IIROC and CSA – Staff Notice 21-329 – Guidance Crypto-Asset Trading Platforms: Compliance with Regulatory Requirements

March 29, 2021 – Covers how securities legislation applies to crypto-asset trading platforms facilitating trading of crypto assets that are securities, or instruments, contracts involving crypto assets. Discuss CTPs operate similar to marketplaces (marketplace platforms), other CTPs trading security tokens or crypto contracts that not marketplaces (dealer platforms).

The guidance includes Appendix A providing ways on managing CTP risks, and an Appendix B with a summary of IIROC requirements applicable in the context of CTPs.

Application of Securities Legislation to Marketplace Platform
CTP is a Marketplace Platform if it maintains, provides a market, facility to bring together multiple buyers, sellers or parties to trade in Security Tokens and/or Crypto Contracts. If it brings together orders of Security Tokens and/or Crypto Contracts of multiple buyers and sellers or parties of contracts; uses established, non-discretionary methods in which orders for Security Tokens and/or Crypto Contracts interact with each other and the buyers and sellers or parties entering the orders agree to the terms of trade.

Provided regulatory guidance for Marketplace Platforms; operate under CSA oversight and self-regulatory entity, as defined in NI 21- 101.10, which currently is only IIROC. Concepts applicable to marketplaces in NI 21-101, NI 23-101 Trading Rules, NI 23-103 Electronic Trading, and Direct Electronic Access to Marketplaces are generally relevant. Trading activity on a Marketplace Platform will be subject to market integrity requirements such as those in IIROC’s Universal Market Integrity Rules (UMIR). As Marketplace Platforms also conduct activities similar to those by Dealer Platforms, where performs these functions, also subject to appropriate dealer requirements.

May be appropriate to regulate a Marketplace Platform as an exchange. For example, if Marketplace Platform trades Security Tokens, regulates issuers of those securities, or regulates, disciplines participants other than by merely denying access. Expected to seek recognition or an exemption from recognition as an exchange. If Marketplace Platform wishes to conduct a pilot to test a novel business idea, proposed new market, provided not offering leverage or margin and not exchange. Can seek registration as an exempt market dealer or restricted dealer, for a limited period.

Novel Business Models
IIROC expects entities to be granted membership with time-limited terms, conditions, and exemptions that take into account the new aspects of the entity’s operations. In contrast with the approach to current Dealer Members, IIROC imposes all applicable requirements without additional exceptions or terms and conditions on membership.

For more information, visit www.iiroc.ca.

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