Canadian securities regulators are planning to go ahead with research to examine the impact of curbing trading fee rebates — but only if U.S. regulators move forward with their own study too.
The Canadian Securities Administrators (CSA) announced that they are prepared to carry out a study to analyze the effects of prohibiting trading fee rebates, but that their proposed pilot study is conditional on the U.S. Securities and Exchange Commission (SEC) launching a similar study.
Both the CSA and SEC have considered, for several years, undertaking research to examine the effects of prohibiting trading rebates.
But the CSA has been reluctant to launch a study unilaterally, given the high degree of integration between Canadian and U.S. markets. There’s a fear that interfering with venues’ trading models could be too disruptive.
Yet, regulators are remain keen to study the impact of banning rebates amid their concerns that current trading fee structures are having negative effects on the trading environment.
Their concerns include that existing models contribute to the segmentation of order flow, increase intermediation in actively traded securities, and create major conflicts of interest for dealer routing decisions.
“We have heard from our stakeholders that it is important to test how marketplace trading fee rebates affect the behaviour of market participants,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers (AMF), in a Thursday release.
“This study will help us to better understand and address potential issues associated with these rebates,” he added.
The CSA envisions carrying out its study in two stages: the first phase would involve inter-listed securities and would take place in tandem with the SEC study, and the second would be carried out three months later, with securities that aren’t inter-listed and exchange-traded funds.
More details will be provided by CSA on the timing and duration of its pilot once SEC announces an implementation date of its own.