IIROC requests comments on proposed guidance regarding best execution obligations
On November 30, the Investment Industry Regulatory Organization of Canada proposed draft guidance regarding the management of order flows with respect to best execution obligations under UMIR. The guidance, released in the context of "a more complex trading environment", sets out a list of frequently asked questions relating to order types in the context of achieving best execution. Namely, the guidance considers issues such as: (i) order routing decisions; (ii) how to manage orders when not all marketplaces are open; (iii) considerations for deciding where to "book" an order; and (iv) obligations when using a third-party vendor for order routing.
Meanwhile, guidance was also proposed regarding the use of certain order types. According to IIROC, "a particular order type may function as designed but the execution outcome may result in an unanticipated price." IIROC stated that it has particular concern with order types without specific execution price limits. Guidance on the subject was also structured as an FAQ, and considered such issues as (i) whether market orders or limit orders should be used "in today's more complex markets"; (ii) whether "stop loss" orders prevent losses in fast moving markets; and (iii) whether "All or None" orders can be used to guarantee a fill of an order at a specific price in volatile markets.
IIROC is accepting comments on the proposed guidance until January 31, 2011. For more information, see IIROC Notice 10-0317.
