The New Market Regulator
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The New Market Regulator Maureen Jensen and Mike Prior CNW Presentation June 4, 2003 Outline • • • • • Canadian Regulatory Landscape Who is RS and what do we do? How does all of this affect you? What does Market Supervision do? A brief look at some of our surveillance tools Canadian Regulatory Landscape • 13 Provincial Securities Regulatorsresponsible for investor protection and regulating fair and efficient markets • SROs – recognized by the securities commissions and responsible for member regulation (IDA), market regulation (RS), mutual fund regulation (MFDA) • Stock Exchanges - responsible for listing, listed company oversight and trade execution Commissions- OSC, BCSC, ASC, CVMQ, etc. Delegated powers under securities legislations and recognition orders SROs Exchanges, QTRSs and ATSs MFDA IDA RS (BC, AB, SK, ON) (BC, AB, SK, ON) (BC, AB, MB, ON, PQ ) Trade Association CIPF NASD Member Regulation Market Regulation TSX TSXVN MX Self- Regulation Market Regulation Nasdaq Canada Who is RS? • RS regulates the trading in Canadian equity markets • RS program the same for all markets, TSX, TSX Venture, Bloomberg and CNQ markets • Rules responsive to marketplace changes Who is RS? • RS formed from market regulation departments at TSX and TSX Venture • All existing expertise, regulatory information and infrastructure moved into RS • RS recognized by CSA as an approved agent for UMIR(Universal market integrity rules) Regulatory Framework-UMIR UMIR applies to: • all market participants • trading activity in all forms of securities (other than debt securities) • all exchanges and other equity marketplaces RS Operations Toronto and Vancouver offices Not-for-profit Regulation costs charged to brokerage firms Specific services provided at cost to Marketplaces RS Operations Integrated regulatory operations for TSX (Toronto office) and TSX Venture (Vancouver office) Surveillance Trade Desk Reviews Investigations and Enforcement Policy Development Marketplace Services such as Timely Disclosure and Investigative Research RS Operations What RS does that affects you? Watch the trading in your market Audit traders to ensure they give clients fair trade execution Investigate and Enforce rule breaches Keep rules up to date and clear Monitor and approve press releases Report disclosure breaches to the exchanges and commissions Provide research on new officers and directors for the exchanges Market Supervision Overview Market Supervision Functions • Administration of Timely Disclosure Policy • Reviewing Trading Patterns • Forwarding suspect trading situations to Investigations & Analysis Timely Disclosure • Cornerstone Policy of TSX • Equal access to information for all • Deals with material news items (i.e. stock splits, major acquisitions, take-over bids, large equity financings) Dealing with Press Releases • M.S. department notified prior to release • Surveillance Officer discusses news with company representative • Decision made whether or not to halt trading • Announcements must be “balanced” Wire Services • Listed company releases news to full text wire service • Currently there are 4 wire services accepted by TSX • Simultaneous, full-text coverage Disclosure Problems • Selective Disclosure • Failure to advise Market Surveillance • Delaying press releases or not disclosing negative news • Inability to reach senior officials • Press releases issued by third party (Investor Relations) Monitoring the Market • Market monitored on an on-line basis throughout the day • Statistical and rule-based alerts • Main tool is “IMM” • Access to Trading Engine • Other internal and external databases Monitoring the Market • • • • • Service to issuers involved in negotiations Monitor trading, order flow, chat rooms More sensitive alerts Multiple contacts, eg. Outside counsel MS staff can provide guidance Referrals to Investigations & Analysis • Unusual trading activity • High or low closing • Specific trading rule violations Surveillance Tools IMM - Intelligent Market Monitor - Alerts MADCAT - Market Data Collection & Analysis Tool Internet ROC - Record Of Contact NewsEdge Consolidated Short Position Report Questions ?
