Canada watchdogs to ease discount trading rules
Reuters Company News - April 10, 2000 11:56
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By Lydia Zajc
TORONTO, April 10 (Reuters) - Canadian discount brokerages, plagued by delays processing increasingly heavy order volumes, will be allowed to bypass a rule that forces them to review every trade for customer safety, securities regulators said on Monday.
David Brown, head of Canada's most powerful securities watchdog, the Ontario Securities Commission, said regulators across the country, a group known as the Canadian Securities Administrator, will work with discount traders to ease the so-called "Know Your Client" rule.
"The Canadian Securities Administrators will accept applications from order-access-only traders, which is a broader term of discount brokerage," Brown told reporters. "The securities firms that will offer order-access services only to their clients will, upon application, be relieved of the suitability requirement for those traders provided that no insights or information will be given on a trade."
Discount brokers allow market players to call their own shots and process buy and sell orders for a smaller fee than a traditional full-service brokers, which offer advice on trades.
The "Know Your Client" rule currently forces brokers to review each trade to make sure it fits a customer's portfolio.
Discount brokers have been lobbying regulators heavily to change that rule, arguing that it's impeding service and access to markets.
"Because we now have a buy-side of the market (that's) growing, and growing very quickly, investors are making their own investment decisions, and don't need the protection of the suitability rule," Brown added. "That perhaps slows the process down."
"It's giving the investor something that the investor doesn't want and ultimately will have to pay for," he added.
John See, vice chairman of TD Waterhouse Group, which oversees Canada's biggest discount broker, was satisfied with the change after spending about three years lobbying the groups. "We really see this as a huge win for the self-directed investor," See said. TD Waterhouse is owned by Toronto-Dominion Bank .
See said the change, combined with the reduction of a training period for traders, will help reduce trading times.
Douglas Hyndman, chairman of the Canadian Securities Administrators, the umbrella organisation for Canada's 13 provincial and territorial commissions, said in a statement that certain conditions will apply to dealers for whom this relief will be available. The conditions include making sure that registered traders give no advice and clients acknowledge their risk.
Service times have slowed in recent months as more Canadians have become interested in the volatile stock market, especially high tech issues. The discount traders, which did not anticipate the boom in business, have seen their systems overloaded and stall under computer glitches, which have caused investors to wait for half an hour or more instead of seeing trades process in minutes.
Brown spoke to reporters after kicking off Canada's National Investor Education Week. |
