(Reuters) - Canadian regulators are investigating traders’ practice of circumventing domestic markets by sending stock orders to venues in United States in exchange for rebates, the Wall Street Journal reported.
The payments are legal in U.S and add up to hundreds of millions of dollars a year, the report said. (on.wsj.com/1usUDIw)
“But, in Canada, brokers are prohibited from paying them, and regulators there, including the Ontario Securities Commission, are exploring whether rule changes are needed to keep more trading within the country,” the Journal reported quoting Susan Greenglass, the commission’s director for market regulation.
The report further quoted Greenglass saying that The Ontario commission’s concern is about the longer-term impact on the Canadian market if order flow is sent to U.S. on a broad basis.
Moves by the brokerage arms of Bank of Nova Scotia, Bank of Montreal , Canadian Imperial Bank of Commerce, Royal Bank of Canada, Toronto-Dominion Bank and others to route retail orders to the U.S. could threaten the effectiveness of Canada’s stock markets, the report said.
The banks were not immediately available for comment outside Canadian working hours.
TMX Group Ltd, the operator of Canada’s biggest stock exchange, said last month that it plans a “speed bump,” minimum order sizes and rebates for active flow on its smaller Alpha exchange.
Reporting by Sneha Banerjee, Narottam Medhora and Sai Sachin R in Bangalore