Omega ATS Stays Open, Conditionally

Omega ATS, an alternative trading venue in Canada, lives to trade another day. [IMGCAP(1)]

The Ontario Securities Commission (OSC) moved two weeks ago to suspend Omega’s trading registration until a hearing could be held to determine if the ATS had conducted itself in an improper fashion. During the hearings, held November 17, 20 and 21, an OSC hearing panel rejected an earlier application from its own commission staff to temporarily suspend the registration of Toronto-based Omega Securities. At issue was the ATS’ market data reporting.

After the announcement of the OSC’s initial move to suspend Omega’s registration, volumes at the ATS were reported to have fallen by 90%.

“Staff’s requests for a temporary order that the registration of OSI be suspended and that trading in any securities by OSI cease until the conclusion of the hearing on the merits or such other time as ordered by the Commission are denied,” the OSC wrote in its opinion.

Following the OSC hearings, a three-day hearing, the panel ruled that a suspension was not warranted, but it did impose several conditions on Omega's registration that relate to its provision of market data.

“Pursuant to subsection 127(5) and paragraph 1 of subsection 127(1) of the Securities Act, RSO 1990, c S.5 (the Act), the registration of OSI is subject to the following terms and conditions:”

• OSI shall forthwith provide notice on its website and to its subscribers in writing that the time of execution of trades disseminated pursuant to its ITCH protocol may differ, at the millisecond level, from the time internally recorded by OSI in its matching engine for the execution of these trades;
• OSI shall upgrade from the ITCH 3.0 protocol to the ITCH 5.0 protocol as expeditiously as possible, in compliance with existing regulatory requirements;
• OSI shall report, on a monthly basis, in writing, to Staff of the Commission and to IIROC, if IIROC so requests, on the ongoing steps taken by OSI to comply with 2(b) above;
• OSI shall implement a MRF Feed patch as expeditiously as possible, in compliance with existing regulatory requirements, including IIROC approvals or certification;
• OSI shall forthwith notify its subscribers that after seven days, all order acknowledgement messages sent pursuant to its FIX Feed will be sent at the millisecond level, except to such subscribers which notify OSI in writing within seven days that they choose not to receive such acknowledgements to the millisecond level;
• OSI shall comply with the terms of the notification referred to in 2(e) and provide a written report to Staff of the Commission within 14 days and to IIROC, if requested by IIROC, outlining steps taken to so comply; and
• OSI shall retain, within 14 days or such later time period as approved by Staff of the Commission, at its own expense, the services of an independent systems reviewer or reviewers that are approved by Staff of the Commission to provide reporting to OSI and Staff of the Commission and to IIROC, if IIROC so requests, regarding the effectiveness of the MRF Feed patch and the ITCH 5.0 protocol, on a quarterly basis for a 12 month period, after each respectively, is implemented; and
• Pursuant to subsection 127(6) of the Act, this Order shall take effect immediately and shall expire on the 15th day after its making unless extended by the Commission.

In a statement, Sean Debotte, President and Chief Executive Officer at Omega said:

“We are pleased with the outcome of the hearing. We believe this decision is reasonable under the circumstances and that the conditions can be readily achieved. We continue to serve both investors and the capital markets with integrity and efficiency.”

Furthermore, Omega said the OSC’s terms and conditions are consistent with those proposed by Omega to the OSC and based on Omega’s own business improvement objectives.

Omega Securities is the operator of two ATSs in Canada - Omega ATS and Lynx ATS. The two represent approximately 5% of Canadian equities trading.