Guidelines

Guidelines on disciplinary sanctions

The objective of these guidelines is to establish the principles and factors that should be considered in order to arrive at fair and appropriate penalties in response to disciplinary complaints without establishing predetermined penalties. This document has three sections: the first itemizes the intended penalties included in the Rules of the Bourse, the second lists the underlying principles, and the third contains a list of factors that must be considered when assessing a fair and appropriate penalty, given the specific circumstances of a case.

Penalties

Article 4.205 of the Rules of the Bourse (former Article 4105) lists potential penalties in the case of an offence to one or more of the Rules of the Bourse. These penalties are:

  • A reprimand
  • A fine not exceeding $1,000,000
  • The suspension or revocation of the rights as an Approved Participant ("participant") or an Approved Person ("person") for such period and upon such conditions, including conditions of reinstatement, as the Committee may determine
  • A prohibition to obtain an approval for the time and upon such conditions determined by the Committee, including the conditions for the release of such a prohibition
  • The expulsion of the Approved Participant
  • The making of restitution to any Person who has suffered a loss as a result of the acts or omissions of a Person under the jurisdiction of the Bourse
  • The obligation to take one or more courses given by CSI Global Education Inc. or any other course deemed appropriate
  • The reimbursement in whole or in part of the costs and expenses (including professional fees) paid or incurred by the Bourse in connection with the complaint and the matters out of which it arose including all investigations, hearings, appeals and other proceedings before or after the complaint

Principles

1. Penalties shall be imposed to prevent future offences and maintain a high standard of business conduct with the aim of protecting the public.

A penalty must have a deterrent effect in order to prevent future offences, with the aim of protecting the public. To this end, a penalty must be sufficient and proportionate to the seriousness of the offence. Among other things, the penalty must be greater than the cost of the misconduct. So in order to have a deterrent effect, a penalty must not be less than the profit generated by committing the offence.

2. Penalties shall be specific and proportionate to the facts of the alleged offence

The penalties must be tailored to all the specific facts and circumstances of the matter at hand. For example, for an offence related to exceeding prescribed position limits, it is important to consider the nature of the transactions (speculative or hedging) that have led to the limits being exceeded as well as whether or not the transactions generated a profit.3

3. Penalties shall be more severe for repeat offenders

One or more offences committed by a participant or a person following a prior, similar disciplinary penalty must result in a more severe penalty. The recurrence of an offence or the occurrence of a similar offence indicates that the prior penalty was insufficient in serving its purpose as a deterrent, so a more severe penalty is justified.

To the extent that the new offence is not comparable to the prior offence, it is important to determine whether, independent of the nature of the offence per se, it reveals that the participant or the person has shown indifference to complying with the Rules of the Exchange.

Furthermore, consideration must be given to the amount of time that has passed between the prior disciplinary penalty and the date of the current offence. The longer this period of time, the less influence this prior disciplinary offence should have in determining the new penalty.

4. Preferably, separate penalties shall be imposed for each offence

When dealing with multiple offences, the imposition of a separate penalty for each offence must be favored. The goals of this principle are to allow participants to differentiate between the offences and to ensure that the penalties have a deterrent effect. However, under certain circumstances, a comprehensive penalty, i.e. a penalty that covers all the offences, may be more appropriate.

5. It may be appropriate to recommend the suspension, revocation or expulsion of a participant or a person

The suspension, revocation or expulsion of a participant or a person must be considered if the behavior at issue significantly impairs the integrity of markets or the reputation of the Exchange or if there is reason to believe that the conduct in question will be repeated. In particular, this principle is invoked if the participant or the person has committed several offences or has a record of numerous offences (disciplinary or judicial), acted deliberately, has demonstrated gross negligence, or has ignored the Exchange's interventions.

Factors for Consideration

1. The disciplinary record of the participant or the person

The penalty must take into account the participant's or the person's disciplinary record with the Exchange or with other securities or derivatives self-regulatory organizations. A participant's or a person's disciplinary record includes any decision by the Disciplinary Committee of the Exchange in which the participant or the person was found responsible for the offence (independent of whether this decision was rendered following a contested hearing or a settlement with the Division) or any decision by another regulator or self-regulatory organization. Even though reminder letters and letters of warning issued by the Regulatory Division are not part of a disciplinary record per se, they may be relevant circumstances to a matter and may therefore be taken into consideration.

2. The participant or the person has acknowledged their own responsibility or that of an employee, where applicable

Admission of responsibility by a participant or a person must be taken into account when determining the penalty. The sooner in the process that responsibility is acknowledged, the more this element must be given evidential value.

3. The participant informed the Exchange of the offence

In accordance with the obligations set out in the Rules of the Exchange (in particular, Article 3.105 (former Article 4002)), all participants must inform the Regulatory Division of any offence. If the Approved Participant knew or should have known that an offence was committed, it must notify the Regulatory Division. Consideration must be given to the circumstances of this disclosure, meaning the quality of the information sent by the Approved Participant, the time taken for such disclosure (meaning the time between the relevant events and the participant's detection of the offence) and the circumstances around such detection (before the Regulatory Division's detection). Timely detection of the incident and prompt and complete disclosure to the Regulatory Division are mitigating factors and must be taken into consideration. In contrast, an offence that goes undetected, disclosure that is late or incomplete, and the absence of disclosure are all issues that may be considered aggravating factors.

4. The participant has implemented corrective measures

This factor takes into account measures taken by the participant to avoid recurrence of the offence. Such corrective measures may take different forms. For example, a process may be changed, the changes may be communicated to the affected employees, supervision activities may be improved, or employees may receive better training.

Consideration must be given to identifying the root cause of the non-compliance and whether the participant has taken appropriate corrective measures, as well as the diligence with which these measures are implemented. The root cause as identified by the participant can be used to determine, for example, whether the offence represents an isolated event or a systemic problem.

The implementation of appropriate corrective measures allows the Division to evaluate whether the offence could be repeated and, if it is repeated, whether it will be detected.

5. The gains generated, losses avoided or costs saved by the participant or the person

The gains generated, losses avoided or costs saved by committing the wrongful act must be taken into account, since the penalty must be greater than the cost of the misconduct. So in order to have a deterrent effect, a penalty must not be less than the profit generated or the costs saved by committing the offence. Such costs may include registration, renewal, transaction or other fees and costs.

6. The participant or the person has compensated the aggrieved person

One of the factors that must be considered is whether the participant or the person who committed the offence has compensated the aggrieved person. Voluntary compensation, prior to any intervention by the Exchange or the Division, must be perceived more favorably than the absence of compensation. Similarly, compensation made voluntarily before any intervention by the Exchange or the Division will be considered preferable to that made after the Division has issued a request for information or opened an investigation.

7. The number of orders or transactions and the trading volume

Depending on the offence, it may be appropriate to take into account the number of orders or transactions entered and the trading volume. For example, this information will be considered when a participant ignores the Rules of the Exchange when it gives people access to automated trading. For this offence, a fair and appropriate penalty needs to take into consideration not only the number of people given such access and the length of time of the offence, but also the number of orders entered and the trading volumes. A large number of orders entered and high trading volumes must result in a more severe penalty than would be imposed if few or no orders were entered or the trading volume was nil.

8. The consequences of the offence for the Exchange's reputation and the integrity of markets

An offence to the Rules of the Exchange may have more far-reaching effects than a simple financial gain or loss. The reputation of the Exchange and the integrity of the market may be affected. In such cases, the penalty must take into account the consequences of the offence in order to protect the reputation of the Exchange and not discredit the Division's activities.

9. The nature and seriousness of the offence

The penalty must be proportionate to the nature and seriousness of the offense. A more serious offence must lead to a more severe penalty. The seriousness of an offence is assessed on the basis of all the consequences of the offending act. The Division believes that any behavior that impairs the integrity of the market or the reputation of the Exchange is inherently more serious.

10. The risk of re-offence

The risk of re-offence may be a crucial factor when assessing the appropriate penalty. A potential for re-offence may exist even in the absence of a disciplinary record. For example, the payment of a penalty combined with a suspension may, in certain circumstances, be more appropriate than the payment of a penalty alone, independent of the amount.

11. Similar or identical behavior

Any pattern of similar behavior must be taken into consideration when determining a penalty. A pattern may generally be found in the disciplinary record of the participant or the person or in a repetition of similar facts. It should be noted that an isolated incident is not sufficient to conclude that a pattern of behavior exists. The presence of a pattern in one participant or one person may suggest that the offence is not an isolated event. In such cases, the penalty must be more severe.

12. The length of the offending conduct

The length of the offending conduct is one of the factors indicating the seriousness of an offence. The longer that the offence lasts, the more severe must be the penalty.

13. The participant or the person tried to conceal the offence or failed to send relevant information to the Division

All participants and persons are required to cooperate with the Division, particularly in its investigations. So if a participant or a person has tried to conceal the offence or has failed to send relevant information to the Division, this represents an aggravating factor. Furthermore, persons at higher management levels must receive higher penalties.

14. The misconduct by the participant or the person is intentional

Planning an act or a transaction that the participant or the person knew, or should have known, was in violation of one or more of the Rules of the Exchange constitutes an aggravating factor. In such circumstances, the penalty must be more severe.

15. Internal penalties imposed by the participant on an employee

If the participant has imposed a penalty on its offending employee, this must be considered a mitigating factor when determining the penalty.

16. The level of cooperation with the Division demonstrated by the participant or the person

The level of cooperation demonstrated by the participant or the person must be taken into consideration, since it may indicate the importance accorded to compliance and regulations. When determining the penalty, favorable consideration must be given to a high level of cooperation from the participant or the person. In contrast, if the participant or the person unduly delayed the work of the investigation or provided inaccurate, erroneous or misleading documents, this constitutes an aggravating factor.

Guidelines for the approval process of approved persons

This document is a reference work of the Regulatory Division (the "Division") of Bourse de Montréal Inc. (the "Bourse"). The content of this document does not supersede the Rules of the Bourse (the "Rules") or any other applicable regulations.

The objective of these guidelines is to describe the conditions of eligibility and the approval process of Approved Persons by the Regulatory Division.

The document is divided into three sections: the first section sets out the relevant provisions of the Rules that apply to Approved Persons; the second enumerates the conditions of eligibility the applicant must satisfy to be approved by the Bourse; and the last section contains a list of questions that every Approved Participant and applicant must ask themselves before filing an application for approval as an Approved Person (the "Application").

Rules of the Bourse

1. What is an "Approved Person"?

According to article 1.101 of the Rules (former article 1102), an "Approved Person" means the employee of an Approved Participant or the employee of an affiliated corporation or subsidiary of an Approved Participant that has been duly approved by the Bourse in accordance with article 3.400 of the Rules (former article 7403).

Article 3.400 (former article 7403) of the Rules states that any person employed by an Approved Participant or an affiliated corporation or subsidiary of an Approved Participant who wishes to have access to the electronic trading system of the Bourse in order to act as an Approved Person in accordance with the Rules must submit the Application beforehand.

All employees of an Approved Participant must be approved to have access to the electronic trading system of the Bourse. An employee of an affiliated corporation or subsidiary of the Approved Participant does not have the obligation to become an Approved Person unless he intends to execute special terms transactions, such as prearranged transactions, block trades and riskless basis cross trades.

Article 3.5 of the Rules (former article 6366 B)) provides that the personnel authorized to act on behalf of a client's account can have access to the electronic trading system of the Bourse without the prior approval of the Bourse. In this particular case, the affiliated corporation or subsidiary of the Approved Participant will be considered as a "client" having direct electronic access (DEA client) authorized by the Approved Participant to transmit orders electronically to the Bourse through the Approved Participant's trading system, using the identifier of the latter. The employee of an affiliated corporation or subsidiary of the Approved Participant, acting in the capacity of a client of the Approved Participant through an access to the electronic trading system of the Bourse in accordance with article 3.5 (former article 6366 B)), is therefore not required to become an Approved Person unless he intends to execute special terms transactions.

Contrary to an employee of the Approved Participant who must be approved to have access to the electronic trading system of the Bourse, an employee of the affiliated corporation or subsidiary of the Approved Participant must be approved if he intends to act as an Approved Person. Notably, this status would allow the employee to execute special terms transactions.

2. Who may apply to be an "Approved Person"?

The applicant must be employed by an Approved Participant or its affiliated corporation or a subsidiary. The definition of "Affiliated Corporations and subsidiaries" is found in article 1.103 of the Rules (former article 1103). The applicant must prove who his/her employer is to the Bourse (refer to the section on  conditions of eligibility ).

The Approved Participant or, as applicable, its affiliated corporation or subsidiary that employs the applicant, must be located in one of the following jurisdictions recognized by the Bourse: Canada, United States, United Kingdom, France, Ireland, Israel and Jersey.

3. Why become an "Approved Person"?

The employees of the Approved Participants who wish to have access to the Bourse's Electronic trading system have the obligation to obtain the Bourse's prior approval.

The employee of an affiliated corporation or a subsidiary of an Approved Participant does not have the obligation to become an Approved Person to have access to the Bourse's electronic trading system, unless the employee wishes to act as an Approved Person within the meaning of the Rules, particularly to be authorized to execute special terms transactions. In fact, articles 6.205 to 6.207 of the Rules (former article 6380) provides that only the Approved Persons may execute special terms transactions, such as prearranged transactions, block trades and riskless basis cross trades. Moreover, article 6.208 of the Rules (former article 6815) stipulates that exchanges for related products, such as exchanges for physical (EFP) exchanges for risk (EFR), are trades that may be executed only by Approved Persons.

This employee, as an Approved Person, may also process trade requests from an Approved Participant and its clients and, with the approval of the Approved Participant and the Bourse, the trade requests from the affiliated corporation or the subsidiary of the Approved Participant and its clients.

4. How to apply to be an "Approved Person"?

Article 3.400 of the Rules (former article 7403) stipulates that the Application must be submitted in the form prescribed by the Bourse. The applicant must answer all the questions and provide the documents required by the Bourse. Any omission may delay the review of the Application by the Bourse. The Application must be completed electronically, otherwise it may be rejected.

The Application must be signed jointly by the applicant, the Approved Participant and, where applicable, the affiliated corporation or subsidiary of the Approved Participant that employs the applicant. If the designated representative of the Approved Participant within the meaning of article 3.104 (former article 3501) of the Rules is not the signatory of the Application, a resolution of the corporation or a relevant excerpt from a resolution of the corporation duly authorizing a representative to sign on behalf of the Approved Participant is required. When the applicant is an employee of an affiliated corporation or a subsidiary of the Approved Participant, a resolution of the corporation or a relevant excerpt from a resolution of the corporation duly authorizing a representative to sign on behalf of the affiliated corporation or the subsidiary of the Approved Participant is required.

The  Application Form as an Approved Person , the  Personal Information Form  and all the documents required in support of the Application must be duly completed and sent to the Division to the following e-mail address:  reg@tmx.com . These forms are mandatory for any applicant, regardless of the jurisdiction of the applicant's employer (Canadian or foreign).

The payment of the fees (plus the applicable taxes) must also be sent to the Division. Note that these fees are not refundable, regardless of whether or not the Application is approved.

Any employee of an Approved Participant and, as applicable, any employee of an affiliated corporation or subsidiary of an Approved Participant wishing to be approved by the Division is required (i) to enroll in the training required by the Division  according to the products he is authorized to trade and (ii) to pay the related fees. A  Training Certificate Form  must then be completed and signed by the applicant, confirming that the applicant has read and understood the content of the course(s) and is committed to comply with the Rules.

It should be noted that the Approved Person status granted to an applicant by the Bourse does not release the Approved Participant and the applicant from ensuring that all requirements related to the applicant's registration are respected (e.g. IIROC, FCA, FINRA), and in no way constitutes an exemption from them. Approval by the Bourse as an Approved Person differs from the registration requirements issued by the competent securities authorities in the jurisdictions where the Approved Participants and their affiliated corporations or subsidiaries are located (refer to the next section discussing the conditions of admission).

5. What are the obligations attached to the status of "Approved Person"?

Article 3.401 of the Rules (former article 7407) provides that the Approved Participant is responsible for all acts and omissions of any Approved Person, as defined in article 1.101 (former article 1102). Any act or omission on the part of an Approved Person that could constitute an offence against any rule, policy or procedure of the Bourse will be considered an offence on the part of the Approved Participant.

Moreover, under article 1.0 of the Rules (former article 1101), the regulations of the Bourse are binding on the Approved Person, as is the case for an Approved Participant.

More specifically, the Approved Person is required to comply with the obligation of providing any information that could be requested by the Division's personnel. In accordance with article 4.1 of the Rules (former article 4001), the Approved Person must submit and give to the Division access to any records, registers, data, data bases, files, documents, papers and information for examination, and allow the Division to obtain a copy on demand.

The Bourse may file a disciplinary complaint against an Approved Person regarding (i) a breach of the regulations of the Bourse or (ii) any act, conduct, unworthy practice or proceeding, inconsistent with just and equitable principles of trade, or detrimental to the reputation of the Bourse or to the interests or the welfare of the public or of the Bourse. This complaint may result in the imposition of disciplinary penalties, the whole in accordance with articles 4.201 and 4.205 of the Rules (former articles 4101 a) and 4105).

It should be noted that article 4.201 (b) (former article 4101 b)) stipulates that the Bourse may also file a complaint against a former Approved Person, provided an originating notice is served on such person within thirty-six (36) months from the date upon which the person ceased to be an Approved Person.

Finally, in accordance with article 3.103 of the Rules (former articles 3304 a) and 3404 a)), an Approved Participant must give the Bourse written notice, within a delay of ten (10) business days, of the termination of employment of an Approved Person. The form prescribed for this purpose by the Bourse can be found on the Bourse's website at the following address:  https://www.m-x.ca/f_publications_en/Termination_notice.pdf . The delay of ten (10) business days begins on the business day following the date of termination of employment.

Conditions of eligibility

Article 3.0 of the Rules (former article 3001) provides that the Bourse shall give its approval where, in its opinion, the applicant has the necessary competence and integrity.

Thus, before submitting an Application for approval as an Approved Person, it is recommended that the applicant and the Approved Participant ensure that the conditions of eligibility are fulfilled. Non-compliance with one of these conditions automatically leads to rejection by the Division of the Application for approval as an Approved Person. Furthermore, the Application will be deemed to have been abandoned and will be cancelled by the Bourse if the applicant does not provide all the information and documents required by the Bourse within six (6) months after the date of filing of the application with the Division.

This page is an updated extract of circular  179-18  published on the Bourse's website on November 12, 2018.

Guidelines for Supervision and Compliance Obligations

Article 3.100 of the Rules of the Bourse (former article 3011) provides that each Approved Participant, at the time of its approval and so long as it remains approved, must establish and maintain a system to supervise the activities of each of its employees and agents that is reasonably designed to achieve compliance with the Rules and Policies of the Bourse and with any legislation and regulations applicable to Securities and Derivative Instruments activities. Each approved participant must also comply with the Electronic Trading Rules, especially those regarding risk management and supervisory controls, policies and procedures, the authorization to set or adjust the risk management and supervisory controls, policies and procedures, as well as the use of automated order systems—Regulation 23-103 Respecting Electronic Trading (Chapter V-1.1, r. 7.1).

The obligations relating to supervision and compliance are principle-based as there exists no one-size-fits-all. As such, the Approved Participants have the ability to design and implement a supervisory system adapted to their business model, structure and risk. The Regualtory Division recognizes that Approved Participants should have the flexibility to determine what is appropriate given their needs and tailor their system accordingly.

The objective of these guidelines is for the Regulatory Division to share the underlying principles and questions it considers when assessing the reasonableness of an Approved Participant's supervisory system. This document is divided into three sections: the first itemizes the required components of a supervisory system as provided per article 3.100 of the Rules of the Bourse (former article 3011), the second lists the principles of a reasonable supervisory system, and the third contains a list of questions that one should ask when assessing its reasonableness.

Supervision and Compliance

Article 3.100 of the Rules of the Bourse (former article 3011) provides that:

  • "A) Each Approved Participant at the time of its approval and so long as it remains approved, must establish and maintain a system to supervise the activities of each employee, Approved Person and agent of the Approved Participant, that is reasonably designed to achieve compliance with the Regulations of the Bourse and with any legislation and regulations applicable to Securities and Derivative Instruments activities. Such a supervisory system must provide, at a minimum, the following:
    • i) the establishment, maintenance and enforcement of written policies and procedures acceptable to the Bourse regarding the conduct of the type of business in which it engages and the supervision of each employee, Approved Person and agent of the Approved Participant that are reasonably designed to achieve compliance with the applicable legislation and regulation;
    • ii) procedures reasonably designed to ensure that each employee, Approved Person and agent of the Approved Participant understand their responsibilities under the written policies and procedures in subparagraph (i);
    • iii) procedures to ensure that the written policies and procedures of the Approved Participant are amended as appropriate within a reasonable time after changes in applicable laws, regulations, Rules and policies and that such changes are communicated to all relevant personnel;
    • iv) sufficient personnel and resources to fully and properly enforce the written policies and procedures in paragraph (i);
    • v) the designation of supervisory personnel with the necessary qualifications and authority to carry out the supervisory responsibilities assigned to them;
    • vi) procedures for follow-up and review to ensure that supervisory personnel are properly executing their supervisory functions; and
    • vii) the maintenance of adequate records of supervisory activity, compliance issues identified and the resolution of those issues.
  • B) Notwithstanding any other provision in the Regulations of the Bourse, each Approved Participant must comply with:
    • i) the Electronic Trading Rules, especially regarding the risk management and supervisory controls, policies and procedures, the authorization to set or adjust these risk management and supervisory controls, policies and procedures, as well as the use of automated order systems; and
    • ii) the requirements of any legislation applicable to the regulation of brokerage and accounts.

Principles

1. A compliance culture

A compliance culture, committed to and unambiguously promoted by management is key to a strong and effective supervisory system. Without such culture, even the most well-designed system on paper is likely to be ineffective as its implementation may be difficult due to the lack of commitment from management, insufficient resources or disinterest in its enforcement.

2. The supervisory system must be reasonably designed

A supervisory system refers to all measures, means, processes, procedures and others, put in place to ensure compliance with regulatory requirements. Such system shall be aligned with the participant's type of business, structure and risks and include the supervision of the trading activities of its employees, agents and clients. A reasonably-designed system is a best-efforts obligation or an obligation to take all possible appropriate measures to comply with the Rules of the Bourse and all applicable regulation.

3. Policies and procedures must be written

A supervisory system requires policies and procedures in writing. The level of detail in the policies and procedures may vary considering the participant's type of business, structure and risks. Clear and comprehensive written policies can be an effective tool to ensure the participant's employees and agents understand regulatory requirements of the Bourse. Therefore, it is expected that the written policies and procedures either cite the relevant articles of the Rules of the Bourse or describe the regulatory obligations of any more restrictive applicable rule dictated by the participant's jurisdiction.

4. Policies and procedures must be kept up to date

To ensure accuracy, the written policies and procedures must be kept up to date with all rule amendments or modifications, a new organizational structure, etc. As such, a participant should review its policies and procedures on a regular basis considering its type of business, structure and risks, to ensure their accuracy, completeness and effectiveness. Any change must be communicated to the participant's personnel.

5. Policies and procedures must be followed

The participant's employees must follow the policies and procedures in place. Personnel should have sufficient knowledge of the participant's policies and procedures and be familiar with the Rules of the Bourse. As such, a participant should consider providing ongoing training to its personnel given their respective supervisory or compliance functions.

The day-to-day activities or practices should reflect the written policies and procedures. A participant should have sufficient personnel and resources to fully and properly apply and, when required, enforce its policies and procedures.

6. Operations and trading activities must be supervised

The participant's policies and procedures should include a process for its personnel to supervise the operations and trading activities of its employees, agents and clients. The frequency and the sample size of the supervisory activities or reviews can vary among participants. Participants may review their trading desk activity differently. Some may perform daily, weekly, monthly or quarterly verifications of their trading activity. While the assessment of the reasonableness of the frequency and sample size of the reviews is on a case-by-case basis, the Division expects that each participant's system be aligned with its specific business type, structure and risks.

7. Identified compliance issues must be reviewed and escalated and, when required, investigated

Should a compliance issue be identified, an Approved Participant must evaluate, escalate and report it (when required by article 3.105 (former article 4002) or other Rules of the Bourse). A participant may choose to have more than one process, as review and escalation may vary given the nature of the compliance issue. For example, the review of technical and operational compliance issues may not need to be handled in the same manner as an internal investigation of a potential market manipulation. Regardless, to avoid the likeliness of recurrence of a compliance issue, the Regulatory Division encourages Approved Participants to have processes that identify the root cause. As a result, appropriate corrective measures can be taken.

8. Adequate records of supervisory activity must be maintained

Records of supervisory activity may assume various forms or even a combination of email exchanges, written analyses, notes, etc. Regardless of the chosen format, the Regulatory Division expects an Approved Participant to maintain, and provide when requested, evidence of its supervision activities including the result of a review or investigation, the escalation of the issue and the implemented corrective actions. Such records must be kept for a period of seven(7) years (article 3.105 of the Rules of the Bourse (former article 4002)).

9. Absence of conflict of interest or the appearance of conflict of interest

The Rules of the Bourse do not differentiate supervisory from compliance roles nor do they prescribe that certain activities be performed within specific functions. The Division is of the view that each participant, having the flexibility to design its supervisory system tailored to its business type, structure and risks, should determine roles and responsibilities as it sees fit. Nonetheless, the Division expects that each system put in place by the participant considers avoiding conflicts of interest or the appearance of conflicts of interest inherent with the functions of supervision and compliance.

Questions

The Division is sharing a sample of questions it uses to understand a participant's supervisory system and determine its reasonableness. The Division believes that these questions may also guide the Bourse's participants in designing or assessing the adequacy of their supervisory system.

  • 1. Does the participant have a supervisory system?
  • 2. What is the nature of the trading activities of the participant?
  • 3. What products (and their corresponding volume) are traded by the participant and its clients?
  • 4. What is the participant's business model and structure?
  • 5. What are the regulatory compliance risks for the participant?
  • 6. Do the participant's policies and procedures include the review and evaluation of compliance with the Rules of the Bourse relevant to its type of business and trading activities?
  • 7. Do the participant's policies and procedures include the review of compliance with the Rules of the Bourse related to recordkeeping requirements?
  • 8. Do the participant's policies and procedures include the review of compliance with the Rules of the Bourse related to LOPR requirements including accuracy and entirety of information transmitted to the Division?
  • 9. Do the participant's policies and procedures include the review of compliance to ensure there is no manipulative or deceptive methods of trading by its employees, agents or clients?
  • 10. Do the participant's policies and procedures include the review of compliance to ensure there is no front running by its employees?
  • 11. Do the participant's policies and procedures include the review of compliance with the Rules of the Bourse related to the order identification requirement?
  • 12. Does the participant have policies and procedures outlining roles and responsibilities of its personnel? Are these policies and procedures in writing?
  • 13. Does the participant have policies and procedures detailing internal controls of the effectiveness of its supervisory system? Are these policies and procedures in writing?
  • 14. Does the participant have policies and procedures requiring the maintaining of records or documentation of its supervisory activities? Are these policies and procedures in writing?
  • 15. Has the participant designated an employee to supervise the trading activities of the other employees?
  • 16. Are the supervisory functions separated based on the type of instruments traded, like options or futures?
  • 17. Does the participant have sufficient employees to perform all activities of its supervisory system?
  • 18. Is the participant's supervisory system based on IIROC, or another regulator, or an SRO's requirements? If so, does it cover all trading activities on the Bourse?
  • 19. Do the policies and procedures describe steps to be taken in order to supervise and monitor trading activities?
  • 20. Has the participant designated an employee to be responsible for overseeing the supervisory system including ensuring it's reasonable designed to comply with the Rules of the Bourse?
  • 21. How long would it take for the participant to identify a compliance issue, if any?
  • 22. Does the participant have an escalation process? What is the escalation process? Is the escalation process in writing?
  • 23. What is the participant's policies and procedures with regards to the imposition of possible disciplinary measures if an employee did not respect the Rules of the Bourse?
  • 24. If a compliance issue is identified and escalated, does the participant have a process to identify its root cause? Is this process in writing?
  • 25. Is the participant's escalation process documented, maintained and verifiable?
  • 26. What is the process if a systemic issue is identified? Is this process in writing?
  • 27. Once the root cause is identified, does the participant have a process to determine appropriate corrective measures? Is this process in writing?
  • 28. Does the participant have a process to ensure corrective measures are implemented?
  • 29. Does common practice of the day-to-day supervisory activities of the participant reflect the written policies and procedures?
  • 30. How are the policies and procedures accessible to all relevant employees of the participant?
  • 31. How often does the participant review its supervisory and compliance policies, procedures and practices?
  • 32. What is the participant's process to communicate to its personnel any change to its policies or procedures?
  • 33. How does the participant assess whether its policies and procedures have been effectively implemented?
  • 34. Does the participant's supervisory and compliance personnel have the appropriate experience and qualifications for their roles and responsibilities?
  • 35. Do the participant's employees granted access to the Bourse's trading system have the required training and approval?
  • 36. What training have the participant's employees received in relevant supervisory or compliance functions?
  • 37. What resources are available to employees to provide guidance relating to the participant's policies and procedures?

Guidelines for the approval process of approved persons

This document is a reference work of the Regulatory Division (the "Division") of Bourse de Montréal Inc. (the "Bourse"). The content of this document does not supersede the Rules of the Bourse (the ‘'Rules'') or any other applicable regulations.

The objective of these guidelines is to describe the conditions of eligibility and the approval process of Approved Persons by the Regulatory Division.

The document is divided into three sections: the first section sets out the relevant provisions of the Rules that apply to Approved Persons; the second enumerates the conditions of eligibility the applicant must satisfy to be approved by the Bourse; and the last section contains a list of questions that every Approved Participant and applicant must ask themselves before filing an application for approval as an Approved Person (the "Application").

Rules of the Bourse

1. What is an "Approved Person"?

According to article 1.101 of the Rules (former article 1102), an "Approved Person" means the employee of an Approved Participant or the employee of an affiliated corporation or subsidiary of an Approved Participant that has been duly approved by the Bourse in accordance with article 3.400 of the Rules (former article 7403).

Article 3.400 (former article 7403) of the Rules states that any person employed by an Approved Participant or an affiliated corporation or subsidiary of an Approved Participant who wishes to have access to the electronic trading system of the Bourse in order to act as an Approved Person in accordance with the Rules must submit the Application beforehand.

All employees of an Approved Participant must be approved to have access to the electronic trading system of the Bourse. An employee of an affiliated corporation or subsidiary of the Approved Participant does not have the obligation to become an Approved Person unless he intends to execute special terms transactions, such as prearranged transactions, block trades and riskless basis cross trades.

Article 3.5 of the Rules (former article 6366 B)) provides that the personnel authorized to act on behalf of a client's account can have access to the electronic trading system of the Bourse without the prior approval of the Bourse. In this particular case, the affiliated corporation or subsidiary of the Approved Participant will be considered as a "client" having direct electronic access (DEA client) authorized by the Approved Participant to transmit orders electronically to the Bourse through the Approved Participant's trading system, using the identifier of the latter. The employee of an affiliated corporation or subsidiary of the Approved Participant, acting in the capacity of a client of the Approved Participant through an access to the electronic trading system of the Bourse in accordance with article 3.5 (former article 6366 B)), is therefore not required to become an Approved Person unless he intends to execute special terms transactions.

Contrary to an employee of the Approved Participant who must be approved to have access to the electronic trading system of the Bourse, an employee of the affiliated corporation or subsidiary of the Approved Participant must be approved if he intends to act as an Approved Person. Notably, this status would allow the employee to execute special terms transactions.

2. Who may apply to be an "Approved Person"?

The applicant must be employed by an Approved Participant or its affiliated corporation or a subsidiary. The definition of "Affiliated Corporations and subsidiaries" is found in article 1.103 of the Rules (former article 1103). The applicant must prove who his/her employer is to the Bourse (refer to the section on conditions of eligibility).

The Approved Participant or, as applicable, its affiliated corporation or subsidiary that employs the applicant, must be located in one of the following jurisdictions recognized by the Bourse: Canada, United States, United Kingdom, France, Ireland, Israel and Jersey.

3. Why become an "Approved Person"?

The employees of the Approved Participants who wish to have access to the Bourse's Electronic trading system have the obligation to obtain the Bourse's prior approval.

The employee of an affiliated corporation or a subsidiary of an Approved Participant does not have the obligation to become an Approved Person to have access to the Bourse's electronic trading system, unless the employee wishes to act as an Approved Person within the meaning of the Rules, particularly to be authorized to execute special terms transactions. In fact, article 6.205 to 6.207 of the Rules (former article 6380) provides that only the Approved Persons may execute special terms transactions, such as prearranged transactions, block trades and riskless basis cross trades. Moreover, article 6.208 of the Rules (former article 6815) stipulates that exchanges for related products, such as exchanges for physical (EFP) exchanges for risk (EFR), are trades that may be executed only by Approved Persons.

This employee, as an Approved Person, may also process trade requests from an Approved Participant and its clients and, with the approval of the Approved Participant and the Bourse, the trade requests from the affiliated corporation or the subsidiary of the Approved Participant and its clients.

4. How to apply to be an "Approved Person"?

Article 3.400 of the Rules (former article 7403) stipulates that the Application must be submitted in the form prescribed by the Bourse. The applicant must answer all the questions and provide the documents required by the Bourse. Any omission may delay the review of the Application by the Bourse. The Application must be completed electronically, otherwise it may be rejected.

The Application must be signed jointly by the applicant, the Approved Participant and, where applicable, the affiliated corporation or subsidiary of the Approved Participant that employs the applicant. If the designated representative of the Approved Participant within the meaning of article 3.104 (former article 3501) of the Rules is not the signatory of the Application, a resolution of the corporation or a relevant excerpt from a resolution of the corporation duly authorizing a representative to sign on behalf of the Approved Participant is required. When the applicant is an employee of an affiliated corporation or a subsidiary of the Approved Participant, a resolution of the corporation or a relevant excerpt from a resolution of the corporation duly authorizing a representative to sign on behalf of the affiliated corporation or the subsidiary of the Approved Participant is required.

The Application Form as an Approved Person, the Personal Information Form and all the documents required in support of the Application must be duly completed and sent to the Division to the following e-mail address: reg@tmx.com. These forms are mandatory for any applicant, regardless of the jurisdiction of the applicant's employer (Canadian or foreign).

The payment of the fees (plus the applicable taxes) must also be sent to the Division. Note that these fees are not refundable, regardless of whether or not the Application is approved.

Any employee of an Approved Participant and, as applicable, any employee of an affiliated corporation or subsidiary of an Approved Participant wishing to be approved by the Division is required (i) to enroll in the training required by the Division according to the products he is authorized to trade and (ii) to pay the related fees. A Training Certificate Form must then be completed and signed by the applicant, confirming that the applicant has read and understood the content of the course(s) and is committed to comply with the Rules.

It should be noted that the Approved Person status granted to an applicant by the Bourse does not release the Approved Participant and the applicant from ensuring that all requirements related to the applicant's registration are respected (e.g. IIROC, FCA, FINRA), and in no way constitutes an exemption from them. Approval by the Bourse as an Approved Person differs from the registration requirements issued by the competent securities authorities in the jurisdictions where the Approved Participants and their affiliated corporations or subsidiaries are located (refer to the next section discussing the conditions of admission).

5. What are the obligations attached to the status of "Approved Person"?

Article 3.401 of the Rules (former article 7407) provides that the Approved Participant is responsible for all acts and omissions of any Approved Person, as defined in article 1.101 (former article 1102). Any act or omission on the part of an Approved Person that could constitute an offence against any rule, policy or procedure of the Bourse will be considered an offence on the part of the Approved Participant.

Moreover, under article 1.0 of the Rules (former article 1101), the regulations of the Bourse are binding on the Approved Person, as is the case for an Approved Participant.

More specifically, the Approved Person is required to comply with the obligation of providing any information that could be requested by the Division's personnel. In accordance with article 4.1 of the Rules (former article 4001), the Approved Person must submit and give to the Division access to any records, registers, data, data bases, files, documents, papers and information for examination, and allow the Division to obtain a copy on demand.

The Bourse may file a disciplinary complaint against an Approved Person regarding (i) a breach of the regulations of the Bourse or (ii) any act, conduct, unworthy practice or proceeding, inconsistent with just and equitable principles of trade, or detrimental to the reputation of the Bourse or to the interests or the welfare of the public or of the Bourse. This complaint may result in the imposition of disciplinary penalties, the whole in accordance with articles 4.201 and 4.205 of the Rules (former articles 4101 a) and 4105).

It should be noted that article 4.201 (b)(former article 4101 b)) stipulates that the Bourse may also file a complaint against a former Approved Person, provided an originating notice is served on such person within thirty-six (36) months from the date upon which the person ceased to be an Approved Person.

Finally, in accordance with article 3.103 of the Rules (former articles 3304 a) and 3404 a)), an Approved Participant must give the Bourse written notice, within a delay of ten (10) business days, of the termination of employment of an Approved Person. The form prescribed for this purpose by the Bourse can be found on the Bourse's website at the following address: https://www.m-x.ca/f_publications_en/Termination_notice.pdf. The delay of ten (10) business days begins on the business day following the date of termination of employment.

Conditions of eligibility

Article 3.0 of the Rules (former article 3001) provides that the Bourse shall give its approval where, in its opinion, the applicant has the necessary competence and integrity.

Thus, before submitting an Application for approval as an Approved Person, it is recommended that the applicant and the Approved Participant ensure that the conditions of eligibility are fulfilled. Non-compliance with one of these conditions automatically leads to rejection by the Division of the Application for approval as an Approved Person. Furthermore, the Application will be deemed to have been abandoned and will be cancelled by the Bourse if the applicant does not provide all the information and documents required by the Bourse within six (6) months after the date of filing of the application with the Division.

1. The applicant must be an employee of the Approved Participant or of an affiliated corporation or subsidiary of an Approved Participant.

A relationship of employment must exist between the applicant and an Approved Participant or an affiliated corporation or subsidiary of an Approved Participant. If the applicant's employer is an affiliated corporation or a subsidiary of an Approved Participant, the corporate structure must be explained and the list of the major shareholders must be provided.

An applicant acting as a consultant, subcontractor or service provider on behalf of an Approved Participant or of an affiliated corporation or subsidiary of this Approved Participant does not satisfy this condition of eligibility.

2. The Approved Participant and, if applicable, the affiliated corporation or the subsidiary of the Approved Participant, must be located in a jurisdiction recognized by the Bourse.

The Approved Participant or, as applicable, the affiliated corporation or subsidiary of the Approved Participant that employs the applicant, must be located in one of the jurisdictions recognized by the Bourse: Canada, United States, United Kingdom, France, Ireland, Israel and Jersey.

For example, employees of an affiliated corporation or a subsidiary of an Approved Participant located in Singapore or Hong Kong may not be admitted as Approved Persons by the Bourse.

3. An employee of the Approved Participant or, as applicable, of the affiliated corporation or the subsidiary, must be competent.

(i) The applicant must be approved, authorized and/or registered with every competent legislative authority.

To determine whether an applicant has the necessary competence, the Bourse requires that the applicant be approved, authorized and/or registered with the legislative authority or authorities that may have jurisdiction, particularly based on the place where the Approved Participant is located and/or, as applicable, the place where the affiliated corporation or the subsidiary of this Approved Participant that employs the applicant is located.

The Approved Participants and Approved Persons, as well as their representatives, have the responsibility to act in compliance with the laws and regulations that apply in all the relevant jurisdictions, including their local jurisdiction and in Canada, and should obtain the necessary legal opinions when they are considering entering orders on the Bourse, whether from Canada or from outside of Canada. Among the considerations to take into account, the Approved Participants who wish to register employees of an affiliated corporation or a subsidiary as Approved Persons must comply with the registration requirements applicable in their local jurisdiction, in Canada or in any relevant jurisdiction. The requirements regarding the registration of professionals from the financial sector in Canada are determined by the securities regulatory authority in each province and territory, and the Investment Industry Regulatory Organization of Canada (IIROC).

It should be noted that when the applicant benefits from an exemption from or waiver of registration or approval, the applicant must refer to the provisions of any applicable law or regulation and provide the Bourse with any relevant documentation. As applicable, the applicant must produce any document certifying an exemption or a waiver in force at the time of filing of the Application for approval.

A false or misleading statement may result in disciplinary penalties or the suspension or revocation of approval as an Approved Person.

(ii) The applicant must certify having taken the training offered by the Bourse.

Any applicant, whether employed by a Canadian or foreign Approved Participant, or by an affiliated corporation or a subsidiary of this Canadian or foreign Approved Participant, must enroll in the course(s) offered by the Bourse. Subsequently, the applicant must complete and certify having read and understood the content of the course(s) and being committed to comply with the Rules.

Depending on the certification and the course(s) taken, the applicant becomes qualified to trade and execute transactions for the products for which the training offered by the Bourse has been completed: (i) futures and options on futures contracts and/or (iii) equity, index, currency and bond options.

At the time the approval is granted, the Bourse clearly identifies in a written communication the products for which the applicant is authorized to trade. An Approved Person who trades any product without prior authorization risks disciplinary action. It is the Approved Participant's responsibility to have oversight and control measures in place to prevent an Approved Person from trading or executing transactions for products for which the Approved Person is not authorized.

4. The applicant has the necessary integrity.

To determine if the applicant has the necessary integrity, the Division must be informed and study any disciplinary, penal and/or criminal background of the applicant. As applicable, the applicant must provide the Division with written observations and/or any relevant document detailing disciplinary, penal and/or criminal background or any offence for which there was a conviction.

The existence of a disciplinary, penal and/or criminal background does not necessarily lead to the automatic rejection of the Application. This may be the case if this background or conviction is related, in particular, to trading of securities and/or derivatives.

This page is an updated extract of circular  179-18  published on the Bourse's website on November 12, 2018.

Questions to ask

The Division wishes to share a non-exhaustive list of questions that the Approved Participant and the applicant should ask themselves in order to determine whether the conditions of eligibility to become an Approved Person are fulfilled. The Division believes that these questions can provide guidance to the Approved Participants and the applicant in the preparation of an Application.

  1. Is the applicant employed by an Approved Participant or an affiliated corporation or subsidiary of an Approved Participant?
  2. Is the applicant's employer located in one of the jurisdictions recognized by the Bourse?
  3. Is the applicant registered with a securities or derivatives regulatory authority? If not, does the applicant benefit from an exemption from or waiver of registration or approval under any applicable law or regulation?
  4. Has the applicant provided a certificate confirming having taken the training offered by the Bourse?
  5. Does the course or do the courses completed correspond to the derivatives the applicant wishes to trade on the Bourse?
  6. In light of the answers provided in the Application Form as an Approved Person, does the applicant satisfy the integrity requirements?
  7. Were the Application Form as an Approved Person, the Personal Information Form and all the documents required in support of the forms mentioned sent to the Division within six (6) months of the date of filing of the application with the Division?
  8. Are the signatures of the applicant, the authorized representative of the Approved Participant and, if applicable, the authorized representative of the affiliated corporation or the subsidiary of the Approved Participant affixed in the required places on the forms and attachments in support of the Application?
  9. Has the approval fee in the amount of $125 (plus taxes) been paid?

In this document, the use of the masculine to designate persons has no other purpose than to lighten the text.

The Regulatory Division will be updating the Guidelines on Off Exchange Transfer in light of the amendments to article 6.200 (circular 114-19).

Guidelines on Off Exchange Transfer

This document is a reference work of the Regulatory Division (the "Division") of Bourse de Montréal Inc. (the "Bourse"). The content of this document does not supersede the Rules of the Bourse (the ‘’Rules’’) or any other applicable regulations.

The objective of these guidelines is to describe what constitutes a permissible off-exchange transfer of Listed Products on the Bourse, describe the conditions given specific situations and explain the process to be followed to undertake an off-exchange transfer.


1. What constitutes an off-exchange transfer?

According to article 6.2 and article 6.3 of the Rules, all transactions on Listed Products must take place on or through the electronic trading system of the Bourse during a trading session. However the Rules provide for specific exceptions to this restriction, for instance special terms transactions, such as EFRPs.

Additionally, the Rules set out specific events where open futures contracts can be transferred without trading through the electronic trading system of the Bourse (“off-exchange transfer”).

In order for an off-exchange transfer to qualify under the Rules, certain conditions must be satisfied.

2. Under what circumstances is an off-exchange transfer permissible?

Article 6.2004 prescribes the circumstances where an off-exchange transfer is permitted and the conditions that must be met.

Paragraph (a) of this article refers to four specific scenarios where an off-exchange transfer can be executed subject to no change in beneficial ownership of the open futures contracts.

Paragraph (c), on the other hand, expands on other situations where an off-exchange transfer may be permitted at the discretion of the Bourse, such as a corporate restructuring or where it is deemed to be in the best interest of the market.

No change in beneficial ownership

There are four situations identified under paragraph (a) where a transfer can be executed:

  • a. at the request of the beneficial owner of the futures contracts to transfer from one Approved Participant to another; or
  • b. at the request of an Approved Participant to transfer open futures contracts to another Approved Participant; or
  • c. to correct an error in clearing; or
  • d. to correct an error in the recording of transactions in the Approved Participants’ books.

However, an off-exchange transfer under these situations can only be carried out if there is no change in beneficial ownership of the futures contracts following the transfer. Therefore, it is important that the Approved Participants acting as parties to this transaction ensure that the open positions remain under the same beneficial owner despite the transfer.

Relevant documentary evidence demonstrating that due diligence has been performed, should be retained in the Approved Participants’ records in addition to all order confirmations, memoranda or notes pertaining to the transfer.

Restructuring or Consolidation

Paragraphs (c)(i) and (ii) of article 6.200 provide for situations where a corporation or similar entity is undergoing a restructuring and where an off-exchange transfer may be permitted. The transfer of position may either be on the books of an Approved Participant or from one Approved Participant to another.

Under paragraph (c)(i) a request for an off-exchange transfer must be in relation to a merger, asset purchase, consolidation or similar transaction between two or more entities. An entity can either be a client holding open positions or it can be an Approved Participant wishing to move the open positions to another entity as a consequence of a merger, asset purchase consolidation or similar transaction. Such transactions are considered non-recurring as provided under the article.

The purpose of paragraph (c)(ii) of this article is to address circumstances relating to the restructuring or consolidation of a partnership, investment fund or commodity pool. An off-exchange transfer may be permitted in this particular scenario subject to the following conditions:

  • a. the managing partner or pool operator remains the same;
  • b. the transfer should not result in the liquidation of any open positions; and
  • c. the prorated allocation of interests in the consolidated account does not result in more than a de minimis change in the value of the interest of any party.

Best interest of the market

There may be other situations which call for an off-exchange transfer but are not covered specifically under paragraph (a) or, (c) (i) or (ii) of article 6.200. Such transfers may still be permitted in accordance with article 6.200 (c) (iii) where it is concluded to be in the best interest of the market and the situation so requires it. In considering a request for an off-exchange transfer under this part, the Division will look at the following criteria:

  • a. Whether the arising situation is a non-recurring event;
  • b. If there is an economic rationale why the change in interest should not happen by liquidating and reestablishing the position through a regular market execution;
  • c. Whether a benefit to the market can be articulated or an adverse impact on the market should be averted;
  • d. If such a transfer will advantage a particular category of market participant over another class of market participant, and if it does, such benefit must be necessary to address a market need.

As an example, an accounting-standard setting body changes its definition of hedging, requiring that hedges be carried in the subsidiary having the risk and not consolidated at a group level. In order to come into compliance with the new ruling, the parent corporation of an Approved Participant or any other entity, wants to transfer open positions to the books of the appropriate subsidiary. This scenario does not fit under the paragraphs (i) or (ii). However, it would be in the market’s best interest to permit all affected entities to adjust their positions in this way.

3. Is the approval of the Bourse required?

Since an off-exchange transfer is subject to different conditions depending on the situation triggering the need to perform the transfer outside of the electronic trading system, the Bourse has oversight over these transfers.

For all situations listed under article 6.200 (a), where there is no change in beneficial ownership of the open positions after the transfer, no prior approval from the Bourse is required. That being said, Approved Participants shall keep an audit trail and proper records in order to demonstrate to the Division, should a request be made, the legitimacy of the off-exchange transfer by providing documentary records on any off-exchange transfer initiated under article 6.200 (a), including confirmation that the beneficial owner of the open positions did not change after the transfer.

The Approved Participant should be able to promptly provide the Division will all records and supporting documents demonstrating that all the conditions applicable under article 6.200 (a), as also set out in section 2 of these Guidelines, are met.

On the other hand, all off-exchange transfers as per article 6.200 (c) require the prior approval of the Division before submitting the transfer request to the Canadian Derivatives Clearing Corporation (“CDCC”) as provided under article 6.200 (b).

4. Who can request for an off-exchange transfer?

Depending on the situation, an off-exchange transfer can be requested by the beneficial owner or an Approved Participant.

Where the request emanates from the beneficial owner of open futures contracts as stipulated under article 6.200 (a)(i), to transfer the positions from one Approved Participant to the another Approved Participant, the Approved Participants involved should submit the request on behalf of the beneficial owner of the positions.

In line with article 6.200 (b) any request for an off-exchange transfer must be submitted by the Approved Participant involved with the open positions and the Approved Participant should complete and submit the request in the form prescribed by CDCC.

For purposes of article 6.200 (c) the Approved Participant involved should first seek the approval of the Division. During the review process more information or supporting documents may be required and the Approved Participant is expected to provide those in a timely manner. Once the request has been reviewed and the Division is satisfied that the off-exchange transfer can be permitted, the Approved Participant will be informed of the decision, and the transfer can be submitted to CDCC.

The Approved Participants should at all times maintain all records relating to the orders, memoranda or other documentary evidence such as confirmation notes, copies of electronic confirmations (email, Instant Message), blotters or statements as applicable. The Approved Participants must be able to promptly produce these when requested by the Division.

5. What information should be included in a request for approval?

As indicated in the previous sections, a request for approval has to be submitted by the Approved Participants for any off-exchange transfer under article 6.200 (c). To enable the Division to effectively assess the circumstances surrounding the off-exchange transfer being proposed, the request should include at a minimum the information and relevant supporting documents specified hereafter.

Where a notification of an off-exchange transfer is sent to the Division, the following information should be included:

  • a. The applicable article of the Rules under which a request is being submitted;
  • b. The reason for requesting an off-exchange transfer, and a detailed description of the circumstances leading to the proposed off-exchange transfer. The description should articulate how the applicable circumstances meet the requirement of the specific situation described in the article of the Rules cited;
  • c. The name of all parties involved;
  • d. Details of the open positions that are to be transferred, and indication whether it is a partial or full transfer of the open positions;
  • e. The proposed transfer date; and
  • f. All supporting documents in light of the information submitted or in support of the request (such as current and new organizational structure in case of the merger).

While reviewing a request for approval, the Division reserves the right to request additional information or supporting documents which it considers relevant.