[co-author: Paul Rand]

On January 4, 2018, the Canadian Securities Administrators (CSA) published Staff Notice 21-322 Applicability of Regulation to the Operation of MTFs or OTFs in Canada (CSA Staff Notice) and the Ontario Securities Commission (OSC) published Staff Notice 21-711 Multilateral Trading Facilities – Exemption from Requirement to be Recognized as an Exchange (OSC Staff Notice, and together with the CSA Staff Notice, the Staff Notices). The Staff Notices flag the potential application of Canadian securities regulations to European Union-based trading venues operating as Regulated Markets, multilateral trading facilities (MTFs) or organized trading facilities (OTFs), where such trading venues offer access to Canadian participants.

The CSA Staff Notice highlights the need for non-Canadian trading venues to consider Canadian securities regulatory requirements, regardless of their regulatory status under local law, if Canadian participants have access to the trading venue. In particular, by directly or indirectly granting access to a Canadian participant, a trading venue may trigger Canadian requirements to be recognized or exempt from recognition as an exchange or registered as an alternative trading system (ATS). Notwithstanding that the Staff Notices are focused on the application of Canadian rules to European venues, the substance of the Staff Notices applies to any non-Canadian trading venue. The Staff Notices are particularly noteworthy in light of recent settlement agreements between Canadian regulators and certain market participants addressing the operation of unregistered ATSs in Canada.

The CSA Staff Notice invites trading venues to contact regulators to discuss the applicable Canadian regulatory framework.