An exchange is defined under the Securities Act as a person who constitutes, maintains or provides a market place or facilities for bringing together purchasers and sellers of securities or derivatives. An exchange is subject to the Canadian Securities Administrators marketplace rules: National Instrument 21-101 Marketplace Operation, National Instrument 23-101 Trading Rules and their related companion policies.
Pursuant to section 36 of the Securities Act, no person shall carry on business as an exchange, a clearing agency, a trade repository or a derivatives trading facility in New Brunswick unless the person is recognized by the Commission as an exchange, clearing agency, a trade repository or a derivatives trading facility under subsection 35(1) of the Securities Act.
Exemption from Recognition
Exemptions from recognition as an exchange have been granted to certain exchanges. An exemption from recognition is usually granted on the basis that the exchange establishes that it:
- meets the criteria for exemption from recognition; and
- is subject to an appropriate regulatory regime.
The Commission has exempted the following exchanges from the requirement to be recognized as an exchange in New Brunswick:
- Neo Exchange is exempted from recognition as an exchange in New Brunswick. Its lead regulator is the Ontario Securities Commission;
- Nasdaq CXC Limited (Nasdaq Canada), together with its parent company Ensoleillement Inc., is exempted from recognition as an exchange in New Brunswick. Its lead regulator is the Ontario Securities Commission.
Swap Execution Facilities and Multilateral Trading Facilities
Swap execution facilities (“SEFs”) are a type of marketplace for trading swaps in the United States. They are governed by the Dodd-Frank Act and rules of the United States Commodity Futures Trading Commission. Multilateral Trading Facilities (“MTFs”) are a type of marketplace for trading over-the-counter derivatives and other products in the European Union (“EU”). They are governed by the Markets in Financial Instruments Directive and other EU and local rules.
SEFs and MTFs may be considered “exchanges and/or derivatives trading facilities” under New Brunswick securities law. If a SEF or MTF provides access to New Brunswick participants, it is considered to be carrying on business in New Brunswick and must be recognized as an exchange and/or a derivatives trading facility, or must obtain an exemption from recognition.
The Commission has exempted the following MTF from the requirement to be recognized as an exchange and derivatives trading facility:
- Refinitiv Multilateral Trading Facility (formerly Thomson Reuters Multilateral Trading Facility) is exempted from recognition as an exchange and as a derivatives trading facility in New Brunswick. Its lead regulator is the Ontario Securities Commission
Oversight of Exchanges and Quotation and Trade Reporting Systems - Memorandum of Understanding
On 25 June 2020, the Financial and Consumer Services Commission published the Memorandum of Understanding for Oversight of Exchanges and Quotation and Trade Reporting Systems (“MOU”). This revised MOU replaces an earlier MOU signed on 3 September 2002 and 1 January 2010.
Like the previous MOU, the revised MOU uses a lead regulator model. The lead regulator is responsible for coordinating the oversight program for an exchange or quotation and trade reporting system. Appendix A to the revised MOU lists the lead, exempting and participating regulators for each exchange.
The Commission signed the MOU on 19 June 2020, and it will be effective on 1 September 2020.