanges.
Notable changes to the Exchange Recognition Orders include:
• Eliminating terms and conditions imposed directly on the significant shareholders of an exchange;
• Streamlining financial reporting and financial viability requirements to eliminate duplication with similar requirements in NI 21-101; and
• Eliminating unnecessary constraints on exchange operations, including requirements for Commission pre-approval of changes to cost allocation models, reorganizations of businesses or operations, and outsourcing arrangements.
The orders varying the Exchange Recognition Orders are published in Chapter 2 of this Bulletin.
The Commission also varied its order, dated September 29, 2015, requiring each of CanDeal.ca Inc., EquiLend Canada Corp., Instinet Canada Cross Limited, Liquidnet Canada Inc., MarketAxess Canada Company, Omega Securities Inc., Perimeter Markets Inc., and TriAct Canada Marketplace LP to comply with the ATS Protocol.
The primary purpose of the changes to the ATS Protocol is to conform its requirements to recent changes made to NI 21-101, including the requirements that changes to Exhibit L of Form 21-101F2 be filed 15 business days before implementation and that non-significant changes to Form 21-101F2 be filed quarterly rather than monthly. Changes have also been made to the process for the Commission's review and approval of fee changes made by alternative trading systems (ATSs) to conform to similar changes to the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto (Exchange Protocol). Lastly, the ATS Protocol has been changed to reflect the revocation of OSC Staff Notice 21-706, described below.
The Commission's order varying the requirements of the ATS Protocol is published in Chapter 2 of this Bulletin.
By way of this notice, Staff is also revoking OSC Staff Notice 21-706 -- Marketplaces' Initial Operations and Material System Changes, effective September 14, 2020.
The purpose of the staff notice is to provide guidance regarding information and timing requirements associated with the launch of new marketplaces and the implementation by existing marketplaces of material changes to their trading-related systems. In Staff's view, much of the guidance in the staff notice has been superseded by requirements in NI 21-101 and the Exchange Protocol and the ATS Protocol (together, the Protocols) and is no longer necessary. In particular, as part of the changes to the Exchange Recognition Orders and the ATS Protocol described above, the Protocols have been revised to clarify the requirements associated with the implementation of material systems changes by marketplaces and the kind of information marketplaces are required to provide to the Commission in support of the proposed timing for the implementation of material systems changes.
{1} Revising the terms and conditions of exchange recognition orders to remove burdensome and duplicative reporting requirements for exchanges is identified as initiative M-1 in the report.
{2} Amending NI 21-101 to remove burdensome and duplicative reporting requirements for marketplaces is identified as initiative M-5 in the report.
Epix Resource Finance Corporation -- s. 127(1)
FILE NO.: 2020-29
PROCEEDING TYPE: Other Application
HEARING DATE AND TIME: September 25, 2020 at 9:00 a.m.
LOCATION: By Teleconference
The purpose of this proceeding is to consider whether it is in the public interest for the Commission to make the order requested in the Application, dated August 24, 2020, filed by Epix Resource Finance Corporation with respect to Aberdeen International Inc.
The hearing set for the date and time indicated above is the first attendance in this proceeding, as described in subsection 7(1) of the Commission's Practice Guideline.
Any party to the proceeding may be represented by a representative at the hearing.
IF A PARTY DOES NOT ATTEND, THE HEARING MAY PROCEED IN THE PARTY'S ABSENCE AND THE PARTY WILL NOT BE ENTITLED TO ANY FURTHER NOTICE IN THE PROCEEDING.
This Notice of Hearing is also available in French on request of a party. Participation may be in either French or English. Participants must notify the Secretary's Office in writing as soon as possible if the participant is requesting a proceeding be conducted wholly or partly in French.
L'avis d'audience est disponible en français sur demande d'une partie, que la participation à l'audience peut se faire en français ou en anglais et que les participants doivent aviser le Bureau du secrétaire par écrit dès que possible si le participant demande qu'une instance soit tenue entièrement ou partiellement en français.
Dated at Toronto this 4th day of September, 2020
For more information
Please visit www.osc.gov.on.ca or contact the Registrar at registrar@osc.gov.on.ca.
The Applicant, Epix Resource Finance Corporation ("Epix"), requests that the Ontario Securities Commission make the following orders:
1. an order, if required, granting the Applicant standing to bring this application pursuant to section 127 of the Securities Act, RSO 1990, c. S. 5 ("the Act");
2. an order pursuant to paragraph 4 of subsection 127(1) of the Act that Aberdeen International Inc. ("Aberdeen"):
(a) review and revise its practices, procedures and structures to comply with all of its obligations as a non-redeemable investment fund as that term is defined in ss. 1(1) of the Act including, without limitation, National Instrument 81-102 -- Investment Funds ("NI 81-102"), National Instrument 81-106 -- Investment Fund Continuous Disclosure ("NI 81-106") and National Instrument 81-107 -- Independent Review Committee for Investment Funds ("NI 81-107");
(b) appoint an independent review committee (the "IRC") as required by NI 81-107 and instruct the IRC to review and report to the Commission and security holders on all conflict of interest matters respecting Aberdeen from January 1, 2017 until the date of this Order and to make any necessary or appropriate recommendations respecting such conflict of interest matters;
3. an order pursuant to paragraph 5 of ss. 127(1) of the Act that Aberdeen:
(a) amend and restate the continuous disclosure documents required to be filed pursuant to NI 81-106; and
(b) review and revise its disclosure to comply, on a prospective basis, with the requirements of NI 81-106;
4. an order that none of the exemptions contained in Ontario securities law applies to any distribution of Aberdeen securities or trades in Aberdeen securities by any insider until such time as Aberdeen has complied with paragraphs 2 and 3 above; and
5. such further and other relief as counsel may advise and the public interest may warrant.
(a) The Parties
i. Aberdeen
6. Aberdeen is incorporated pursuant to the laws of Ontario and is a reporting issuer in the Provinces of Ontario, Alberta, British Columbia and the Yukon Territory. Aberdeen's common shares are listed on the TSX Venture Exchange under the symbol "AAB".
7. As described in Aberdeen's most recent Management Discussion and Analysis ("MD&A") for the period ended April 30, 2020, Aberdeen does not carry on any active business. To the contrary, Aberdeen describes itself as an "investment entity" within the meaning of International Financial Reporting Standards ("IFRS") 10.
8. Aberdeen's investment philosophy is to acquire equity participation in small capitalization public and private companies in the metals and mining sector. As at April 30, 2020, Aberdeen's portfolio contained investments in thirty-two companies. Aberdeen estimates the aggregate fair market value of its investments to be approximately $24 million.
9. Aberdeen holds minority interests in all but one of its investee companies, the latter comprising only approximately 2% of its net asset value.
10. Stan Bharti is Aberdeen's Executive Chair. Mr. Bharti has been a director of Aberdeen since 2005 and beneficially held 19.9% of Aberdeen's common shares (as at April 30, 2020). As described below, Mr. Bharti is also an officer, director or shareholder (directly or indirectly), of many of the companies in which Aberdeen invests. Other directors and officers of Aberdeen are similarly situated. In fact, all of Aberdeen's portfolio companies involve related parties as directors, officers and/or shareholders.
11. Mr. Bharti is also the Executive Chairman of Forbes & Manhattan Inc. ("F&M"). F&M is owned by a family member of Mr. Bharti. F&M describes itself as a private merchant bank with a focus on the resource, agriculture, technology and telecommunications sectors.
12. F&M provides management and administrative services to Aberdeen, as well as to many companies in Aberdeen's investment portfolio. According to Aberdeen's management information circular filed on July 9, 2019, Aberdeen pays management fees to F&M in the amount of $300,000 annually. In the event of a change of control (as the term is defined in Aberdeen's disclosure), Aberdeen is obliged to pay F&M approximately $4.8 million.
13. As described in greater detail below, the relationships between Aberdeen's directors and officers, F&M and Aberdeen's portfolio companies commonly give rise to related party transactions involving conflicts of interest. In fact, Aberdeen discloses that "in practice, a significant percentage of companies in which Aberdeen invests are companies in which Mr. Stan Bharti holds a key role, and consequently, the investment practices and policies of the Company are subject to potential conflicts of interest."{1}
ii. Epix
14. Epix is an Aberdeen shareholder holding approximately 1,000,000 common shares. Epix is controlled, directly or indirectly, by Michael Sheridan.
15. Mr. Sheridan, as a beneficiary of the estate of Patrick Sheridan and a shareholder of Sheridan Platinum Group, is currently responding on behalf of the estate to litigation pursued by Forbes Royalty Corporation ("Forbes Royalty"), one of Mr. Bharti's companies (the "FRC Litigation"). As one of many related party transactions, Aberdeen has advanced a loan (essentially a line of credit) to Forbes Royalty for the purpose of funding this litigation.
16. Although Mr. Sheridan (and, indirectly, Epix) has an interest in the outcome of the FRC Litigation, this Application is much broader in scope, has been brought in good faith and gives rise to an important ongoing issue concerning Aberdeen that engages the Commission's public interest jurisdiction. As a significant shareholder of Aberdeen, Epix is, and has been, directly affected by Aberdeen's past disclosure and governance practices and will continue to be, particularly as Aberdeen's disclosures, governance and related party transactions have not been made or carried out in compliance sections 111 and 112 of the Act and NI 81-102, NI 81-106 and NI 81-107.
(b) Aberdeen is a Non-Redeemable Investment Fund
17. The gravamen of this Application is that Aberdeen is a "non-redeemable investment fund" as that term is defined in ss. 1(1) of the Act and in NI 81-106. A non-redeemable investment fund is defined as an issuer:
(a) whose primary purpose is to invest money provided by its security holders,
(b) that does not invest,
(i) for the purpose of exercising or seeking to exercise control of an issuer, other than an issuer that is a mutual fund or a non-redeemable investment fund or
(ii) for the purpose of being actively involved in the management of any issuer in which it invests, other than an issuer that is a mutual fund or a non-redeemable investment fund, and
(c) is not a mutual fund.
18. This definition is, to a significant degree, co-extensive with the definition of an "investment entity" under IFRS 10. IFRS 10 defines an investment entity as an entity that:
(a) obtains funds from one or more investors for the purpose of providing those investor(s) with professional investment management services;
(b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and
(c) measures and evaluates the performance of substantially all of its investments on a fair value basis.
19. In its disclosure documents, Aberdeen characterizes itself as an "investment entity" to take advantage of fair value accounting rules available for investment entities under IFRS but wrongly denies that it is an investment fund for the purposes of securities law.
20. Issuers are not entitled to choose whether they fall within the definition of a non-redeemable investment fund which is consequent upon the nature of the issuer's business and operations --- to invest money provided by its security holders in a portfolio of securities issued by private and public entities and not for the purpose of managing or exercising control over investee companies.
21. Because Aberdeen is a non-redeemable investment fund, it is subject to the amendments to NI 81-102, NI 81-106 and NI 81-107 that came into force as part of the Canadian Securities Administrators' Modernization of Investment Fund Product Regulation Project (the "Modernization Project"). These amendments implemented core investment restrictions and operational and disclosure requirements for publicly offered non-redeemable investment funds.
22. Aberdeen has failed to implement practices, procedures and structures to comply with applicable law and provide securityholders with disclosures and other protections available to investors in investment fund securities, particularly as they pertain to related party transactions and conflicts of interest.
23. Aberdeen's business model involves investing in private and public companies connected to Mr. Bharti and/or other Aberdeen insiders. This is summarized in Aberdeen's Annual Information Form for the year ended January 31, 2020):
Aberdeen's primary investment objective is to realize exceptional earnings by investing in pre-IPO and/or early stage public resource companies with undeveloped or undervalued high-quality resources. Aberdeen's investments are carried out in accordance with an opportunistic and disciplined process to maximize returns while minimizing risk, taking advantage of investment opportunities identified from the industry contacts of the Board, the officers of the Company and the members of the Investment Committee. In practice, a significant percentage of companies in which Aberdeen invests are companies in which Mr. Stan Bharti holds a key role, and consequently, the investment practices and policies of the Company are subject to potential conflicts of interest... (Emphasis added.)
24. Aberdeen does not invest for the purpose of exercising control in any material portfolio company or managing any operating business regardless of the size of its investment in portfolio companies --- which is why it falls within the definition of a "non-redeemable investment fund" as described above.
25. By contrast, Aberdeen invests for the purpose of facilitating its directors and officers and other related parties acting in other capacities to exercise control and operate and direct the businesses of certain Aberdeen portfolio companies, but not on Aberdeen's behalf or necessarily in its interest. Particulars of these activities, including these directors' and officers' compensation, their ownership interest and the financial performance of private investee companies are opaque to Aberdeen shareholders and the market generally.
26. At its core, Aberdeen's investment strategy is to invest money provided by its security holders to bolster the control positions of Aberdeen insiders and related parties in Aberdeen portfolio companies such that it is, in effect, structured as a non-compliant publicly traded non-redeemable investment fund.
27. As further described below, consistent with its classification as an "investment entity", Aberdeen reports the value of its public and privately held investment assets at fair value in reliance on IFRS 9, 10 and IAS 2 rather than reporting results on a consolidated basis with investee subsidiaries as would be typical of a reporting issuer in the corporate finance, as opposed to the investment fund, stream.
28. Because Aberdeen has determined itself to be an "Investment Entity" in accordance with IFRS 10, the financial condition of Aberdeen's private investee companies as well as the compensation arrangements between these entities and Aberdeen insiders are, by and large, absent from its disclosures.
29. Because Aberdeen does not recognize itself as a non-redeemable investment fund, it deems the numerous related party transactions between insiders and its public investee companies to be permissible when they ought not to be.
(c) Related Party Transactions Involving Conflicts of Interest
30. As stated above, Aberdeen acknowledges that a "significant amount" of the investments that it makes are to related parties and subject to potential conflicts of interest.
31. Strikingly, all of Aberdeen's investments are in companies in which Mr. Bharti or other members of management or the board have a direct or indirect personal financial interest and/or hold board seats or management positions.
32. The affairs of Aberdeen and other issuers connected to Mr. Bharti frequently pursue the same strategy relying extensively on related party investments for the benefit of management and the board. This strategy is entirely inconsistent with the policy considerations underlying the regulation of public investment funds in Canada, which are designed to apply stringent restrictions on conflicts of interest on the part of investment fund managers.
33. The strategy can be summarized as follows:
(a) Mr. Bharti and a core group of directors and management, such as Aberdeen's Chief Financial Officer, Ryan Ptolemy, assume key positions with issuers in the Bharti group's investment portfolio, often receiving management fees or other compensation in material amounts;
(b) the portfolio companies often enter into a management services arrangement with F&M on terms favourable to F&M having regard to the small market capitalization of these companies;
(c) the portfolio companies often make strategic investments, by way of private placement or loans, in other F&M-managed issuers or issuers otherwise connected to the Bharti group;
(d) periodically, related-party transactions for the purchase or sale of assets are consummated between companies in the Bharti group;
(e) funds may be raised from shareholders through initial public offerings or private placements to inject new capital into the system;
(f) reporting issuers in the Bharti group, including Aberdeen and Sulliden Mining Capital Inc. (which is structured in a similar manner to Aberdeen) appear to record fair value of their portfolio having regard to the price of the intra-portfolio company transactions; and
(g) Aberdeen and many of the companies in the Bharti group have the same registered address and use the same auditor -- McGovern Hurley LLP.
34. At least to some degree, Aberdeen publicly discloses related-party transactions. In the circumstances, however, mere disclosure of the related-party transactions and potential conflicts of interest, in many cases without full or meaningful detail, is insufficient to adequately protect Aberdeen shareholders or provide oversight over Aberdeen's board of directors and management.
35. The following is an excerpt of Aberdeen's disclosure of the investments, and management and/or director and officer positions held by Aberdeen insiders or former insiders in Aberdeen portfolio companies as at April 30, 2020.{2} As stated, this list comprises each and every investment in the Aberdeen portfolio.
Investment |
Nature of relationship |
Estimated Fair value |
% of FV |
|
|||
African Gold Group, Inc. |
Director and officer (Stan Bharti) and officer (Ryan Ptolemy) |
$ 702,136 |
2.9% |
African Thunder Platinum Limited{*} |
Former director (George Faught), 10% security holder (Aberdeen) |
3,782,293 |
15.5% |
Apio Africa Ltd. |
Director (Stan Bharti) |
35,172 |
0.1% |
Amazon Potash Corporation{*} |
Director (Stan Bharti), former director (George Faught) |
-- |
0.0% |
Blue Sky Energy Inc. |
10% security holder (Aberdeen) |
623,502 |
2.6% |
Brazil Potash Corp.{*} |
Director (Stan Bharti), officer (Ryan Ptolemy) |
13,105,869 |
53.9% |
Earthrenew Inc. |
Officer (Ryan Ptolemy) |
657,987 |
2.7% |
Fura Gems Inc. |
Officer (Ryan Ptolemy), Director and 10% security holder (Stan Bharti) |
1,287,574 |
5.3% |
International Cobalt Inc.{*} |
10% security holder (Aberdeen) |
462,023 |
1.9% |
Jourdan Resources Inc. |
10% security holder (Aberdeen) |
83,333 |
0.3% |
Magnolia Colombia Limited |
Director (Maurice Colsen) |
120,000 |
0.5% |
Panthera Resources PLC |
Former director (David Stein) |
31,901 |
0.1% |
Q-Gold Resources Ltd. |
Director (Maurice Colsen), 10% security holders (Aberdeen, Stan Bharti) |
632,000 |
2.6% |
QuestCap Inc. |
Former director and officer (Stan Bharti) |
1,337,715 |
5.5% |
Sulliden Mining Capital Inc. |
Director and officer (Stan Bharti), 10% security holder (Aberdeen) |
273,584 |
1.1% |
Temujin Mining Corp.{*} |
Director (Stan Bharti) |
-- |
0.0% |
Yukoterre Resources Inc. |
Director (Maurice Colsen) |
78,400 |
0.3% |
Total of 15 other investments |
1,150,325 |
4.7% |
|
Total Investments -- April 30, 2020 |
$ 24,363,814 |
100.0% |
|
{*} Private company
36. Aberdeen does not disclose the significant compensation paid, directly or indirectly, to its directors and officers for their roles in the portfolio companies. The following table summarizes the base compensation received by Aberdeen's directors and officers from other publicly available sources that would not normally be accessible to the typical retail investor. This table excludes details of potentially lucrative bonuses and stock-based compensation. This is far from a complete list because any compensation received from most private portfolio companies is entirely undisclosed to the public, as is the compensation they receive indirectly through F&M:
Stan Bharti
African Gold Group Inc.
US$300,000 per annum (through F&M)
*$200,000 bonus paid in 2019
Apio Africa Ltd.
Information not available
Amazon Potash Corp.
Information not available
Brazil Potash Corp.
US$180,000 per annum
Euro Sun Mining Inc.
$360,000 per annum
Fura Gems Inc.
Information not available
Q-Gold Resources Inc.
Information not available
Questcap Inc.
US$300,000 per annum (through F&M)
Sulliden Mining Capital Inc.
$324,000 per annum (through F&M)
*100,000 bonus paid in 2019
Temujin Mining Corp.
Information not available
Total
At least $1,700,000 per annum
Ryan Ptolemy
African Gold Group Inc.
$5,000 per month
Brazil Potash Corp.
US$5,000 per month
Earthrenew Inc.
$3,000 per month
Fura Gems Inc.
$1,500 per month
Total
Approx. $174,000
George Faught
African Thunder Platinum Limited
Information not available
Amazon Potash Corporation
Information not available
Maurice Colson
Magnolia Columbia Limited
~$24,000 per annum
Q-Gold Resources Ltd.
Information not available
Yukoterre Resources Inc.
Information not available
Total
at least $14,500 per annum
David Stein
Panthera Resources PLC
$14,505 in 2019
37. Aberdeen also fails to disclose that the following portfolio companies are also managed by F&M and pay F&M in aggregate more than $2,000,000 per annum in management fees (based on publicly available information):
(a) African Gold Group Inc.;
(b) Blue Sky Energy Inc.;
(c) Brazil Potash Corp.;
(d) Euro Sun Mining Inc.;
(e) Earthrenew Inc.;
(f) Fura Gems Inc.;
(g) Magnolia Colombia Limited;
(h) QMX Gold Corporation;
(i) QuestCap Inc.; and
(j) Sulliden Mining Capital Inc.
38. None of this activity is permissible for a publicly traded investment fund. The policy considerations underlying investment fund regulation dictate that investment fund managers, as fiduciaries managing passive investments for the benefit of their security holders, must not benefit personally from their connection to investee companies.
39. The same policy considerations underlie IFRS 10, which generally only permits issuers to use fair value accounting if they invest money provided by shareholders for the purpose of seeking capital gains and dividends and not to operate the businesses of portfolio companies thereby allowing them to secure management compensation for themselves from these investee entities.
(d) Conclusion
40. As referenced above, conflicts are endemic to Aberdeen as they are to other entities within Mr. Bharti's sphere of influence.
41. The relief sought on this Application will, on a prospective basis, bring Aberdeen into compliance with Ontario securities law for the benefit of its security holders as the public interest mandates in the circumstances of this case.
42. It is fitting and consistent with Ontario securities law and the policy objectives of investment fund regulation that future related party transactions and conflict of interest matters of Aberdeen be subject to the regulatory framework established to govern circumstances where reporting issuers manage passive investments on behalf of security holders.
The Applicant intends to rely on the following evidence at the hearing:
43. The Applicant intends to rely on affidavit evidence to be delivered in advance of the hearing together with the public disclosure records of Aberdeen and other related or connected issuers.
DATED this 24st day of August, 2020 |
Fasken Martineau DuMoulin LLP |
333 Bay Street, Suite 2400 |
|
Toronto, Ontario |
|
M5H 2T6 |
|
David Hausman |
|
Tel: 416-868-3486 |
|
dhausman@fasken.com |
|
Jonathan Wansbrough |
|
Tel: 416-943-8839 |
|
jwansbrough@fasken.com |
|
Lawyers for the Applicant, Epix Resource Finance Corporation |
|
{1} Aberdeen Annual Information Form for the financial year ended January 31, 2020 at p. 8.
{2} Aberdeen Management Discussion & Analysis for the period ended April 30, 2020 at p. 20.
FOR IMMEDIATE RELEASE
September 2, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated September 2, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
Epix Resource Finance Corporation
FOR IMMEDIATE RELEASE
September 4, 2020
TORONTO -- On September 4, 2020 the Commission issued a Notice of Hearing pursuant to Subsection 127 (1) of the Securities Act, RSO 1990, c S.5, to consider whether it is in the public interest for the Commission to make the order requested in the Application, dated August 24, 2020, filed by Epix Resource Finance Corporation with respect to Aberdeen International Inc.
The hearing will be held on September 25, 2020 at 9:00 a.m.
A copy of the Notice of Hearing dated September 4, 2020 and the Application dated August 24, 2020 are available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
September 8, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated September 8, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
Nord Gold S.E. and Cardinal Resources Limited
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Section 6.1 of NI 62-104 -- take-over bid-relief from requirements applicable to take-over bids in Part 2 and Part 3 of NI 62-104 -- take-over bid for issuer not resident in Canada that is a reporting issuer in Canada and publicly listed in Australia and Ontario -- offeror to acquire all outstanding ordinary shares of target issuer that it does not already own -- would be eligible for foreign take-over bid exemption but for the fact that ownership by security holders resident in Canada exceeds 10% -- offeror's bid is a "market" bid subject to laws of Australia -- competing take-over bid outstanding for target issuer's ordinary shares -- published market on which the greatest volume of trading in securities of target issuer occurred during the 12 months immediately preceding the commencement of the bid was not in Canada -- offeror extended offer period for additional 10 days -- offer is exempt from requirements applicable to take-over bids in Part 2 and Part 3 of NI 62-104, subject to conditions, including that the offeror issue a news release in Canada providing details and contact information for security holders in Canada advising them as to how they may accept the bid, that security holders in Canada are entitled to participate on terms at least as favourable as the terms that apply to all other holders of target securities, and that the offeror satisfy the conditions set out in subsections 4.4(e), (f) and (g) of NI 62-104.
National Instrument 62-104 Take-Over Bids and Issuer Bids, s. 6.1, Parts 2 and 3.
September 3, 2020
The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) pursuant to section 6.1 of National Instrument 62-104 Take-Over Bids and Issuer Bids (NI 62-104), exempting the all-cash on-market take-over bid commenced by the Filer to purchase all of the issued ordinary shares (the Issuer Shares) of the Issuer, as such bid may be amended, supplemented or replaced, including through any subsequent all-cash on-market take-over bid commenced by the Filer to purchase all of the issued Issuer Shares (the Foreign On-Market Bid) through the facilities of the Australian Securities Exchange (the ASX) from the requirements applicable to take-over bids in Part 2 and Part 3 of NI 62-104 (the Take-Over Bid Requirements) (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this Application; and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon by the Filer in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
Nord Gold S.E.
1. The Filer is a European public limited liability company registered under the laws of England and Wales (registered number SE000102).
2. Three related non-Canadian individuals own more than 99.9% of the shares of the Filer.
3. The Filer operates 10 mines in four countries: Russia, Kazakhstan, Burkina Faso and Guinea.
4. At the commencement of the Foreign On-Market Bid, the Filer owned 98,443,593 Issuer Shares, representing approximately 18.71% of the outstanding Issuer Shares, all of which were acquired before the commencement of the Foreign On-Market Bid. The Filer currently controls 149,344,714 Issuer Shares, representing approximately 28.39% of the outstanding Issuer Shares.
5. The Filer is not a reporting issuer in any jurisdiction in Canada.
Cardinal Resources Limited
6. The Issuer is an Australian corporation established under the Australian Corporations Act 2001 (Cth).
7. The head office address of the Issuer is 28 Ord Street, Suite 1, West Perth, Western Australia, 6005.
8. The Issuer is a reporting issuer in all of the provinces of Canada, excluding Québec.
9. The Issuer, through its subsidiaries, owns gold mining projects only in Ghana, West Africa. To the best knowledge of the Filer, the Issuer has no significant assets in Canada.
10. The Issuer Shares are listed for trading on the ASX and listed and posted for trading on the Toronto Stock Exchange (the TSX) under the symbol "CDV".
11. In the 12 months ended May 15, 2020, approximately 11.8% of the ordinary share trading in the Issuer Shares took place on the TSX, with 88.2% taking place on the ASX.
12. To the best knowledge of the Filer, based on the ASX announcements made by the Issuer, the number of issued Issuer Shares is 526,024,522.
13. As at July 16, 2020, the only registered Shareholder of the Issuer resident in Canada is The Canadian Depositary for Securities Limited (CDS) which was the registered holder of 65,875,580 issued Issuer Shares representing approximately 12.5% of the issued Issuer Shares as of such date. CDS used an Australian address for its registration address.
14. To the best knowledge of the Filer, holders of Issuer Shares (Shareholders) resident in Canada were constituted as follows:
(a) as at July 15, 2020, MM Asset Management Inc. held 48,415,566 Issuer Shares, representing approximately 9.20% of the issued Issuer Shares;
(b) as at July 14, 2020, Bank of Nova Scotia and 1832 Asset Management L.P. held 26,000,000 Issuer Shares, representing approximately 4.94% of the issued Issuer Shares;
(c) not more than 2% of the holders of Issuer Shares are "retail" shareholders resident in Canada; and
(d) all of the foregoing held their Issuer Shares beneficially or exercised control or direction over their Issuer Shares.
15. On August 11, 2020, Shandong Gold Mining (HongKong) Co., Limited commenced an "off-market bid" under the Australian Corporations Act 2001 (Cth) for all of the issued Issuer Shares.
The Foreign On-Market Bid
16. The Filer announced the Foreign On-Market Bid on July 15, 2020. The Foreign On-Market Bid:
(a) is unconditional;
(b) is a "market bid" for the purposes of the Australian Corporations Act 2001 (Cth);
(c) became open for acceptance on July 30, 2020 until its initial expiry date of August 31, 2020;
(d) was given effect to by an Australian broker retained by the Filer placing a "buy-order" through the trading platform of the ASX, which is the only procedure that can be used to give effect to the Foreign On-Market Bid;
(e) as required by the Australian Corporations Act 2001 (Cth), is and can only be made in relation to "quoted securities" (as that term is defined in the Australian Corporations Act 2001 (Cth)), being all of the issued Issuer Shares;
(f) may be accepted by Shareholders only through brokers who are participants on the ASX only and by no other means;
(g) could be accepted by any Shareholder by transferring or dematerializing its Issuer Shares to an account in Australia and instructing an Australian broker to place a "sell-order" through the ASX trading platform in order to accept the Foreign On-Market Bid; and
(h) may be a "take-over bid" for purposes of NI 62-104 by the application of Section 1.10 of NI 62-104.
17. Under the current terms of the Foreign On-Market Bid, Shareholders will receive AUD$0.90 in cash for each Issuer Share that they deposit to the Foreign On-Market Bid.
18. The Foreign On-Market Bid has been made by the Filer in compliance with the requirements of the Australian Corporations Act 2001 (Cth), the operating rules of the ASX, and the applicable requirements of the Australian Securities and Investments Commission.
19. Section 4.4 of NI 62-104 provides an exemption (the Foreign Take-Over Bid Exemption) from the Take-Over Bid Requirements where, among other things, the following conditions are satisfied:
(a) security holders whose last address as shown on the books of the offeree issuer is in Canada hold less than 10% of the outstanding securities of the class subject to the bid at the commencement of the bid; and
(b) the offeror reasonably believes that security holders in Canada beneficially own less than 10% of the outstanding securities of the class subject to the bid at the commencement of the bid.
20. If the Foreign On-Market Bid is a "take-over bid" for purposes of NI 62-104 by the application of Section 1.10 of NI 62-104, the Foreign On-Market Bid would not have the benefit of the Foreign Take-Over Bid Exemption because Canadian beneficial and registered Shareholder ownership was not less than 10% of the outstanding Issuer Shares at the commencement of the Foreign On-Market Bid.
21. The published market on which the greatest volume of trading in Issuer Shares occurred during the 12 months immediately preceding the commencement of the Foreign On-Market Bid was not in Canada.
22. Details concerning the Foreign On-Market Bid are contained in a bidder's statement prepared by the Filer and despatched to each registered Shareholder as is required by the Australian Corporations Act 2001 (Cth).
23. As of September 3, 2020, 44,983,095 Issuer Shares have been accepted into the Foreign On-Market Bid.
24. On August 24, 2020, the Foreign On-Market Bid was extended in accordance with the Australian Corporations Act 2001 (Cth) such that it is open for acceptance until close of trade on the ASX on September 10, 2020.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
(a) the Filer issues a news release in Canada providing details and contact information for Shareholders resident in Canada advising them as to how they may accept the Foreign On-Market Bid;
(b) Shareholders in Canada are entitled to participate in the Foreign On-Market Bid on terms at least as favourable as the terms that apply to the general body of Shareholders; and
(c) the Filer satisfies the conditions set out in subsections 4.4(e), (f) and (g), as may be applicable, of NI 62-104.
TMX Group Limited et al. -- ss. 21, 144
Subsection 144(1) of the Securities Act (Ontario) -- application for order varying the Commission's order recognizing TMX Group Limited, TSX Inc. and Alpha Exchange Inc. as exchanges -- variations required to streamline the regulatory reporting requirements applicable to recognized exchanges carrying on business in Ontario and to reduce regulatory burden -- requested order granted.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 21, 144(1).
August 31, 2020
WHEREAS the Ontario Securities Commission (Commission) issued an order dated July 4, 2012, which was varied on April 24, 2015, September 29, 2015, June 22, 2018, February 8, 2019, and May 31, 2019 recognizing each of Maple Group Acquisition Corporation (now TMX Group Limited), TMX Group Inc., TSX Inc., Alpha Trading Systems Limited Partnership, and Alpha Exchange Inc. as exchanges pursuant to section 21 of the Act (Exchange Recognition Order);
AND WHEREAS the Commission considers the proper operation of the exchanges as essential to investor protection and maintaining a fair and efficient capital market, and therefore requires that any conflicts of interest in the operation of the exchanges be dealt with appropriately, the fairness and efficiency of the market not be impaired by any anti-competitive activity, and that systemic risks are monitored and controlled;
AND WHEREAS TMX Group Limited (TMX Group), TSX Inc. (TSX), and Alpha Exchange Inc. (Alpha Exchange) have agreed to the applicable terms and conditions set out in the Schedules to the Exchange Recognition Order;
AND WHEREAS TMX Group provided to Commission Staff a letter, dated June 28, 2012, regarding TMX Group's undertakings to the Autorité des marchés financiers, which is attached to the Exchange Recognition Order at Appendix B;
AND WHEREAS the Commission has received an application under section 144 of the Act to vary and restate the Exchange Recognition Order to reflect the streamlining of certain reporting requirements and to reduce regulatory burden (Application);
AND WHEREAS based on the Application and the representations that TMX Group, TSX, and Alpha Exchange have made to the Commission, the Commission has determined that:
(a) TMX Group, TSX, and Alpha Exchange continue to satisfy the recognition criteria set out in Schedule 1 to the Exchange Recognition Order,
(b) it is in the public interest to continue to recognize each of TMX Group, TSX, and Alpha Exchange as an exchange pursuant to section 21 of the Act, and
(c) it is not prejudicial to the public interest to vary and restate the Exchange Recognition Order pursuant to section 144 of the Act;
IT IS ORDERED, pursuant to section 144 of the Act, that the Application to vary and restate the Exchange Recognition Order is granted.
IT IS ORDERED, pursuant to section 21 of the Act, that:
(a) TMX Group continues to be recognized as an exchange,
(b) TSX continues to be recognized as an exchange, and
(c) Alpha Exchange continues to be recognized as an exchange,
provided that TMX Group, TSX, and Alpha Exchange comply with the terms and conditions set out in the Schedules to the Exchange Recognition Order, as applicable.
DATED this 31st day of August, 2020, to take effect September 14, 2020.
1.1 Compliance with NI 21-101 and NI 23-101
The exchange complies with the requirements set out in National Instrument 21-101 Marketplace Operation (NI 21-101) and in National Instrument 23-101 Trading Rules, each as amended from time to time, which include requirements relating to:
(a) access;
(b) marketplace operations;
(c) exchange rules, policies and other similar instruments;
(d) order and trade transparency;
(e) transparency of marketplace operations;
(f) record keeping;
(g) marketplace systems and business continuity planning;
(h) confidentiality of information;
(i) outsourcing;
(j) clearing and settlement;
(k) fair and orderly markets;
(l) the management of conflicts of interest; and
(m) filing of financial statements.
2.1 Governance
The governance structure and governance arrangements of the exchange ensure:
(a) effective oversight of the exchange;
(b) that business and regulatory decisions are in keeping with the exchange's public interest mandate;
(c) fair, meaningful and diverse representation on the board of directors (Board) and any committees of the Board, including:
(i) appropriate representation of independent directors, and
(ii) a proper balance among the interests of the different persons or companies using the services and facilities of the exchange;
(d) the exchange has policies and procedures to appropriately identify and manage conflicts of interest; and
(e) there are appropriate qualifications, remuneration, limitation of liability and indemnity provisions for directors, officers, and employees of the exchange.
2.2 Fitness
The exchange has policies and procedures under which it will take reasonable steps, and has taken such reasonable steps, to ensure that each director and officer is a fit and proper person.
3.1 Fair Access
(a) The exchange has established appropriate written standards for access to its services, including requirements to ensure participants are appropriately registered under Ontario securities laws, or exempted from these requirements.
(b) The access standards and the process for obtaining, limiting, and denying access are fair, transparent, and applied reasonably.
4.1 Regulation
The exchange has the authority, resources, capabilities, systems, and processes to allow it to perform its regulation functions, whether directly or indirectly through a regulation services provider, including setting requirements governing the conduct of participants and issuers, monitoring their conduct, and appropriately disciplining them for violations of exchange requirements.
5.1 Rules and Rulemaking
(a) The exchange has rules, policies, and other similar instruments (Rules) that are designed to appropriately govern and regulate the operations and activities of participants and issuers.
(b) In addition to meeting the requirements of NI 21-101 relating to market operations and exchange rules, policies, and other similar instruments as referred to in paragraphs 1.1(b) and (c) of this Schedule, respectively, the Rules are also designed to
(i) ensure a fair and orderly market, and
(ii) provide a framework for disciplinary and enforcement actions.
6.1 Due Process
For any decision made by the exchange that affects a participant or issuer, or an applicant to be a participant or issuer, including a decision in relation to access, listing, exemptions, or discipline, the exchange ensures that:
(a) parties are given an opportunity to be heard or make representations, and
(b) it keeps a record of, gives reasons for, and provides for appeals or reviews of its decisions.
7.1 Clearing and Settlement
The exchange has appropriate arrangements for the clearing and settlement of trades.
8.1 Information Technology Risk Management Procedures
The exchange has appropriate risk management procedures in place, including those that handle trading errors, trading halts, and circuit breakers.
9.1 Financial Viability
The exchange has sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
10.1 Fees
(a) All fees imposed by the exchange are reasonable and equitably allocated and are consistent with the requirements in Ontario securities laws, including those listed in paragraphs 1.1(a) and (e) of this Schedule.
(b) The process for setting fees is fair and appropriate, and the fee model is transparent.
11.1 Information Sharing and Regulatory Cooperation
The exchange has mechanisms in place to enable it to share information and otherwise co-operate with the Commission, recognized self-regulatory organizations, other recognized or exempt exchanges, clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) For the purposes of this Schedule:
"accounting principles" means accounting principles as defined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
"affiliated entity" has the meaning ascribed to it in section 1.3 of NI 21-101;
"Alpha Member" means a person or company that has been permitted to access the trading facilities of Alpha Exchange and is subject to regulatory oversight by Alpha Exchange, and the person's or company's representatives;
"associate" has the meaning ascribed to it in subsection 1(1) of the Act;
"ATS" means an alternative trading system as defined in subsection 1(1) of the Act;
"audited consolidated financial statements" means financial statements that
(i) are prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises, including that they adhere to the standards specified for consolidated financial statements in International Accounting Standard 27 Consolidated and Separate Financial Statements,
(ii) include notes to the financial statements that identify the accounting principles used to prepare the financial statements, and
(iii) are audited in accordance with Canadian GAAS and are accompanied by an auditor's report;
"Board" means the board of directors;
"criteria for recognition" means all the criteria for recognition set out in Schedule 1 to the Exchange Recognition Order;
"dealer" means "investment dealer" as that term is defined in section 1.1 of National Instrument 31-103 Registration Requirements;
"Governance Committee" means the governance committee established by TMX Group pursuant to section 17 of Schedule 3 to the Exchange Recognition Order;
"IIROC" means the Investment Industry Regulatory Organization of Canada;
"marketplace" has the meaning ascribed to it in subsection 1(1) of the Act;
"marketplace participant" has the meaning ascribed to it in section 1.1 of NI 21-101;
"NI 21-101" means National Instrument 21-101 Marketplace Operation;
"officer" has the meaning ascribed to it in subsection 1(1) of the Act;
"regulated TMX marketplace" means a TMX marketplace that is regulated by the Commission as a recognized exchange or an ATS;
"Regulatory Oversight Committee" means the committee established by TMX Group pursuant to section 18 of Schedule 3 to the Exchange Recognition Order;
"Rule" means a rule, policy, or other similar instrument of TSX or Alpha Exchange, as applicable;
"shareholder" means a person or company that holds any class or series of voting shares of TMX Group;
"significant TMX shareholder" means a person or company that:
(i) beneficially owns or exercises control or direction over more than 10% of the outstanding shares of TMX Group provided, however, that the ownership of or control or direction over additional TMX Group shares in connection with the following activities will not be included for the purposes of determining whether the 10% threshold has been exceeded:
(A) investment activities on behalf of the person or company or its affiliated entity where such investments are made (I) by a bona fide third party investment manager with discretionary authority (subject to such retained discretion in order for the person or company or its affiliated entity to fulfil its fiduciary duties); or (II) by an investment fund or other pooled investment vehicle in which the person or company or such affiliated entity has directly or indirectly invested and which is managed by a third party who has not been provided with confidential, undisclosed information about TMX Group,
(B) acting as a custodian for securities in the ordinary course,
(C) normal course trading (including proprietary client facilitation trading) and wealth management activities (including, for greater certainty, in connection with the management of any mutual funds, pooled funds, trust accounts, estate portfolios and other investor funds and portfolios), including electronic securities trading, conducted for or on behalf of clients of the person or company, provided that any fund manager with discretionary authority carrying out such activities on behalf of such clients, or such clients, have not been provided with confidential, undisclosed information about TMX Group,
(D) the acquisition of TMX Group shares in connection with the adjustment of index-related portfolios or other "basket" related trading,
(E) making a market in securities to facilitate trading in shares of TMX Group by third party clients or to provide liquidity to the market in the person or company's capacity as a designated market maker for shares of TMX Group securities, in the person or company's capacity as designated market maker for derivatives on TMX Group shares, or in the person or company's capacity as market maker or "designated broker" for exchange traded funds which may have investments in shares of TMX Group, in each case in the ordinary course, (which, for greater certainty, will include acquisitions or other derivative transactions undertaken in connection with hedging positions of, or in relation to, TMX Group shares), or
(F) providing financial services to any other person or company in the ordinary course of business of its and their banking, securities, wealth and insurance businesses, provided that such other person or company has not been provided with confidential, undisclosed information about TMX Group,
and subject to the conditions that the ownership of or control or direction over TMX Group shares by a person or company in connection with the activities listed in (A) through (F) above:
(G) is not intended by that person or company to facilitate evasion of the 10% threshold set out in clause (i), and
(H) does not provide that person or company the ability to exercise voting rights over more than 10% of the voting shares of TMX Group in a manner that is solely in the interests of that person or company as it relates to that person or company's ownership of or control or direction over the subject shares, except where the ability to exercise voting rights over more than 10% of the voting shares arises as a result of the activities listed in (E) above in which case the person or company must not exercise its voting rights with respect to those excess voting shares; or
(ii) is a shareholder whose nominee is on the TMX Group Board, for as long as that nominee remains on the TMX Group Board;
"TMX clearing agency" means any clearing agency owned or operated by TMX Group or TMX Group's affiliated entities;
"TMX issuer" means a person or company whose securities are listed on a TMX marketplace;
"TMX marketplace" means any marketplace owned or operated by TMX Group or TMX Group's affiliated entities;
"TMX marketplace participant" means a marketplace participant of any TMX marketplace;
"TMX trading facility" means any trading facility owned or operated by TMX Group or TMX Group's affiliated entities;
"TSX issuer" means a person or company whose securities are listed on TSX;
"TSX PO" means a person or company that has been permitted to access the trading facilities of TSX and is subject to regulatory oversight by TSX, and the person's or company's representatives; and
"unaudited non-consolidated financial statements" means financial statements that are prepared in the same manner as audited consolidated financial statements, except that
(i) they are not audited; and
(ii) investments in subsidiary entities, jointly controlled entities and associates are accounted for as specified for separate financial statements in International Accounting Standard 27 Consolidated and Separate Financial Statements.
(b) For the purposes of this Schedule, an individual is independent if the individual is "independent" within the meaning of section 1.4 of National Instrument 52-110 Audit Committees, as amended from time, but is not independent if the individual is:
(i) a partner, director, officer or employee, of a TMX marketplace participant or an associate of a partner, director, officer or employee of a TMX marketplace participant, or
(ii) a partner, director, officer or employee of an affiliated entity of a TMX marketplace participant, who is responsible for or is actively or significantly engaged in the day-to-day operations or activities of that TMX marketplace participant.
(a) The recognized exchange must conduct the business and operations of the recognized exchange in a manner that is consistent with the public interest.
(b) The mandate of the Board of the recognized exchange must expressly include the regulatory and public interest responsibilities of the recognized exchange.
The recognized exchange must continue to meet the criteria for recognition set out in Schedule 1 to the Exchange Recognition Order.
In order to ensure that the recognized exchange operates with integrity and in the public interest, the recognized exchange must take reasonable steps to ensure that each director and officer of the recognized exchange is a fit and proper person. As part of those steps, the recognized exchange will consider whether the past conduct of each director or officer affords reasonable grounds for the belief that the director or officer will perform his or her duties with integrity and in a manner that is consistent with the public interest responsibilities of the recognized exchange.
(a) The recognized exchange must ensure that at least 50% of its Board members are independent directors.
(b) The chair of the Board of the recognized exchange must be independent.
(c) In the event that the recognized exchange fails to meet the requirements of paragraphs (a) or (b) of this section, it must immediately advise the Commission and take appropriate measures to promptly remedy such failure.
(d) The recognized exchange must ensure that the Board is subject to requirements that the quorum for the Board consists of a majority of the Board members, with at least 50% being independent.
At least one director of the recognized exchange must be a representative of a marketplace participant that is not affiliated with any Canadian Schedule I bank.
(a) At the request of the Commission, the recognized exchange must engage an independent consultant, or independent consultants, acceptable to the Commission to prepare a written report assessing the governance structure of TMX Group and TSX and will also include Alpha Exchange if requested by the Commission (Governance Review).
(b) The recognized exchange must provide the written report to its Board promptly after the report's completion and then to the Commission within 30 days of providing it to its Board.
(c) The scope of the Governance Review must be approved by the Commission.
(d) The Governance Review must include an appropriate degree of public consultation, including consultation with users of the recognized exchange's services and facilities.
(a) The recognized exchange must not, through any fee schedule, any fee model, or any contract, agreement, or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession, or other similar arrangement that is accessible only to, whether as designed or by implication, a particular marketplace participant or any other particular person or company; or
(ii) any discount, rebate, allowance, price concession, or other similar arrangement for any service or product offered by the recognized exchange that is conditional upon:
(A) the requirement to have a TMX marketplace be set as the default or first marketplace a marketplace participant routes to, or
(B) the router of a TMX marketplace being used as the marketplace participant's primary router.
(b) Except with the prior approval of the Commission, the recognized exchange must not, through any fee schedule, any fee model, or any contract, agreement, or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession, or other similar arrangement on any services or products offered by the recognized exchange that is conditional upon the purchase of any other service or product provided by the recognized exchange or any affiliated entity; or
(ii) any discount, rebate, allowance, price concession, or other similar arrangement that is accessible only to, whether as designed or by implication, a class of marketplace participants or of any other persons or companies.
(c) The recognized exchange must obtain prior Commission approval before implementing any new, or amendments to, fees and fee models, including any new, or amendments to, any incentives relating to arrangements that provide for equity ownership in TMX Group for marketplace participants or their affiliated entities based on trading volumes or values on TMX marketplaces.
(d) The recognized exchange must not require another person or company to purchase or otherwise obtain products or services from any TMX clearing agency as a condition of the recognized exchange supplying or continuing to supply a product or service.
(e) Except with the prior approval of the Commission, the recognized exchange must not require another person or company to purchase or otherwise obtain products or services from the recognized exchange, any TMX marketplace, or a significant TMX shareholder as a condition of the recognized exchange supplying or continuing to supply a product or service.
(f) At the request of the Commission, the recognized exchange must:
(i) conduct a review, the scope of which must be approved by the Commission, of the fees and fee models of the recognized exchange and all regulated TMX marketplaces that are related to trading, clearing, settlement, depository, data, and any other services specified by the Commission;
(ii) include input from relevant stakeholders; and
(iii) provide a written report on the outcome of such review to its Board promptly after the report's completion and then to the Commission within 30 days of providing it to its Board.
(g) If the Commission considers that it would be in the public interest, the Commission may require a recognized exchange to submit, for approval by the Commission, a fee, fee model, or incentive that has previously been submitted and/or approved by the Commission.
(h) Where the Commission decides not to approve the fee, fee model, or incentive submitted under paragraph (g), any previous approval for the fee, fee model, or incentive must be revoked, if applicable, and the recognized exchange must no longer be permitted to offer the fee, fee model, or incentive.
The recognized exchange must not support, encourage, or incent, either through fee incentives or otherwise, TMX marketplace participants to coordinate the routing of TMX marketplace participants' orders to a particular TMX marketplace or TMX trading facility.
The recognized exchange must not establish requirements relating to clearing and settlement of trades that would result in:
(a) unfair discrimination of or between market participants based on the clearing agency used; or
(b) an imposition of any burden on competition among clearing agencies or back-office or post-trade service providers that is not reasonably necessary or appropriate; or
(c) an unreasonable prohibition, condition, or limitation relating to access by a person or company to services offered by the recognized exchange or a TMX clearing agency.
The recognized exchange must deliver to the Commission its annual financial budget, together with the underlying assumptions, that has been approved by its Board, within 30 days after the commencement of each fiscal year.
The recognized exchange must provide the Commission with the information set out in Appendix A to this Schedule 2, as amended from time to time.
(a) The recognized exchange must, and must cause its affiliated entities to, promptly provide the Commission, on request, any and all data, information, and analyses in the custody or control of the recognized exchange or any of its affiliated entities, without limitations, redactions, restrictions, or conditions, including, without limiting the generality of the foregoing:
(i) data, information, and analyses relating to all of its or their businesses; and
(ii) data, information, and analyses of third parties in its or their custody or control.
(b) The recognized exchange must share information and otherwise cooperate with other recognized or exempt exchanges, recognized self-regulatory organizations, other recognized or exempt clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(c) The disclosure or sharing of information by the recognized exchange or any affiliated entities pursuant to the Schedules to the Exchange Recognition Order is subject to any confidentiality provisions contained in agreements entered into with the Bank of Canada pertaining to information received from the Bank of Canada in its role as registrar, issuing agent, transfer agent, or paying agent for the Government of Canada.
(a) The recognized exchange must certify in writing to the Commission, in a certificate signed by its CEO and general counsel, within one year of the effective date of the recognition of the recognized exchange as an exchange pursuant to this Exchange Recognition Order and every year subsequent to that date, or at other times required by the Commission, that the recognized exchange is in compliance with the terms and conditions applicable to it in the Exchange Recognition Order and describe in detail:
(i) the steps taken to require compliance;
(ii) the controls in place to verify compliance; and
(iii) the names and titles of employees who have oversight of compliance.
(b) If a recognized exchange or its directors, officers, or employees become(s) aware of a breach or a possible breach of any of the terms and conditions applicable to the recognized exchange under the Schedules to the Exchange Recognition Order, such person must, within two business days after becoming aware of the breach or possible breach, notify the Regulatory Oversight Committee of the breach or possible breach. The director, officer, or employee of the recognized exchange must provide to the Regulatory Oversight Committee details sufficient to describe the nature, date, and effect (actual and anticipated) of the breach or possible breach.
(c) The Regulatory Oversight Committee must, within two business days after being notified of the breach or possible breach under (b), notify the Commission and confirm that the breach or possible breach is under investigation as required by (d).
(d) The Regulatory Oversight Committee must promptly cause an investigation to be conducted of the breach or possible breach reported under (b). Once the Regulatory Oversight Committee has made a determination as to whether there has been a breach, or that there is an impending breach, of any terms and conditions applicable to the recognized exchange under the Schedules to the Exchange Recognition Order, the Regulatory Oversight Committee must, within two business days of such determination, notify the Commission of its determination and must provide details sufficient to describe the nature, date, and effect (actual and anticipated) of the breach or impending breach, and any actions that will be taken to address it.
(a) Immediate notification of a decision to enter into a definitive agreement (including a binding letter of intent), memorandum of understanding, or other similar arrangement with any governmental or regulatory body, self-regulatory organization, clearing agency, stock exchange, other marketplace or market, except in the case where the agreement or arrangement: (i) is primarily intended to restrict the use or disclosure of confidential information, (ii) is primarily for the purpose of facilitating discussions in connection with a possible definitive agreement, (iii) is necessary to support the provision of the existing exchange services, or (iv) relates to the provision of the existing exchange services and is also subject to the standard form agreements of the exchange (for example, listing agreements, data subscription agreements, etc.).
(b) Any plans by the recognized exchange or its affiliated entities that carry on business in Canada to enter into new businesses (directly or indirectly, including joint ventures) or to cease existing businesses, promptly after the Board has made the decision to implement those plans.
(c) Immediate notification if the recognized exchange:
(i) becomes the subject of any order, directive, or other similar action of a governmental or regulatory authority;
(ii) becomes aware that it is the subject of a criminal or regulatory investigation; or
(iii) becomes, or is notified that it will become, the subject of a material lawsuit.
(d) Any strategic plan for the recognized exchange and its affiliated entities carrying on business in Canada, including strategic plans relating to its equities, fixed income, and derivatives (including exchange-traded and over-the-counter or otherwise) businesses, within 30 days of approval by the Board.
(e) Any information submitted by the recognized exchange to a Canadian securities regulatory authority under a requirement of a recognition order, exemption order, or NI 21-101, provided concurrently.
(a) At least annually, or more frequently if required by the Commission, the recognized exchange's assessment of the risks, including business risks, facing the recognized exchange and its affiliated entities carrying on business in Canada, and its plan for addressing such risks.
Terms used in this Schedule have the same meanings and interpretation as in section 1 of Schedule 2.
(a) TMX Group must continue to own, directly or indirectly, all of the issued and outstanding voting shares of TSX and Alpha Exchange.
(b) Without the prior approval of the Commission, and subject to terms and conditions considered appropriate by the Commission, no person or company and no combination of persons or companies acting jointly or in concert may beneficially own or exercise control or direction over more than 10%, or such other percentage as may be prescribed by the Commission, of any class or series of voting shares of TMX Group. The Commission's approval under this paragraph may be subject to such terms and conditions as the Commission considers appropriate.
(c) The articles of TMX Group must contain the share ownership restrictions and provisions respecting the enforcement of such restrictions which, without limiting the foregoing, may provide for the filing of declarations, the suspension of voting rights, the forfeiture of dividends, the refusal of the issue or registration of voting shares, and the sale or redemption of voting shares held contrary to the restrictions and payment of net proceeds of the sale or redemption to the person entitled thereto.
(a) TMX Group must maintain a governance committee of the Board that, at a minimum:
(i) is made up of independent directors;
(ii) confirms the status of nominees to the TMX Group Board as independent before the name of the individual is submitted to shareholders as a nominee for election to the TMX Group Board;
(iii) confirms on an annual basis that the status of the directors who are independent has not changed; and
(iv) assesses and approves all nominees of management to the TMX Group Board.
(a) TMX Group must establish and maintain a Regulatory Oversight Committee that, at a minimum:
(i) has a minimum of three directors;
(ii) is made up of independent directors;
(iii) considers real or perceived conflicts of interest that may arise, including but not limited to the following contexts:
(A) ownership interests in TMX Group by any TMX marketplace participant with representation on the TMX Group Board,
(B) increased concentration of ownership of the recognized exchange, and
(C) the profit-making objective and the public interest responsibilities of TMX Group, including general oversight of the management of the regulatory and public interest responsibilities of TSX and Alpha Exchange;
(iv) oversees the establishment of mechanisms to avoid or appropriately manage conflicts of interest or potential conflicts of interest, perceived or real, including any policies and procedures that are developed by TMX Group, TSX, or Alpha Exchange, including those that are required to be established pursuant to the Schedules to the Exchange Recognition Order;
(v) reviews the effectiveness of the policies and procedures regarding conflicts of interest on a regular, and at least annual, basis; and
(vi) reports in writing directly to the Commission on any matter that the Regulatory Oversight Committee deems appropriate or that is required by the Commission without first requiring Board approval or notification for such reporting.
(b) The Regulatory Oversight Committee must provide such information as may be required by the Commission from time to time.
(a) TMX Group must ensure that a regulated TMX marketplace does not, through any fee schedule, any fee model, or any contract, agreement, or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession, or other similar arrangement that is accessible only to, whether as designed or by implication, a particular market participant or any other particular person or company; or
(ii) any discount, rebate, allowance, price concession, or other similar arrangement for any service or product offered by the regulated TMX marketplace that is conditional upon:
(A) the requirement to have a TMX marketplace be set as the default or first marketplace a marketplace participant routes to, or
(B) the router of a TMX marketplace being used as the marketplace participant's primary router.
(b) TMX Group must ensure that any affiliated entity does not, through any fee schedule, any fee model, or any contract, agreement, or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession, or other similar arrangement on any services or products offered by the affiliated entity that is conditional upon the purchase of any other service or product provided by a regulated TMX marketplace; or
(ii) any discount, rebate, allowance, price concession, or other similar arrangement for any service or product offered by the affiliated entity that is conditional upon
(A) the requirement to have a regulated TMX marketplace be set as the default or first marketplace a marketplace participant routes to, or
(B) the router of a regulated TMX marketplace being used as the marketplace participant's primary router.
(c) Unless prior approval has been granted by the Commission, TMX Group must ensure that a regulated TMX marketplace does not, through any fee schedule, any fee model, or any contract, agreement, or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession, or other similar arrangement on any services or products offered by the regulated TMX marketplace that is conditional upon the purchase of any other service or product provided by the regulated TMX marketplace or any affiliated entity; or
(ii) any discount, rebate, allowance, price concession, or other similar arrangement that is accessible only to, whether as designed or by implication, a class of marketplace participants or of any other persons or companies.
(d) TMX Group must ensure that a regulated TMX marketplace obtains prior Commission approval before implementing any new, or amendments to, fees and fee models, including any new, or amendments to, any incentives relating to arrangements that provide for equity ownership in TMX Group for marketplace participants or their affiliated entities based on trading volumes or values on TMX marketplaces.
(e) TMX Group must ensure that a regulated TMX marketplace does not require another person or company to purchase or otherwise obtain products or services from any TMX clearing agency as a condition of the regulated TMX marketplace supplying or continuing to supply a product or service.
(f) TMX Group must ensure that a regulated TMX marketplace does not require a person or company to obtain products or services from the regulated TMX marketplace, any other TMX marketplace, or a significant TMX shareholder as a condition of the regulated TMX marketplace supplying or continuing to supply a product or service, unless prior approval has been granted by the Commission.
(g) TMX Group must ensure that any affiliated entity does not require another person or company to obtain products or services from any regulated TMX marketplace or any TMX clearing agency as a condition of the affiliated entity supplying or continuing to supply a product or service.
(h) If the Commission considers that it would be in the public interest, the Commission may require a regulated TMX marketplace to submit, for approval by the Commission, a fee, fee model, or incentive that has previously been submitted to and/or approved by the Commission.
(i) Where the Commission decides not to approve the fee, fee model, or incentive submitted under paragraph (h), any previous approval for the fee, fee model, or incentive will be revoked, if applicable, and the regulated TMX marketplace will no longer be permitted to offer the fee, fee model, or incentive.
(a) TMX Group must establish, maintain, and require compliance with policies and procedures that:
(i) require that confidential information regarding marketplace operations, regulation functions, a TMX marketplace participant or TMX issuer that is obtained by a partner, director, officer, or employee of a significant TMX shareholder through that individual's involvement in the management or oversight of marketplace operations or regulation functions of a TMX marketplace:
(A) be kept separate and confidential from the business or other operations of the significant TMX shareholder, except with respect to information regarding marketplace operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of marketplace operations and the individual can and does exercise due care in his or her disclosure of the information, and
(B) not be used to provide an advantage to the significant TMX shareholder or its affiliated entities.
(b) TMX Group must regularly review compliance with the policies and procedures established in accordance with (a) and must document each review and any deficiencies and how those deficiencies were remedied.
(a) TMX Group must, for so long as TSX carries on business as an exchange, allocate sufficient financial and other resources to TSX to ensure that TSX can carry out its functions in a manner that is consistent with the public interest and in compliance with Ontario securities law.
(b) TMX Group must, for so long as Alpha Exchange carries on business as an exchange, allocate sufficient financial and other resources to Alpha Exchange to ensure that Alpha Exchange can carry out its functions in a manner that is consistent with the public interest and in compliance with Ontario securities law.
(c) TMX Group must notify the Commission immediately upon becoming aware that it is or will be unable to allocate sufficient financial and other resources, as required under (a) or (b), to TSX or Alpha Exchange, as applicable.
(d) TMX Group must ensure that there continues to be significant focus on the development of its core senior equities business, including by allocating sufficient financial and other resources to allow for such development.
Terms used in this Schedule have the same meanings and interpretation as in section 1 of Schedule 2.
(a) TSX must establish, maintain and require compliance with policies and procedures that:
(i) require that confidential information regarding exchange operations, regulation functions, a TSX PO or TSX Issuer that is obtained by a partner, director, officer or employee of a significant TMX shareholder through that individual's involvement in the management or oversight of exchange operations or regulation functions:
(A) be kept separate and confidential from the business or other operations of the significant TMX shareholder, except with respect to information regarding exchange operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of exchange operations and the individual can and does exercise due care in his or her disclosure of the information, and
(B) not be used to provide an advantage to the significant TMX shareholder or its affiliated entities.
(b) TSX must establish, maintain, and require compliance with policies and procedures that identify and manage any conflicts of interest or potential conflicts of interest arising from the listing of the shares of any significant TMX shareholder or an affiliate of a significant TMX shareholder on TSX, and such policies and procedures, and any amendments, must not be implemented without prior approval of the Commission.
(c) TSX shall establish, maintain, and require compliance with policies and procedures that identify and manage any conflicts of interest or potential conflicts of interest arising from the listing of the shares of TMX Group or a competitor to TMX Group on TSX, and such policies and procedures, and any amendments, shall not be implemented without prior approval of the Commission.
(d) TSX must regularly review compliance with the policies and procedures established under (a), (b) and (c), and must document each review, and any deficiencies and how those deficiencies were remedied.
TSX's requirements must provide access to the facilities of TSX only to properly registered investment dealers that are members of IIROC and satisfy the access requirements reasonably established by TSX.
(a) TSX must establish, maintain, and require compliance with policies and procedures that effectively monitor and enforce the Rules against TSX Issuers and TSX POs, either directly or indirectly through a regulation services provider.
(b) TSX has retained and will continue to retain IIROC as a regulation services provider to provide certain regulation services which have been approved by the Commission.
(c) TSX must perform all other regulation functions not performed by IIROC and must maintain adequate staffing, systems, and other resources in support of those functions. TSX must obtain prior Commission approval before outsourcing such regulation functions to any party, including affiliated entities or associates of TSX.
(d) TSX must notify the Commission of any violations of Ontario securities law of which it becomes aware in the ordinary course of its business or otherwise.
(a) TSX must establish and maintain a TSX Board Rules Committee that, at a minimum:
(i) is composed of independent directors; and
(ii) reviews and decides, or makes recommendations to the TSX Board, on all Rules that must be submitted to the Commission for review and approval under Schedule 6.
(a) TSX must maintain sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
(b) TSX must calculate monthly the following financial ratios:
(i) a current ratio, being the ratio of current assets to current liabilities;
(ii) a debt to cash flow ratio, being the ratio of total debt (including any line of credit draw downs, and the current and long-term portions of any loans, but excluding accounts payable, accrued expenses and other liabilities) to adjusted EBITDA (i.e., earnings before interest, taxes, stock-based compensation, depreciation, and amortization) for the most recent 12 months; and
(iii) a financial leverage ratio, being the ratio of total assets to shareholders' equity,
in each case calculated based on both consolidated and non-consolidated financial statements.
(c) TSX must report quarterly in writing to the Commission the monthly calculations for the previous quarter of the financial ratios as required to be calculated under (b).
(d) If TSX determines that it does not have, or anticipates that, in the next twelve months, it will not have, on a consolidated or non-consolidated basis, sufficient financial resources for the proper performance of its functions and to meet its responsibilities, it will immediately notify the Commission along with the reasons for the deficiency, and any impact on the financial viability of TSX.
(e) Upon receipt of a notification made by TSX under (d), the Commission may, as determined appropriate, impose additional terms or conditions on TSX.
(f) TSX must deliver to the Commission its annual financial budget, on a non-consolidated basis, together with the underlying assumptions, that has been approved by its Board, within 30 days after the commencement of each fiscal year.
(a) TSX must provide the Commission with:
(i) the information set out in Appendix A to this Schedule 4, as amended from time to time; and
(ii) any information required to be provided by TSX to IIROC, including any and all order and trade information, as required by the Commission.
For the purposes of this Appendix:
"Participant" means a TSX PO or Alpha Member, as applicable.
(a) Prior notification of a decision to enter into a definitive agreement (including a binding letter of intent), memorandum of understanding, or other similar arrangement with any governmental or regulatory body, self-regulatory organization, clearing agency, stock exchange, other marketplace, or market, except in the case where the agreement or arrangement: (i) is primarily intended to restrict the use or disclosure of confidential information, (ii) is primarily for the purpose of facilitating discussions in connection with a possible definitive agreement, (iii) is necessary to support the provision of the existing exchange services, or (iv) relates to the provision of the existing exchange services and is also subject to the standard form agreements of the exchange (for example, listing agreements, data subscription agreements, etc.).
(b) Copies of all notices, bulletins, and similar forms of communication that the recognized exchange sends to Participants or issuers.
(c) Prompt notification of any suspension or delisting of an issuer, including the reasons for the suspension or delisting.
(d) Prompt notification of any suspension or termination of a Participant's status as a Participant of the recognized exchange, including the reasons for the suspension or termination.
(a) A quarterly report summarizing all exemptions or waivers granted during the period pursuant to the Rules to any Participant or issuer, which shall include the following information:
(i) the name of the Participant or issuer;
(ii) the type of exemption or waiver granted during the period;
(iii) the date of the exemption or waiver; and
(iv) a description of the recognized exchange's reason for the decision to grant the exemption or waiver.
(b) A quarterly report regarding original listing applications containing the following information:
(i) the name of any issuer whose original listing application was conditionally approved, the date of such approval, the type of listing, the category of listing and, if known, whether the issuer was denied an application to list its securities on another marketplace;
(ii) the name of any issuer whose original listing application was rejected and the reasons for rejection, by category of listing; and
(iii) the name of any issuer whose original listing application was withdrawn or abandoned and, if known, the reasons why the application was withdrawn or abandoned, by category of listing.
(c) A quarterly report summarizing all significant incidents of issuer non-compliance identified by the recognized exchange during the period, together with a summary of the actions taken to address and resolve the incidents of non-compliance.
Terms used in this Schedule have the same meanings and interpretation as in section 1 of Schedule 2.
(a) Alpha Exchange must establish, maintain, and require compliance with policies and procedures that:
(i) require that confidential information regarding exchange operations, regulation functions, or an Alpha Member that is obtained by a partner, director, officer, or employee of a significant TMX shareholder through that individual's involvement in the management or oversight of exchange operations or regulation functions:
(A) be kept separate and confidential from the business or other operations of the significant TMX shareholder, except with respect to information regarding exchange operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of exchange operations and the individual can and does exercise due care in his or her disclosure of the information, and
(B) not be used to provide an advantage to the significant TMX shareholder or its affiliated entities.
(b) Alpha Exchange must regularly review compliance with the policies and procedures established under (a) and must document each review and any deficiencies and how those deficiencies were remedied.
Alpha Exchange's requirements must provide access to the facilities of Alpha Exchange only to properly registered investment dealers that are members of IIROC and satisfy the access requirements reasonably established by Alpha Exchange.
(a) Alpha Exchange must establish, maintain, and require compliance with policies and procedures that effectively monitor and enforce the Rules against Alpha Members, either directly or indirectly through a regulation services provider.
(b) Alpha Exchange has retained and will continue to retain IIROC as a regulation services provider to provide certain regulation services which have been approved by the Commission.
(c) Alpha Exchange must perform all other regulation functions not performed by IIROC, and must maintain adequate staffing, systems, and other resources in support of those functions. Alpha Exchange must obtain prior Commission approval before outsourcing such regulation functions to any party, including affiliated entities or associates of Alpha Exchange.
(d) Alpha Exchange must notify the Commission of any violations of Ontario securities law of which it becomes aware in the ordinary course of its business or otherwise.
(a) Alpha Exchange must establish and maintain an Alpha Exchange Board Rules Committee that, at a minimum:
(i) is composed of independent directors; and
(ii) reviews and decides, or makes recommendations to the Alpha Exchange Board, on all Rules that must be submitted to the Commission for review and approval under Schedule 6.
(a) Alpha Exchange must maintain sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
(b) Alpha Exchange must calculate monthly the following financial ratios:
(i) a current ratio, being the ratio of current assets to current liabilities;
(ii) a debt to cash flow ratio, being the ratio of total debt (including any line of credit draw downs, and the current and long-term portions of any loans, but excluding accounts payable, accrued expenses and other liabilities) to adjusted EBITDA (i.e., earnings before interest, taxes, stock-based compensation, depreciation, and amortization) for the most recent 12 months; and
(iii) a financial leverage ratio, being the ratio of total assets to shareholders' equity,
in each case calculated based on both consolidated and non-consolidated financial statements.
(c) Alpha Exchange must report quarterly in writing to the Commission, the monthly calculations for the previous quarter of the financial ratios as required to be calculated under (b).
(d) If Alpha Exchange determines that it does not have, or anticipates that, in the next twelve months, it will not have, on a consolidated or non-consolidated basis, sufficient financial resources for the proper performance of its functions and to meet its responsibilities, it will immediately notify the Commission along with the reasons for the deficiency, and any impact on the financial viability of Alpha Exchange.
(e) Upon receipt of a notification made by Alpha Exchange under (d), the Commission may, as determined appropriate, impose additional terms or conditions on Alpha Exchange.
(f) Alpha Exchange must deliver to the Commission its annual financial budget, on a non-consolidated basis, together with the underlying assumptions, that has been approved by its Board, within 30 days after the commencement of each fiscal year.
(a) Alpha Exchange must provide the Commission with:
(i) the information set out in Appendix A to Schedule 4, as amended from time to time; and
(ii) any information required to be provided by Alpha Exchange to IIROC, including any and all order and trade information, as required by the Commission.
This Protocol sets out the procedures a recognized exchange (Exchange) must follow for any Rule or Change, both as defined in section 2 below, and describes the procedures for their review by Commission Staff (Staff) and approval by the Commission or the Director. This Protocol also establishes requirements regarding the time at which an Exchange may begin operations following recognition by the Commission.
For the purposes of this Protocol:
(a) Change means a Fee Change, a Housekeeping Change or a Significant Change.
(b) Director means "Director" as defined in subsection 1(1) of the Securities Act (Ontario).
(c) Fee Change means any new fee or fee model of the Exchange and any amendment to a fee or fee model.
(d) Fee Change subject to Public Comment means a Fee Change that, in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
(e) Housekeeping Change means an amendment to the information in Form 21-101F1 that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(f) Housekeeping Rule means a new Rule or an amendment to a Rule that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(g) Public Interest Rule means a Rule or an amendment to a Rule that is not a Housekeeping Rule.
(h) Rule includes a rule, policy and other similar instrument of the Exchange.
(i) Significant Change means an amendment to the information in Form 21-101F1 other than
(i) a Housekeeping Change,
(ii) a Fee Change, or
(iii) a Rule,
and for greater certainty includes the matters listed in subsection 6.1(4) of Companion Policy 21-101 CP.
(j) Significant Change subject to Public Comment means a Significant Change that
(i) is listed in paragraphs 6.1(4)(a) or (b) of Companion Policy 21-101 CP, or
(ii) in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
The Exchange and Staff will follow the process for review and approval set out in this Protocol for all Changes, new Rules and Rule amendments.
The Exchange's board of directors, or a duly authorized committee of the board, must approve all Rules prior to their submission under this Protocol.
(a) The Exchange may submit a written request with Staff to waive or vary any part of this Protocol. The request must provide reasons why granting the waiver is appropriate in the circumstances.
(b) Staff will use their best efforts to provide to the Exchange within five business days of receipt of its request either:
(i) written notice that Staff object to granting the waiver or variation; or
(ii) written notice that the waiver or variation has been granted by Staff.
The Exchange must not begin operations until a reasonable period of time after the Exchange is notified that it has been recognized by the Commission.
(a) Prior to the implementation of a Fee Change, Public Interest Rule or Significant Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that, together with the notice for publication submitted under paragraph (a)(ii), if applicable, fully describes:
(A) the proposed Fee Change, Public Interest Rule or Significant Change;
(B) the expected date of implementation of the proposed Fee Change, Public Interest Rule or Significant Change;
(C) the rationale for the proposal and any relevant supporting analysis;
(D) the expected impact, including the quantitative impact, of the proposed Fee Change, Public Interest Rule or Significant Change on the market structure, members and, if applicable, on investors, issuers and the capital markets;
(E) the expected impact of the Fee Change, Public Interest Rule or Significant Change on the Exchange's compliance with Ontario securities law requirements and in particular requirements for fair access and maintenance of fair and orderly markets;
(F) a summary of any consultations, including consultations with external parties, undertaken in formulating the Fee Change, Public Interest Rule or Significant Change, and the internal governance process followed to approve the Rule or Change;
(G) for a proposed Fee Change:
1. the expected number of marketplace participants likely to be subject to the new fee, along with a description of the costs they will incur; and
2. if the proposed Fee Change applies differently across types of marketplace participants, a description of this difference, how it impacts each class of affected marketplace participant, including, where applicable, numerical examples, and any justification for the difference in treatment.
(H) if the Public Interest Rule or Significant Change will require members or service vendors to modify their systems after implementation of the Rule or Change, the expected impact of the Rule or Change on the systems of members and service vendors together with an estimate of the amount of time needed to perform the necessary work and how the estimated amount of time was deemed reasonable in light of the expected impact of the Public Interest Rule or Significant Change on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets;
(I) where the proposed Significant Change is not a Significant Change subject to Public Comment, the rationale for why the proposed Significant Change is not considered a Significant Change subject to Public Comment;
(J) a discussion of any alternatives considered; and
(K) if applicable, whether the proposed Fee Change, Significant Change or Public Interest Rule would introduce a fee model, feature or Rule that currently exists in other markets or jurisdictions;
(ii) for a proposed Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, a notice for publication that generally includes the information required under paragraph (a)(i), except information that, if included in the notice, would result in the public disclosure of sensitive information or confidential or proprietary financial, commercial or technical information;
(iii) for a proposed Public Interest Rule, the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules, and if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) for a proposed Fee Change or Significant Change, blacklined and clean copies of Form 21-101F1 showing the proposed Change.
(b) The Exchange will submit the materials set out in subsection (a)
(i) at least 45 days prior to the expected implementation date of a proposed Public Interest Rule or Significant Change; and
(ii) at least fifteen business days prior to the expected implementation date of a proposed Fee Change.
(c) For a Housekeeping Rule, the Exchange will provide Staff with the following materials:
(i) a cover letter that fully describes the Rule and indicates that it was classified as a Housekeeping Rule and provides an analysis of the rationale for the classification, and the date or proposed date of implementation of the Rule;
(ii) the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules;
(iii) if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) a notice for publication on the OSC website or in the OSC Bulletin that contains the information in paragraph (ii) as well as the implementation date for the Rule and indicates that the Rule has been classified as a Housekeeping Rule and was not published for comment.
(d) For a Housekeeping Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that indicates that the change was classified as a Housekeeping Change and, for each Housekeeping Change, provides an analysis of the rationale for the classification and the expected or actual date of implementation of the Change; and
(ii) blacklined and clean copies of Form 21-101F1 showing the Change.
(e) The Exchange will submit the materials set out in subsection (d) by the earlier of
(i) the Exchange's close of business on the 10th calendar day after the end of the calendar quarter in which the Housekeeping Change was implemented; and
(ii) the date on which the Exchange publicly announces a Housekeeping Change, if applicable.
(a) Within 5 business days of the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will review the notice and materials to ensure that they contain an adequate level of detail, analysis and discussion to elicit meaningful public comment, and will promptly notify the Exchange of any deficiency requiring a resubmission of the notice and/or materials.
(b) Where the notice and/or materials are considered by Staff to be deficient, the Exchange will amend and resubmit the notice and/or materials accordingly, and the date of resubmission will serve as the submission date for the purposes of this Protocol.
(c) Where the notice and materials are considered by Staff to be adequate for publication, Staff will proceed with the processes set out in section 9.
(a) As soon as practicable after the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will publish in the OSC Bulletin and/or on the OSC website, the notice prepared by the Exchange, along with a notice prepared by Staff, if necessary, that provides market participants with an opportunity to provide comments to Staff and to the Exchange within 30 days from the date the notice appears in the OSC Bulletin or on the OSC website, whichever comes first.
(b) If public comments are received
(i) the Exchange will forward copies of the comments promptly to Staff; and
(ii) the Exchange will prepare a summary of the public comments and a response to those comments and provide them to Staff promptly after the end of the comment period.
(a) Staff will use their best efforts to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change within
(i) 45 days from the date of submission of a proposed Public Interest Rule or Significant Change; and
(ii) fifteen business days from the date of submission of a proposed Fee Change.
(b) Staff will notify the Exchange if they anticipate that their review of the proposed Fee Change, Public Interest Rule or Significant Change will exceed the timelines in subsection (a).
(c) If Staff have material comments or require additional information to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change, Staff will use best efforts to provide the Exchange with a comment letter promptly by the end of the public comment period for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, and promptly after the receipt of the materials submitted under section 7 for all other Changes.
(d) The Exchange will respond to any comments received from Staff in writing.
(e) Unless Staff agree to an extension of time, if the Exchange fails to respond to Staff's comments within 120 days after the receipt of Staff's comment letter, the Exchange will be deemed to have withdrawn the proposed Fee Change, Public Interest Rule or Significant Change. If the Exchange wishes to proceed with the Fee Change, Public Interest Rule or Significant Change after it has been deemed withdrawn, the Exchange will have to be re-submit it for review and approval in accordance with this Protocol.
(f) Upon completion of Staff's review of a Fee Change, Public Interest Rule or Significant Change, Staff will submit the Change or Rule to the Director or, in the circumstances described in subsection (g), to the Commission, for a decision within the following timelines:
(i) for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, the later of 45 days from the date that the related materials were published for comment and the date that Staff's comments and public comments, including any concerns identified, have been adequately addressed by the Exchange;
(ii) for any other Significant Change, the later of 45 days from the date of submission of the Change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange; or
(iii) for any other Fee Change, the later of fifteen business days from the date of submission of the change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange.
(g) A Fee Change, Public Interest Rule or Significant Change may be submitted to the Commission for a decision, within the timelines in subsection (f),
(i) if the proposed Fee Change, Public Interest Rule or Significant Change introduces a novel feature to the Exchange or the capital markets;
(ii) if the proposed Fee Change, Public Interest Rule or Significant Change raises significant regulatory or public interest concerns; or
(iii) in any other situation where, in Staff's view, Commission approval is appropriate.
(h) Staff will promptly notify the Exchange of the decision.
(i) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is approved, Staff will publish the following documents in the OSC Bulletin and/or on the OSC website promptly after the approval:
(i) a notice indicating that the proposed Rule or Change is approved;
(ii) the summary of public comments and responses prepared by the Exchange, if applicable; and
(iii) if non-material changes were made to the version published for public comment, a brief description of these changes prepared by the Exchange and a blacklined copy of the revised Rule or Change highlighting the revisions made.
(a) Staff will review a proposed Fee Change, Public Interest Rule or Significant Change to assess whether it is in the public interest for the Director or the Commission to approve the Rule or Change. In making this determination, Staff will have regard for the purposes of the Securities Act (Ontario) (Act) as set out in section 1.1 of the Act. The factors that Staff will consider in making their determination also include whether:
(i) the Rule or Change would impact the Exchange's compliance with Ontario securities law;
(ii) the Exchange followed its established internal governance practices in approving the proposed Rule or Change;
(iii) the Exchange followed the requirements of this Protocol and has provided sufficient analysis of the nature, purpose and effect of the Rule or Change; and
(iv) the Exchange adequately addressed any comments received.
(a) A Public Interest Rule or Significant Change will be effective on the later of:
(i) the date that the Exchange is notified that the Change or Rule is approved;
(ii) if applicable, the date of publication of the notice of approval on the OSC website;
(iii) if applicable, the implementation date established by the Exchange's Rules, agreements, practices, policies or procedures; and
(iv) the date designated by the Exchange.
(b) The Exchange must not implement a Fee Change unless the Exchange has provided stakeholders, including marketplace participants, issuers and vendors, as applicable, with notice of the Fee Change at least five business days prior to implementation.
(c) Where a Significant Change involves a material change to any of the systems, operated by or on behalf of the Exchange, described in section 12.1 of National Instrument 21-101, the Significant Change will not be effective until a reasonable period of time after the Exchange is notified that the Significant Change is approved.
(d) In determining what constitutes a reasonable period of time for purposes of implementing a Significant Change under paragraph (c), Staff will consider how the Significant Change will impact the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns.
(e) The Exchange must notify Staff promptly following the implementation of a Public Interest Rule, Significant Change or Fee Change that becomes effective under subsections (a) and (b).
(f) Where the Exchange does not implement a Public Interest Rule, Significant Change or Fee Change within 180 days of the effective date of the Fee Change, Public Interest Rule or Significant Change, as provided for in subsections (a) and (b), the Public Interest Rule, Significant Change or Fee Change will be deemed to be withdrawn.
(a) If, subsequent to its publication for comment, the Exchange revises a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment in a manner that results in a material change to the proposed substance or effect of the Rule or Change, Staff will, in consultation with the Exchange, determine whether or not the revised Rule or Change should be published for an additional 30-day comment period.
(b) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is republished under subsection (a), the request for comments will include a blacklined version marked to the originally published version, a summary of comments and responses prepared by the Exchange, and an explanation of the revisions and the supporting rationale for the revisions.
(a) If the Exchange withdraws a Fee Change, Public Interest Rule or a Significant Change that was previously submitted, it will provide a written notice of withdrawal to Staff.
(b) If the notice of withdrawal relates to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, Staff will publish the notice of withdrawal in the OSC Bulletin and/or on the OSC website as soon as practicable.
(c) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is deemed to have been withdrawn as provided in subsection 10(e), Staff will prepare and publish a notice informing market participants that the Exchange did not proceed with the Rule or Change.
(a) Subject to subsections (c) and (d), a Housekeeping Rule will be effective on the later of
(i) the date of the publication of the notice to be published on the OSC website or in the OSC Bulletin, in accordance with subsection (e), and
(ii) the date designated by the Exchange.
(b) Subject to subsections (c) and (d), a Housekeeping Change will be effective on the date designated by the Exchange.
(c) Staff will review the materials submitted by the Exchange for a Housekeeping Change or Housekeeping Rule to assess the appropriateness of the categorization of the Rule or Change as housekeeping within five business days from the date that the Exchange submitted the documents in accordance with subsections 7(c) and 7(d). The Exchange will be notified in writing if there is disagreement with respect to the categorization of the Rule or Change as housekeeping.
(d) If Staff disagree with the categorization of the Rule or Change as housekeeping, the Exchange will immediately repeal the Change, if applicable, submit the proposed Rule as a Public Interest Rule or the proposed Change as a Significant Change, and follow the review and approval processes described in this Protocol as applying to a Public Interest Rule or Significant Change, including those processes applicable to a Significant Change subject to Public Comment, if applicable.
(e) If Staff do not disagree with the categorization of the Rule, Staff will publish a notice to that effect in the OSC Bulletin or on the OSC website as soon as is practicable.
(a) The Exchange may need to make a Public Interest Rule or Significant Change effective immediately where the Exchange determines that there is an urgent need to implement the Rule or Change to maintain fair and orderly markets, or because of a substantial and imminent risk of material harm to the Exchange, its members, other market participants, issuers or investors.
(b) When the Exchange determines that immediate implementation is necessary, it will advise Staff in writing as soon as possible, but in any event, at least five business days prior to the proposed implementation of the Public Interest Rule or Significant Change. The written notice will include the expected effective date of the Public Interest Rule or Significant Change and an analysis to support the need for immediate implementation. An application for an exemption from the 45-day advance filing requirements in National Instrument 21-101 must follow within five business days following the Exchange receiving notice that Staff agree with immediate implementation of the Public Interest Rule or Significant Change.
(c) If Staff do not agree that immediate implementation is necessary, Staff will promptly notify the Exchange, in writing, of the disagreement no later than the end of the third business day following submission of the notice under subsection (b). If the disagreement is not resolved, the Exchange will submit the Public Interest Rule or Significant Change in accordance with the timelines in section 7.
A Public Interest Rule or Significant Change that has been implemented immediately in accordance with section 16 will be published, if applicable, and reviewed and approved by the Director or by the Commission in accordance with the procedures set out in section 10, with necessary modifications. If the Director or the Commission does not approve the Public Interest Rule or Significant Change, the Exchange will immediately repeal the Rule or Change and inform its members of the decision.
The Commission's powers under subsection 21(5) of the Securities Act (Ontario) are not constrained in any way, notwithstanding a Rule or Change having been approved under this Protocol.
June 28, 2012
Attention: John P. Stevenson, Secretary of the Commission
Dear Mr. Stevenson:
This letter is further to the meeting on March 7, 2012 during which OSC staff and TMX discussed Maple's understanding of the impact of the proposed undertakings to the AMF set out in the January 31, 2012 draft letter of Maple to Mr. Mario Albert, President and CEO of the AMF.
In paragraphs 15 and 16 of the letter (now paragraphs 14 and 15), Maple has undertaken, in effect, to continue to develop Montreal as a centre of excellence in derivatives. At the meeting, counsel to Maple indicated that this is consistent with Maple's current plans to continue to utilize the assets and resources at MX and CDCC to grow the trading and clearing of derivatives products, including both exchange traded derivatives and OTC derivatives. These undertakings would not have the effect of requiring TMX to move any existing businesses to Montreal, nor would they restrict Maple from developing and investing in derivatives opportunities, including for fixed income derivatives, in jurisdictions outside Montreal if that makes sense at some point in the future.
With respect to paragraphs 19, 20 and 21 (now paragraphs 18, 19 and 20), Maple is undertaking that if it establishes an exchange or clearing house in Canada (or participates in a joint venture or partnership) for trading or clearing derivatives that are presently over-the-counter derivatives, the head and executive office of that exchange or clearing house (or the principal Maple business unit that manages Maple's interest in that joint venture or partnership) will be in Montreal, the senior management responsible for overseeing operating plans and budgets, and development and execution of policy and direction, for that exchange or clearing house (or the principal Maple business unit that manages Maple's interest in that joint venture or partnership), will be in Montreal, and the most senior officer will be a resident of Quebec. With respect to over-the-counter derivatives, the application of these undertakings is limited to recognized exchanges and clearing houses in Canada (or participation in a joint venture or partnership) for over-the-counter derivatives. For the sake of clarity, since the undertakings are made by Maple, the undertakings do not prevent any investor in Maple from trading any derivatives or related products, including over-the-counter derivatives, through facilities not owned by Maple or its subsidiaries.
With respect to our discussions regarding the application of the undertakings to "fixed income transactions", reference to this term was added because CDCC currently clears transactions that are not "derivatives" within the ordinary meaning of that term, and the AMF wanted to ensure that the undertaking covered clearing of repurchase transactions (aka repos) and clearing of trades involving securities that are eligible for repurchase transactions. Following discussion with AMF staff, we have revised the AMF undertakings to clarify that only these transactions are covered by the undertakings, by referencing only the clearing of fixed income transactions in paragraph 30(c)(ii) (now paragraph 29(c)(ii)) and more clearly defining the term fixed income transactions in footnote 1. A revised draft of the undertakings, blacklined to the version previously circulated to you, has been provided to you for your reference.
Except for
(i) the clearing through CDCC of trades in derivatives that are exchange traded on MX,
(ii) the clearing through CDCC of trades for fixed income transactions or other securities that are intended to be cleared through the central counterparty facility of CDCC, and
(iii) a clearing house subject to paragraphs 19, 20 and 21 (now paragraphs 18, 19 and 20),
the undertakings do not limit or restrict the location in which Maple or its affiliated entities conduct or manage business related to back office or post-trade processing of trades, including collateral management; and, for greater certainty, are not intended to transfer or diminish CDS' current cash markets clearing, settlement and depository functions. In addition, for the sake of clarity, since the undertakings are made by Maple, the undertakings do not prevent any investor in Maple from trading and/or clearing any fixed income securities through facilities not owned by Maple or its subsidiaries.
Finally, Maple confirms that management of TMX Group have considered these undertakings from the perspective of TMX's businesses. They are comfortable with these undertakings and believe they are consistent with TMX's current business plans and would not negatively impact TMX's ability to conduct its current or future businesses in the public interest.
We hope the foregoing is helpful.
Yours very truly,
Aequitas Innovations Inc. and Neo Exchange Inc. -- ss. 21, 144
Subsection 144(1) of the Securities Act (Ontario) -- application for order varying the Commission's order recognizing Neo Exchange Inc. as an exchange -- variation required to streamline the regulatory reporting requirements applicable to recognized exchanges carrying on business in Ontario and to reduce regulatory burden -- requested order granted.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 21, 144(1).
August 31, 2020
WHEREAS the Ontario Securities Commission (Commission) issued an order dated November 13, 2014, effective as at March 1, 2015, which was varied on February 27, 2015, September 29, 2015 and February 8, 2019, recognizing Aequitas Neo Exchange Inc. and its sole shareholder, Aequitas Innovations Inc. (Aequitas),) as exchanges pursuant to section 21 of the Act (Recognition Order);
AND WHEREAS on January 15, 2019, the name Aequitas Neo Exchange Inc. was changed to Neo Exchange Inc. (Neo Exchange);
AND WHEREAS the Commission considers the proper operation of exchanges as essential to investor protection and maintaining a fair and efficient capital market, and therefore requires that any conflicts of interest in the operation of exchanges be dealt with appropriately, the fairness and efficiency of the market not be impaired by any anti-competitive activity, and that systemic risks are monitored and controlled;
AND WHEREAS Aequitas and Neo Exchange have agreed to the applicable terms and conditions set out in the Schedules to the Recognition Order;
AND WHEREAS the Commission has received an application under section 144 of the Act to vary and restate the Recognition Order to reflect the streamlining of certain reporting requirements and to reduce regulatory burden (Application);
AND WHEREAS based on the Application and the representations that Aequitas and Neo Exchange have made to the Commission, the Commission has determined that:
(a) Aequitas and Neo Exchange continue to satisfy the recognition criteria set out in Schedule 1 to the Recognition Order,
(b) it is in the public interest to continue to recognize each of Aequitas and Neo Exchange as an exchange pursuant to section 21 of the Act, and
(c) it is not prejudicial to the public interest to vary and restate the Recognition Order pursuant to section 144 of the Act;
IT IS ORDERED, pursuant to section 144 of the Act, that the Application to vary and restate the Recognition Order is granted.
IT IS ORDERED, pursuant to section 21 of the Act, that:
(a) Aequitas continues to be recognized as an exchange, and
(b) Neo Exchange continues to be recognized as an exchange,
provided that Aequitas and Neo Exchange comply with the terms and conditions set out in the Schedules to the Recognition Order, as applicable.
DATED this 31st day of August, 2020, to take effect September 14, 2020.
1.1 Compliance with NI 21-101 and NI 23-101
The exchange complies with the requirements set out in National Instrument 21-101 Marketplace Operation (NI 21-101) and in National Instrument 23-101 Trading Rules, each as amended from time to time, which include requirements relating to:
(a) access;
(b) marketplace operations;
(c) exchange rules, policies and other similar instruments;
(d) order and trade transparency;
(e) transparency of marketplace operations;
(f) record keeping;
(g) marketplace systems and business continuity planning;
(h) confidentiality of information;
(i) outsourcing;
(j) clearing and settlement;
(k) fair and orderly markets;
(l) the management of conflicts of interest; and
(m) filing of financial statements.
2.1 Governance
The governance structure and governance arrangements of the exchange ensure:
(a) effective oversight of the exchange;
(b) that business and regulatory decisions are in keeping with the exchange's public interest mandate;
(c) fair, meaningful and diverse representation on the board of directors (Board) and any committees of the Board, including:
(i) appropriate representation of independent directors, and
(ii) a proper balance among the interests of the different persons or companies using the services and facilities of the exchange;
(d) the exchange has policies and procedures to appropriately identify and manage conflicts of interest; and
(e) there are appropriate qualifications, remuneration, limitation of liability and indemnity provisions for directors, officers and employees of the exchange.
2.2 Fitness
The exchange has policies and procedures under which it will take reasonable steps, and has taken such reasonable steps, to ensure that each director and officer is a fit and proper person.
3.1 Fair Access
(a) The exchange has established appropriate written standards for access to its services including requirements to ensure participants are appropriately registered under Ontario securities laws, or exempted from these requirements.
(b) The access standards and the process for obtaining, limiting and denying access are fair, transparent and applied reasonably.
4.1 Regulation
The exchange has the authority, resources, capabilities, systems and processes to allow it to perform its regulation functions, whether directly or indirectly through a regulation services provider, including setting requirements governing the conduct of participants and issuers, monitoring their conduct, and appropriately disciplining them for violations of exchange requirements.
5.1 Rules and Rulemaking
(a) The exchange has rules, policies, and other similar instruments (Rules) that are designed to appropriately govern and regulate the operations and activities of participants and issuers.
(b) In addition to meeting the requirements of NI 21-101 relating to market operations and exchange rules, policies and other similar instruments as referred to in paragraphs 1.1(b) and (c) of this Schedule, respectively, the Rules are also designed to
(i) ensure a fair and orderly market; and
(ii) provide a framework for disciplinary and enforcement actions.
6.1 Due Process
For any decision made by the exchange that affects a participant or issuer, or an applicant to be a participant or issuer, including a decision in relation to access, listing, exemptions, or discipline, the exchange ensures that:
(a) parties are given an opportunity to be heard or make representations, and
(b) it keeps a record of, gives reasons for and provides for appeals or reviews of its decisions.
7.1 Clearing and Settlement
The exchange has appropriate arrangements for the clearing and settlement of trades.
8.1 Information Technology Risk Management Procedures
The exchange has appropriate risk management procedures in place including those that handle trading errors, trading halts and circuit breakers.
9.1 Financial Viability
The exchange has sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
10.1 Fees
(a) All fees imposed by the exchange are reasonable and equitably allocated and are consistent with the requirements in Ontario securities laws, including those requirements listed in paragraphs 1.1(a) and (e) of this Schedule.
(b) The process for setting fees is fair and appropriate, and the fee model is transparent.
11.1 Information Sharing and Regulatory Cooperation
The exchange has mechanisms in place to enable it to share information and otherwise co-operate with the Commission, recognized self-regulatory organizations, other recognized or exempt exchanges, clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) For the purposes of this Schedule:
"accounting principles" means accounting principles as defined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
"affiliated entity" has the meaning ascribed to it in section 1.3 of National Instrument 21-101 Marketplace Operation;
"associate" has the meaning ascribed to it in subsection 1(1) of the Act;
"Board" means the board of directors of Aequitas or Neo Exchange, as the context requires;
"Competitor" means a person whose consolidated business, operations or disclosed business plans are in competition, to a significant extent, with the listing functions, trading functions, market data services or other material lines of business of Neo Exchange or its affiliated entities;
"criteria for recognition" means all the criteria for recognition set out in Schedule 1 to the Order;
"dealer" means "investment dealer", as that term is defined in section 1.1 of National Instrument 31-103 Registration Requirements;
"IIROC" means the Investment Industry Regulatory Organization of Canada;
"marketplace" has the meaning ascribed to it in subsection 1(1) of the Act;
"marketplace participant" has the meaning ascribed to it in section 1.1 of NI 21-101;
"Neo Exchange issuer" means a person or company whose securities are listed on Neo Exchange;
"Neo Exchange marketplace participant" means a marketplace participant of Neo Exchange;
"Nominating Committee" means the committee established by Neo Exchange pursuant to section 7 of this Schedule or by Aequitas pursuant to section 26 of Schedule 3, as the context requires;
"officer" has the meaning ascribed to it in subsection 1(1) of the Act;
"Regulatory Oversight Committee" means the committee established by Neo Exchange pursuant to section 8 of this Schedule;
"Rule" means a rule, policy, or other similar instrument of Neo Exchange;
"shareholder" means a person or company that holds any class or series of voting shares of Aequitas;
"significant shareholder" means:
(i) a person or company that beneficially owns or controls, directly or indirectly, more than 10% of any class or series of voting shares of Aequitas; or
(ii) a shareholder whose nominee is on the Board of Neo Exchange or Aequitas, for as long as the nominee of that shareholder remains on the Board of Neo Exchange or Aequitas; and
"unaudited non-consolidated financial statements" means financial statements that are prepared in the same manner as audited consolidated financial statements, except that
(i) they are not audited; and
(ii) investments in subsidiary entities, jointly controlled entities and associates are accounted for as specified for separate financial statements in International Accounting Standard 27 Separate Financial Statements.
(b) For the purposes of this Schedule, an individual is independent if the individual is "independent" within the meaning of section 1.4 of National Instrument 52-110 Audit Committees, as amended from time to time, but is not independent if the individual:
(i) is a partner, officer, director or employee of a Neo Exchange marketplace participant or an associate of that partner, officer or employee;
(ii) is a partner, officer, director or employee of an affiliated entity of a Neo Exchange marketplace participant who is responsible for or is actively engaged in the day-to-day operations or activities of that Neo Exchange marketplace participant;
(iii) is an officer or an employee of Aequitas or any of its affiliates;
(iv) is a partner, officer or employee of a significant shareholder or any of its affiliated entities or an associate of that partner, officer or employee;
(v) is a director of a significant shareholder or any of its affiliated entities or an associate of that director;
(vi) is a person who owns or controls, or is the officer or employee of a person or company that owns or controls, directly or indirectly, more than 10% of the shares of Aequitas;
(vii) is the director of a person or company that beneficially owns or controls, directly or indirectly, more than 10% of any class or series of voting shares of Aequitas;
(viii) is a director that was nominated, and as a result appointed or elected, by a significant shareholder; or
(ix) has, or has had, any relationship with a significant shareholder that could, in the view of the Nomination Committee, having regard to all relevant circumstances, be reasonably perceived to interfere with the exercise of his or her independent judgment as a director of Aequitas or Neo Exchange.
(c) For the purposes of paragraph (b), the Nominating Committee may waive the restrictions set out in subparagraphs (b)(v), (b)(vii) and (viii) provided that:
(i) the individual being considered does not have, and has not had, any relationship with a shareholder that could, in the view of the Nominating Committee, having regard to all relevant circumstances, be reasonably perceived to interfere with the exercise of his or her independent judgement as a director of Neo Exchange;
(ii) Neo Exchange publicly discloses the use of the waiver with reasons why the particular candidate was selected;
(iii) Neo Exchange provides advance notice to the Commission, at least 15 business days before the public disclosure in sub-paragraph (c)(ii) is made, and
(iv) the Commission does not object within 15 business days of its receipt of the notice provided under sub-paragraph (c)(iii) above.
(a) Neo Exchange must conduct its business and operations in a manner that is consistent with the public interest.
(b) The mandate of the Board must expressly include regulatory and public interest responsibilities of Neo Exchange.
(a) Without the prior approval of the Commission, and subject to terms and conditions considered appropriate by the Commission, no person or company and no combination of persons or companies acting jointly or in concert may beneficially own or exercise control or direction over:
(i) more than 10% of any class or series of voting shares of Neo Exchange and, thereafter,
(ii) more than 50% of any class or series of voting shares of Neo Exchange.
(b) The articles of Neo Exchange must contain the share ownership restrictions and provisions respecting the enforcement of such restrictions which, without limiting the foregoing, may provide for the filing of declarations, the suspension of voting rights, the forfeiture of dividends, the refusal of the issue or registration of voting shares and the sale or redemption of voting shares held contrary to the restrictions and payment of net proceeds of the sale or redemption to the person entitled thereto.
Neo Exchange must continue to meet the criteria for recognition set out in Schedule 1 to the Order.
In order to ensure that Neo Exchange operates with integrity and in the public interest, Neo Exchange will take reasonable steps to ensure that each director or officer of Neo Exchange is a fit and proper person. As part of those steps, Neo Exchange will consider whether the past conduct of each director or officer affords reasonable grounds for the belief that the director or officer will perform their duties with integrity and in a manner that is consistent with Neo Exchange's public interest responsibilities.
(a) Neo Exchange must ensure that at least 50% of its Board members are independent.
(b) The chair of the Board must be independent.
(c) In the event that Neo Exchange fails to meet the requirements under (a) or (b), it must immediately advise the Commission and take appropriate measures to promptly remedy such failure.
(d) Neo Exchange must ensure that its Board is subject to requirements that the quorum for the Board consists of a majority of the Board members, with at least 50% being independent.
Neo Exchange must maintain a Nominating Committee of the Board that, at a minimum:
(a) is made up of at least three directors, at least 50% of which must be independent;
(b) confirms the status of a nominee to the Board as independent before the individual is appointed to the Board or the name of the individual is submitted to the shareholder(s) of Neo Exchange as a nominee for election to the Board, whichever comes first;
(c) confirms, on an annual basis, that the status of the directors that are independent has not changed;
(d) assesses and approves all nominees of management to the Board; and
(e) has a requirement that the quorum consist of at least 50% of independent directors.
(a) Neo Exchange must establish and maintain a Regulatory Oversight Committee that, at a minimum:
(i) is made up of at least three directors, a majority of which must be independent;
(ii) reviews and decides, or makes recommendations to the Board, on proposed regulation and rules that must be submitted to the OSC for review and approval under Schedule 4 Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto of this Order;
(iii) considers real or perceived conflicts of interest that may arise, including but not limited to the following contexts:
(A) ownership interests in Aequitas by any Neo Exchange marketplace participant with representation on the Board of Aequitas or the Board of Neo Exchange,
(B) significant changes to the ownership of Aequitas, and
(C) the profit-making objective and the public interest responsibilities of Neo Exchange, including general oversight of the management of the regulatory and public interest responsibilities of Neo Exchange;
(iv) oversees the establishment of mechanisms to avoid and appropriately manage conflicts of interest or potential conflicts of interest, perceived or real, including any policies and procedures that are developed by Neo Exchange, including those that are required to be established pursuant to the Schedules of the Order;
(v) reviews the effectiveness of the policies and procedures regarding conflicts of interest on a regular, and at least annual, basis;
(vi) reports in writing directly to the Commission on any matter that the Regulatory Oversight Committee deems appropriate or that is required by the Commission without first requiring Board approval for such reporting.
(b) The Regulatory Oversight Committee must provide such information as may be required by the Commission from time to time.
(a) Neo Exchange must establish, maintain and require compliance with policies and procedures that:
(i) require that confidential information regarding marketplace operations, regulation functions, a Neo Exchange marketplace participant or a Neo Exchange issuer that is obtained by a partner, director, officer or employee of a significant shareholder through that individual's involvement in the management or oversight of marketplace operations or regulation functions of Neo Exchange:
(A) be kept separate and confidential from the business or other operations of the significant shareholder, except with respect to information regarding marketplace operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of marketplace operations and the individual can and does exercise due care in his or her disclosure of the information, and
(B) not be used to provide an advantage to the significant shareholder or its affiliated entities.
(b) Neo Exchange must establish, maintain and require compliance with policies and procedures that identify and manage conflicts of interest or potential conflicts of interest arising from the listing of the shares of any significant shareholder or an affiliate of a significant shareholder on Neo Exchange.
(c) Neo Exchange must regularly review compliance with the policies and procedures established in accordance with (a) and (b) and must document each review, and any deficiencies, and how those deficiencies were remedied.
Neo Exchange's requirements must provide access to the facilities of Neo Exchange only to properly registered investment dealers that are members of IIROC and satisfy reasonable access requirements established by Neo Exchange.
(a) Neo Exchange must establish, maintain and require compliance with policies and procedures that effectively monitor and enforce the Rules against Neo Exchange marketplace participants and Neo Exchange issuers, either directly or indirectly through a regulation services provider.
(b) Neo Exchange has retained and will continue to retain IIROC as a regulation services provider to provide, as agent for Neo Exchange, certain regulation services that have been approved by the Commission.
(c) Neo Exchange must perform all other regulation functions not performed by IIROC, and must maintain adequate staffing, systems and other resources in support of those functions. Neo Exchange must obtain prior Commission approval before outsourcing such regulation functions to any party, including affiliated entities or associates of Neo Exchange.
(d) Neo Exchange must notify the Commission of any violations of Ontario securities law of which it becomes aware in the ordinary course of its business or otherwise.
(a) Neo Exchange must not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a particular marketplace participant or any other particular person or company, or
(ii) any discount, rebate, allowance, price concession or other similar arrangement for any service or product offered by Neo Exchange that is conditional upon:
(A) the requirement to have Neo Exchange be set as the default or first marketplace a marketplace participant routes to, or
(B) the router of Neo Exchange being used as the marketplace participant's primary router.
(b) Except with the prior approval of the Commission, Neo Exchange must not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement on any services or products offered by Neo Exchange that is conditional upon the purchase of any other service or product provided by Neo Exchange or any affiliated entity, or
(ii) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a class of marketplace participants or of any other persons or companies.
(c) Neo Exchange must obtain prior Commission approval before implementing any new, or amendments to, fees and fee models, including any new, or amendments to any, incentives relating to arrangements that provide for equity ownership in Aequitas for marketplace participants or their affiliated entities based on trading volumes of values on Neo Exchange.
(d) Except with the prior approval of the Commission, Neo Exchange must not require another person or company to purchase or otherwise obtain products or services from Neo Exchange or a significant shareholder as a condition of Neo Exchange supplying or continuing to supply a product or service.
(e) If the Commission considers that it would be in the public interest, the Commission may require Neo Exchange to submit for approval by the Commission a fee, fee model or incentive that has previously been submitted to and/or approved by the Commission.
(f) Where the Commission decides not to approve the fee, fee model or incentive submitted under (e), any previous approval for the fee, fee model or incentive must be revoked, if applicable, and Neo Exchange will no longer be permitted to offer the fee, fee model or incentive.
Neo Exchange must not support, encourage or incent, either through fee incentives or otherwise, Neo Exchange marketplace participants, Neo Exchange affiliated entities or significant shareholders to coordinate the routing of their orders to Neo Exchange.
Neo Exchange must deliver to the Commission its annual financial budget, together with the underlying assumptions, that has been approved by its Board, within 30 days from the commencement of each fiscal year.
(a) Neo Exchange must maintain sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
(b) Neo Exchange must calculate the following financial ratios monthly:
(i) a current ratio, being the ratio of current assets to current liabilities;
(ii) a debt to cash flow ratio, being the ratio of total debt (including any line of credit draw downs, and the current and long-term portions of any loans, but excluding accounts payable, accrued expenses and other liabilities) to EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization) for the most recent 12 months; and
(iii) a financial leverage ratio, being the ratio of total assets to shareholders' equity, in each case following the same accounting principles as those used for the unaudited non consolidated financial statements of Neo Exchange.
(c) Neo Exchange must report quarterly in writing to the Commission the monthly calculations for the previous quarter of the financial ratios as required to be calculated under paragraph (b).
(d) If Neo Exchange determines that it does not have, or anticipates that, in the next twelve months, it will not have sufficient financial resources for the proper performance of its functions and to meet its responsibilities, it will immediately notify the Commission along with the reasons and any impact on the financial viability of Neo Exchange.
(e) Upon receipt of a notification made by Neo Exchange under (d), the Commission may, as determined appropriate, impose additional terms and conditions on Neo Exchange.
(a) Neo Exchange must provide the Commission with:
(i) the information set out in Appendix A to this Schedule, as amended from time to time; and
(ii) any information required to be provided by Neo Exchange to IIROC, including all order and trade information, as required by the Commission.
(a) At the request of the Commission, Neo Exchange must engage an independent consultant, or independent consultants acceptable to the Commission to prepare a written report assessing the governance structure of Neo Exchange (Governance Review).
(b) The written report must be provided to the Board of Neo Exchange promptly after the report's completion and then to the Commission within 30 days of providing it to the Board.
(c) The scope of the Governance Review must be approved by the Commission.
(a) Neo Exchange must, and must cause its affiliated entities to, promptly provide to the Commission, on request, any and all data, information and analyses in the custody or control of Neo Exchange or any of its affiliated entities, without limitations, redactions, restrictions or conditions, including, without limiting the generality of the foregoing:
(i) data, information and analyses relating to all of its or their businesses; and
(ii) data, information and analyses of third parties in its or their custody or control.
(b) Neo Exchange must share information and otherwise cooperate with other recognized or exempt exchanges, recognized self-regulatory organizations, recognized or exempt clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) Neo Exchange must certify in writing to the Commission, in a certificate signed by its CEO and general counsel, within one year of the effective date of its recognition as an exchange pursuant to this Order and every year subsequent to that date, or at any times required by the Commission, that it is in compliance with the terms and conditions applicable to it in the Order and describe in detail:
(i) the steps taken to require compliance;
(ii) the controls in place to verify compliance;
(iii) the names and titles of employees who have oversight of compliance.
(b) If Neo Exchange or any of its directors, officers or employees become aware of a breach or a possible breach of any of the terms and conditions applicable to the Neo Exchange under the Schedules to the Order, such person must, within two business days after becoming aware of the breach or possible breach, notify the Regulatory Oversight Committee of the breach or possible breach. The director, officer or employee of the recognized exchange must provide to the Regulatory Oversight Committee details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or possible breach.
(c) The Regulatory Oversight Committee must, within two business days after being notified of the breach or possible breach, notify the Commission and confirm that the breach or possible breach is under investigation as required by (d).
(d) The Regulatory Oversight Committee must promptly cause to be conducted an investigation of the breach or possible breach reported under (b). Once the Regulatory Oversight Committee has made a determination as to whether there has been a breach, or that there is an impending breach, of any terms and conditions applicable to Neo Exchange under the Schedules to the Order, the Regulatory Oversight Committee must, within two business days of such determination, notify the Commission of its determination and must provide details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or impending breach, and any actions that will be taken to address it.
(a) Immediate notification of a decision to enter into a definitive agreement (including a binding letter of intent), memorandum of understanding or other similar agreement with any governmental or regulatory body, self-regulatory obligation, clearing agency, stock exchange, other marketplace or market, except in the case where the agreement or arrangement: (i) is primarily intended to restrict the use or disclosure of confidential information, (ii) is primarily for the purpose of facilitating discussions in connection with a possible definitive agreement, (iii) is necessary to support the provision of the existing exchange services, or (iv) relates to the provision of the existing exchange services and is also subject to the standard form agreements of the exchange (for example, listing agreements, data subscription agreements, etc.).
(b) Immediate notification if Neo Exchange:
(i) becomes the subject of any order, directive or similar action of a governmental or regulatory authority;
(ii) becomes aware that it is the subject of a criminal or regulatory investigation; or
(iii) becomes, or it is notified in writing that it will become, the subject of a material lawsuit.
(c) Any strategic plan for Neo Exchange, within 30 days of approval by the Board.
(d) Any information submitted by Neo Exchange to a Canadian securities regulatory authority under a requirement of a recognition order, exemption order or NI 21-101, provided concurrently.
(e) Copies of all notices, bulletins and similar forms of communication that Neo Exchange sends to the Neo Exchange marketplace participants or Neo Exchange issuers.
(f) Prompt notification of any suspension or delisting of a Neo Exchange issuer, including the reasons for the suspension or delisting.
(g) Prompt notification of any initial listing application received from a significant shareholder or any of its affiliates.
(h) Prompt notification of any initial listing application received from a Competitor.
(i) Prompt notification of any application for exemption or waiver from requirements received from a significant shareholder or any of its affiliates.
(a) A quarterly report summarizing all exemptions or waivers granted during the period pursuant to the Rules to any Neo Exchange marketplace participant or Neo Exchange issuer, which must include the following information:
(i) the name of the Neo Exchange marketplace participant or Neo Exchange issuer;
(ii) the type of exemption or waiver granted during the period;
(iii) the date of the exemption or waiver; and
(iv) a description of the recognized exchange's reason for the decision to grant the exemption or waiver.
(b) A quarterly report regarding initial listing applications containing the following information:
(i) the name of any Neo Exchange issuer whose initial listing application was conditionally approved, the date of such approval, the type of listing, the category of listing and, if known, whether the issuer was denied an application to list its securities on another marketplace;
(ii) the name of any issuer whose initial listing application was rejected and the reasons for rejection, by category of listing; and
(iii) the name of any issuer whose initial listing application was withdrawn or abandoned and, if known, the reasons why the application was withdrawn or abandoned, by category of listing.
The information required by section 2(b)(i) above should disclose whether the issuer is an Emerging Market Issuer, whether the listing involved an agent, underwriter or Canadian Securities Regulatory Authority, and any additional requirements imposed by Neo Exchange pursuant to sections 2.10 and 2.11 of the Neo Exchange Listing Manual.
(c) A quarterly report summarizing all significant incidents of non-compliance by Neo Exchange issuers identified by Neo Exchange during the period, together with a summary of the actions taken to address and resolve the incidents of non-compliance.
(d) A quarterly report listing all the Competitors listed on Neo Exchange.
(e) A quarterly report summarizing instances where conflicts of interest or potential conflicts of interest with respect to Competitors have been identified by Neo Exchange and how such conflicts were addressed.
(f) A quarterly report, the scope of which must be approved by the Commission, relating to compliance with the use of certain designations by marketplace participants, including the results of reviews of marketplace participants' use of such designations and a description of the actions taken to address and resolve instances of non-compliance.
At least annually, or more frequently if required by the Commission, an assessment of the risks, including business risks, facing Neo Exchange and the plan for addressing such risks.
Terms used in this Schedule have the same meanings and interpretation as in section 1 of Schedule 2.
(a) Aequitas must conduct its business and operations in a manner that is consistent with the public interest.
(b) The mandate of the Board must expressly include Aequitas' regulatory and public interest responsibilities.
(a) Without the prior approval of the Commission, and subject to terms and conditions considered appropriate by the Commission, no person or company and no combination of persons or companies acting jointly or in concert may beneficially own or exercise control or direction over:
(i) more than 10% of any class or series of voting shares of Aequitas and, thereafter,
(ii) more than 50% of any class or series of voting shares of Aequitas.
(b) The articles of Aequitas must contain the share ownership restrictions and provisions respecting the enforcement of such restrictions which, without limiting the foregoing, may provide for the filing of declarations, the suspension of voting rights, the forfeiture of dividends, the refusal of the issue or registration of voting shares and the sale or redemption of voting shares held contrary to the restrictions and payment of net proceeds of the sale or redemption to the person entitled thereto.
Aequitas must continue to meet the criteria for recognition set out in Schedule 1 to the Order.
In order to ensure that Aequitas and its affiliates operate with integrity and in the public interest, Aequitas must take reasonable steps to ensure that each director or officer of Aequitas is a fit and proper person. As part of those steps, Aequitas will consider whether the past conduct of each director or officer affords reasonable grounds for the belief that the director or officer will perform their duties with integrity and in a manner that is consistent with Aequitas's public interest responsibilities.
(a) Aequitas must ensure that at least one third of its Board members are independent.
(b) In the event that Aequitas fails to meet the requirements under (a), it must immediately advise the Commission and take appropriate measures to remedy such failure.
(c) Aequitas must ensure that the Board is subject to requirements that the quorum for the Board consists of a majority of the Board members, with at least two directors being independent.
Aequitas must maintain a Nominating Committee that, at a minimum:
(a) is made up of at least three directors, at least 50% of which must be independent;
(b) confirms the status of a nominee to the Board as independent before the individual is appointed to the Board or the name of the individual is submitted to shareholders as a nominee for election to the Board, whichever comes first;
(c) confirms, on an annual basis, that the status of the directors that are independent has not changed;
(d) assesses and approves all nominees of management to the Board; and
(e) has a requirement that the quorum consist of at least 50% of independent directors.
(a) Aequitas must establish, maintain and require compliance with policies and procedures that:
(i) require that confidential information regarding marketplace operations, regulation functions, a Neo Exchange marketplace participant or a Neo Exchange issuer that is obtained by a partner, director, officer or employee of a significant shareholder through that individual's involvement in the management or oversight of the marketplace operations or regulation functions of Neo Exchange:
(A) be kept separate and confidential from the business or other operations of the significant shareholder, except with respect to information regarding marketplace operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of marketplace operations and the individual can and does exercise due care in his or her disclosure of the information, and
(B) not be used to provide an advantage to the significant shareholder or its affiliated entities.
(b) Aequitas must regularly review compliance with the policies and procedures established in accordance with (a) and must document each review and any deficiencies and how those deficiencies were remedied.
(a) Aequitas must, for so long as Neo Exchange carries on business as an exchange, allocate sufficient financial and other resources to Neo Exchange to ensure that Neo Exchange can carry out its functions in a manner that is consistent with the public interest and in compliance with Ontario securities law.
(b) Aequitas must notify the Commission immediately upon being aware that it is or will be unable to allocate sufficient financial and other resources, as required under (a), to Neo Exchange.
(a) Aequitas must ensure that its affiliated entities, including Neo Exchange, do not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a particular marketplace participant or any other particular person or company, or
(ii) any discount, rebate, allowance, price concession or other similar arrangement for any service or product offered by the affiliated entity, including Neo Exchange, that is conditional upon:
(A) the requirement to have Neo Exchange be set as the default or first marketplace a marketplace participant routes to; or
(B) the router of Neo Exchange being used as the marketplace participant's primary router.
(b) Aequitas must ensure that its affiliated entities, including Neo Exchange, do not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement on any services or products offered by the affiliated entity, including Neo Exchange, that is conditional upon the purchase of any other service or product provided by the affiliated entity; or
(ii) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a class of marketplace participants or of any other persons or companies,
unless prior approval has been granted by the Commission.
(c) Aequitas must ensure that Neo Exchange obtains prior Commission approval before implementing any new, or amendments to, fees and fee models, including any new, or amendments to any, incentives relating to arrangements that provide for equity ownership in Aequitas for marketplace participants or their affiliated entities based on trading volumes of values on Neo Exchange.
(d) Aequitas must ensure that Neo Exchange does not require a person or company to purchase or otherwise obtain products or services from Neo Exchange or from a significant shareholder as a condition of Neo Exchange supplying or continuing to supply a product or service unless prior approval has been granted by the Commission.
(e) Aequitas must ensure that any affiliated entity does not require another person or company to obtain products or services from Neo Exchange as a condition of the affiliated entity supplying or continuing to supply a product or service.
Aequitas must not support, encourage or incent, either through fee incentives or otherwise, Neo Exchange marketplace participants, Neo Exchange affiliated entities or significant shareholders to coordinate the routing of their order to Neo Exchange.
Aequitas must deliver to the Commission its annual financial budget, together with the underlying assumptions, that has been approved by its Board, within 30 days from the commencement of each fiscal year.
Aequitas must obtain prior Commission approval of any changes to any agreement between Aequitas and its shareholders.
Aequitas must provide the Commission with the information set out in Appendix A to this Schedule, as amended from time to time.
(a) At the request of the Commission, Aequitas must engage an independent consultant, or independent consultants, acceptable to the Commission to prepare a written report assessing the governance structure of Aequitas (Aequitas Governance Review).
(b) The written report must be provided to the Board of Aequitas promptly after the report's completion and then to the Commission within 30 days of providing it to the Board.
(c) The scope of the Aequitas Governance Review must be approved by the Commission.
(a) Aequitas must, and must cause its affiliated entities to promptly provide to the Commission, on request, any and all data, information and analyses in the custody or control or Aequitas or any of its affiliated entities, without limitations, redactions, restrictions or conditions, including, without limiting the generality of the foregoing:
(i) data, information and analyses relating to all of its or their businesses; and
(ii) data, information and analyses of third parties in its or their custody or control.
(b) Aequitas must share information and otherwise cooperate with other recognized or exempt exchanges, recognized self-regulatory organizations, recognized or exempt clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) Aequitas must certify in writing to the Commission, in a certificate signed by its CEO and general counsel, within one year of the effective date of its recognition as an exchange pursuant to this Order and every year subsequent to that date, or at any times required by the Commission, that it is in compliance with the terms and conditions applicable to it in the Order and describe in detail:
(i) the steps taken to require compliance;
(ii) the controls in place to verify compliance; and
(iii) the names and titles of employees who have oversight of compliance.
(b) If Aequitas or any of its directors, officers or employees become aware of a breach or a possible breach of any of the terms and conditions applicable to Aequitas under the Schedules to the Order, such person must, within two business days after becoming aware of the breach or possible breach, notify the Board or committee designated by the Board and approved by the Commission of the breach or possible breach. The director, officer or employee of the recognized exchange must provide to the Board or committee designated by the Board details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or possible breach.
(c) The Board or committee designated by the Board must, within two business days after being notified of the breach or possible breach, notify the Commission and confirm that the breach or possible breach is under investigation as required under (d).
(d) The Board or committee designated by the Board must promptly cause to be conducted an investigation of the breach or possible breach reported under (b). Once the Board or committee designated by the Board has made a determination as to whether there has been a breach, or that there is an impending breach, of any terms and conditions applicable to Aequitas under the Schedules to the Order, the Board or committee designated by the Board must, within two business days of such determination, notify the Commission of its determination and must provide details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or impending breach, and any actions that will be taken to address it.
(a) Immediate notification of a decision to enter into a definitive agreement (including a binding letter of intent), memorandum of understanding or other similar agreement with any governmental or regulatory body, self-regulatory obligation, clearing agency, stock exchange, other marketplace or market, except in the case where the agreement or arrangement: (i) is primarily intended to restrict the use or disclosure of confidential information, (ii) is primarily for the purpose of facilitating discussions in connection with a possible definitive agreement, (iii) is necessary to support the provision of the existing exchange services, (iv) relates to the provision of the existing exchange services and is also subject to the standard form agreements of the exchange (for example, listing agreements, data subscription agreements, etc.), or (v) relates to a business line other than exchange services.
(b) Immediate notification if Aequitas:
(i) becomes the subject of any order, directive or similar action of a governmental or regulatory authority;
(ii) becomes aware that it is the subject of a criminal or regulatory investigation; or
(iii) becomes, or it is notified in writing that it will become, the subject of a material lawsuit.
(c) Immediate notification if any shareholder or any affiliate of a shareholder of Aequitas becomes, or it is notified in writing that it will become, the subject of a criminal, administrative or regulatory proceeding.
(d) Any strategic plan for Aequitas and its affiliated entities, within 30 days of approval by the Board.
(e) Any information submitted by Aequitas to a Canadian securities regulatory authority under a requirement of a recognition order, exemption order or NI 21-101, provided concurrently.
At least annually, or more frequently if required by the Commission, an assessment of the risks, including business risks, facing Aequitas and its affiliated entities and the plan for addressing such risks.
This Protocol sets out the procedures a recognized exchange (Exchange) must follow for any Rule or Change, both as defined in section 2 below, and describes the procedures for their review by Commission Staff (Staff) and approval by the Commission or the Director. This Protocol also establishes requirements regarding the time at which an Exchange may begin operations following recognition by the Commission.
For the purposes of this Protocol:
(a) Change means a Fee Change, a Housekeeping Change or a Significant Change.
(b) Director means "Director" as defined in subsection 1(1) of the Securities Act (Ontario).
(c) Fee Change means any new fee or fee model of the Exchange and any amendment to a fee or fee model.
(d) Fee Change subject to Public Comment means a Fee Change that, in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
(e) Housekeeping Change means an amendment to the information in Form 21-101F1 that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(f) Housekeeping Rule means a new Rule or an amendment to a Rule that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(g) Public Interest Rule means a Rule or an amendment to a Rule that is not a Housekeeping Rule.
(h) Rule includes a rule, policy and other similar instrument of the Exchange.
(i) Significant Change means an amendment to the information in Form 21-101F1 other than
(i) a Housekeeping Change,
(ii) a Fee Change, or
(iii) a Rule,
and for greater certainty includes the matters listed in subsection 6.1(4) of Companion Policy 21-101 CP.
(j) Significant Change subject to Public Comment means a Significant Change that
(i) is listed in paragraphs 6.1(4)(a) or (b) of Companion Policy 21-101 CP, or
(ii) in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
The Exchange and Staff will follow the process for review and approval set out in this Protocol for all Changes, new Rules and Rule amendments.
The Exchange's board of directors, or a duly authorized committee of the board, must approve all Rules prior to their submission under this Protocol.
(a) The Exchange may submit a written request with Staff to waive or vary any part of this Protocol. The request must provide reasons why granting the waiver is appropriate in the circumstances.
(b) Staff will use their best efforts to provide to the Exchange within five business days of receipt of its request either:
(i) written notice that Staff object to granting the waiver or variation; or
(ii) written notice that the waiver or variation has been granted by Staff.
The Exchange must not begin operations until a reasonable period of time after the Exchange is notified that it has been recognized by the Commission.
(a) Prior to the implementation of a Fee Change, Public Interest Rule or Significant Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that, together with the notice for publication submitted under paragraph (a)(ii), if applicable, fully describes:
(A) the proposed Fee Change, Public Interest Rule or Significant Change;
(B) the expected date of implementation of the proposed Fee Change, Public Interest Rule or Significant Change;
(C) the rationale for the proposal and any relevant supporting analysis;
(D) the expected impact, including the quantitative impact, of the proposed Fee Change, Public Interest Rule or Significant Change on the market structure, members and, if applicable, on investors, issuers and the capital markets;
(E) the expected impact of the Fee Change, Public Interest Rule or Significant Change on the Exchange's compliance with Ontario securities law requirements and in particular requirements for fair access and maintenance of fair and orderly markets;
(F) a summary of any consultations, including consultations with external parties, undertaken in formulating the Fee Change, Public Interest Rule or Significant Change, and the internal governance process followed to approve the Rule or Change;
(G) for a proposed Fee Change:
1. the expected number of marketplace participants likely to be subject to the new fee, along with a description of the costs they will incur; and
2. if the proposed Fee Change applies differently across types of marketplace participants, a description of this difference, how it impacts each class of affected marketplace participant, including, where applicable, numerical examples, and any justification for the difference in treatment.
(H) if the Public Interest Rule or Significant Change will require members or service vendors to modify their systems after implementation of the Rule or Change, the expected impact of the Rule or Change on the systems of members and service vendors together with an estimate of the amount of time needed to perform the necessary work and how the estimated amount of time was deemed reasonable in light of the expected impact of the Public Interest Rule or Significant Change on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets;
(I) where the proposed Significant Change is not a Significant Change subject to Public Comment, the rationale for why the proposed Significant Change is not considered a Significant Change subject to Public Comment;
(J) a discussion of any alternatives considered; and
(K) if applicable, whether the proposed Fee Change, Significant Change or Public Interest Rule would introduce a fee model, feature or Rule that currently exists in other markets or jurisdictions;
(ii) for a proposed Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, a notice for publication that generally includes the information required under paragraph (a)(i), except information that, if included in the notice, would result in the public disclosure of sensitive information or confidential or proprietary financial, commercial or technical information;
(iii) for a proposed Public Interest Rule, the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules, and if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) for a proposed Fee Change or Significant Change, blacklined and clean copies of Form 21-101F1 showing the proposed Change.
(b) The Exchange will submit the materials set out in subsection (a)
(i) at least 45 days prior to the expected implementation date of a proposed Public Interest Rule or Significant Change; and
(ii) at least fifteen business days prior to the expected implementation date of a proposed Fee Change.
(c) For a Housekeeping Rule, the Exchange will provide Staff with the following materials:
(i) a cover letter that fully describes the Rule and indicates that it was classified as a Housekeeping Rule and provides an analysis of the rationale for the classification, and the date or proposed date of implementation of the Rule;
(ii) the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules;
(iii) if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) a notice for publication on the OSC website or in the OSC Bulletin that contains the information in paragraph (ii) as well as the implementation date for the Rule and indicates that the Rule has been classified as a Housekeeping Rule and was not published for comment.
(d) For a Housekeeping Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that indicates that the change was classified as a Housekeeping Change and, for each Housekeeping Change, provides an analysis of the rationale for the classification and the expected or actual date of implementation of the Change; and
(ii) blacklined and clean copies of Form 21-101F1 showing the Change.
(e) The Exchange will submit the materials set out in subsection (d) by the earlier of
(i) the Exchange's close of business on the 10th calendar day after the end of the calendar quarter in which the Housekeeping Change was implemented; and
(ii) the date on which the Exchange publicly announces a Housekeeping Change, if applicable.
(a) Within 5 business days of the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will review the notice and materials to ensure that they contain an adequate level of detail, analysis and discussion to elicit meaningful public comment, and will promptly notify the Exchange of any deficiency requiring a resubmission of the notice and/or materials.
(b) Where the notice and/or materials are considered by Staff to be deficient, the Exchange will amend and resubmit the notice and/or materials accordingly, and the date of resubmission will serve as the submission date for the purposes of this Protocol.
(c) Where the notice and materials are considered by Staff to be adequate for publication, Staff will proceed with the processes set out in section 9.
(a) As soon as practicable after the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will publish in the OSC Bulletin and/or on the OSC website, the notice prepared by the Exchange, along with a notice prepared by Staff, if necessary, that provides market participants with an opportunity to provide comments to Staff and to the Exchange within 30 days from the date the notice appears in the OSC Bulletin or on the OSC website, whichever comes first.
(b) If public comments are received
(i) the Exchange will forward copies of the comments promptly to Staff; and
(ii) the Exchange will prepare a summary of the public comments and a response to those comments and provide them to Staff promptly after the end of the comment period.
(a) Staff will use their best efforts to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change within
(i) 45 days from the date of submission of a proposed Public Interest Rule or Significant Change; and
(ii) fifteen business days from the date of submission of a proposed Fee Change.
(b) Staff will notify the Exchange if they anticipate that their review of the proposed Fee Change, Public Interest Rule or Significant Change will exceed the timelines in subsection (a).
(c) If Staff have material comments or require additional information to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change, Staff will use best efforts to provide the Exchange with a comment letter promptly by the end of the public comment period for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, and promptly after the receipt of the materials submitted under section 7 for all other Changes.
(d) The Exchange will respond to any comments received from Staff in writing.
(e) Unless Staff agree to an extension of time, if the Exchange fails to respond to Staff's comments within 120 days after the receipt of Staff's comment letter, the Exchange will be deemed to have withdrawn the proposed Fee Change, Public Interest Rule or Significant Change. If the Exchange wishes to proceed with the Fee Change, Public Interest Rule or Significant Change after it has been deemed withdrawn, the Exchange will have to be re-submit it for review and approval in accordance with this Protocol.
(f) Upon completion of Staff's review of a Fee Change, Public Interest Rule or Significant Change, Staff will submit the Change or Rule to the Director or, in the circumstances described in subsection (g), to the Commission, for a decision within the following timelines:
(i) for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, the later of 45 days from the date that the related materials were published for comment and the date that Staff's comments and public comments, including any concerns identified, have been adequately addressed by the Exchange;
(ii) for any other Significant Change, the later of 45 days from the date of submission of the Change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange; or
(iii) for any other Fee Change, the later of fifteen business days from the date of submission of the change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange.
(g) A Fee Change, Public Interest Rule or Significant Change may be submitted to the Commission for a decision, within the timelines in subsection (f),
(i) if the proposed Fee Change, Public Interest Rule or Significant Change introduces a novel feature to the Exchange or the capital markets;
(ii) if the proposed Fee Change, Public Interest Rule or Significant Change raises significant regulatory or public interest concerns; or
(iii) in any other situation where, in Staff's view, Commission approval is appropriate.
(h) Staff will promptly notify the Exchange of the decision.
(i) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is approved, Staff will publish the following documents in the OSC Bulletin and/or on the OSC website promptly after the approval:
(i) a notice indicating that the proposed Rule or Change is approved;
(ii) the summary of public comments and responses prepared by the Exchange, if applicable; and
(iii) if non-material changes were made to the version published for public comment, a brief description of these changes prepared by the Exchange and a blacklined copy of the revised Rule or Change highlighting the revisions made.
(a) Staff will review a proposed Fee Change, Public Interest Rule or Significant Change to assess whether it is in the public interest for the Director or the Commission to approve the Rule or Change. In making this determination, Staff will have regard for the purposes of the Securities Act (Ontario) (Act) as set out in section 1.1 of the Act. The factors that Staff will consider in making their determination also include whether:
(i) the Rule or Change would impact the Exchange's compliance with Ontario securities law;
(ii) the Exchange followed its established internal governance practices in approving the proposed Rule or Change;
(iii) the Exchange followed the requirements of this Protocol and has provided sufficient analysis of the nature, purpose and effect of the Rule or Change; and
(iv) the Exchange adequately addressed any comments received.
(a) A Public Interest Rule or Significant Change will be effective on the later of:
(i) the date that the Exchange is notified that the Change or Rule is approved;
(ii) if applicable, the date of publication of the notice of approval on the OSC website;
(iii) if applicable, the implementation date established by the Exchange's Rules, agreements, practices, policies or procedures; and
(iv) the date designated by the Exchange.
(b) The Exchange must not implement a Fee Change unless the Exchange has provided stakeholders, including marketplace participants, issuers and vendors, as applicable, with notice of the Fee Change at least five business days prior to implementation.
(c) Where a Significant Change involves a material change to any of the systems, operated by or on behalf of the Exchange, described in section 12.1 of National Instrument 21-101, the Significant Change will not be effective until a reasonable period of time after the Exchange is notified that the Significant Change is approved.
(d) In determining what constitutes a reasonable period of time for purposes of implementing a Significant Change under paragraph (c), Staff will consider how the Significant Change will impact the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns.
(e) The Exchange must notify Staff promptly following the implementation of a Public Interest Rule, Significant Change or Fee Change that becomes effective under subsections (a) and (b).
(f) Where the Exchange does not implement a Public Interest Rule, Significant Change or Fee Change within 180 days of the effective date of the Fee Change, Public Interest Rule or Significant Change, as provided for in subsections (a) and (b), the Public Interest Rule, Significant Change or Fee Change will be deemed to be withdrawn.
(a) If, subsequent to its publication for comment, the Exchange revises a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment in a manner that results in a material change to the proposed substance or effect of the Rule or Change, Staff will, in consultation with the Exchange, determine whether or not the revised Rule or Change should be published for an additional 30-day comment period.
(b) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is republished under subsection (a), the request for comments will include a blacklined version marked to the originally published version, a summary of comments and responses prepared by the Exchange, and an explanation of the revisions and the supporting rationale for the revisions.
(a) If the Exchange withdraws a Fee Change, Public Interest Rule or a Significant Change that was previously submitted, it will provide a written notice of withdrawal to Staff.
(b) If the notice of withdrawal relates to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, Staff will publish the notice of withdrawal in the OSC Bulletin and/or on the OSC website as soon as practicable.
(c) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is deemed to have been withdrawn as provided in subsection 10(e), Staff will prepare and publish a notice informing market participants that the Exchange did not proceed with the Rule or Change.
(a) Subject to subsections (c) and (d), a Housekeeping Rule will be effective on the later of
(i) the date of the publication of the notice to be published on the OSC website or in the OSC Bulletin, in accordance with subsection (e), and
(ii) the date designated by the Exchange.
(b) Subject to subsections (c) and (d), a Housekeeping Change will be effective on the date designated by the Exchange.
(c) Staff will review the materials submitted by the Exchange for a Housekeeping Change or Housekeeping Rule to assess the appropriateness of the categorization of the Rule or Change as housekeeping within five business days from the date that the Exchange submitted the documents in accordance with subsections 7(c) and 7(d). The Exchange will be notified in writing if there is disagreement with respect to the categorization of the Rule or Change as housekeeping.
(d) If Staff disagree with the categorization of the Rule or Change as housekeeping, the Exchange will immediately repeal the Change, if applicable, submit the proposed Rule as a Public Interest Rule or the proposed Change as a Significant Change, and follow the review and approval processes described in this Protocol as applying to a Public Interest Rule or Significant Change, including those processes applicable to a Significant Change subject to Public Comment, if applicable.
(e) If Staff do not disagree with the categorization of the Rule, Staff will publish a notice to that effect in the OSC Bulletin or on the OSC website as soon as is practicable.
(a) The Exchange may need to make a Public Interest Rule or Significant Change effective immediately where the Exchange determines that there is an urgent need to implement the Rule or Change to maintain fair and orderly markets, or because of a substantial and imminent risk of material harm to the Exchange, its members, other market participants, issuers or investors.
(b) When the Exchange determines that immediate implementation is necessary, it will advise Staff in writing as soon as possible, but in any event, at least five business days prior to the proposed implementation of the Public Interest Rule or Significant Change. The written notice will include the expected effective date of the Public Interest Rule or Significant Change and an analysis to support the need for immediate implementation. An application for an exemption from the 45-day advance filing requirements in National Instrument 21-101 must follow within five business days following the Exchange receiving notice that Staff agree with immediate implementation of the Public Interest Rule or Significant Change.
(c) If Staff do not agree that immediate implementation is necessary, Staff will promptly notify the Exchange, in writing, of the disagreement no later than the end of the third business day following submission of the notice under subsection (b). If the disagreement is not resolved, the Exchange will submit the Public Interest Rule or Significant Change in accordance with the timelines in section 7.
A Public Interest Rule or Significant Change that has been implemented immediately in accordance with section 16 will be published, if applicable, and reviewed and approved by the Director or by the Commission in accordance with the procedures set out in section 10, with necessary modifications. If the Director or the Commission does not approve the Public Interest Rule or Significant Change, the Exchange will immediately repeal the Rule or Change and inform its members of the decision.
The Commission's powers under subsection 21(5) of the Securities Act (Ontario) are not constrained in any way, notwithstanding a Rule or Change having been approved under this Protocol.
CNSX Markets Inc. -- ss. 21, 144
Subsection 144(1) of the Securities Act (Ontario) -- application for order varying the Commission's order recognizing CNSX Markets Inc. as an exchange -- variation required to streamline the regulatory reporting requirements applicable to recognized exchanges carrying on business in Ontario and to reduce regulatory burden -- requested order granted.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 21, 144(1).
August 31, 2020
WHEREAS the Ontario Securities Commission (Commission) issued an order dated May 7, 2004, and varied on September 9, 2005, June 13, 2006, May 16, 2008, varied and restated on July 6, 2010, varied on June 22, 2012, varied and restated on November 5, 2013, varied on October 1, 2015, and varied and restated on February 12, 2016 and February 8, 2019, recognizing the Canadian Trading and Quotation System Inc. (CNQ), which later changed its name to CNSX Markets Inc. (CNSX), as an exchange pursuant to section 21 of the Act (Recognition Order);
AND WHEREAS the Commission considers the proper operation of an exchange as essential to investor protection and maintaining a fair and efficient capital market, and therefore requires that any conflicts of interest in the operation of an exchange be dealt with appropriately and risks to the integrity of the market associated with the listing and continued listing of issuers are monitored and controlled;
AND WHEREAS CNSX has agreed to the terms and conditions set out in the Schedules to the Recognition Order;
AND WHEREAS the Commission has received an application under section 144 of the Act to vary and restate the Recognition Order to reflect the streamlining of certain reporting requirements and to reduce regulatory burden (Application);
AND WHEREAS, based on the Application and the representations that CNSX has made to the, the Commission has determined that:
(a) CNSX continues to satisfy the recognition criteria set out in Schedule 1 of the Recognition Order,
(b) it is in the public interest to continue to recognize CNSX as an exchange pursuant to section 21 of the Act, and
(c) it is not prejudicial to the public interest to vary and restate the Recognition Order pursuant to section 144 of the Act;
IT IS ORDERED, pursuant to section 144 of the Act, that the Application to vary and restate the Recognition Order is granted.
IT IS ORDERED, pursuant to section 21 of the Act, that CNSX continues to be recognized as an exchange, provided that CNSX complies with the terms and conditions set out in the Schedules to the Recognition Order, as applicable.
DATED this 31st day of August, 2020, to take effect September 14, 2020.
1.1 Compliance with NI 21-101 and NI 23-101
The exchange complies with the requirements set out in National Instrument 21-101 Marketplace Operation (NI 21-101) and in National Instrument 23-101 Trading Rules, each as amended from time to time, which include requirements relating to:
(a) access;
(b) marketplace operations;
(c) exchange rules, policies and other similar instruments;
(d) order and trade transparency;
(e) transparency of marketplace operations;
(f) record keeping;
(g) marketplace systems and business continuity planning;
(h) confidentiality of information;
(i) outsourcing;
(j) clearing and settlement;
(k) fair and orderly markets;
(l) the management of conflicts of interest; and
(m) filing of financial statements.
2.1 Governance
The governance structure and governance arrangements of the exchange ensure:
(a) effective oversight of the exchange;
(b) that business and regulatory decisions are in keeping with the exchange's public interest mandate;
(c) fair, meaningful and diverse representation on the board of directors (Board) and any committees of the Board, including:
(i) appropriate representation of independent directors, and
(ii) a proper balance among the interests of the different persons or companies using the services and facilities of the exchange;
(d) the exchange has policies and procedures to appropriately identify and manage conflicts of interest; and
(e) there are appropriate qualifications, remuneration, limitation of liability and indemnity provisions for directors, officers and employees of the exchange.
2.2 Fitness
The exchange has policies and procedures under which it will take reasonable steps, and has taken such reasonable steps, to ensure that each director and officer is a fit and proper person.
3.1 Fair Access
(a) The exchange has established appropriate written standards for access to its services including requirements to ensure participants are appropriately registered under Ontario securities laws, or exempted from these requirements.
(b) The access standards and the process for obtaining, limiting and denying access are fair, transparent and applied reasonably.
4.1 Regulation
The exchange has the authority, resources, capabilities, systems and processes to allow it to perform its regulation functions, whether directly or indirectly through a regulation services provider, including setting requirements governing the conduct of participants and issuers, monitoring their conduct, and appropriately disciplining them for violations of exchange requirements.
5.1 Rules and Rulemaking
(a) The exchange has rules, policies, and other similar instruments (Rules) that are designed to appropriately govern and regulate the operations and activities of participants and issuers.
(b) In addition to meeting the requirements of NI 21-101 relating to market operations and exchange rules, policies and other similar instruments as referred to in paragraphs 1.1(b) and (c) of this Schedule, respectively, the Rules are also designed to
(i) ensure a fair and orderly market; and
(ii) provide a framework for disciplinary and enforcement actions.
6.1 Due Process
For any decision made by the exchange that affects a participant or issuer, or an applicant to be a participant or issuer, including a decision in relation to access, listing, exemptions, or discipline, the exchange ensures that:
(a) parties are given an opportunity to be heard or make representations, and
(b) it keeps a record of, gives reasons for and provides for appeals or reviews of its decisions.
7.1 Clearing and Settlement
The exchange has appropriate arrangements for the clearing and settlement of trades.
8.1 Information Technology Risk Management Procedures
The exchange has appropriate risk management procedures in place including those that handle trading errors, trading halts and circuit breakers.
9.1 Financial Viability
The exchange has sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
10.1 Fees
(a) All fees imposed by the exchange are reasonable and equitably allocated and are consistent with the requirements in Ontario securities laws, including those requirements listed in paragraphs 1.1(a) and (e) of this Schedule.
(b) The process for setting fees is fair and appropriate, and the fee model is transparent.
11.1 Information Sharing and Regulatory Cooperation
The exchange has mechanisms in place to enable it to share information and otherwise co-operate with the Commission, recognized self-regulatory organizations, other recognized or exempt exchanges, clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) For the purposes of this Schedule:
"accounting principles" means accounting principles as defined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
"affiliated entity" has the meaning ascribed to it in section 1.3 of National Instrument 21-101 Marketplace Operation;
"associate" has the meaning ascribed to it in subsection 1(1) of the Act;
"Board" means the board of directors of CNSX;
"Competitor" means a person whose consolidated business, operations or disclosed business plans are in competition, to a significant extent, with the listing functions, trading functions, market data services or other material lines of business of CNSX or its affiliated entities;
"CNSX Issuer" means a person or company whose securities are listed on CNSX;
"CNSX marketplace participant" means a marketplace participant of CNSX;
"criteria for recognition" means all the criteria for recognition set out in Schedule 1 to the Order;
"dealer" means "investment dealer", as that term is defined in section 1.1 of National Instrument 31-103 Registration Requirements;
"IIROC" means the Investment Industry Regulatory Organization of Canada;
"marketplace" has the meaning ascribed to it in subsection 1(1) of the Act;
"marketplace participant" has the meaning ascribed to it in section 1.1 of NI 21-101;
"Nominating Committee" means the committee established by CNSX pursuant to section 7 of this Schedule;
"officer" has the meaning ascribed to it in subsection 1(1) of the Act;
"Regulatory Oversight Committee" means the committee established by CNSX pursuant to section 8 of this Schedule;
"Rule" means a rule, policy, or other similar instrument of CNSX;
"shareholder" means a person or company that holds any class or series of voting shares of CNSX;
"significant shareholder" means:
(i) a person or company that beneficially owns or controls, directly or indirectly, more than 10% of any class or series of voting shares of CNSX; or
(ii) a shareholder whose nominee is on the Board, for as long as the nominee of that shareholder remains on the Board; and
"unaudited non-consolidated financial statements" means financial statements that are prepared in the same manner as audited consolidated financial statements, except that
(i) they are not audited; and
(ii) investments in subsidiary entities, jointly controlled entities and associates are accounted for as specified for separate financial statements in International Accounting Standard 27 Separate Financial Statements.
(b) For the purposes of this Schedule, an individual is independent if the individual is "independent" within the meaning of section 1.4 of National Instrument 52-110 Audit Committees, as amended from time to time, but is not independent if the individual:
(i) is a partner, director, officer or employee of a CNSX marketplace participant or an associate of that partner, officer or employee;
(ii) is a partner, officer, director or employee of an affiliated entity of a CNSX marketplace participant who is responsible for or is actively engaged in the day-to-day operations or activities of that CNSX marketplace participant;
(iii) is an officer or an employee of CNSX or any of its affiliates;
(iv) is a partner, officer or employee of a significant shareholder or any of its affiliated entities or an associate of that partner, officer or employee;
(v) is a director of a significant shareholder or any of its affiliated entities or an associate of that director;
(vi) is a person who owns or controls, or is the officer or employee of a person or company that owns or controls, directly or indirectly, more than 10% of any class or series of voting shares of CNSX;
(vii) is the director of a person or company that beneficially owns or controls, directly or indirectly, more than 10% of any class or series of voting shares of CNSX;
(viii) is a director that was nominated, and as a result appointed or elected, by a significant shareholder; or
(ix) has, or has had, any relationship with a significant shareholder that could, in the view of the Nomination Committee, having regard to all relevant circumstances, be reasonably perceived to interfere with the exercise of his or her independent judgment as a director of CNSX.
(c) For the purposes of paragraph (b), the Nominating Committee may waive the restrictions set out in subparagraphs (b)(v), b(vii) and b(viii) provided that:
(i) the individual being considered does not have, and has not had, any relationship with a shareholder that could, in the view of the Nominating Committee, having regard to all relevant circumstances, be reasonably perceived to interfere with the exercise of his or her independent judgement as a director of CNSX;
(ii) CNSX publicly discloses the use of the waiver with reasons why the particular candidate was selected;
(iii) CNSX provides advance notice to the Commission, at least 15 business days before the public disclosure in sub-paragraph (c)(ii) is made, and
(iv) the Commission does not object within 15 business days of its receipt of the notice provided under sub-paragraph (c)(iii) above.
(a) CNSX must conduct its business and operations in a manner that is consistent with the public interest.
(b) The mandate of the Board of CNSX must expressly include the regulatory and public interest responsibilities of CNSX.
(a) Without the prior approval of the Commission, and subject to terms and conditions considered appropriate by the Commission, no person or company and no combination of persons or companies acting jointly or in concert may beneficially own or exercise control or direction over:
(i) more than 10% of any class or series of voting shares of CNSX and, thereafter,
(ii) more than 50% of any class or series of voting shares of CNSX.
(b) The articles of CNSX must contain the share ownership restrictions and provisions respecting the enforcement of such restrictions which, without limiting the foregoing, may provide for the filing of declarations, the suspension of voting rights, the forfeiture of dividends, the refusal of the issue or registration of voting shares and the sale or redemption of voting shares held contrary to the restrictions and payment of net proceeds of the sale or redemption to the person entitled thereto.
CNSX must continue to meet the criteria for recognition set out in Schedule 1 to the Recognition Order.
To ensure that CNSX operates with integrity and in the public interest, CNSX will take reasonable steps to ensure that each director or officer of CNSX is a fit and proper person. As part of those steps, CNSX will consider whether the past conduct of each director or officer of CNSX affords reasonable grounds for the belief that the director or officer will perform their duties with integrity and in a manner that is consistent with CNSX's public interest responsibilities.
(a) CNSX will ensure that at least 50% of its directors are independent.
(b) The Chair of the Board must be independent.
(c) In the event that CNSX fails to meet the requirement in paragraph (a) or (b), it will immediately advise the Commission and take appropriate measures to promptly remedy such failure.
(d) CNSX must ensure that its Board is subject to requirements that the quorum for the Board consists of a majority of the Board members, at least 50% of whom must be independent directors.
CNSX must maintain a Nominating Committee of the Board that, at a minimum:
(a) is made up of at least three directors, at least 50% of which must be independent;
(b) confirms the status of a nominee to the Board as independent before the individual is appointed to the Board or the name of the individual is submitted to the shareholder(s) of CNSX as a nominee for election to the Board, whichever comes first;
(c) confirms, on an annual basis, that the status of the directors that are independent has not changed;
(d) assesses and approves all nominees of management to the Board; and
(e) has a requirement that the quorum consist of at least 50% of independent directors.
(a) CNSX will establish and maintain a Regulatory Oversight Committee that, at a minimum:
(i) is made up of at least three directors, a majority of which must be independent;
(ii) reviews and decides, or makes recommendations to the Board, on proposed regulation and rules that must be submitted to the Commission for review and approval under Schedule 3 Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto of this Order;
(iii) considers real or perceived conflicts of interest that may arise, including but not limited to the following contexts:
(A) ownership interests in CNSX by any CNSX marketplace participant with representation on the Board of CNSX,
(B) significant changes to the ownership of CNSX, and
(C) the profit-making objective and the public interest responsibilities of CNSX, including general oversight of the management of the regulatory and public interest responsibilities of CNSX;
(iv) oversees the establishment of mechanisms to avoid and appropriately manage conflicts of interest or potential conflicts of interest, perceived or real, including any policies and procedures that are developed by CNSX, including those that are required to be established pursuant to the Schedules of the Recognition Order;
(v) reviews the effectiveness of the policies and procedures regarding conflicts of interest on a regular, and at least annual, basis;
(vi) reports in writing directly to the Commission on any matter that the Regulatory Oversight Committee deems appropriate or that is required by the Commission without first requiring Board approval for such reporting.
(b) The Regulatory Oversight Committee must provide such information as may be required by the Commission from time to time.
(a) At the request of the Commission, CNSX must engage an independent consultant, or independent consultants acceptable to the Commission to prepare a written report assessing the governance structure of CNSX (Governance Review).
(b) The written report must be provided to the Board of CNSX promptly after the report's completion and then to the Commission within 30 days of providing it to the Board.
(c) The scope of the Governance Review must be approved by the Commission.
(a) CNSX must establish, maintain and require compliance with policies and procedures that:
(i) require that confidential information regarding exchange operations, regulation functions, a CNSX marketplace participant or CNSX Issuer that is obtained by a partner, director, officer or employee of a significant shareholder through that individual's involvement in the management or oversight of exchange operations or regulation functions:
(A) be kept separate and confidential from the business or other operations of the significant shareholder, except with respect to information regarding exchange operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of exchange operations and the individual can and does exercise due care in his or her disclosure of the information, and
(B) not be used to provide an advantage to the significant shareholder or its affiliated entities.
(b) CNSX must establish, maintain and require compliance with policies and procedures that identify and manage any conflicts of interest or potential conflicts of interest arising from the listing of the shares of any significant shareholder or affiliated entity on CNSX.
(c) CNSX must regularly review compliance with the policies and procedures established under (a) and (b) and will document each review, and any deficiencies, and how those deficiencies were remedied.
CNSX's requirements must provide access to the facilities of CNSX only to properly registered investment dealers that are members of IIROC and satisfy the access requirements reasonably established by CNSX.
(a) CNSX must establish, maintain and require compliance with policies and procedures that effectively monitor and enforce Rules against CNSX marketplace participants and CNSX Issuers, either directly or indirectly through a regulation services provider.
(b) CNSX has retained and will continue to retain IIROC as a regulation services provider to provide certain regulation services that have been approved by the Commission.
(c) CNSX must perform all other regulation functions not performed by IIROC, and must maintain adequate staffing, systems and other resources in support of those functions. CNSX must obtain prior Commission approval before outsourcing such regulation functions to any party, including affiliated entities or associates of CNSX.
(d) CNSX must notify the Commission of any violations of Ontario securities law of which it becomes aware in the ordinary course of its business or otherwise.
(a) CNSX must ensure that only the issuers set out in Appendix B to this Schedule, as amended from time to time, are eligible for listing on CNSX.
(b) CNSX must ensure that, in exercising its discretion in carrying out its listing function, it takes into consideration the public interest, the risks associated with the listing and continued listing of issuers, and the integrity of the market.
(c) CNSX may, in accordance with the requirements for qualification for trading set out in its Rules, designate certain listed securities as Other Listed securities without approving such securities for an additional listing.
(d) CNSX has and will continue to ensure that it has sufficient authority over CNSX Issuers.
(e) CNSX must carry out appropriate review procedures to monitor and enforce listed issuer compliance with the Rules and provide a report to the Commission annually, or as required by the Commission, describing the procedures carried out, and the types of deficiencies found and how they were remedied.
(f) CNSX will amend its Policies and Forms, from time to time, at the request of the Director, Corporate Finance, to reflect changes to the disclosure requirements of Ontario securities law.
(a) CNSX must not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a particular marketplace participant or any other particular person or company, or
(ii) any discount, rebate, allowance, price concession or other similar arrangement for any service or product offered by CNSX that is conditional upon:
(A) the requirement to have CNSX be set as the default or first marketplace a marketplace participant routes to, or
(B) the router of CNSX being used as the marketplace participant's primary router.
(b) Except with the prior approval of the Commission, CNSX must not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement on any services or products offered by CNSX that is conditional upon the purchase of any other service or product provided by CNSX or any affiliated entity, or
(ii) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a class of marketplace participants or of any other persons or companies.
(c) CNSX must obtain prior Commission approval before implementing any new, or amendments to, fees and fee models, including any new, or amendments to any, incentives relating to arrangements that provide for equity ownership in CNSX for marketplace participants or their affiliated entities based on trading volumes of values on CNSX.
(d) Except with the prior approval of the Commission, CNSX must not require another person or company to purchase or otherwise obtain products or services from CNSX or a significant shareholder as a condition of CNSX supplying or continuing to supply a product or service.
(e) If the Commission considers that it would be in the public interest, the Commission may require CNSX to submit for approval by the Commission a fee, fee model or incentive that has previously been submitted to and/or approved by the Commission.
(f) Where the Commission decides not to approve the fee, fee model or incentive submitted under paragraph (e), any previous approval for the fee, fee model or incentive must be revoked, if applicable, and CNSX will no longer be permitted to offer the fee, fee model or incentive.
CNSX must not support, encourage or incent, either through fee incentives or otherwise, CNSX marketplace participants, CNSX affiliated entities or significant shareholders to coordinate the routing of their orders to CNSX.
CNSX must deliver to the Commission its annual financial budget, together with the underlying assumptions, that has been approved by its Board, within 30 days from the commencement of each fiscal year.
(a) CNSX must maintain sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
(b) CNSX must calculate monthly the following financial ratios:
(i) a current ratio, being the ratio of current assets to current liabilities;
(ii) a debt to cash flow ratio, being the ratio of total debt (including any line of credit draw downs, and the current and long-term portions of any loans, but excluding accounts payable, accrued expenses and other liabilities) to adjusted EBITDA (i.e., earnings before interest, taxes, stock-based compensation, depreciation and amortization) for the most recent 12 months; and
(iii) a financial leverage ratio, being the ratio of total assets to shareholders' equity,
in each case following the same accounting principles as those used for the unaudited non-consolidated financial statements of CNSX.
(c) CNSX must report quarterly in writing to the Commission the results of the calculations referred to in (b).
(d) If CNSX determines that it does not have, or anticipates that, in the next twelve months, it will not have sufficient financial resources for the proper performance of its functions and to meet its responsibilities, it will immediately notify the Commission along with the reasons and any impact on the financial viability of CNSX.
(e) Upon receipt of a notification made by CNSX under (d), the Commission may, as determined appropriate, impose additional terms on CNSX.
(a) CNSX must provide the Commission with:
(i) the information set out in Appendix A to this Schedule, as amended from time to time; and
(ii) any information required to be provided by CNSX to IIROC, including all order and trade information, as required by the Commission.
(a) CNSX must, and must cause its affiliated entities to, promptly provide the Commission, on request, any and all data, information and analyses in the custody or control of CNSX or any of its affiliated entities, without limitations, redactions, restrictions or conditions, including, without limiting the generality of the foregoing:
(i) data, information and analyses relating to all of its or their businesses; and
(ii) data, information and analyses of third parties in its or their custody or control.
(b) CNSX must share information and otherwise cooperate with other recognized or exempt exchanges, recognized self-regulatory organizations, other recognized or exempt clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) CNSX must certify in writing to the Commission, in a certificate signed by its CEO and general counsel, within one year of the effective date of its recognition as an exchange pursuant to this Recognition Order and every year subsequent to that date, or at any times required by the Commission, that it is in compliance with the terms and conditions applicable to it in the Order and describe in detail:
(i) the steps taken to require compliance;
(ii) the controls in place to verify compliance;
(iii) the names and titles of employees who have oversight of compliance.
(b) If CNSX or any of its directors, officers or employees become aware of a breach or a possible breach of any of the terms and conditions applicable to the CNSX under the Schedules to the Recognition Order, such person must, within two business days after becoming aware of the breach or possible breach, notify the Regulatory Oversight Committee of the breach or possible breach. The director, officer or employee of the recognized exchange must provide to the Regulatory Oversight Committee details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or possible breach.
(c) The Regulatory Oversight Committee must, within two business days after being notified of the breach or possible breach, notify the Commission and confirm that the breach or possible breach is under investigation as required by (d).
(d) The Regulatory Oversight Committee must promptly cause to be conducted an investigation of the breach or possible breach reported under (b). Once the Regulatory Oversight Committee has made a determination as to whether there has been a breach, or that there is an impending breach, of any terms and conditions applicable to CNSX under the Schedules to the Order, the Regulatory Oversight Committee must, within two business days of such determination, notify the Commission of its determination and must provide details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or impending breach, and any actions that will be taken to address it.
(a) Immediate notification of a decision to enter into a definitive agreement (including a binding letter of intent), memorandum of understanding or other similar agreement with any governmental or regulatory body, self-regulatory obligation, clearing agency, stock exchange, other marketplace or market, except in the case where the agreement or arrangement: (i) is primarily intended to restrict the use or disclosure of confidential information, (ii) is primarily for the purpose of facilitating discussions in connection with a possible definitive agreement, (iii) is necessary to support the provision of the existing exchange services, or (iv) relates to the provision of the existing exchange services and is also subject to the standard form agreements of the exchange (for example, listing agreements, data subscription agreements, etc.).
(b) Immediate notification if CNSX:
(i) becomes the subject of any order, directive or similar action of a governmental or regulatory authority;
(ii) becomes aware that it is the subject of a criminal or regulatory investigation; or
(iii) becomes, or it is notified in writing that it will become, the subject of a material lawsuit.
(c) Any strategic plan for CNSX, within 30 days of approval by the Board.
(d) Any information submitted by CNSX to a Canadian securities regulatory authority under a requirement of a recognition order, exemption order or NI 21-101, provided concurrently.
(e) Copies of all notices, bulletins and similar forms of communication that CNSX sends to the CNSX marketplace participants or CNSX issuers.
On a quarterly basis, CNSX must submit to the Commission a report summarizing all exemptions or waivers granted pursuant to the rules, policies or other similar instruments (Rules) to any CNSX marketplace participant or CNSX Issuer during the period. This summary should include the following information:
(a) The name of the CNSX marketplace participant or CNSX Issuer;
(b) The type of exemption or waiver granted during the period;
(c) The date of the exemption or waiver; and
(d) A description of CNSX staff's reason for the decision to grant the exemption or waiver.
On a quarterly basis, CNSX must submit to the Commission a report containing the following information:
(a) The number of listing applications filed;
(b) The number of listing applications that were accepted;
(c) The number of listing applications that were rejected and the reasons for rejection, by category;
(d) The number of listing applications that were withdrawn or abandoned and, if known, the reasons why the application was withdrawn or abandoned, by category;
(e) The number of listing applications filed by CNSX Issuers as a result of a Fundamental Change;
(f) The number of listing applications filed by CNSX Issuers as a result of a Fundamental Change that were accepted;
(g) The number of listing applications filed by CNSX Issuers as a result of a Fundamental Change that were rejected and the reasons for rejection, by category;
(h) The number of listing applications filed by CNSX Issuers as a result of a Fundamental Change that were withdrawn or abandoned and, if known, the reasons why the application was withdrawn or abandoned, by category.
In each of the foregoing cases, the numbers must be broken down by industry category and in any other manner that a Director of the Commission requests.
At least annually, or more frequently if required by the Commission, an assessment of the risks, including business risks, facing CNSX and the plan for addressing such risks.
If a CNSX Issuer has been suspended or disqualified from qualification for listing, CNSX will immediately issue a notice setting out the reasons for the suspension and submit this information to the Commission.
1. Subject to section 2 below, only an issuer that:
(a) is a reporting issuer or the equivalent in a jurisdiction in Canada; or
(b) is proposing to list debt securities issued or guaranteed by a government in Canada that are exempt from the prospectus requirements under clause 73(1)(a) of the Act; or
(c) is proposing to list debt securities issued or guaranteed by a financial institution that are exempt from the prospectus requirements under clause 73(1)(b) of the Act; and
(d) is not in default of any requirements of securities legislation in any jurisdiction in Canada,
is eligible for listing. However, if an issuer is eligible for listing under paragraph (b) or (c) above, CNSX may only list debt securities of the issuer that are contemplated by those paragraphs unless the issuer files and obtains a receipt for a preliminary prospectus and a prospectus in a jurisdiction in Canada.
2. An issuer that is a reporting issuer in a jurisdiction in Canada but is not considered eligible under the Rules due to the process by which it became a reporting issuer, is ineligible for listing unless it:
(a) files and obtains a receipt for a preliminary prospectus and a prospectus in a jurisdiction in Canada; and
(b) is not in default of any requirements of securities legislation in any jurisdiction in Canada.
This Protocol sets out the procedures a recognized exchange (Exchange) must follow for any Rule or Change, both as defined in section 2 below, and describes the procedures for their review by Commission Staff (Staff) and approval by the Commission or the Director. This Protocol also establishes requirements regarding the time at which an Exchange may begin operations following recognition by the Commission.
For the purposes of this Protocol:
(a) Change means a Fee Change, a Housekeeping Change or a Significant Change.
(b) Director means "Director" as defined in subsection 1(1) of the Securities Act (Ontario).
(c) Fee Change means any new fee or fee model of the Exchange and any amendment to a fee or fee model.
(d) Fee Change subject to Public Comment means a Fee Change that, in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
(e) Housekeeping Change means an amendment to the information in Form 21-101F1 that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(f) Housekeeping Rule means a new Rule or an amendment to a Rule that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(g) Public Interest Rule means a Rule or an amendment to a Rule that is not a Housekeeping Rule.
(h) Rule includes a rule, policy and other similar instrument of the Exchange.
(i) Significant Change means an amendment to the information in Form 21-101F1 other than
(i) a Housekeeping Change,
(ii) a Fee Change, or
(iii) a Rule,
and for greater certainty includes the matters listed in subsection 6.1(4) of Companion Policy 21-101 CP.
(j) Significant Change subject to Public Comment means a Significant Change that
(i) is listed in paragraphs 6.1(4)(a) or (b) of Companion Policy 21-101 CP, or
(ii) in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
The Exchange and Staff will follow the process for review and approval set out in this Protocol for all Changes, new Rules and Rule amendments.
The Exchange's board of directors, or a duly authorized committee of the board, must approve all Rules prior to their submission under this Protocol.
(a) The Exchange may submit a written request with Staff to waive or vary any part of this Protocol. The request must provide reasons why granting the waiver is appropriate in the circumstances.
(b) Staff will use their best efforts to provide to the Exchange within five business days of receipt of its request either:
(i) written notice that Staff object to granting the waiver or variation; or
(ii) written notice that the waiver or variation has been granted by Staff.
The Exchange must not begin operations until a reasonable period of time after the Exchange is notified that it has been recognized by the Commission.
(a) Prior to the implementation of a Fee Change, Public Interest Rule or Significant Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that, together with the notice for publication submitted under paragraph (a)(ii), if applicable, fully describes:
(A) the proposed Fee Change, Public Interest Rule or Significant Change;
(B) the expected date of implementation of the proposed Fee Change, Public Interest Rule or Significant Change;
(C) the rationale for the proposal and any relevant supporting analysis;
(D) the expected impact, including the quantitative impact, of the proposed Fee Change, Public Interest Rule or Significant Change on the market structure, members and, if applicable, on investors, issuers and the capital markets;
(E) the expected impact of the Fee Change, Public Interest Rule or Significant Change on the Exchange's compliance with Ontario securities law requirements and in particular requirements for fair access and maintenance of fair and orderly markets;
(F) a summary of any consultations, including consultations with external parties, undertaken in formulating the Fee Change, Public Interest Rule or Significant Change, and the internal governance process followed to approve the Rule or Change;
(G) for a proposed Fee Change:
1. the expected number of marketplace participants likely to be subject to the new fee, along with a description of the costs they will incur; and
2. if the proposed Fee Change applies differently across types of marketplace participants, a description of this difference, how it impacts each class of affected marketplace participant, including, where applicable, numerical examples, and any justification for the difference in treatment.
(H) if the Public Interest Rule or Significant Change will require members or service vendors to modify their systems after implementation of the Rule or Change, the expected impact of the Rule or Change on the systems of members and service vendors together with an estimate of the amount of time needed to perform the necessary work and how the estimated amount of time was deemed reasonable in light of the expected impact of the Public Interest Rule or Significant Change on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets;
(I) where the proposed Significant Change is not a Significant Change subject to Public Comment, the rationale for why the proposed Significant Change is not considered a Significant Change subject to Public Comment;
(J) a discussion of any alternatives considered; and
(K) if applicable, whether the proposed Fee Change, Significant Change or Public Interest Rule would introduce a fee model, feature or Rule that currently exists in other markets or jurisdictions;
(ii) for a proposed Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, a notice for publication that generally includes the information required under paragraph (a)(i), except information that, if included in the notice, would result in the public disclosure of sensitive information or confidential or proprietary financial, commercial or technical information;
(iii) for a proposed Public Interest Rule, the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules, and if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) for a proposed Fee Change or Significant Change, blacklined and clean copies of Form 21-101F1 showing the proposed Change.
(b) The Exchange will submit the materials set out in subsection (a)
(i) at least 45 days prior to the expected implementation date of a proposed Public Interest Rule or Significant Change; and
(ii) at least fifteen business days prior to the expected implementation date of a proposed Fee Change.
(c) For a Housekeeping Rule, the Exchange will provide Staff with the following materials:
(i) a cover letter that fully describes the Rule and indicates that it was classified as a Housekeeping Rule and provides an analysis of the rationale for the classification, and the date or proposed date of implementation of the Rule;
(ii) the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules;
(iii) if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) a notice for publication on the OSC website or in the OSC Bulletin that contains the information in paragraph (ii) as well as the implementation date for the Rule and indicates that the Rule has been classified as a Housekeeping Rule and was not published for comment.
(d) For a Housekeeping Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that indicates that the change was classified as a Housekeeping Change and, for each Housekeeping Change, provides an analysis of the rationale for the classification and the expected or actual date of implementation of the Change; and
(ii) blacklined and clean copies of Form 21-101F1 showing the Change.
(e) The Exchange will submit the materials set out in subsection (d) by the earlier of
(i) the Exchange's close of business on the 10th calendar day after the end of the calendar quarter in which the Housekeeping Change was implemented; and
(ii) the date on which the Exchange publicly announces a Housekeeping Change, if applicable.
(a) Within 5 business days of the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will review the notice and materials to ensure that they contain an adequate level of detail, analysis and discussion to elicit meaningful public comment, and will promptly notify the Exchange of any deficiency requiring a resubmission of the notice and/or materials.
(b) Where the notice and/or materials are considered by Staff to be deficient, the Exchange will amend and resubmit the notice and/or materials accordingly, and the date of resubmission will serve as the submission date for the purposes of this Protocol.
(c) Where the notice and materials are considered by Staff to be adequate for publication, Staff will proceed with the processes set out in section 9.
(a) As soon as practicable after the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will publish in the OSC Bulletin and/or on the OSC website, the notice prepared by the Exchange, along with a notice prepared by Staff, if necessary, that provides market participants with an opportunity to provide comments to Staff and to the Exchange within 30 days from the date the notice appears in the OSC Bulletin or on the OSC website, whichever comes first.
(b) If public comments are received
(i) the Exchange will forward copies of the comments promptly to Staff; and
(ii) the Exchange will prepare a summary of the public comments and a response to those comments and provide them to Staff promptly after the end of the comment period.
(a) Staff will use their best efforts to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change within
(i) 45 days from the date of submission of a proposed Public Interest Rule, , Significant Change; or Fee Change subject to Public Comment; and
(ii) fifteen business days from the date of submission of a proposed Fee Change.
(b) Staff will notify the Exchange if they anticipate that their review of the proposed Fee Change, Public Interest Rule or Significant Change will exceed the timelines in subsection (a).
(c) If Staff have material comments or require additional information to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change, Staff will use best efforts to provide the Exchange with a comment letter promptly by the end of the public comment period for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, and promptly after the receipt of the materials submitted under section 7 for all other Changes.
(d) The Exchange will respond to any comments received from Staff in writing.
(e) Unless Staff agree to an extension of time, if the Exchange fails to respond to Staff's comments within 120 days after the receipt of Staff's comment letter, the Exchange will be deemed to have withdrawn the proposed Fee Change, Public Interest Rule or Significant Change. If the Exchange wishes to proceed with the Fee Change, Public Interest Rule or Significant Change after it has been deemed withdrawn, the Exchange will have to be re-submit it for review and approval in accordance with this Protocol.
(f) Upon completion of Staff's review of a Fee Change, Public Interest Rule or Significant Change, Staff will submit the Change or Rule to the Director or, in the circumstances described in subsection (g), to the Commission, for a decision within the following timelines:
(i) for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, the later of 45 days from the date that the related materials were published for comment and the date that Staff's comments and public comments, including any concerns identified, have been adequately addressed by the Exchange;
(ii) for any other Significant Change, the later of 45 days from the date of submission of the Change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange; or
(iii) for any other Fee Change, the later of fifteen business days from the date of submission of the change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange.
(g) A Fee Change, Public Interest Rule or Significant Change may be submitted to the Commission for a decision, within the timelines in subsection (f),
(i) if the proposed Fee Change, Public Interest Rule or Significant Change introduces a novel feature to the Exchange or the capital markets;
(ii) if the proposed Fee Change, Public Interest Rule or Significant Change raises significant regulatory or public interest concerns; or
(iii) in any other situation where, in Staff's view, Commission approval is appropriate.
(h) Staff will promptly notify the Exchange of the decision.
(i) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is approved, Staff will publish the following documents in the OSC Bulletin and/or on the OSC website promptly after the approval:
(i) a notice indicating that the proposed Rule or Change is approved;
(ii) the summary of public comments and responses prepared by the Exchange, if applicable; and
(iii) if non-material changes were made to the version published for public comment, a brief description of these changes prepared by the Exchange and a blacklined copy of the revised Rule or Change highlighting the revisions made.
(a) Staff will review a proposed Fee Change, Public Interest Rule or Significant Change to assess whether it is in the public interest for the Director or the Commission to approve the Rule or Change. In making this determination, Staff will have regard for the purposes of the Securities Act (Ontario) (Act) as set out in section 1.1 of the Act. The factors that Staff will consider in making their determination also include whether:
(i) the Rule or Change would impact the Exchange's compliance with Ontario securities law;
(ii) the Exchange followed its established internal governance practices in approving the proposed Rule or Change;
(iii) the Exchange followed the requirements of this Protocol and has provided sufficient analysis of the nature, purpose and effect of the Rule or Change; and
(iv) the Exchange adequately addressed any comments received.
(a) A Public Interest Rule or Significant Change will be effective on the later of:
(i) the date that the Exchange is notified that the Change or Rule is approved;
(ii) if applicable, the date of publication of the notice of approval on the OSC website;
(iii) if applicable, the implementation date established by the Exchange's Rules, agreements, practices, policies or procedures; and
(iv) the date designated by the Exchange.
(b) The Exchange must not implement a Fee Change unless the Exchange has provided stakeholders, including marketplace participants, issuers and vendors, as applicable, with notice of the Fee Change at least five business days prior to implementation.
(c) Where a Significant Change involves a material change to any of the systems, operated by or on behalf of the Exchange, described in section 12.1 of National Instrument 21-101, the Significant Change will not be effective until a reasonable period of time after the Exchange is notified that the Significant Change is approved.
(d) In determining what constitutes a reasonable period of time for purposes of implementing a Significant Change under paragraph (c), Staff will consider how the Significant Change will impact the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns.
(e) The Exchange must notify Staff promptly following the implementation of a Public Interest Rule, Significant Change or Fee Change that becomes effective under subsections (a) and (b).
(f) Where the Exchange does not implement a Public Interest Rule, Significant Change or Fee Change within 180 days of the effective date of the Fee Change, Public Interest Rule or Significant Change, as provided for in subsections (a) and (b), the Public Interest Rule, Significant Change or Fee Change will be deemed to be withdrawn.
(a) If, subsequent to its publication for comment, the Exchange revises a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment in a manner that results in a material change to the proposed substance or effect of the Rule or Change, Staff will, in consultation with the Exchange, determine whether or not the revised Rule or Change should be published for an additional 30-day comment period.
(b) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is republished under subsection (a), the request for comments will include a blacklined version marked to the originally published version, a summary of comments and responses prepared by the Exchange, and an explanation of the revisions and the supporting rationale for the revisions.
(a) If the Exchange withdraws a Fee Change, Public Interest Rule or a Significant Change that was previously submitted, it will provide a written notice of withdrawal to Staff.
(b) If the notice of withdrawal relates to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, Staff will publish the notice of withdrawal in the OSC Bulletin and/or on the OSC website as soon as practicable.
(c) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is deemed to have been withdrawn as provided in subsection 10(e), Staff will prepare and publish a notice informing market participants that the Exchange did not proceed with the Rule or Change.
(a) Subject to subsections (c) and (d), a Housekeeping Rule will be effective on the later of
(i) the date of the publication of the notice to be published on the OSC website or in the OSC Bulletin, in accordance with subsection (e), and
(ii) the date designated by the Exchange.
(b) Subject to subsections (c) and (d), a Housekeeping Change will be effective on the date designated by the Exchange.
(c) Staff will review the materials submitted by the Exchange for a Housekeeping Change or Housekeeping Rule to assess the appropriateness of the categorization of the Rule or Change as housekeeping within five business days from the date that the Exchange submitted the documents in accordance with subsections 7(c) and 7(d). The Exchange will be notified in writing if there is disagreement with respect to the categorization of the Rule or Change as housekeeping.
(d) If Staff disagree with the categorization of the Rule or Change as housekeeping, the Exchange will immediately repeal the Change, if applicable, submit the proposed Rule as a Public Interest Rule or the proposed Change as a Significant Change, and follow the review and approval processes described in this Protocol as applying to a Public Interest Rule or Significant Change, including those processes applicable to a Significant Change subject to Public Comment, if applicable.
(e) If Staff do not disagree with the categorization of the Rule, Staff will publish a notice to that effect in the OSC Bulletin or on the OSC website as soon as is practicable.
(a) The Exchange may need to make a Public Interest Rule or Significant Change effective immediately where the Exchange determines that there is an urgent need to implement the Rule or Change to maintain fair and orderly markets, or because of a substantial and imminent risk of material harm to the Exchange, its members, other market participants, issuers or investors.
(b) When the Exchange determines that immediate implementation is necessary, it will advise Staff in writing as soon as possible, but in any event, at least five business days prior to the proposed implementation of the Public Interest Rule or Significant Change. The written notice will include the expected effective date of the Public Interest Rule or Significant Change and an analysis to support the need for immediate implementation. An application for an exemption from the 45-day advance filing requirements in National Instrument 21-101 must follow within five business days following the Exchange receiving notice that Staff agree with immediate implementation of the Public Interest Rule or Significant Change.
(c) If Staff do not agree that immediate implementation is necessary, Staff will promptly notify the Exchange, in writing, of the disagreement no later than the end of the third business day following submission of the notice under subsection (b). If the disagreement is not resolved, the Exchange will submit the Public Interest Rule or Significant Change in accordance with the timelines in section 7.
A Public Interest Rule or Significant Change that has been implemented immediately in accordance with section 16 will be published, if applicable, and reviewed and approved by the Director or by the Commission in accordance with the procedures set out in section 10, with necessary modifications. If the Director or the Commission does not approve the Public Interest Rule or Significant Change, the Exchange will immediately repeal the Rule or Change and inform its members of the decision.
The Commission's powers under subsection 21(5) of the Securities Act (Ontario) are not constrained in any way, notwithstanding a Rule or Change having been approved under this Protocol.
Nasdaq CXC Limited and Ensoleillement Inc. -- ss. 21, 144
Subsection 144(1) of the Securities Act (Ontario) -- application for order varying the Commission's order recognizing Nasdaq CXC Limited as an exchange -- variation required to streamline the regulatory reporting requirements applicable to recognized exchanges carrying on business in Ontario and to reduce regulatory burden -- requested order granted.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 21, 144(1).
August 31, 2020
WHEREAS the Ontario Securities Commission (Commission) issued an order dated December 21, 2017, which was varied and restated on April 20, 2018 and February 8, 2019, recognizing Ensoleillement Inc. (CXCH) and Nasdaq CXC Limited (Nasdaq Canada) as exchanges pursuant to section 21 of the Act (Recognition Order);
AND WHEREAS at the time the Commission issued the Recognition Order, CXCH was the sole shareholder of Nasdaq Canada, and Nasdaq, Inc. (Nasdaq) was the sole shareholder of CXCH;
AND WHEREAS Nasdaq Canada separately provides access to Canadian permitted clients wishing to use Nasdaq Fixed Income (NFI), a fixed income trading system for trading in U.S. fixed income securities;
AND WHEREAS the Commission considers the proper operation of CXCH and Nasdaq Canada as essential to investor protection and maintaining a fair and efficient capital market, and therefore requires that any conflicts of interest in the operation of CXCH and Nasdaq Canada be dealt with appropriately, the fairness and efficiency of the market not be impaired by any anti-competitive activity, and that systemic risks are monitored and controlled;
AND WHEREAS CXCH and Nasdaq Canada have agreed to the applicable terms and conditions set out in the Schedules to the Recognition Order;
AND WHEREAS the Commission has received an application under section 144 of the Act to vary and restate the Recognition Order to reflect the streamlining of certain reporting requirements and to reduce regulatory burden (Application);
AND WHEREAS based on the Application and the representations that CXCH and Nasdaq Canada have made to the Commission, the Commission has determined that:
(a) CXCH and Nasdaq Canada continue to satisfy the recognition criteria set out in Schedule 1 to the Recognition Order,
(b) it is in the public interest to continue to recognize each of CXCH and Nasdaq Canada as an exchange pursuant to section 21 of the Act, and
(c) it is not prejudicial to the public interest to vary and restate the Recognition Order pursuant to section 144 of the Act;
IT IS ORDERED, pursuant to section 144 of the Act, that the Application to vary and restate the Recognition Order is granted.
IT IS ORDERED, pursuant to section 21 of the Act, that:
(a) CXCH continues to be recognized as an exchange, and
(b) Nasdaq Canada continues to be recognized as an exchange,
provided that CXCH and Nasdaq Canada comply with the terms and conditions set out in the Schedules to the Recognition Order, as applicable.
DATED this 31st day of August, 2020, to take effect September 14, 2020.
1.1 Compliance with NI 21-101 and NI 23-101
The exchange complies with the requirements set out in National Instrument 21-101 Marketplace Operation (NI 21-101) and in National Instrument 23-101 Trading Rules, each as amended from time to time, which include requirements relating to:
(a) access;
(b) marketplace operations;
(c) exchange rules, policies and other similar instruments;
(d) order and trade transparency;
(e) transparency of marketplace operations;
(f) record keeping;
(g) marketplace systems and business continuity planning;
(h) confidentiality of information;
(i) outsourcing;
(j) clearing and settlement;
(k) fair and orderly markets;
(l) the management of conflicts of interest; and
(m) filing of financial statements.
2.1 Governance
The governance structure and governance arrangements of the exchange ensure:
(a) effective oversight of the exchange;
(b) that business and regulatory decisions are in keeping with the exchange's public interest mandate;
(c) fair, meaningful and diverse representation on the board of directors (Board) and any committees of the Board, including:
(i) appropriate representation of independent directors, and
(ii) a proper balance among the interests of the different persons or companies using the services and facilities of the exchange;
(d) the exchange has policies and procedures to appropriately identify and manage conflicts of interest; and
(e) there are appropriate qualifications, remuneration, limitation of liability and indemnity provisions for directors, officers and employees of the exchange.
2.2 Fitness
The exchange has policies and procedures under which it will take reasonable steps, and has taken such reasonable steps, to ensure that each director and officer is a fit and proper person.
3.1 Fair Access
(a) The exchange has established appropriate written standards for access to its services including requirements to ensure participants are appropriately registered under Ontario securities laws, or exempted from these requirements.
(b) The access standards and the process for obtaining, limiting and denying access are fair, transparent and applied reasonably.
4.1 Regulation
The exchange has the authority, resources, capabilities, systems and processes to allow it to perform its regulation functions, whether directly or indirectly through a regulation services provider, including setting requirements governing the conduct of participants, monitoring their conduct, and appropriately disciplining them for violations of exchange requirements.
5.1 Rules and Rulemaking
(a) The exchange has rules, policies, and other similar instruments (Rules) that are designed to appropriately govern and regulate the operations and activities of participants.
(b) In addition to meeting the requirements of NI 21-101 relating to market operations and exchange rules, policies and other similar instruments as referred to in paragraphs 1.1(b) and (c) of this Schedule, respectively, the Rules are also designed to
(i) ensure a fair and orderly market; and
(ii) provide a framework for disciplinary and enforcement actions.
6.1 Due Process
For any decision made by the exchange that affects a participant, or an applicant to be a participant, including a decision in relation to access, exemptions, or discipline, the exchange ensures that:
(a) parties are given an opportunity to be heard or make representations, and
(b) it keeps a record of, gives reasons for and provides for appeals or reviews of its decisions.
7.1 Clearing and Settlement
The exchange has appropriate arrangements for the clearing and settlement of trades.
8.1 Information Technology Risk Management Procedures
The exchange has appropriate risk management procedures in place including those that handle trading errors, trading halts and circuit breakers.
9.1 Financial Viability
The exchange has sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
10.1 Fees
(a) All fees imposed by the exchange are reasonable and equitably allocated and are consistent with the requirements in Ontario securities laws, including those requirements listed in paragraphs 1.1(a) and (e) of this Schedule.
(b) The process for setting fees is fair and appropriate, and the fee model is transparent.
11.1 Information Sharing and Regulatory Cooperation
The exchange has mechanisms in place to enable it to share information and otherwise co-operate with the Commission, recognized self-regulatory organizations, other recognized or exempt exchanges, clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) For the purposes of this Schedule:
"accounting principles" means accounting principles as defined in National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards;
"Nasdaq Canada dealer" means a dealer that is also a significant shareholder;
"Nasdaq Canada marketplace participant" means a marketplace participant of Nasdaq Canada;
"affiliated entity" has the meaning ascribed to it in section 1.3 of National Instrument 21-101 Marketplace Operation;
"associate" has the meaning ascribed to it in subsection 1(1) of the Act;
"Board" means the board of directors of CXCH or Nasdaq Canada, as the context requires;
"criteria for recognition" means all the criteria for recognition set out in Schedule 1 to the Order;
"Competitor" means a person whose consolidated business, operations or disclosed business plans are in competition, to a significant extent, with the trading functions, market data services or other material lines of business of Nasdaq Canada or its affiliated entities;
"dealer" means "investment dealer", as that term is defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registration Obligations;
"IIROC" means the Investment Industry Regulatory Organization of Canada;
"marketplace" has the meaning ascribed to it in subsection 1(1) of the Act;
"marketplace participant" has the meaning ascribed to it in section 1.1 of NI 21-101;
"Nominating Committee" means the committee established by CXCH pursuant to section 26 of Schedule 3;
"officer" has the meaning ascribed to it in subsection 1(1) of the Act;
"Regulatory Oversight Committee" means the committee established by Nasdaq Canada pursuant to section 7 of this Schedule;
"Rule" means a rule, policy, or other similar instrument of Nasdaq Canada;
"shareholder" means a person or company that holds any class or series of voting shares of CXCH;
"significant shareholder" means:
(i) a person or company that beneficially owns or controls directly more than 10% of any class or series of voting shares of CXCH or Nasdaq; or
(ii) a shareholder whose nominee is on the Board, for as long as the nominee of that shareholder remains on the Board; and
"unaudited non-consolidated financial statements" means financial statements that are prepared in the same manner as audited consolidated financial statements, except that
(i) they are not audited; and
(ii) investments in subsidiary entities, jointly controlled entities and associates are accounted for as specified for separate financial statements in International Accounting Standard 27 Separate Financial Statements.
(b) For the purposes of this Schedule, an individual is independent if the individual is "independent" within the meaning of section 1.4 of National Instrument 52-110 Audit Committees, as amended from time to time, but is not independent if the individual:
(i) is a partner, officer, director or employee of a Nasdaq Canada marketplace participant, or of an affiliated entity of a Nasdaq Canada marketplace participant, who is responsible for or is actively engaged in the day- to-day operations or activities of that Nasdaq Canada marketplace participant;
(ii) is an officer or an employee of CXCH or any of its affiliated entities;
(iii) is a partner, officer or employee of Nasdaq, Inc. or an associate of that partner, officer or employee;
(iv) is a director of Nasdaq or an associate of that director;
(v) is a person who owns or controls, or is the officer or employee of a person or company that owns or controls, directly or indirectly, more than 10% of the shares of CXCH;
(vi) is a director of a person or company that beneficially owns or controls, directly or indirectly, more than 10% of any class or series of voting shares of Nasdaq; or
(vii) has any relationship with Nasdaq or a person or company that owns or controls, directly or indirectly, more than 10% of the shares of CXCH, that could, in the view of the Nominating Committee, having regard to all relevant circumstances, be reasonably perceived to interfere with the exercise of his or her independent judgment as a director of CXCH or Nasdaq Canada.
(c) For the purposes of paragraph (b), the Nominating Committee may waive the restrictions set out in subparagraphs (b)(iv) and (b)(vi) provided that:
(i) the individual being considered does not have, and has not had, any relationship with Nasdaq, Inc. that could, in the view of the Nominating Committee, having regard to all relevant circumstances, be reasonably perceived to interfere with the exercise of his or her independent judgement as a director of Nasdaq Canada or CXCH;
(ii) Nasdaq Canada publicly discloses the use of the waiver with reasons why the particular candidate was selected;
(iii) Nasdaq Canada provides advance notice to the Commission, at least 15 business days before the public disclosure in sub-paragraph (c)(ii) is made, and
(iv) the Commission does not object within 15 business days of its receipt of the notice provided under sub-paragraph (c)(iii) above.
(a) Nasdaq Canada must conduct its business and operations in a manner that is consistent with the public interest.
(b) The mandate of the Board must expressly include regulatory and public interest responsibilities of Nasdaq Canada.
(a) Without the prior approval of the Commission, and subject to terms and conditions considered appropriate by the Commission, no person or company and no combination of persons or companies acting jointly or in concert will beneficially own or exercise control or direction over:
(i) more than 10% of any class or series of voting shares of Nasdaq Canada and, thereafter,
(ii) more than 50% of any class or series of voting shares of Nasdaq Canada.
(b) The articles of Nasdaq Canada must contain the share ownership restrictions and provisions respecting the enforcement of such restrictions which, without limiting the foregoing, may provide for the filing of declarations, the suspension of voting rights, the forfeiture of dividends, the refusal of the issue or registration of voting shares and the sale or redemption of voting shares held contrary to the restrictions and payment of net proceeds of the sale or redemption to the person entitled thereto.
Nasdaq Canada must continue to meet the criteria for recognition set out in Schedule 1 to the Order.
To ensure that Nasdaq Canada operates with integrity and in the public interest, Nasdaq Canada will take reasonable steps to ensure that each director or officer of Nasdaq Canada is a fit and proper person. As part of those steps, Nasdaq Canada will consider whether the past conduct of each director or officer of Nasdaq Canada affords reasonable grounds for the belief that the director or officer will perform their duties with integrity and in a manner that is consistent with Nasdaq Canada's public interest responsibilities.
(a) Nasdaq Canada must ensure that at least 50% of its Board members are independent.
(b) The Chair of the Board must be independent.
(c) In the event that Nasdaq Canada fails to meet the requirement in paragraph (a) of this section, it must immediately advise the Commission and take appropriate measures to promptly remedy such failure.
(d) Nasdaq Canada must ensure that its Board is subject to requirements that the quorum for the Board consists of a majority of the Board members, at least 50% of whom must be independent directors.
(a) Nasdaq Canada must establish and maintain a Regulatory Oversight Committee that, at a minimum:
(i) is made up of at least three directors, a majority of whom must be independent;
(ii) reviews and decides, or makes recommendations to the Board, on proposed regulations and rules that must be submitted to the Commission for review and approval under Schedule 5 Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto of this Order;
(iii) considers real or perceived conflicts of interest that may arise, including but not limited to the following contexts:
A. ownership interests in CXCH by any Nasdaq Canada marketplace participant with representation on the Board of CXCH or the Board of Nasdaq Canada,
B. significant changes in ownership of Nasdaq Canada and CXCH, and
C. the profit-making objective and the public interest responsibilities of Nasdaq Canada, including general oversight of the management of the regulatory and public interest responsibilities of Nasdaq Canada;
(iv) oversees the establishment of mechanisms to avoid and appropriately manage conflicts of interest or potential conflicts of interest, perceived or real, including any policies and procedures that are developed by Nasdaq Canada and CXCH, including those that are required to be established pursuant to the Schedules of the Order;
(v) reviews the effectiveness of the policies and procedures regarding conflicts of interest on a regular, and at least annual, basis;
(vi) reports in writing directly to the Commission on any matter that the Regulatory Oversight Committee deems appropriate or that is required by the Commission without first requiring Board approval for such reporting;
(vii) has a requirement that the quorum consist of a majority of the Regulatory Oversight Committee members, a majority of whom must be independent.
(b) The Regulatory Oversight Committee must provide such information as may be required by the Commission from time to time.
(a) Nasdaq Canada must establish, maintain and require compliance with policies and procedures that:
(i) require that confidential information regarding marketplace operations, regulation functions, or a Nasdaq Canada marketplace participant that is obtained by a partner, director, officer or employee of a significant shareholder through that individual's involvement in the management or oversight of marketplace operations or regulation functions of Nasdaq Canada:
A. be kept separate and confidential from the business or other operations of the significant shareholder and its affiliated entities, except with respect to information regarding marketplace operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of marketplace operations and the individual can and does exercise due care in his or her disclosure of the information, and
B. not be used to provide an advantage to the significant shareholder or its affiliated entities.
(b) Nasdaq Canada must regularly review compliance with the policies and procedures established under (a) and must document each review, and any deficiencies, and how those deficiencies were remedied.
Nasdaq Canada's requirements must provide access to the facilities of Nasdaq Canada only to properly registered investment dealers that are members of IIROC and satisfy reasonable access requirements established by Nasdaq Canada, except that Canadian "permitted clients" as such term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations will have separate access to Nasdaq Fixed Income.
(a) Nasdaq Canada must establish, maintain and require compliance with policies and procedures that effectively monitor and enforce the Rules against Nasdaq Canada marketplace participants, either directly or indirectly through a regulation services provider.
(b) Nasdaq Canada has retained and will continue to retain IIROC as a regulation services provider to provide, as agent for Nasdaq Canada, certain regulation services that have been approved by the Commission.
(c) Nasdaq Canada must perform all other regulation functions not performed by IIROC, and must maintain adequate staffing, systems and other resources in support of those functions. Nasdaq Canada must obtain prior Commission approval before outsourcing such regulation functions to any party, including affiliated entities or associates of Nasdaq Canada.
(d) Nasdaq Canada must notify the Commission of any violations of Ontario securities law of which it becomes aware in the ordinary course of its business or otherwise.
(a) Nasdaq Canada must not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a particular marketplace participant or any other particular person or company, or
(ii) any discount, rebate, allowance, price concession or other similar arrangement for any service or product offered by Nasdaq Canada or Nasdaq and its affiliated entities and significant shareholders that is conditional upon:
A. the requirement to have Nasdaq Canada be set as the default or first marketplace a marketplace participant routes orders to, or
B. the router of Nasdaq Canada being used as the marketplace participant's primary order router.
(b) Except with the prior approval of the Commission, Nasdaq Canada must not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement on any services or products offered by Nasdaq Canada or Nasdaq and its affiliated entities and significant shareholders that is conditional upon the purchase of any other service or product provided by Nasdaq Canada or Nasdaq or any affiliated entity, or
(ii) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a class of marketplace participants or of any other persons or companies.
(c) Except with the prior approval of the Commission, Nasdaq Canada must not require another person or company to purchase or otherwise obtain products or services from Nasdaq Canada or Nasdaq and its affiliated entities and significant shareholders as a condition of Nasdaq Canada supplying or continuing to supply a product or service.
(d) If the Commission considers that it would be in the public interest, the Commission may require Nasdaq Canada to submit for approval by the Commission a fee, fee model or incentive that has previously been submitted to and/or approved by the Commission.
(e) Where the Commission decides not to approve the fee, fee model or incentive submitted under (d), any previous approval for the fee, fee model or incentive must be revoked, if applicable, and Nasdaq Canada will no longer be permitted to offer the fee, fee model or incentive.
Nasdaq Canada must not support, encourage or incent, either through fee incentives or otherwise, Nasdaq Canada marketplace participants, Nasdaq affiliated entities or significant shareholders to coordinate the routing of their orders to Nasdaq Canada.
Nasdaq Canada must deliver to the Commission its annual financial budget, together with the underlying assumptions, that has been approved by its Board, within 30 days from the commencement of each fiscal year.
(a) Nasdaq Canada must maintain sufficient financial resources for the proper performance of its functions and to meet its responsibilities.
(b) Nasdaq Canada must calculate the following financial ratios monthly:
(i) a current ratio, being the ratio of current assets to current liabilities;
(ii) a debt to cash flow ratio, being the ratio of total debt (including any line of credit draw downs, and the current and long-term portions of any loans, but excluding accounts payable, accrued expenses and other liabilities) to EBITDA (earnings before interest, taxes, stock-based compensation, depreciation and amortization) for the most recent 12 months; and
(iii) a financial leverage ratio, being the ratio of total assets to shareholders' equity,
in each case following the same accounting principles as those used for the unaudited non-consolidated financial statements of Nasdaq Canada.
(c) Nasdaq Canada must report quarterly in writing to the Commission the monthly calculations for the previous quarter of the financial ratios as required to be calculated under (b).
(d) If Nasdaq Canada determines that it does not have, or anticipates that, in the next twelve months, it will not have sufficient financial resources for the proper performance of its functions and to meet its responsibilities, it will immediately notify the Commission along with the reasons and any impact on the financial viability of Nasdaq Canada.
(e) Upon receipt of a notification made by Nasdaq Canada under (d), the Commission may, as determined appropriate, impose additional terms and conditions on Nasdaq Canada.
(a) Nasdaq Canada must provide the Commission with:
(i) the information set out in Appendix A to this Schedule, as amended from time to time; and
(ii) any information required to be provided by Nasdaq Canada to IIROC, including all order and trade information, as required by the Commission.
(a) At the request of the Commission, Nasdaq Canada must engage an independent consultant, or independent consultants acceptable to the Commission to prepare a written report assessing the governance structure of Nasdaq Canada (Governance Review).
(b) The written report must be provided to the Board of Nasdaq Canada promptly after the report's completion and then to the Commission within 30 days of providing it to the Board.
(c) The scope of the Governance Review must be approved by the Commission.
(a) Nasdaq Canada must, and must cause its affiliated entities, to promptly provide to the Commission, on request, any and all data, information and analyses in the custody or control of Nasdaq Canada or any of its affiliated entities, without limitations, redactions, restrictions or conditions, including, without limiting the generality of the foregoing:
(i) data, information and analyses relating to all of its or their businesses; and
(ii) data, information and analyses of third parties in its or their custody or control.
(b) Nasdaq Canada must share information and otherwise cooperate with other recognized or exempt exchanges, recognized self-regulatory organizations, recognized or exempt clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) Nasdaq Canada must certify in writing to the Commission, in a certificate signed by its CEO and either its general counsel or chief compliance officer, within one year of the effective date of its recognition as an exchange pursuant to this Order and every year subsequent to that date, or at any times required by the Commission, that it is in compliance with the terms and conditions applicable to it in the Order and describe in detail:
(i) the steps taken to require compliance;
(ii) the controls in place to verify compliance;
(iii) the names and titles of employees who have oversight of compliance.
(b) If Nasdaq Canada or any of its directors, officers or employees become aware of a breach or a possible breach of any of the terms and conditions applicable to Nasdaq Canada under the Schedules to the Order, such person must, within two business days after becoming aware of the breach or possible breach, notify the Regulatory Oversight Committee of the breach or possible breach. The director, officer or employee of the recognized exchange must provide to the Regulatory Oversight Committee details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or possible breach.
(c) The Regulatory Oversight Committee must, within two business days after being notified of the breach or possible breach, notify the Commission and confirm that the breach or possible breach is under investigation as required by (d).
(d) The Regulatory Oversight Committee must promptly cause to be conducted an investigation of the breach or possible breach reported under (b). Once the Regulatory Oversight Committee has made a determination as to whether there has been a breach, or that there is an impending breach, of any terms and conditions applicable to Nasdaq Canada under the Schedules to the Order, the Regulatory Oversight Committee must, within two business days of such determination, notify the Commission of its determination and must provide details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or impending breach, and any actions that will be taken to address it.
Except with the prior approval of the Commission, no securities will be listed on Nasdaq Canada.
(a) Immediate notification of a decision to enter into a definitive agreement (including a binding letter of intent), memorandum of understanding or other similar agreement with any governmental or regulatory body, self-regulatory organization, clearing agency, stock exchange, other marketplace or market, except in the case where the agreement or arrangement: (i) is primarily intended to restrict the use or disclosure of confidential information, (ii) is primarily for the purpose of facilitating discussions in connection with a possible definitive agreement, (iii) is necessary to support the provision of the existing exchange services, (iv) relates to the provision of the existing exchange services and is also subject to the standard form agreements of the exchange (for example, data subscription agreements, etc.), or (v) relates to a business line other than exchange services.
(b) Immediate notification if Nasdaq Canada:
(i) becomes the subject of any order, directive or similar action of a governmental or regulatory authority;
(ii) becomes aware that it is the subject of a criminal or regulatory investigation; or
(iii) becomes, or it is notified in writing that it will become, the subject of a material lawsuit.
(c) Any strategic plan for Nasdaq Canada, within 30 days of approval by the Board.
(d) Any information submitted by Nasdaq Canada to a Canadian securities regulatory authority under a requirement of a recognition order, exemption order or NI 21-101, provided concurrently.
(e) Copies of all notices, bulletins and similar forms of communication that Nasdaq Canada sends to the Nasdaq Canada marketplace participants.
(f) Prompt notification of any application for exemption or waiver from Nasdaq Canada requirements received from a significant shareholder or any of its affiliated entities.
(a) A quarterly report summarizing all exemptions or waivers granted during the period pursuant to the Rules to any Nasdaq Canada marketplace participant, which must include the following information:
(i) the name of the Nasdaq Canada marketplace participant;
(ii) the type of exemption or waiver granted during the period;
(iii) the date of the exemption or waiver; and
(iv) a description of the recognized exchange's reason for the decision to grant the exemption or waiver.
(b) A quarterly report summarizing instances where conflicts of interest or potential conflicts of interest with respect to Competitors have been identified by Nasdaq Canada and how such conflicts were addressed.
At least annually, an assessment of the risks, including business risks, facing Nasdaq Canada and the plan for addressing such risks.
Terms used in this Schedule have the same meanings and interpretation as in section 1 of Schedule 2.
(a) CXCH must conduct its business and operations in a manner that is consistent with the public interest.
(b) The mandate of the Board must expressly include CXCH's regulatory and public interest responsibilities.
(a) Without the prior approval of the Commission, and subject to terms and conditions considered appropriate by the Commission, no person or company and no combination of persons or companies acting jointly or in concert may beneficially own or exercise control or direction over more than 10% or more than 50% respectively of any class or series of voting shares of CXCH.
(b) The articles of CXCH must contain the share ownership restrictions and provisions respecting the enforcement of such restrictions which, without limiting the foregoing, may provide for the filing of declarations, the suspension of voting rights, the forfeiture of dividends, the refusal of the issue or registration of voting shares and the sale or redemption of voting shares held contrary to the restrictions and payment of net proceeds of the sale or redemption to the person entitled thereto.
CXCH must continue to meet the criteria for recognition set out in Schedule 1 to the Order.
In order to ensure that CXCH and Nasdaq Canada operate with integrity and in the public interest, CXCH will take reasonable steps to ensure that each director or officer of CXCH is a fit and proper person. As part of those steps, CXCH will consider whether the past conduct of each director or officer of CXCH affords reasonable grounds for belief that the director or officer will perform their duties with integrity and in a manner that is consistent with CXCH's and Nasdaq Canada's public interest responsibilities.
(a) CXCH must ensure that at least 50% of its Board members are independent.
(b) The Chair of the Board must be independent.
(c) In the event that CXCH fails to meet the requirement under (a) of this section, it must immediately advise the Commission and take appropriate measures to remedy such failure.
(d) CXCH must ensure that its Board is subject to requirements that the quorum for the Board consists of a majority of the Board members, at least 50% of whom must be independent.
CXCH must maintain a Nominating Committee that, at a minimum:
(a) is made up of at least three directors, a majority of whom must be independent, and has an independent Chair;
(b) confirms the status of a nominee to the Board as independent before the individual is appointed to the Board or the name of the individual is submitted to shareholders as a nominee for election to the Board, whichever comes first;
(c) confirms, on an annual basis, that the status of the directors that are independent has not changed;
(d) assesses and approves all nominees of management to the Board; and
(e) has a requirement that the quorum consist of a majority of the Nominating Committee members, a majority of whom must be independent.
(a) CXCH must establish, maintain and require compliance with policies and procedures that:
(i) require that confidential information regarding marketplace operations, regulation functions, or a Nasdaq Canada marketplace participant that is obtained by a partner, director, officer or employee of CXCH or Nasdaq through that individual's involvement in the management or oversight of the marketplace operations or regulation functions of Nasdaq Canada:
A. be kept separate and confidential from the business or other operations of the partner, director, officer or employee of CXCH or Nasdaq, except with respect to information regarding marketplace operations where disclosure is necessary to carry out the individual's responsibilities for the management or oversight of marketplace operations and the individual can and does exercise due care in his or her disclosure of the information, and
B. not be used to provide an advantage to the partner, director, officer or employee of CXCH or Nasdaq or Nasdaq's affiliated entities,
provided that nothing in (a)(i) will be construed to limit CXCH or Nasdaq Canada from providing to Nasdaq necessary information.
(b) CXCH must regularly review compliance with the policies and procedures established under (a) and must document each review and any deficiencies and how those deficiencies were remedied.
(a) CXCH must, for so long as Nasdaq Canada carries on business as an exchange, allocate sufficient financial and other resources to Nasdaq Canada to ensure that Nasdaq Canada can carry out its functions in a manner that is consistent with the public interest and in compliance with Ontario securities law.
(b) CXCH must notify the Commission immediately upon being aware that it is or will be unable to allocate sufficient financial and other resources, as required under (a), to Nasdaq Canada.
(a) CXCH must ensure that its affiliated entities, including Nasdaq Canada, do not, through any fee schedule, any fee model or any contract, agreement or other arrangement with any marketplace participant or any other person, significant shareholder or company, provide:
(i) any discount, rebate, allowance, price concession or other similar arrangement on any services or products offered by Nasdaq Canada or Nasdaq and its affiliated entities and significant shareholders that is conditional upon the purchase of any other service or product provided by the affiliated entity; or
(ii) any discount, rebate, allowance, price concession or other similar arrangement that is accessible only to, whether as designed or by implication, a class of marketplace participants or of any other persons or companies,
unless prior approval has been granted by the Commission.
(b) CXCH must ensure that Nasdaq Canada does not require a person or company to purchase or otherwise obtain products or services from Nasdaq Canada or Nasdaq and its affiliated entities and significant shareholders as a condition of Nasdaq Canada supplying or continuing to supply a product or service unless prior approval has been granted by the Commission.
(c) CXCH must ensure that Nasdaq Canada or Nasdaq and its affiliated entities and significant shareholders do not require another person, significant shareholder or company to obtain products or services from Nasdaq Canada as a condition of the affiliated entity supplying or continuing to supply a product or service.
CXCH must not support, encourage or incent, either through fee incentives or otherwise, Nasdaq Canada marketplace participants, Nasdaq affiliated entities or significant shareholders to coordinate the routing of their order to Nasdaq Canada.
CXCH must deliver to the Commission its annual financial budget, together with the underlying assumptions, that has been approved by its Board, within 30 days from the commencement of each fiscal year.
CXCH must obtain prior Commission approval of any changes to any agreement between CXCH and its significant shareholders.
CXCH must provide the Commission with the information set out in Appendix B to this Schedule, as amended from time to time.
(a) At the request of the Commission, CXCH must engage an independent consultant, or independent consultants, acceptable to the Commission to prepare a written report assessing the governance structure of CXCH (CXCH Governance Review).
(b) The written report must be provided to the Board of CXCH promptly after the report's completion and then to the Commission within 30 days of providing it to the Board.
(c) The scope of the CXCH Governance Review must be approved by the Commission.
(a) CXCH must, and must cause its affiliated entities to promptly provide to the Commission, on request, any and all data, information and analyses in the custody or control or CXCH or any of its affiliated entities, without limitations, redactions, restrictions or conditions, including, without limiting the generality of the foregoing:
(i) data, information and analyses relating to all of its or their businesses; and
(ii) data, information and analyses of third parties in its or their custody or control.
(b) CXCH must share information and otherwise cooperate with other recognized or exempt exchanges, recognized self-regulatory organizations, recognized or exempt clearing agencies, investor protection funds, and other appropriate regulatory bodies.
(a) CXCH must certify in writing to the Commission, in a certificate signed by its CEO and either its Chairman of the Board, general counsel or chief compliance officer, within one year of the effective date of its recognition as an exchange pursuant to this Order and every year subsequent to that date, or at any times required by the Commission, that it is in compliance with the terms and conditions applicable to it in the Order and describe in detail:
(i) the steps taken to require compliance;
(ii) the controls in place to verify compliance; and
(iii) the names and titles of employees who have oversight of compliance.
(b) If CXCH or any of its directors, officers or employees become aware of a breach or a possible breach of any of the terms and conditions applicable to CXCH under the Schedules to the Order, such person must, within two business days after becoming aware of the breach or possible breach, notify the Board or committee designated by the Board and approved by the Commission of the breach or possible breach. The director, officer or employee of the recognized exchange must provide to the Board or committee designated by the Board details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or possible breach.
(c) The Board or committee designated by the Board must, within two business days after being notified of the breach or possible breach, notify the Commission and confirm that the breach or possible breach is under investigation as required under (d).
(d) The Board or committee designated by the Board must promptly cause to be conducted an investigation of the breach or possible breach reported under (b). Once the Board or committee designated by the Board has made a determination as to whether there has been a breach, or that there is an impending breach, of any terms and conditions applicable to CXCH under the Schedules to the Order, the Board or committee designated by the Board must, within two business days of such determination, notify the Commission of its determination and must provide details sufficient to describe the nature, date and effect (actual and anticipated) of the breach or impending breach, and any actions that will be taken to address it.
(a) Immediate notification of a decision to enter into a definitive agreement (including a binding letter of intent), memorandum of understanding or other similar agreement with any governmental or regulatory body, self-regulatory organization, clearing agency, stock exchange, other marketplace or market, except in the case where the agreement or arrangement: (i) is primarily intended to restrict the use or disclosure of confidential information, (ii) is primarily for the purpose of facilitating discussions in connection with a possible definitive agreement, (iii) is necessary to support the provision of the existing exchange services, (iv) relates to the provision of the existing exchange services and is also subject to the standard form agreements of the exchange (for example, data subscription agreements, etc.), or (v) relates to a business line other than exchange services.
(b) Immediate notification if CXCH:
(i) becomes the subject of any order, directive or similar action of a governmental or regulatory authority;
(ii) becomes aware that it is the subject of a criminal or regulatory investigation; or
(iii) becomes, or it is notified in writing that it will become, the subject of a material lawsuit.
(c) Immediate notification if Nasdaq becomes, or it is notified in writing that it will become, the subject of a criminal, administrative or regulatory proceeding.
(d) Any strategic plan for CXCH, within 30 days of approval by the Board.
(e) Any information submitted by CXCH to a Canadian securities regulatory authority under a requirement of a recognition order, exemption order or NI 21-101, provided concurrently.
Annual Reporting
At least annually, or more frequently if required by the Commission, an assessment of the risks, including business risks, facing CXCH and Nasdaq Canada and the plan for addressing such risks.
This Protocol sets out the procedures a recognized exchange (Exchange) must follow for any Rule or Change, both as defined in section 2 below, and describes the procedures for their review by Commission Staff (Staff) and approval by the Commission or the Director. This Protocol also establishes requirements regarding the time at which an Exchange may begin operations following recognition by the Commission.
For the purposes of this Protocol:
(a) Change means a Fee Change, a Housekeeping Change or a Significant Change.
(b) Director means "Director" as defined in subsection 1(1) of the Securities Act (Ontario).
(c) Fee Change means any new fee or fee model of the Exchange and any amendment to a fee or fee model.
(d) Fee Change subject to Public Comment means a Fee Change that, in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
(e) Housekeeping Change means an amendment to the information in Form 21-101F1 that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(f) Housekeeping Rule means a new Rule or an amendment to a Rule that
(i) does not have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(g) Public Interest Rule means a Rule or an amendment to a Rule that is not a Housekeeping Rule.
(h) Rule includes a rule, policy and other similar instrument of the Exchange.
(i) Significant Change means an amendment to the information in Form 21-101F1 other than
(i) a Housekeeping Change,
(ii) a Fee Change, or
(ii) a Rule,
and for greater certainty includes the matters listed in subsection 6.1(4) of Companion Policy 21-101 CP.
(j) Significant Change subject to Public Comment means a Significant Change that
(i) is listed in paragraphs 6.1(4)(a) or (b) of Companion Policy 21-101 CP, or
(ii) in Staff's view, may have a significant impact on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
The Exchange and Staff will follow the process for review and approval set out in this Protocol for all Changes, new Rules and Rule amendments.
The Exchange's board of directors, or a duly authorized committee of the board, must approve all Rules prior to their submission under this Protocol.
(a) The Exchange may submit a written request with Staff to waive or vary any part of this Protocol. The request must provide reasons why granting the waiver is appropriate in the circumstances.
(b) Staff will use their best efforts to provide to the Exchange within five business days of receipt of its request either:
(i) written notice that Staff object to granting the waiver or variation; or
(ii) written notice that the waiver or variation has been granted by Staff.
The Exchange must not begin operations until a reasonable period of time after the Exchange is notified that it has been recognized by the Commission.
(a) Prior to the implementation of a Fee Change, Public Interest Rule or Significant Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that, together with the notice for publication submitted under paragraph (a)(ii), if applicable, fully describes:
(A) the proposed Fee Change, Public Interest Rule or Significant Change;
(B) the expected date of implementation of the proposed Fee Change, Public Interest Rule or Significant Change;
(C) the rationale for the proposal and any relevant supporting analysis;
(D) the expected impact, including the quantitative impact, of the proposed Fee Change, Public Interest Rule or Significant Change on the market structure, members and, if applicable, on investors, issuers and the capital markets;
(E) the expected impact of the Fee Change, Public Interest Rule or Significant Change on the Exchange's compliance with Ontario securities law requirements and in particular requirements for fair access and maintenance of fair and orderly markets;
(F) a summary of any consultations, including consultations with external parties, undertaken in formulating the Fee Change, Public Interest Rule or Significant Change, and the internal governance process followed to approve the Rule or Change;
(G) for a proposed Fee Change:
1. the expected number of marketplace participants likely to be subject to the new fee, along with a description of the costs they will incur; and
2. if the proposed Fee Change applies differently across types of marketplace participants, a description of this difference, how it impacts each class of affected marketplace participant, including, where applicable, numerical examples, and any justification for the difference in treatment.
(H) if the Public Interest Rule or Significant Change will require members or service vendors to modify their systems after implementation of the Rule or Change, the expected impact of the Rule or Change on the systems of members and service vendors together with an estimate of the amount of time needed to perform the necessary work and how the estimated amount of time was deemed reasonable in light of the expected impact of the Public Interest Rule or Significant Change on the Exchange, its market structure, members, issuers, investors or the Canadian capital markets;
(I) where the proposed Significant Change is not a Significant Change subject to Public Comment, the rationale for why the proposed Significant Change is not considered a Significant Change subject to Public Comment;
(J) a discussion of any alternatives considered; and
(K) if applicable, whether the proposed Fee Change, Significant Change or Public Interest Rule would introduce a fee model, feature or Rule that currently exists in other markets or jurisdictions;
(ii) for a proposed Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, a notice for publication that generally includes the information required under paragraph (a)(i), except information that, if included in the notice, would result in the public disclosure of sensitive information or confidential or proprietary financial, commercial or technical information;
(iii) for a proposed Public Interest Rule, the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules, and if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) for a proposed Fee Change or Significant Change, blacklined and clean copies of Form 21-101F1 showing the proposed Change.
(b) The Exchange will submit the materials set out in subsection (a)
(i) at least 45 days prior to the expected implementation date of a proposed Public Interest Rule or Significant Change; and
(ii) at least fifteen business days prior to the expected implementation date of a proposed Fee Change.
(c) For a Housekeeping Rule, the Exchange will provide Staff with the following materials:
(i) a cover letter that fully describes the Rule and indicates that it was classified as a Housekeeping Rule and provides an analysis of the rationale for the classification, and the date or proposed date of implementation of the Rule;
(ii) the text of the Rule and a blacklined version of the Rule indicating changes to any existing Rules;
(iii) if supplementary material relating to the Rule is contained in Form 21-101F1, blacklined and clean copies of Form 21-101F1; and
(iv) a notice for publication on the OSC website or in the OSC Bulletin that contains the information in paragraph (ii) as well as the implementation date for the Rule and indicates that the Rule has been classified as a Housekeeping Rule and was not published for comment.
(d) For a Housekeeping Change, the Exchange will provide Staff with the following materials:
(i) a cover letter that indicates that the change was classified as a Housekeeping Change and, for each Housekeeping Change, provides an analysis of the rationale for the classification and the expected or actual date of implementation of the Change; and
(ii) blacklined and clean copies of Form 21-101F1 showing the Change.
(e) The Exchange will submit the materials set out in subsection (d) by the earlier of
(i) the Exchange's close of business on the 10th calendar day after the end of the calendar quarter in which the Housekeeping Change was implemented; and
(ii) the date on which the Exchange publicly announces a Housekeeping Change, if applicable.
(a) Within 5 business days of the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will review the notice and materials to ensure that they contain an adequate level of detail, analysis and discussion to elicit meaningful public comment, and will promptly notify the Exchange of any deficiency requiring a resubmission of the notice and/or materials.
(b) Where the notice and/or materials are considered by Staff to be deficient, the Exchange will amend and resubmit the notice and/or materials accordingly, and the date of resubmission will serve as the submission date for the purposes of this Protocol.
(c) Where the notice and materials are considered by Staff to be adequate for publication, Staff will proceed with the processes set out in section 9.
(a) As soon as practicable after the receipt of the notice and materials submitted by the Exchange relating to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with subsection 7(a), Staff will publish in the OSC Bulletin and/or on the OSC website, the notice prepared by the Exchange, along with a notice prepared by Staff, if necessary, that provides market participants with an opportunity to provide comments to Staff and to the Exchange within 30 days from the date the notice appears in the OSC Bulletin or on the OSC website, whichever comes first.
(b) If public comments are received
(i) the Exchange will forward copies of the comments promptly to Staff; and
(ii) the Exchange will prepare a summary of the public comments and a response to those comments and provide them to Staff promptly after the end of the comment period.
(a) Staff will use their best efforts to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change within
(i) 45 days from the date of submission of a proposed Public Interest Rule or Significant Change; and
(ii) fifteen business days from the date of submission of a proposed Fee Change.
(b) Staff will notify the Exchange if they anticipate that their review of the proposed Fee Change, Public Interest Rule or Significant Change will exceed the timelines in subsection (a).
(c) If Staff have material comments or require additional information to complete their review of a proposed Fee Change, Public Interest Rule or Significant Change, Staff will use best efforts to provide the Exchange with a comment letter promptly by the end of the public comment period for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, and promptly after the receipt of the materials submitted under section 7 for all other Changes.
(d) The Exchange will respond to any comments received from Staff in writing.
(e) Unless Staff agree to an extension of time, if the Exchange fails to respond to Staff's comments within 120 days after the receipt of Staff's comment letter, the Exchange will be deemed to have withdrawn the proposed Fee Change, Public Interest Rule or Significant Change. If the Exchange wishes to proceed with the Fee Change, Public Interest Rule or Significant Change after it has been deemed withdrawn, the Exchange will have to be re-submit it for review and approval in accordance with this Protocol.
(f) Upon completion of Staff's review of a Fee Change, Public Interest Rule or Significant Change, Staff will submit the Change or Rule to the Director or, in the circumstances described in subsection (g), to the Commission, for a decision within the following timelines:
(i) for a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, the later of 45 days from the date that the related materials were published for comment and the date that Staff's comments and public comments, including any concerns identified, have been adequately addressed by the Exchange;
(ii) for any other Significant Change, the later of 45 days from the date of submission of the Change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange; or
(iii) for any other Fee Change, the later of fifteen business days from the date of submission of the change and the date that Staff's comments and any concerns identified have been adequately addressed by the Exchange.
(g) A Fee Change, Public Interest Rule or Significant Change may be submitted to the Commission for a decision, within the timelines in subsection (f),
(i) if the proposed Fee Change, Public Interest Rule or Significant Change introduces a novel feature to the Exchange or the capital markets;
(ii) if the proposed Fee Change, Public Interest Rule or Significant Change raises significant regulatory or public interest concerns; or
(iii) in any other situation where, in Staff's view, Commission approval is appropriate.
(h) Staff will promptly notify the Exchange of the decision.
(i) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is approved, Staff will publish the following documents in the OSC Bulletin and/or on the OSC website promptly after the approval:
(i) a notice indicating that the proposed Rule or Change is approved;
(ii) the summary of public comments and responses prepared by the Exchange, if applicable; and
(iii) if non-material changes were made to the version published for public comment, a brief description of these changes prepared by the Exchange and a blacklined copy of the revised Rule or Change highlighting the revisions made.
(a) Staff will review a proposed Fee Change, Public Interest Rule or Significant Change to assess whether it is in the public interest for the Director or the Commission to approve the Rule or Change. In making this determination, Staff will have regard for the purposes of the Securities Act (Ontario) (Act) as set out in section 1.1 of the Act. The factors that Staff will consider in making their determination also include whether:
(i) the Rule or Change would impact the Exchange's compliance with Ontario securities law;
(ii) the Exchange followed its established internal governance practices in approving the proposed Rule or Change;
(iii) the Exchange followed the requirements of this Protocol and has provided sufficient analysis of the nature, purpose and effect of the Rule or Change; and
(iv) the Exchange adequately addressed any comments received.
(a) A Public Interest Rule or Significant Change will be effective on the later of:
(i) the date that the Exchange is notified that the Change or Rule is approved;
(ii) if applicable, the date of publication of the notice of approval on the OSC website;
(iii) if applicable, the implementation date established by the Exchange's Rules, agreements, practices, policies or procedures; and
(iv) the date designated by the Exchange.
(b) The Exchange must not implement a Fee Change unless the Exchange has provided marketplace participants with notice of the Fee Change at least five business days prior to implementation.
(c) Where a Significant Change involves a material change to any of the systems, operated by or on behalf of the Exchange, described in section 12.1 of National Instrument 21-101, the Significant Change will not be effective until a reasonable period of time after the Exchange is notified that the Significant Change is approved.
(d) In determining what constitutes a reasonable period of time for purposes of implementing a Significant Change under paragraph (c), Staff will consider how the Significant Change will impact the Exchange, its market structure, members, issuers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns.
(e) The Exchange must notify Staff promptly following the implementation of a Public Interest Rule, Significant Change or Fee Change that becomes effective under subsections (a) and (b).
(f) Where the Exchange does not implement a Public Interest Rule, Significant Change or Fee Change within 180 days of the effective date of the Fee Change, Public Interest Rule or Significant Change, as provided for in subsections (a) and (b), the Public Interest Rule, Significant Change or Fee Change will be deemed to be withdrawn.
(a) If, subsequent to its publication for comment, the Exchange revises a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment in a manner that results in a material change to the proposed substance or effect of the Rule or Change, Staff will, in consultation with the Exchange, determine whether or not the revised Rule or Change should be published for an additional 30-day comment period.
(b) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is republished under subsection (a), the request for comments will include a blacklined version marked to the originally published version, a summary of comments and responses prepared by the Exchange, and an explanation of the revisions and the supporting rationale for the revisions.
(a) If the Exchange withdraws a Fee Change, Public Interest Rule or a Significant Change that was previously submitted, it will provide a written notice of withdrawal to Staff.
(b) If the notice of withdrawal relates to a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment, Staff will publish the notice of withdrawal in the OSC Bulletin and/or on the OSC website as soon as practicable.
(c) If a Public Interest Rule, Significant Change subject to Public Comment or Fee Change subject to Public Comment is deemed to have been withdrawn as provided in subsection 10(e), Staff will prepare and publish a notice informing market participants that the Exchange did not proceed with the Rule or Change.
(a) Subject to subsections (c) and (d), a Housekeeping Rule will be effective on the later of
(i) the date of the publication of the notice to be published on the OSC website or in the OSC Bulletin, in accordance with subsection (e), and
(ii) the date designated by the Exchange.
(b) Subject to subsections (c) and (d), a Housekeeping Change will be effective on the date designated by the Exchange.
(c) Staff will review the materials submitted by the Exchange for a Housekeeping Change or Housekeeping Rule to assess the appropriateness of the categorization of the Rule or Change as housekeeping within five business days from the date that the Exchange submitted the documents in accordance with subsections 7(c) and 7(d). The Exchange will be notified in writing if there is disagreement with respect to the categorization of the Rule or Change as housekeeping.
(d) If Staff disagree with the categorization of the Rule or Change as housekeeping, the Exchange will immediately repeal the Change, if applicable, submit the proposed Rule as a Public Interest Rule or the proposed Change as a Significant Change, and follow the review and approval processes described in this Protocol as applying to a Public Interest Rule or Significant Change, including those processes applicable to a Significant Change subject to Public Comment, if applicable.
(e) If Staff do not disagree with the categorization of the Rule, Staff will publish a notice to that effect in the OSC Bulletin or on the OSC website as soon as is practicable.
(a) The Exchange may need to make a Public Interest Rule or Significant Change effective immediately where the Exchange determines that there is an urgent need to implement the Rule or Change to maintain fair and orderly markets, or because of a substantial and imminent risk of material harm to the Exchange, its members, other market participants, issuers or investors.
(b) When the Exchange determines that immediate implementation is necessary, it will advise Staff in writing as soon as possible, but in any event, at least five business days prior to the proposed implementation of the Public Interest Rule or Significant Change. The written notice will include the expected effective date of the Public Interest Rule or Significant Change and an analysis to support the need for immediate implementation. An application for an exemption from the 45-day advance filing requirements in National Instrument 21-101 must follow within five business days following the Exchange receiving notice that Staff agree with immediate implementation of the Public Interest Rule or Significant Change.
(c) If Staff do not agree that immediate implementation is necessary, Staff will promptly notify the Exchange, in writing, of the disagreement no later than the end of the third business day following submission of the notice under subsection (b). If the disagreement is not resolved, the Exchange will submit the Public Interest Rule or Significant Change in accordance with the timelines in section 7.
A Public Interest Rule or Significant Change that has been implemented immediately in accordance with section 16 will be published, if applicable, and reviewed and approved by the Director or by the Commission in accordance with the procedures set out in section 10, with necessary modifications. If the Director or the Commission does not approve the Public Interest Rule or Significant Change, the Exchange will immediately repeal the Rule or Change and inform its members of the decision.
The Commission's powers under subsection 21(5) of the Securities Act (Ontario) are not constrained in any way, notwithstanding a Rule or Change having been approved under this Protocol.
CanDeal.ca Inc. et al. -- s. 144
Subsection 144(1) of the Securities Act (Ontario) -- application for order varying the Commission's order requiring alternative trading systems to comply with Process for the Review and Approval of the Information Contained in Form 21-101F2 and the Exhibits Thereto -- variations required to harmonize with similar requirements for recognized exchanges -- requested order granted.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 144(1).
August 31, 2020
WHEREAS each of CanDeal.ca Inc., EquiLend Canada Corp., Instinet Canada Cross Limited, Liquidnet Canada Inc., MarketAxess Canada Company, Omega Securities Inc., Perimeter Markets Inc., and TriAct Canada Marketplace LP (together, Marketplaces) is an alternative trading system (ATS) carrying on business in Ontario;
AND WHEREAS the Ontario Securities Commission (Commission) issued an order dated June 22, 2012, and varied on September 29, 2015 (ATS Order), requiring each of the Marketplaces to follow the Process for the Review and Approval of the Information Contained in Form 21-101F2 and the Exhibits Thereto (ATS Protocol), appended to the ATS Order as Appendix A;
AND WHEREAS the Commission has received an application under section 144 of the Act to vary the ATS Order to reflect changes to the ATS Protocol appended to the ATS Order as Appendix A;
AND WHEREAS in the Commission's opinion, it would not be prejudicial to the public interest to issue an order varying the ATS Order to reflect changes to the ATS Protocol appended to the ATS Order as Appendix A;
IT IS ORDERED that, pursuant to section 144 of the Act, the ATS Order is varied as follows:
1. Appendix A to the ATS Order is replaced with the revised form of Appendix A appended to this order.
DATED this 31st day of August, 2020, to take effect September 14, 2020.
This Protocol sets out the procedures an alternative trading system (ATS) must follow for any Change, as defined in section 2 below, and describes the procedures for its review by Commission Staff (Staff) and approval by the Commission or the Director. This Protocol also establishes requirements regarding the time at which an ATS may begin operations following registration by the Commission.
For the purposes of this Protocol:
(a) Change means a Fee Change, a Housekeeping Change or a Significant Change.
(b) Director means "Director" as defined in subsection 1(1) of the Securities Act (Ontario).
(c) Fee Change means any new fee or fee model of the ATS and any amendment to a fee or fee model.
(d) Fee Change subject to Public Comment means a Fee Change that, in Staff's view, may have a significant impact on the ATS, its market structure, subscribers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
(e) Housekeeping Change means an amendment to the information in Form 21-101F2 that
(i) does not have a significant impact on the ATS, its market structure, subscribers, investors or the Canadian capital markets, or
(ii) is of a housekeeping or administrative nature and is comparable to the types of housekeeping changes listed in subsection 6.1(5)(b) of Companion Policy 21-101CP.
(f) Significant Change means an amendment to the information in Form 21-101F2 other than
(i) a Housekeeping Change, or
(ii) a Fee Change,
and for greater certainty includes the matters listed in subsection 6.1(4) of Companion Policy 21-101 CP.
(g) Significant Change subject to Public Comment means a Significant Change that
(i) is listed in paragraphs 6.1(4)(a) or (b) of Companion Policy 21-101 CP, or
(ii) in Staff's view, may have a significant impact on the ATS, its market structure, subscribers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns and should be subject to public comment.
The ATS and Staff will follow the process for review and approval set out in this Protocol for all Changes.
(a) The ATS may submit a written request with Staff to waive or vary any part of this Protocol. The request must provide reasons why granting the waiver is appropriate in the circumstances.
(b) Staff will use their best efforts to provide to the ATS within five business days of receipt of its request either:
(i) written notice that Staff object to granting the waiver or variation; or
(ii) written notice that the waiver or variation has been granted by Staff.
The ATS must not begin operations until a reasonable period of time after the ATS is notified that it has been registered by the Commission.
(a) Prior to the implementation of a Fee Change or Significant Change, the ATS will provide Staff with the following materials:
(i) a cover letter that, together with the notice for publication submitted under paragraph (a)(ii), if applicable, fully describes:
(A) the proposed Fee Change or Significant Change;
(B) the expected date of implementation of the proposed Fee Change or Significant Change;
(C) the rationale for the proposal and any relevant supporting analysis;
(D) the expected impact, including the quantitative impact, of the proposed Fee Change or Significant Change on the market structure, subscribers and, if applicable, on investors and the capital markets;
(E) the expected impact of the Fee Change or Significant Change on the ATS's compliance with Ontario securities law requirements and in particular requirements for fair access and maintenance of fair and orderly markets;
(F) a summary of any consultations, including consultations with external parties, undertaken in formulating the Fee Change or Significant Change, and the internal governance process followed to approve the Change;
(G) for a proposed Fee Change:
1. the expected number of marketplace participants likely to be subject to the new fee, along with a description of the costs they will incur; and
2. if the proposed Fee Change applies differently across types of marketplace participants, a description of this difference, how it impacts each class of affected marketplace participant, including, where applicable, numerical examples, and any justification for the difference in treatment.
(H) if the Significant Change will require subscribers or service vendors to modify their systems after implementation of the Change, the expected impact of the Change on the systems of subscribers and service vendors together with an estimate of the amount of time needed to perform the necessary work and how the estimated amount of time was deemed reasonable in light of the expected impact of the Significant Change on the ATS, its market structure, subscribers, investors or the Canadian capital markets;
(I) where the proposed Significant Change is not a Significant Change subject to Public Comment, the rationale for why the proposed Significant Change is not considered a Significant Change subject to Public Comment;
(J) a discussion of any alternatives considered; and
(K) if applicable, whether the proposed Fee Change or Significant Change would introduce a fee model or feature that currently exists in other markets or jurisdictions;
(ii) for a proposed Significant Change subject to Public Comment or Fee Change subject to Public Comment, a notice for publication that generally includes the information required under paragraph (a)(i), except information that, if included in the notice, would result in the public disclosure of sensitive information or confidential or proprietary financial, commercial or technical information;
(iii) for a proposed Fee Change or Significant Change, blacklined and clean copies of Form 21-101F2 showing the proposed Change.
(b) The ATS will submit the materials set out in subsection (a)
(i) at least 45 days prior to the expected implementation date of a proposed Significant Change; and
(ii) at least fifteen business days prior to the expected implementation date of a proposed Fee Change.
(c) For a Housekeeping Change, the ATS will provide Staff with the following materials:
(i) a cover letter that fully describes the Change and indicates that it was classified as a Housekeeping Change and, for each Housekeeping Change, provides an analysis of the rationale for the classification and the expected or actual date of implementation of the Change; and
(ii) blacklined and clean copies of Form 21-101F2 showing the Change.
(d) The ATS will submit the materials set out in subsection (c) by the earlier of
(i) the ATS's close of business on the 10th calendar day after the end of the calendar quarter in which the Housekeeping Change was implemented; and
(ii) the date on which the ATS publicly announces a Housekeeping Change, if applicable.
(a) Within 5 business days of the receipt of the notice and materials submitted by the ATS relating to a Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with paragraph 6(a)(ii), Staff will review the notice and materials to ensure that they contain an adequate level of detail, analysis and discussion to elicit meaningful public comment, and will promptly notify the ATS of any deficiency requiring a resubmission of the notice and/or materials.
(b) Where the notice and/or materials are considered by Staff to be deficient, the ATS will amend and resubmit the notice and/or materials accordingly, and the date of resubmission will serve as the submission date for the purposes of this Protocol.
(c) Where the notice and materials are considered by Staff to be adequate for publication, Staff will proceed with the processes set out in section 8.
(a) As soon as practicable after the receipt of the notice and materials submitted by the ATS relating to a Significant Change subject to Public Comment or Fee Change subject to Public Comment, in accordance with paragraph 6(a)(ii), Staff will publish in the OSC Bulletin and/or on the OSC website, the notice prepared by the ATS, along with a notice prepared by Staff, if necessary, that provides market participants with an opportunity to provide comments to Staff and to the ATS within 30 days from the date the notice appears in the OSC Bulletin or on the OSC website, whichever comes first.
(b) If public comments are received
(i) the ATS will forward copies of the comments promptly to Staff; and
(ii) the ATS will prepare a summary of the public comments and a response to those comments and provide them to Staff promptly after the end of the comment period.
(a) Staff will use their best efforts to complete their review of a proposed Fee Change or Significant Change within
(i) 45 days from the date of submission of a proposed Significant Change; and
(ii) fifteen business days from the date of submission of a proposed Fee Change.
(b) Staff will notify the ATS if they anticipate that their review of the proposed Fee Change or Significant Change will exceed the timelines in subsection (a).
(c) If Staff have material comments or require additional information to complete their review of a proposed Fee Change or Significant Change, Staff will use best efforts to provide the ATS with a comment letter promptly by the end of the public comment period for a Significant Change subject to Public Comment or Fee Change subject to Public Comment, and promptly after the receipt of the materials submitted under section 6 for all other Changes.
(d) The ATS will respond to any comments received from Staff in writing.
(e) Unless Staff agree to an extension of time, if the ATS fails to respond to Staff's comments within 120 days after the receipt of Staff's comment letter, the ATS will be deemed to have withdrawn the proposed Fee Change or Significant Change. If the ATS wishes to proceed with the Fee Change or Significant Change after it has been deemed withdrawn, the ATS will have to re-submit it for review and approval in accordance with this Protocol.
(f) Upon completion of Staff's review of a Fee Change or Significant Change, Staff will submit the Change to the Director or, in the circumstances described in subsection (g), to the Commission, for a decision within the following timelines:
(i) for a Significant Change subject to Public Comment or Fee Change subject to Public Comment, the later of 45 days from the date that the related materials were published for comment and the date that Staff's comments and public comments, including any concerns identified, have been adequately addressed by the ATS;
(ii) for any other Significant Change, the later of 45 days from the date of submission of the Change and the date that Staff's comments and any concerns identified have been adequately addressed by the ATS; or
(iii) for any other Fee Change, the later of fifteen business days from the date of submission of the change and the date that Staff's comments and any concerns identified have been adequately addressed by the ATS.
(g) A Fee Change or Significant Change may be submitted to the Commission for a decision, within the timelines in subsection (f),
(i) if the proposed Fee Change or Significant Change introduces a novel feature to the ATS or the capital markets;
(ii) if the proposed Fee Change or Significant Change raises significant regulatory or public interest concerns; or
(iii) in any other situation where, in Staff's view, Commission approval is appropriate.
(h) Staff will promptly notify the ATS of the decision.
(i) If a Significant Change subject to Public Comment or Fee Change subject to Public Comment is approved, Staff will publish the following documents in the OSC Bulletin and/or on the OSC website promptly after the approval:
(i) a notice indicating that the proposed Change is approved;
(ii) the summary of public comments and responses prepared by the ATS, if applicable; and
(iii) if non-material changes were made to the version published for public comment, a brief description of these changes prepared by the ATS and a blacklined copy of the revised Change highlighting the revisions made.
(a) Staff will review a proposed Fee Change or Significant Change to assess whether it is in the public interest for the Director or the Commission to approve the Change. In making this determination, Staff will have regard for the purposes of the Securities Act (Ontario) (Act) as set out in section 1.1 of the Act. The factors that Staff will consider in making their determination also include whether:
(i) the Change would impact the ATS's compliance with Ontario securities law;
(ii) the ATS followed its established internal governance practices in approving the proposed Change;
(iii) the ATS followed the requirements of this Protocol and has provided sufficient analysis of the nature, purpose and effect of the Change; and
(iv) the ATS adequately addressed any comments received.
(a) A Fee Change or Significant Change will be effective on the later of:
(i) the date that the ATS is notified that the Change is approved;
(ii) if applicable, the date of publication of the notice of approval on the OSC website;
(iii) if applicable, the implementation date established by the ATSs' rules, agreements, practices, policies or procedures; and
(iv) the date designated by the ATS.
(b) The ATS must not implement a Fee Change unless the ATS has provided stakeholders, including marketplace participants, issuers and vendors, as applicable, with notice of the Fee Change at least five business days prior to implementation.
(c) Where a Significant Change involves a material change to any of the systems, operated by or on behalf of the ATS, described in section 12.1 of National Instrument 21-101, the Significant Change will not be effective until a reasonable period of time after the ATS is notified that the Significant Change is approved.
(d) In determining what constitutes a reasonable period of time for purposes of implementing a Significant Change under paragraph (c), Staff will consider how the Significant Change will impact the ATS, its market structure, subscribers, investors or the Canadian capital markets or otherwise raises regulatory or public interest concerns.
(e) The ATS must notify Staff promptly following the implementation of a Significant Change or Fee Change that becomes effective under subsections (a) and (b).
(f) Where the ATS does not implement a Significant Change or Fee Change within 180 days of the effective date of the Fee Change or Significant Change, as provided for in subsections (a) and (b), the Significant Change or Fee Change will be deemed to be withdrawn.
(a) If, subsequent to its publication for comment, the ATS revises a Significant Change subject to Public Comment or Fee Change subject to Public Comment in a manner that results in a material change to the proposed substance or effect of the Change, Staff will, in consultation with the ATS, determine whether or not the revised Change should be published for an additional 30-day comment period.
(b) If a Significant Change subject to Public Comment or Fee Change subject to Public Comment is republished under subsection (a), the request for comments will include a blacklined version marked to the originally published version, a summary of comments and responses prepared by the ATS, and an explanation of the revisions and the supporting rationale for the revisions.
(a) If the ATS withdraws a Fee Change or a Significant Change that was previously submitted, it will provide a written notice of withdrawal to Staff.
(b) If the notice of withdrawal relates to a Significant Change subject to Public Comment or Fee Change subject to Public Comment, Staff will publish the notice of withdrawal in the OSC Bulletin and/or on the OSC website as soon as practicable.
(c) If a Significant Change subject to Public Comment or Fee Change subject to Public Comment is deemed to have been withdrawn as provided in subsection 9(e), Staff will prepare and publish a notice informing market participants that the ATS did not proceed with the Change.
(a) Subject to subsections (b) and (c), a Housekeeping Change will be effective on the date designated by the ATS.
(b) Staff will review the materials submitted by the ATS for a Housekeeping Change to assess the appropriateness of the categorization of the Change as housekeeping within five business days from the date that the ATS submitted the documents in accordance with subsections 6(c) and 6(d). The ATS will be notified in writing if there is disagreement with respect to the categorization of the Change as housekeeping.
(c) If Staff disagree with the categorization of the Change as housekeeping, the ATS will immediately repeal the Change, submit the proposed Change as a Significant Change, and follow the review and approval process described in this Protocol as applying to a Significant Change, including those processes applicable to a Significant Change subject to Public Comment, if applicable.
(a) The ATS may need to make a Significant Change effective immediately where the ATS determines that there is an urgent need to implement the Change to maintain fair and orderly markets, or because of a substantial and imminent risk of material harm to the ATS, its subscribers, other market participants or investors.
(b) When the ATS determines that immediate implementation is necessary, it will advise Staff in writing as soon as possible, but in any event, at least five business days prior to the proposed implementation of the Significant Change. The written notice will include the expected effective date of the Significant Change and an analysis to support the need for immediate implementation. An application for an exemption from the 45-day advance filing requirements in National Instrument 21-101 must follow within five business days following the ATS receiving notice that Staff agree with immediate implementation of the Significant Change.
(c) If Staff do not agree that immediate implementation is necessary, Staff will promptly notify the ATS, in writing, of the disagreement no later than the end of the third business day following submission of the notice under subsection (b). If the disagreement is not resolved, the ATS will submit the Significant Change in accordance with the timelines in section 6.
A Significant Change that has been implemented immediately in accordance with section 15 will be published, if applicable, and reviewed and approved by the Director or by the Commission in accordance with the procedures set out in section 9, with necessary modifications. If the Director or the Commission does not approve the Significant Change, the ATS will immediately repeal the Change and inform its subscribers of the decision.
The Commission's powers under section 21.0.1 of the Securities Act (Ontario) are not constrained in any way, notwithstanding a Change having been approved under this Protocol.
File No. 2019-22
September 2, 2020
WHEREAS on September 2, 2020, the Ontario Securities Commission held a hearing by videoconference to deal with procedural matters relating to this proceeding;
ON READING the written materials filed by Maurice Aziz, Andre Itwaru and Staff of the Commission, and on hearing the oral submissions of the representatives for Staff of the Commission, Global Bioenergy Resources Inc., Nayeem Alli, Maurice Aziz, and Andre Itwaru, and from Harish Bajaj, appearing in person, no one appearing for First Global Data Ltd;
IT IS ORDERED, for reasons to follow, that the merits hearing shall proceed by videoconference, on the dates previously ordered, pursuant to Rule 23(1) of the Ontario Securities Commission Rules of Procedure and Forms, (2019) 42 OSCB 9714 and section 5.2 of the Statutory Powers Procedure Act, RSO 1990, c S.22.
First Global Data Ltd. et al. -- s. 152
File No. 2019-22
September 8, 2020
WHEREAS the Ontario Securities Commission held a hearing in writing to consider a request of Staff of the Commission (Staff) for an order pursuant to section 152 of the Securities Act, RSO 1990, c S.5 (the Act);
ON READING Staff's Motion Record and on considering that no party opposes the relief sought;
IT IS ORDERED THAT Staff may apply, on behalf of the Commission, to the Ontario Superior Court of Justice pursuant to section 152 of the Act for an Order:
(a) appointing the members of the panel assigned to the merits hearing in this proceeding (the Hearing Panel) to take the evidence of Adriana Rios Garcia, an individual who resides in Sunny Isles Beach, Florida, for use in the merits hearing before the Commission;
(b) providing for the issuance of a letter of request directed to the judicial authorities of the State of Florida requesting the issuing of such process as is necessary to compel Adriana Rios Garcia to attend and give testimony before the Hearing Panel by video link and audio link, on oath or otherwise, in the merits hearing before the Commission;
(c) providing that the testimony of Adriana Rios Garcia shall be taken at the office of Kahn & Resnik P.L., located at the DCOTA Office Center, 1815 Griffin Road, Suite 207, Dania, Florida 33004, or at such other location in Florida as Staff may advise upon reasonable notice, so that the Hearing Panel, sitting in Toronto, is able to observe and participate by video link and audio link and make any required evidentiary rulings;
(d) providing that Adriana Rios Garcia shall give her testimony during the merits hearing before the Commission, commencing on October 5, 2020 at 10:00 a.m. Eastern Time or on such other dates and times thereafter as Staff may advise upon reasonable notice;
(e) prescribing that the procedural and evidentiary rules of Ontario will apply to the examination of Adriana Rios Garcia to the extent permissible by the laws of Florida; and
(f) providing for the payment by the Commission of the greater of any witness fees and travel expenses as may be required by the laws of Ontario and by the laws of Florida.
Temporary, Permanent & Rescinding Issuer Cease Trading Orders
Company Name |
Date of Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/Revoke |
|
||||
THERE IS NOTHING TO REPORT THIS WEEK. |
||||
Company Name |
Date of Order |
Date of Revocation |
|
||
Corsurex Resource Corp. |
July 21, 2020 |
September 2, 2020 |
|
||
LEUCADIA FINANCE PARTNERS INC. |
September 4, 2020 |
__________ |
|
||
Medifocus Inc. |
September 4, 2020 |
__________ |
|
||
Primeline Energy Holdings Inc. |
September 4, 2020 |
__________ |
Temporary, Permanent & Rescinding Management Cease Trading Orders
Company Name |
Date of Order |
Date of Lapse |
|
||
RYU Apparel Inc. |
June 17, 2020 |
September 1, 2020 |
|
||
Sproutly Canada, Inc. |
August 20, 2020 |
September 2, 2020 |
Outstanding Management & Insider Cease Trading Orders
Company Name |
Date of Order or Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/ Expire |
Date of Issuer Temporary Order |
|
|||||
Performance Sports Group Ltd. |
19 October 2016 |
31 October 2016 |
31 October 2016 |
__________ |
__________ |
Company Name |
Date of Order |
Date of Lapse |
|
||
RYU Apparel Inc. |
17 June 2020 |
September 1, 2020 |
|
||
Sproutly Canada, Inc. |
August 20, 2020 |
September 2, 2020 |
National Instrument 21-101 Marketplace Operation
1. National Instrument 21-101 Marketplace Operation is amended by this Instrument.
2. Section 3.2 is amended
(a) in subsection (2) by replacing "seven" with "15",
(b) in paragraph (3)(a) by replacing "month" with "calendar quarter", and
(c) by adding the following subsection:
(6) For the purposes of subsection (5), if information in a marketplace's Form 21-101F1 or Form 21-101F2, as applicable, has not changed since the marketplace filed its most recent Form 21-101F1 or Form 21-101F2 under subsection (5), the marketplace may incorporate that information by reference into its updated and consolidated Form 21-101F1 or Form 21-101F2..
3. Subsection 4.2(1) is amended by deleting "the requirements outlined in".
4. Part 4 is amended by adding the following section:
4.3 Filing of Interim Financial Reports
A recognized exchange and a recognized quotation and trade reporting system must file interim financial reports for each interim period, within 60 days after the end of the interim period, prepared in accordance with paragraphs 4.1(1)(a) and (b)..
5. Subparagraph 12.1(a)(i) is replaced with the following:
(i) adequate internal controls over those systems, and.
6. Subparagraph 12.1(a)(ii) is amended by adding "cyber resilience," after "information security,".
7. Subparagraph 12.1(b)(ii) is amended by:
(a) adding "processing capability" after "determine the",
(b) deleting "ability",
(c) adding "perform" after "those systems to",
(d) deleting "process transactions", and
(e) deleting "and" after "efficient manner,".
8. Paragraph 12.1(c) is amended by:
(a) deleting "material",
(b) replacing "breach" wherever it occurs with "incident",
(c) adding "that is material" before "and provide timely", and
(d) adding ", and" at the end of the paragraph.
9. Section 12.1 is amended by adding the following paragraph:
(d) keep a record of any systems failure, malfunction, delay or security incident and identify whether or not it is material..
10. Section 12.1.1 is replaced with the following:
12.1.1 Auxiliary Systems -- For each system that shares network resources with one or more of the systems, operated by or on behalf of the marketplace, that supports order entry, order routing, execution, trade reporting, trade comparison, data feeds, market surveillance and trade clearing, that, if breached, would pose a security threat to one or more of the previously mentioned systems, a marketplace must
(a) develop and maintain adequate information security controls that relate to the security threats posed to any system that supports order entry, order routing, execution, trade reporting, trade comparison, data feeds, market surveillance and trade clearing,
(b) promptly notify the regulator, or in Québec, the securities regulatory authority and, if applicable, its regulation services provider, of any security incident that is material and provide timely updates on the status of the incident, the resumption of service, where applicable, and the results of the marketplace's internal review of the security incident, and
(c) keep a record of any security incident and identify whether or not it is material..
11. Part 12 is amended by adding the following section:
12.1.2 Vulnerability Assessments -- On a reasonably frequent basis and, in any event, at least annually, a marketplace must engage one or more qualified parties to perform appropriate assessments and testing to identify security vulnerabilities and measure the effectiveness of information security controls that assess the marketplace's compliance with paragraphs 12.1(a) and 12.1.1(a)..
12. Subsection 12.2(1) is replaced with the following:
(1) On a reasonably frequent basis and, in any event, at least annually, a marketplace must engage one or more qualified external auditors to conduct an independent systems review and prepare a report in accordance with established audit standards and best industry practices that assesses the marketplace's compliance with
(a) paragraph 12.1(a),
(b) section 12.1.1, and
(c) section 12.4..
13. Paragraph 12.2(2)(b) is replaced with the following:
(b) the regulator or, in Québec, the securities regulatory authority, by the earlier of
(i) the 30th day after providing the report to its board of directors or the audit committee, and
(ii) the 60th day after the report's completion..
14. In the following provisions "and" is replaced with "or":
(a) Paragraph 12.3(1)(a), and
(b) Paragraph 12.3(2)(a).
15. Paragraph 12.3(3.1)(a) is amended by replacing "(2)(a)" with "(2)(b)".
16. Subsection 12.4(3) is amended by replacing "marketplace" with "recognized exchange or quotation and trade reporting system".
17. Paragraph 14.5(a) is amended
(a) in subparagraph (i) by replacing "an adequate system of internal controls" with "adequate internal controls", and
(b) in subparagraph (ii) by adding "cyber resilience," after "information security,".
18. Subparagraph 14.5(b)(ii) is amended by:
(a) adding "processing capability" after "determine the",
(b) deleting "ability",
(c) adding "perform" after "those systems to", and
(d) deleting "process information".
19. Paragraph 14.5(c) is replaced with the following:
(c) on a reasonably frequent basis and, in any event, at least annually, engage one or more qualified external auditors to conduct an independent systems review and prepare a report in accordance with established audit standards and best industry practices that assesses the information processor's compliance with paragraph (a) and section 14.6,.
20. Subparagraph 14.5(d)(ii) is replaced with the following:
(ii) the regulator or, in Québec, the securities regulatory authority, by the earlier of the 30th day after providing the report to its board of directors or the audit committee and the 60th day after the report's completion,.
21. Paragraph 14.5(e) is replaced with the following:
(e) promptly notify the following of any systems failure, malfunction, delay or security incident that is material and provide timely updates on the status of the failure, malfunction, delay or security incident, the resumption of service, and the results of the information processor's internal review of the failure, malfunction, delay or security incident:
(i) the regulator or, in Québec, the securities regulatory authority;
(ii) any regulation services provider, recognized exchange or recognized quotation and trade reporting system monitoring trading of the securities about which information is provided to the information processor, and.
22. Section 14.5 is amended by adding the following paragraph:
(f) keep a record of any systems failure, malfunction, delay or security incident and identify whether or not it is material..
23. Part 14 is amended by adding the following section:
14.5.1 Vulnerability Assessments
On a reasonably frequent basis and, in any event, at least annually, an information processor must engage one or more qualified parties to perform appropriate assessments and testing to identify security vulnerabilities and measure the effectiveness of information security controls that assess the information processor's compliance with paragraph 14.5(a)..
24. Form 21-101F1 is amended by replacing the portion of the Form after the heading "EXHIBITS" and before the heading "Exhibit A -- Corporate Governance" with the following:
File all Exhibits with the Filing. For each Exhibit, include the name of the exchange or quotation and trade reporting system, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect must be included instead of the Exhibit.
Except as provided below, if the filer, recognized exchange or recognized quotation and trade reporting system files an amendment to the information provided in its Filing and the information relates to an Exhibit filed with the Filing or a subsequent amendment, the filer, recognized exchange or recognized quotation and trade reporting system, must, in order to comply with subsection 3.2(1), (2) or (3) of National Instrument 21-101 Marketplace Operation, provide a description of the change and the actual or expected date of the implementation of the change, and file a complete and updated Exhibit. The filer must provide a blacklined version showing changes from the previous filing.
If the filer, recognized exchange or recognized quotation and trade reporting system has otherwise filed the information required by the previous paragraph pursuant to section 5.5 of National Instrument 21-101 Marketplace Operation, it is not required to file the information again as an amendment to an Exhibit. However, if supplementary material relating to a filed rule is contained in an Exhibit, an amendment to the Exhibit must also be filed..
25. Exhibit B of Form 21-101F1 is replaced with the following:
Exhibit B -- Ownership
In the case of an exchange or quotation and trade reporting system that is a corporation, other than an exchange or quotation and trade reporting system that is a reporting issuer, provide a list of the beneficial holders of 10 percent or more of any class of securities of the exchange or quotation and trade reporting system. For each listed security holder, provide the following:
1. Name.
2. Principal business or occupation and title, if any.
3. Ownership interest, including the total number of securities held, the percentage of the exchange or quotation and trade reporting system's issued and outstanding securities held, and the class or type of security held.
4. Whether the security holder has control (as interpreted in subsection 1.3(2) of National Instrument 21-101 Marketplace Operation).
In the case of an exchange or quotation and trade reporting system that is a partnership, sole proprietorship or other type of organization, provide a list of the registered or beneficial holders of the partnership interests or other ownership interests in the exchange or quotation and trade reporting system. For each person or company listed, provide the following:
1. Name.
2. Principal business or occupation and title, if any.
3. Nature of the ownership interest, including a description of the type of partnership interest or other ownership interest.
4. Whether the person or company has control (as interpreted in subsection 1.3(2) of National Instrument 21-101 Marketplace Operation)..
26. Section 1 of Exhibit C of Form 21-101F1 is amended by
(a) repealing Item 4, and
(b) repealing Item 5.
27. Exhibit D of Form 21-101F1 is amended by
(a) repealing Item 2 of section 2,
(b) repealing Item 5 of section 2, and
(c) repealing Item 6 of section 2.
28. Exhibit E of Form 21-101F1 is amended by
(a) deleting ", including a description of any co-location arrangements" in Item 2 after "services",
(b) repealing Item 7, and
(c) repealing Item 8.
29. Exhibit G of Form 21-101F1 is amended by
(a) replacing "high level" with "high-level" in Item 1 under "General",
(b) replacing "the Instrument" with "National Instrument 21-101 Marketplace Operation" in Item 2 under "General" and in Item 3 under "Systems", and
(c) replacing "are" with "is" in Item 2 under "IT Risk Assessment".
30. Form 21-101F2 is amended by replacing the portion of the Form after the heading "EXHIBITS" and before the heading "Exhibit A -- Corporate Governance" with the following:
File all Exhibits with the Initial Operation Report. For each Exhibit, include the name of the ATS, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect must be included instead of the Exhibit.
If the ATS files an amendment to the information provided in its Initial Operation Report and the information relates to an Exhibit filed with the Initial Operation Report or a subsequent amendment, the ATS must, in order to comply with subsection 3.2(1), (2) or (3) of National Instrument 21-101 Marketplace Operation, provide a description of the change and the actual or expected date of the implementation of the change, and file a complete and updated Exhibit. The ATS must provide a blacklined version showing changes from the previous filing..
31. Exhibit B of Form 21-101F2 is replaced with the following:
Exhibit B -- Ownership
In the case of an ATS that is a corporation, other than an ATS that is a reporting issuer, provide a list of the beneficial holders of 10 percent or more of any class of securities of the ATS. For each listed security holder, provide the following:
1. Name.
2. Principal business or occupation and title, if any.
3. Ownership interest, including the total number of securities held, the percentage of the ATS's issued and outstanding securities held, and the class or type of security held.
4. Whether the security holder has control (as interpreted in subsection 1.3(2) of National Instrument 21-101 Marketplace Operation).
In the case of an ATS that is a partnership, sole proprietorship or other type of organization, provide a list of the registered or beneficial holders of the partnership interests or other ownership interests in the ATS. For each person or company listed, provide the following:
1. Name.
2. Principal business or occupation and title, if any.
3. Nature of the ownership interest, including a description of the type of partnership interest or other ownership interest.
4. Whether the person or company has control (as interpreted in subsection 1.3(2) of National Instrument 21-101 Marketplace Operation)..
32. Section 1 of Exhibit C of Form 21-101F2 is amended by
(a) repealing Item 4, and
(b) repealing Item 5.
33. Exhibit D of Form 21-101F2 is amended by
(a) repealing Item 2 of section 2, and
(b) repealing Item 5 of section 2.
34. Exhibit E of Form 21-101F2 is amended by
(a) deleting ", including a description of any co-location arrangements" in Item 2,
(b) repealing Item 7, and
(c) repealing Item 8.
35. Exhibit G of Form 21-101F2 is amended by
(a) replacing "high level" with "high-level" in Item 1 under "General",
(b) replacing "the Instrument" with "National Instrument 21-101 Marketplace Operation" in Item 2 under "General" and in Item 3 under "Systems", and
(c) replacing "are" with "is" in Item 2 under "IT Risk Assessment".
36. Part A of Form 21-101F3 is amended by
(a) repealing Item B in section 3,
(b) repealing Item C in section 3,
(c) repealing section 4,
(d) repealing section 5,
(e) repealing section 6, and
(f) repealing section 7.
37. Section 1 of Part B of Form 21-101F3 is amended by
(a) repealing Item 1 and Chart 1,
(b) repealing Item 2 and Chart 2,
(c) repealing Item 3 and Chart 3,
(d) repealing Item 4 and Chart 4,
(e) repealing Item 5 and Chart 5, and
(f) repealing Item 6 and Chart 6.
38. Section 2 of Part B of Form 21-101F3 is amended by
(a) repealing Item 3, and
(b) repealing Chart 9.
39. Form 21-101F5 is amended by replacing the portion of the Form after the heading "Exhibits" and before the heading "Exhibit A -- Corporate Governance" with the following:
File all Exhibits with the Initial Form. For each Exhibit, include the name of the information processor, the date of filing of the Exhibit and the date as of which the information is accurate (if different from the date of the filing). If any Exhibit required is inapplicable, a statement to that effect must be included instead of the Exhibit.
If the information processor files an amendment to the information provided in its Initial Form, and the information relates to an Exhibit filed with the Initial Form or a subsequent amendment, the information processor must, in order to comply with sections 14.1 and 14.2 of National Instrument 21-101 Marketplace Operation, provide a description of the change and the actual or expected date of the implementation of the change, and file a complete and updated Exhibit. The information processor must provide a blacklined version showing changes from the previous filing..
40. Section 1 of Exhibit C of Form 21-101F5 is amended by
(a) replacing "directors," with "officers," after "list of the partners,",
(b) repealing Item 4, and
(c) repealing Item 5.
41. Section 1 of Exhibit G of Form 21-101F5 is amended by replacing "National Instruments 21-101 and 23-101" with "National Instrument 21-101 Marketplace Operation and National Instrument 23-101 Trading Rules".
42. In the following provisions of Form 21-101F5, "National Instrument 21-101" is replaced with "National Instrument 21-101Marketplace Operation":
(a) Section 2 of Exhibit J,
(b) Section 1 of Exhibit K, and
(c) Exhibit M wherever the expression occurs.
43.
(1) The Instrument comes into force on September 14, 2020.
(2) In Saskatchewan, despite subsection (1), if this Instrument is filed with the Registrar of Regulations after September 14, 2020, this Instrument comes into force on the day on which it is filed with the Registrar of Regulations.
Companion Policy 21-101CP Marketplace Operation
1. Companion Policy 21-101CP Marketplace Operation is changed by this Document.
2. Subsection 6.1(6) is changed by replacing "seven" with "15" immediately before "business days before the expected implementation date".
3. Section 6.2 is replaced with the following:
6.2 Filing of Financial Statements -- Part 4 of the Instrument sets out the financial reporting requirements applicable to marketplaces. Subsections 4.1(2) and 4.2(2) respectively require an ATS to file audited financial statements initially, together with Form 21-101F2, and on an annual basis thereafter. These financial statements may be in the same form as those filed with IIROC. The annual audited financial statements may be filed with the Canadian securities regulatory authorities at the same time as they are filed with IIROC.
Section 4.3 requires recognized exchanges and recognized quotation and trade reporting systems to file interim financial reports within 60 days after the end of each interim period. In the view of the Canadian securities regulatory authorities, the term interim period means a period commencing on the first day of the recognized exchange's or quotation and trade reporting system's financial year and ending nine, six or three months before the end of the same financial year.
The Canadian securities regulatory authorities expect that financial statements and reports filed under subsections 4.2 and 4.3 should disclose the accounting principles used to prepare them. For clarity, financial statements and reports should include:
(a) in the case of annual financial statements, an unreserved statement of compliance with IFRS;
(b) in the case of an interim financial report, an unreserved statement of compliance with International Accounting Standard 34 Interim Financial Reporting..
4. Section 7.2 is changed by replacing "authority" with "authorities" after "Canadian securities regulatory".
5. Section 7.3 is changed by deleting ", policies" after "violations of rules".
6. Section 7.8 is changed by replacing subsection (1) with the following:
(1) Marketplaces are required under section 5.11 of the Instrument to maintain and ensure compliance with policies and procedures that identify and manage conflicts of interest arising from the operation of the marketplace or the services it provides. These may include conflicts, actual, potential or perceived, related to the commercial interest of the marketplace, the interests of its owners or its operators, including partners, directors, officers, or employees of the marketplace's owners, referral arrangements and the responsibilities and sound functioning of the marketplace. For an exchange and quotation and trade reporting system, they may also include potential conflicts between the operation of the marketplace and its regulatory responsibilities..
7. Section 14.1 is changed by replacing subsection (1) with the following:
(1) Paragraph 12.1(a) of the Instrument requires the marketplace to develop and maintain adequate internal controls over the systems specified. As well, the marketplace is required to develop and maintain adequate general computer controls. These are the controls which are implemented to support information technology planning, acquisition, development and maintenance, computer operations, information systems support, cyber resilience, and security. Recognized guides as to what constitutes adequate information technology controls may include guidance, principles or frameworks published by the Chartered Professional Accountants of Canada (CPA Canada), American Institute of Certified Public Accountants (AICPA), Information Systems Audit and Control Association (ISACA), International Organization for Standardization (ISO) or the National Institute of Standards and Technology (U.S. Department of Commerce) (NIST)..
8. Section 14.1 is changed by replacing subsection (2) with the following:
(2) Capacity management requires that a marketplace monitor, review, and test (including stress test) the actual capacity and performance of its systems on an ongoing basis. Accordingly, paragraph 12.1(b) of the Instrument requires a marketplace to meet certain systems capacity, processing capability and disaster recovery standards. These standards are consistent with prudent business practice. The activities and tests required in this paragraph are to be carried out at least once every 12 months. In practice, continuing changes in technology, risk management requirements and competitive pressures will often result in these activities being carried out or tested more frequently..
9. Section 14.1 is changed by replacing subsection (2.1) with the following:
(2.1) Paragraph 12.1(c) of the Instrument requires a marketplace to promptly notify the regulator or, in Québec, the securities regulatory authority of any systems failure, malfunction, delay or security incident that is material. A failure, malfunction, delay or security incident is considered "material" if the marketplace would, in the normal course of operations, escalate the matter to or inform senior management ultimately accountable for technology. Such events would not generally include those that have or would have little or no impact on the marketplace's operations or on participants. Non-material events may become material if they recur or have a cumulative effect..
10. Section 14.1 is changed by adding the following subsections:
(2.2) For purposes of paragraph 12.1(c) of the Instrument, a security incident is considered to be any event that actually or potentially jeopardizes the confidentiality, integrity or availability of any of the systems that support the functions listed in section 12.1 or any system that shares network resources with one or more of these systems or the information the system processes, stores or transmits, or that constitutes a violation or imminent threat of violation of security policies, security procedures or acceptable use policies. Any security incident that requires non-routine measures or resources by the marketplace would be considered material and thus reportable to the regulator or, in Québec, the securities regulatory authority. The onus would be on the marketplace to document the reasons for any security incident it did not consider material. Marketplaces should also have documented criteria to guide the decision on when to publicly disclose a security incident. The criteria for public disclosure of a security incident should include, but not be limited to, any instance in which client data could be compromised. Public disclosure should include information on the types and number of participants affected..
(2.3) With respect to the prompt notification requirement in paragraph 12.1(c), the Canadian securities regulatory authorities expect that a marketplace will provide notification of a systems failure, malfunction, delay or security incident that is material, orally or in writing, upon escalating the matter to its senior management. It is expected that, as part of the required notification, the marketplace will provide updates on the status of the failure, malfunction, delay or incident and the resumption of service. The marketplace should also have comprehensive and well-documented procedures in place to record, report, analyze, and resolve all incidents. In this regard, the marketplace should undertake a "post-incident" review to identify the causes and any required improvement to the normal operations or business continuity arrangements. Such reviews should, where relevant, include the marketplace's participants. The results of such internal reviews are required to be communicated to the regulator or, in Québec, the securities regulatory authority as soon as practicable. We note that CSA Staff Notice 21-326 Guidance for Reporting Material Systems Incidents provides marketplaces with additional guidance and a comprehensive set of guidelines for reporting material systems incidents under paragraph 12.1(c)..
(2.4) Paragraph 12.1(d) of the Instrument requires a marketplace to keep a record of any systems failure, malfunction, delay or security incident and identify whether or not it is material. We note that a marketplace may be asked to provide the regulator or, in Québec, the securities regulatory authority, with additional information, such as but not limited to reports, logs or other documents related to a systems failure, malfunction, delay, security incident or any other system or process-related data..
(2.5) A marketplace should also refer to the guidance in (2.2), (2.3) and (2.4) regarding security incidents that arise in connection with a marketplace's auxiliary systems under section 12.1.1 of the Instrument. A marketplace may be asked to provide the regulator or, in Québec, the securities regulatory authority, with additional information, such as but not limited to reports, logs or other documents related to a security incident..
11. Section 14.1 is changed by replacing subsection (3) with the following:
(3) Subsection 12.2(1) of the Instrument requires a marketplace to engage one or more qualified external auditors to conduct an annual independent systems review to assess the marketplace's compliance with paragraph 12.1(a), section 12.1.1 and section 12.4 of the Instrument. The review must be conducted and reported on at least once in each 12-month period by a qualified external auditor in accordance with established audit standards and best industry practices. We consider that best industry practices include the "Trust Services Criteria" developed by the American Institute of CPAs and CPA Canada. The focus of the assessment of any systems that share network resources with trading-related systems required under paragraph 12.2(1)(b) would be to address potential threats from a security incident that could negatively impact a trading-related system. For purposes of subsection 12.2(1), we consider a qualified external auditor to be a person or company or a group of persons or companies with relevant experience in both information technology and in the evaluation of related internal controls in a complex information technology environment. Before engaging a qualified external auditor to conduct the independent systems review, a marketplace is expected to discuss its choice of external auditor and the scope of the systems review mandate with the regulator or, in Québec, the securities regulatory authority. We further expect that the report prepared by the external auditor include, to the extent applicable, an audit opinion that (i) the description included in the report fairly presents the systems and controls that were designed and implemented throughout the reporting period, (ii) the controls stated in the description were suitably designed, and (iii) the controls operated effectively throughout the reporting period..
12. Section 14.1 is changed by replacing subsection (3.1) with the following:
(3.1) Section 12.1.2 of the Instrument requires a marketplace to engage one or more qualified parties to perform appropriate assessments and testing to identify security vulnerabilities and measure the effectiveness of information security controls. We would expect a marketplace to implement appropriate improvements where necessary. For the purposes of section 12.1.2, we consider a qualified party to be a person or company or a group of persons or companies with relevant experience in both information technology and in the evaluation of related internal systems or controls in a complex information technology environment. We consider that qualified parties may include external auditors or third-party information system consultants, as well as employees of the marketplace or an affiliated entity of the marketplace but may not be persons responsible for the development or operation of the systems or capabilities being tested. The regulator or, in Québec, the securities regulatory authority may, in accordance with securities legislation, require the marketplace to provide a copy of any such assessment..
13. Section 14.1 is changed by deleting subsection (4).
14. Section 14.1 is changed by replacing subsection (5) with the following:
(5) Under section 15.1 of the Instrument, the regulator or, in Québec, the securities regulatory authority may consider granting a marketplace an exemption from the requirements to engage one or more qualified external auditors to conduct an annual independent systems review and prepare a report under subsection 12.2(1) of the Instrument provided that the marketplace prepare a control self-assessment and file this self-assessment with the regulator or, in Québec, the securities regulatory authority. The scope of the self-assessment would be similar to the scope that would have applied if the marketplace underwent an independent systems review. Reporting of the self-assessment results and the timeframe for reporting would be consistent with that established for an independent systems review.
In determining if the exemption is in the public interest and the length of the exemption, the regulator or, in Québec, the securities regulatory authority may consider a number of factors including: the market share of the marketplace, the timing of the last independent systems review, changes to systems or staff of the marketplace and whether the marketplace has experienced material systems failures, malfunction or delays..
15. Section 14.3 is changed by replacing subsection (1) with the following:
(1) Business continuity management is a key component of a marketplace's operational risk-management framework. Section 12.4 of the Instrument requires that marketplaces develop and maintain reasonable business continuity plans, including disaster recovery plans. Business continuity planning should encompass all policies and procedures to ensure uninterrupted provision of key services regardless of the cause of potential disruption. In fulfilling the requirement to develop and maintain reasonable business continuity plans, the Canadian securities regulatory authorities expect that marketplaces are to remain current with best practices for business continuity planning and to adopt them to the extent that they address their critical business needs..
16. These changes become effective on September 14, 2020.
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Project #3069424
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Project #3028319
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Project #3110088
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Project #3110653
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Project #3109725
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Project #3109725
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Project #3027865
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Project #3098513
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Project #3101918
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Project #3101920
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Project #3055427
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Project #3055756
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Project #3104074
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Project #3070227
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Project #3081370
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Project #3099086
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Project #3083136
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Project #3087366
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Project #3099756
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Project #3100257
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Type |
Company |
Category of Registration |
Effective Date |
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New Registration |
VM Capital Inc. |
Exempt Market Dealer |
September 1, 2020 |
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Change in Registration Category |
BelCo Private Capital Inc. |
From: Exempt Market Dealer |
September 2, 2020 |
To: Exempt Market Dealer, Portfolio Manager and Investment Fund Manager |
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Change in Registration Category |
Hamilton Lane (Canada) LLC |
From: Exempt Market Dealer and Portfolio Manager |
September 4, 2020 |
To: Exempt Market Dealer, Portfolio Manager and Investment Fund Manager |
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