December 17, 2007 

Dear M. St. Gelais,

The Canadian Security Traders Association, Inc. (CSTA) is a professional trade organization whose mission is to promote and improve the ethics, business standards and working environment for members who engage in the buying, selling and trading in securities. The CSTA represents over 900 traders nationwide in Canada, and is led by Governors from each of three distinct regions. The organization was founded in 2002 to serve as a national voice for our affiliate organizations. The CSTA is also affiliated with the Security Traders Association (U.S.A.), which has 6,000 members globally.

We often comment on industry development and form opinions on trading issues based on input from our members.

Our fast growing Canadian equity markets have witnessed the entry of a number of new electronic trading platforms that have been registered as Alternative Trading Systems (ATSs) with more to start operations in the next year. This competition should be good for our market place by providing investors choice, cost compression and improved market depth.

The greatest challenge facing Canadian equity traders today is the requirement to comply with the out dated trade-through rules now that there are multiple electronic market places in Canada.

Currently the trade-through obligation falls entirely on the dealers as the rules now in place continue to impose a best price requirement on them, whereas non-dealer participants in these markets are not required to respect best price obligations. Canadian regulators should follow the lead taken by the SEC which has imposed responsibility on the marketplaces for complying with its version of the trade-through rule.

The Canadian Security Traders Association, Inc. is hereby requesting the Canadian Securities Regulators to grant traders exemption from any trade-through violations until such time as all collective industry participants agree on the necessity for a formal trade-through rule, and further, agree on where the liability for compliance should appropriately and realistically lay.

The Canadian Security Traders Association, Inc. is also requesting the Canadian Security Administrators to institute a de-minimus rule that would require a marketplace to obtain 5% of monthly trading volume in each security before the obligation to include that market place for that security in a smart router.

The CSTA recommends the following:

1. Traders should be exempt from any trade-through violations, the onus should lie
   with the marketplace until there is a National Best Bid / Best Offer system in place.
2. Institute a de-minimus rule that would require a marketplace to obtain 5% of
   monthly trading volume in any one security before the obligation to include that securities market place in a smart router.
3. A test period of a minimum of 60 days of stress testing for every new ATS to
   ensure the system can execute in heavy volume. i.e. A trader runs the risk of having an order in suspension if the system crashes.
4. Appropriate trade functionality to ensure dealer compliance with UMIR rules.
5. Dissemination of order data must be in real-time and must be available
   electronically using a standard industry-wide recognized data feed provider.
6. CSTA is recommending a time of 1 second trade-through exemption for trading
   through any new quote, similar to U.S. regulations.
7. CSTA is recommending that any additional listings on Pure Trade and Omega be
   delayed until the above-recommendations are in place or permit these systems to continue to add new listings but allow traders trade-through protection.

The CSTA has been fielding a number of comments made by our members, some of which are attached to our submission.

In conclusion, the CSTA has observed that under the current proposals the technology costs for dealers operating in a multiple marketplace environment are very onerous, especially for small regional dealers, who may simply withdraw from equity trading which will eventually limit competition and more than offset the benefits to investors that come from multiple marketplaces. Most importantly, TRADERS, who are bearing the entire weight of regulatory rulings on their shoulders, are now facing fines and/or job-loss with the current unrealistic and out dated regulations.

The CSTA would caution the CSA about unintended consequences. Markets can become very fragile when onerous rules and regulations become prohibitive to growing business and capital will find alternative markets.

We encourage you to study recent trade-through statements given by SEC Commissioner Paul Atkins, Greg Mills of the IIAC and a report commissioned by TIAA-CREF http://www.sec.gov/news/speech/2007/spch043007psa.htm
The Canadian Security Traders Association, Inc. would be pleased to discuss these matters in greater length.

Sincerely,

 

Spencer MacCosham	Sonny (George) Lennon	Colin Fraser
Chairperson, CSTA	President, CSTA	Chair, Trading Issues Committee
604-654-1151	705-924-1877	416-861-8383
spencer.maccosham@raymondjames.ca	cstapres@xplornet.com	cfraser@salmanpartners.com