* Settlement expected by Christmas
* Firms involved in talks include three big banks
TORONTO, Dec 8 (Reuters) - Canadian regulators are moving closer to a penalty settlement with a group of major banks and brokerages that sold asset-backed commercial paper before the market froze due to the U.S. subprime credit crisis, the Globe and Mail newspaper reported on Tuesday.
The Globe named Royal Bank of Canada (RY.TO), Bank of Nova Scotia (BNS.TO) and National Bank of Canada (NA.TO), as well as Canaccord Financial (CF.TO) and Credential Securities Inc as firms involved in the talks, which are expected to be wrapped up by Christmas.
The market for asset-backed commercial paper, or ABCP, collapsed in August 2007, leaving investors unable to redeem some C$32 billion ($30.2 billion) of the paper.
Canadian regulators, including securities commissions in the provinces of Quebec, Ontario and British Columbia and the Investment Industry Regulatory Organization of Canada, are pushing for banks to pay millions in settlements, and to acknowledge their role in selling the paper to investors even amid signs the ABCP market was troubled.
Sources cited by the Globe said the settlement will likely be under C$200 million.
Investors in ABCP included pension fund manager Caisse de depot et placement du Quebec, which owned about C$12.6 billion in seized up commercial paper.
$1=$1.06 Canadian Editing by Peter Galloway