Traders on CIBC trading floor.CHARLA JONES/The Globe and Mail
Canada's securities industry watchdog had made changes to its proposed new rules for bond trading that aim to increase industry transparency.
The Investment Industry Regulatory Organization of Canada said Thursday that it is looking for comment on changes to the new reporting requirements it plans to impose on banks and securities firms. It first introduced the changes last year.
The new system will require these debt-trading dealers to submit a record of each and every transaction. This should better protect fixed-income investors by shining a light on the darker corners of the debt markets.
The new system improves upon the current market trade reporting system (MTRS), which is based on weekly statistics. The weekly data have not been as reliable enough, IIROC says, and the information from different dealers has been difficult to compare. "There have been some concerns regarding potential inconsistencies in the MTRS reporting methodologies among dealers," IIROC said in its report.
The new electronic reporting system, called MTRS 2.0, requires a daily account for all debt securities transactions, and eliminates the weekly report.
All told, the new system is meant to ensure that the prices clients pay on their bond transactions are fairly priced and unmanipulated.
After receiving feedback on its proposed changes issued in February, 2013, IIROC is easing up on the speed that banks would have to submit their transactions, and changing the information set it wants.
In IIROC's original proposal, the dealers had to submit their transaction data on the day after the trade was made (called T+1). Some companies, including TD Securities Inc., argued that transactions are sometimes fixed or changed, and this would create problems with the reliability of the data. In the amended draft, IIROC takes these concerns into account, but doesn't quite meet TD halfway on its request to extend the deadline to three days (T+3). IIROC's extended the deadline from T+1 at 2:00 a.m. to T+1 at 2:00 p.m.
The regulator said in its amended proposal that it would put measures in place to "identify [that] cancellations and corrections of transactions have been added to ensure the reported transaction data is accurate and complete."
IIROC also said it would make changes to the kind of data it intends to collect. Certain information related to coupons and internal transactions, for example, are no longer required to be submitted.
From technology to staff, the costs of the operation and maintenance of the MTRS 2.0 system will be paid by the dealers, but the fee model won't be published until late next year.
"Desjardins would like to caution IIROC that this project will have a huge budgetary impact to all dealers," Laflèche Montreuil, trading desk compliance manager at Desjardins Securities, said in a letter to the regulator earlier this year.
IIROC's is welcoming comment on this second draft until March 10, and final rules are expected to land in the second quarter of this year.
After that, the dealers will have two years to implement the two phases of the plan.