With U.S. regulators pondering some major new equity market structure reforms — including the proposed elimination of the order protection rule — Canadian regulators are delaying certain trading rule changes for inter-listed securities and contemplating whether other reforms are needed.
Earlier this month, the U.S. Securities and Exchange Commission (SEC) launched a consultation on a proposal to eliminate trade through protection for U.S. equity markets — rescinding the rules that require brokers to route orders to execute against the best price.
That proposal, which is now out for a 60-day comment period, aims to address ongoing concerns about market fragmentation, given the proliferation of trading venues in the U.S. and the large share of equity volumes that are executed on “dark” markets, among other things.
At the same time, the SEC also delayed the implementation of reforms to trading tick size requirements and access fee caps that were slated to take effect later this year, but have now been pushed back to Nov. 1, 2027 to give the U.S. securities industry more time to adopt these changes.
In light of these developments, the Canadian Securities Administrators (CSA) and the Canadian Investment Regulatory Organization (CIRO) said that they will also delay planned changes to trading increments and access fee caps for inter-listed securities — measures that were designed to align with the planned changes in the U.S. markets — to match the SEC’s new timeline.
At the same time, the CSA indicated that it will also consider “any necessary action,” given the SEC’s proposal to drop its order protection rule — a potential major change to U.S. equity market structure that would give brokers more control over order routing (subject to their best execution obligations), in an effort to reduce regulatory complexity and to address the unintended consequences of regulation on equity market structure.
If the Canadian regulators decide to make any changes to the order protection requirements in Canada, those revisions would still have to go through the ordinary rulemaking process.