On October 15, 2012, following a lengthy industry consultation by the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC), IIROC implemented a dark liquidity framework. Amendments to the Universal Market Integrity Rules (UMIR) required that small orders which interact with dark must receive meaningful price improvement, and lit orders must trade before dark orders at the same price on the same marketplace. The regulatory objective of this change was to establish a framework that recognized the contribution of dark orders to the post-trade price discovery process and their value to certain investors, while balancing this against the need to protect lit market price discovery, ensure meaningful price improvement and establish a level playing field between transparent marketplaces and dark pools. In introducing this new regulatory framework, IIROC recognized there might be a cost to certain trading segments; however, the policy was proactive in protecting the integrity of the price discovery process.
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