Group Co.
S3 Now Offers Compliance with Amended IIROC Best Ex Requirements
Traders Magazine Online News, August 22, 2017
S3, a financial services software company providing innovative solutions to monitor and analyze trade execution for fixed income securities, equities, and options, released a statement regarding the Company’s data analytics solutions and the recent updates to best execution regulations issued by the Investment Industry Regulatory Organization of Canada (IIROC).
IIROC recently amended its Rules Notice 16-0233, Notice 16-0234 and Rule 3300 to consolidate best execution requirements for broker-dealers, including as they pertain to these firms’ obligations to provide clients with fair pricing of over-the-counter (OTC) securities. The amended regulations explicitly require broker-dealers to establish, maintain, and ensure compliance with written policies and procedures that are reasonably designed to achieve best execution when acting for a client.
Mark Davies, CEO of S3, commented, “The amendments recently issued by IIROC are indicative of the continued push by regulatory entities in all major financial markets to hold firms accountable for attaining optimal execution for client orders, in order to promote a more transparent and fairer marketplace. At S3 we seek to improve trust in the securities industry, and as such we provide customers with unmatched insight into variables impacting execution quality. As regulatory oversight increases, our Canadian customers can rest assured knowing that they have the tools in place to remain fully compliant.”
Specific aspects of the amendments, which will become effective in January 2018, include:
- IIROC will now prohibit the practice of sending client orders in bulk to a foreign intermediary for execution outside of Canada without considering other liquidity sources, including those in Canada.
- Broker-dealers must regularly review the way in which they manage client orders and order flow, in order to ensure that their best execution policies and procedures remain effective.
- Firms must take order and trade information from all applicable marketplaces into account when determining routing strategies designed to achieve best execution.
- With respect to OTC securities, IIROC considers a broker-dealer to have achieved best execution when it obtains a price that is fair and reasonable in relation to prevailing market conditions.
- In the context of an illiquid security, broker-dealers may be required to canvass various parties to source the availability and the price of the specific security.
S3’s solutions, including its Canadian Best Execution Quality Suite and Fixed Income Execution Quality Suite, enable customers to determine the true execution quality of those orders executed on behalf of their clients, as well as their own orders. The Company’s software platform enables its Canadian clients to meet all requirements of the amended IIROC regulations by providing them with more detailed insights on their orders. The Fixed Income Execution Quality Suite incorporates data from a variety of sources, including evaluated prices. Firms utilizing the platform can measure the value of a given bond one to two days before a given trade, at the time the order is executed and the day after the execution occurs. S3 recently bolstered its fixed income offering with the addition of contra reporting functionality, which provides customers with greater insight into the trading activity of their counterparties.
Mr. Davies concluded, “Per the amended IIROC regulations, firms are expected to ensure that prices provided to its clients are fair and reasonable. Determining what constitutes ‘fair and reasonable’ can be especially difficult for OTC bond transactions given the relative opacity of the fixed income market. Our product suite mitigates this issue by enabling customers to conduct deeper analysis on their orders in order to adapt their trading operations to best suit the needs of their clients, ultimately improving trust in the securities markets and streamlining regulatory compliance for our Canadian customers.”
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