IIROC releases guidance allowing dealers to guarantee trade prices
On January 9, the Investment Industry Regulatory Organization of Canada (IIROC) published guidance regarding the procedures to be followed by a Participant (dealer) wishing to guarantee a trade price for a client order that outperforms a benchmark price. As we discussed last year, IIROC released a draft version of the guidance on July 4 that would allow a certain amount of "outperformance" to be guaranteed under certain circumstances if a dealer agreed to take the trade as principal. Under the initial proposal, dealers would only be able to guarantee outperformance up to a maximum of the lesser of 50% of the Participant's historical realized outperformance of the same benchmark over the prior calendar quarter and 30 basis points.
The final version of the guidance released yesterday, however, has been revised to address public comments received. Of particular interest, the guidance now provides that a dealer may guarantee outperformance up to a maximum of the greater of 50% of the Participant's historical realized outperformance of the same benchmark over the prior calendar quarter and 25 basis points. Thus, dealers will be able to guarantee outperformance of 25 basis points, even in the absence of a demonstrated ability to outperform the benchmark.
For more information, see IIROC Notice 12-0010.
