How We Are Regulated
Aequitas NEO Exchange Inc. and its parent company, Aequitas Innovations Inc., are authorized by the Canadian Securities Administrators (“CSA”) to operate an exchange for listing and trading securities and certain financial products. To be authorized, exchanges are “recognized” or exempted from recognition under securities legislation in the jurisdictions in which they operate.
Recognition & Exemption Orders
The NEO Exchange is authorized to operate across Canada as an exchange for listing and trading equity and debt securities and certain financial products, including exchange-traded funds, closed-end funds and structured products. In November, 2014, NEO and its parent company received a recognition order from the Ontario Securities Commission (“OSC”) and the following month the other members of the CSA issued exemption orders. All of the orders, which can be found below, were effective as of March 1, 2015.
- Aequitas Innovations Inc. and Aequitas NEO Exchange Inc. OSC Recognition Order
- Aequitas Innovations Inc. and Aequitas NEO Exchange Inc. OSC Variation Order
- Aequitas Innovations Inc. and Aequitas NEO Exchange Inc. Multi-Jurisdictional Exemption Order
- Aequitas Innovations Inc. and Aequitas NEO Exchange Inc. ASC Exemption Order
- Aequitas Innovations Inc. and Aequitas NEO Exchange Inc. BCSC Exemption Order
To operate nationally, an exchange must be recognized by at least one CSA jurisdiction (the “lead regulator”), in our case, the OSC. The lead regulator directly oversees the exchange, and exempting regulators rely on the lead regulator’s oversight. This model is set out in the CSA’s Memorandum of Understanding Respecting the Oversight of Exchanges and Quotation and Trade Reporting Systems. The OSC’s oversight includes review and approval of our rule and policy changes, significant structural and operational changes, and fees. OSC staff also receive other filings and reporting as required under the recognition order.
As a recognized exchange, we can carry out our market regulation activities directly or through a regulation services provider. Similar to the other equity exchanges in Canada, we have contracted with the Investment Industry Regulatory Organization of Canada (“IIROC”) to act as our regulation services provider.
Regulatory Policies & Procedures
Consistent with regulation as an exchange with a public interest mandate and our guiding principle of transparency, we will provide ongoing information on how we meet our regulatory obligations and seek input from our stakeholders.
The NEO Exchange is required, under its recognition order, to establish and maintain a Regulatory Oversight Committee (“ROC”). The structure and obligations of the ROC are set out in Schedule 2 to the recognition order and are reflected in the committee’s mandate, available below.
Conflicts of interest & Confidentiality policies
Identification, avoidance and/or management of conflicts of interest, as applicable, and maintenance of confidentiality are paramount to the integrity of our marketplace. As a recognized exchange, we must ensure that conflicts relating to all of our services, including listings and trading, are addressed, and our recognition order contains certain requirements regarding conflict of interest and confidentiality.
As a result, we have the following policies and procedures in place that cover conflicts of interest, whether real or perceived, relating to the exchange’s operations, business and regulatory functions and our shareholders’ use of our products and services.
Rules, Fees & Changes
The NEO Exchange’s rules and policies (the Trading Policies and Listing Manual and Listing Forms), as well as our fees and operational and governance structure, have been approved by the OSC.
New public interest rules and rule amendments must be provided by exchange staff to the Regulatory Oversight Committee, which is responsible for reviewing proposed rules and deciding on or making recommendations to the board of directors regarding the filing.
The rules must then be submitted to the OSC and the exempting regulators for review and approved by the OSC in accordance with Schedule 5 of the recognition order. Fee changes and changes to information on operations and governance previously filed must also be filed in accordance with Schedule 5 of the recognition order.
All non-housekeeping rule changes and certain significant changes, including those that are considered to have an impact or potential impact on the exchange’s market structure or members, or on issuers, investors or the capital markets or otherwise raise public interest concerns, must be published for comment.
In addition to the Trading Policies, trading on the Aequitas NEO Exchange is governed by the Universal Market Integrity Rules (“UMIR”) maintained by IIROC (to reference UMIR, please go to www.iiroc.ca).
In accordance with its recognition order, the NEO Exchange has adopted procedures setting out the steps for appealing a decision made by the Exchange (“Appeal Procedures”). The Appeal Procedures were treated as a public interest rule, and were approved by the OSC on January 7, 2016.
A key element in re-focusing on the original purpose of an exchange is our approach to governance. We are re-mutualizing the exchange business, but this time with the participation of a cross-section of all users. The broad and diverse ownership structure of Aequitas Innovations Inc., the parent company of Aequitas NEO Exchange Inc., with majority control by those representing investors and issuers, and its independent governance oversight, are built on the core founding principle of fostering innovation and competition, which we believe will enhance market integrity and promote the public interest. This governance model will ensure that we stay true to our mission.