IIROC Universal Market Integrity Rules (UMIR) Complete Rulebook with Annotations_2013 by BestExecution

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									 ANNOTATED UNIVERSAL MARKET INTEGRITY RULES


                     Important Disclaimer

The following annotated version of the Universal Market Integrity Rules
(“UMIR”) has been prepared as an informal reference document by the
Market Regulation Policy Department of the Investment Industry
Regulatory Organization of Canada (“IIROC”). While every effort has been
made to ensure the completeness and accuracy of the document, users
must recognize that this annotated version is not the official version of
UMIR.
The official version of UMIR is comprised of Schedule A.1 to Transition Rule
No. 1 of IIROC as amended from time to time as set out in Schedule A to
IIROC Notices posted to the IIROC website under the category “Rules
Notice – Notice of Approval – UMIR”.
This annotated version of UMIR reflects material issued or published by
IIROC up to January 1, 2013. For material issued after January 1, 2013,
reference should be made to “Notices” under the heading “News and
Publications” on the IIROC website at www.iiroc.ca.
                                                        Universal Market Integrity Rules
                                                            Rules & Policies

                            TABLE OF CONTENTS
PART 1 – DEFINITIONS AND INTERPRETATION
  1.1     Definitions………………………………….……..……….…….....……                       1.1-1 – 1.1-33
  1.2     Interpretation………………………………………….……..…….……                         1.2-1 – 1.2-6
PART 2 – ABUSIVE TRADING
  2.1     Just and Equitable Principles..……………….…………..……….…..              2.1-1 – 2.1-12
  2.2     Manipulative and Deceptive Activities….….……….…..……..…..…         2.2-1 – 2.2-24
  2.3     Improper Orders and Trades.……..….……..….……..………………                2.3.1 – 2.3-6
PART 3 – SHORT SELLING
  3.1     Restrictions on Short Selling…………………………….……..…..….               3.1-1 – 3.1-23
  3.2     Prohibition on the Entry of Orders……………….….……..………….             3.2-1 – 3.2-2
PART 4 – FRONTRUNNING
  4.1     Frontrunning…………………………………………….……..……..…                          4.1-1 – 4.1-3
PART 5 – BEST EXECUTION OBLIGATION
  5.1     Best Execution of Client Orders………………………...……..…..…              5.1-1 – 5.1-11
  5.2     Best Price Obligation — Repealed…………..……….…...………….              5.2-1 – 5.2-28
  5.3     Client Priority……………………………………………....……..…..…                     5.3-1 – 5.3-12
PART 6 – ORDER ENTRY AND EXPOSURE
  6.1     Entry of Orders to a Marketplace……..………………….……..…….              6.1-1 – 6.1-3
  6.2     Designations and Identifiers…………………………….……..………                  6.2-1 – 6.2-30
  6.3     Exposure of Client Orders………………………….........……..……..             6.3-1 – 6.3-3
  6.4     Trades to be on a Marketplace……………………….……..……..….                6.4-1 – 6.4-18
  6.5     Minimum Size Requirements of Certain Orders Entered on a
          Marketplace……………………………………….……..….……….….                          6.5-1
  6.6     Provision of Price Improvement by a Dark Order ….……..……..…       6.6-1 – 6.6-3
PART 7 – TRADING IN A MARKETPLACE
  7.1     Trading Supervision Obligations…………………….……..…………                 7.1-1 – 7.1-49
  7.2     Proficiency Obligations……………………………….……..…………                     7.2-1
  7.3     Liability for Bids, Offers and Trades…………………….……..…..…           7.3-1
  7.4     Contract Record and Official Transaction Record….……..……..…       7.4-1
  7.5     Recorded Prices……………………………………….……..…………                          7.5-1 – 7.5-8
  7.6     Cancelled Trades……………………………………….……..……..…                        7.6-1
  7.7     Trading During Certain Securities Transactions…………………….          7.7-1 – 7.7-19
  7.8     Restrictions on Trading During a Securities Exchange Take-over
          Bid – repealed ……………………………………………………..…...                        7.8-1
  7.9     Trading in Listed or Quoted Securities by a Derivatives Market
          Maker……………………………………………….……..……………..                              7.9-1
  7.10    Extended Failed Trades………………………………….……..…..…                     7.10-1 – 7.10-3
  7.11    Variation and Cancellation and Correction of Trades .……..………     7.11-1 – 7.11-2

Table of Contents                                                                     UMIR 1
January 1, 2013
  7.12    Inability to Rely on Marketplace Functionality ……….……..…….…          7.12-1
  7.13    Routing Arrangements – proposed…………………….………..……                      7.13-1 – 7.13-2
  7.14    Direct Electronic Access – proposed….……………….………..……                  7.14-1 – 7.14-3
PART 8 – PRINCIPAL TRADING
  8.1     Client-Principal Trading……………………………..........……..…….                 8.1-1 – 8.1-5
PART 9 – TRADING HALTS, DELAYS AND SUSPENSIONS
  9.1     Regulatory Halts, Delays and Suspensions of Trading ...……...….       9.1-1 – 9.1-7
PART 10 – COMPLIANCE
  10.1    Compliance Requirement.……………………………….……….……                           10.1-1 – 10.1-10
  10.2    Investigations…………………………………………….……..……....                           10.2-1 – 10.2-2
  10.3    Extension of Responsibility………………………………...………….                      10.3-1 – 10.3-2
  10.4    Extension of Restrictions…………………………………...……..…...                    10.4-1 – 10.4-3
  10.5    Powers and Remedies…………………………………….……..…....                          10.5-1 – 10.5-3
  10.6    Exercise of Authority…………………………………….……..………                          10.6-1
  10.7    Assessment of Expenses……………………………….……….…….                           10.7-1
  10.8    Practice and Procedure……………………………..........…………...                   10.8-1 – 10.8-21
  10.9    Power of Market Integrity Officials……………………….……..…….                 10.9-1 – 10.9-9
 10.10 Report of Short Positions………………………………….……..…….                          10.10-1 – 10.10-5
 10.11 Audit Trail Requirements…………………………………..……..…....                        10.11-1 – 10.11-8
 10.12 Retention and Inspection of Records and Instructions..……..…..…          10.12-1 – 10.12-2
 10.13 Exchange and Provision of Information by Market Regulators …...         10.13-1
 10.14 Synchronization of Clocks………………………….........……..……..                    10.14-1 – 10.14-2
 10.15 Assignment of Identifiers and Symbols………………….……..…….                    10.15-1 – 10.15-2
 10.16 Gatekeeper Obligations of Directors, Officers and Employees of
          Participants and Access Persons………..……..….……..….…..…...              10.16-1 – 10.16-8
 10.17 Gatekeeper Obligations with Respect to Electronic Access….……            10.17-1
 10.18 Gatekeeper Obligations with Respect to Access to Marketplaces
          – proposed…………………………….……..….……..….…….………                             10.18-1
PART 11 – ADMINISTRATION OF UMIR
    11.1      General Exemption Relief…………………………..........……..……. 11.1-1 – 11.1-4
    11.2      General Prescriptive Power……………………………….……..…… 11.2-1
    11.3      Review or Appeal of Market Regulator Decisions……...……..……. 11.3-1
    11.4      Method of Giving Notice……………………………….……..……..… 11.4-1
    11.5      Computation of Time……………………………………….……..….... 11.5-1
    11.6      Waiver of Notice………………………………………….……..……… 11.6-1
    11.7      Omissions or Errors in Giving Notice………………….……..…….... 11.7-1
    11.8      Transitional Provisions………………….………………….……..…… 11.8-1 – 11.8-2
    11.9      Non-Application of UMIR……………….………………….……..….... 11.9-1
   11.10      Indemnification and Limited Liability of the Market Regulator….…. 11.10-1
   11.11      Status of UMIR and Policies…………………………........................ 11.11-1

Table of Contents                                                                         UMIR 2
January 1, 2013
                                                                                Universal Market Integrity Rules
                                                                                     Rules & Policies


 PART 1 – DEFINITIONS AND INTERPRETATION
1.1      Definitions
         In UMIR, unless the subject matter or context otherwise requires:
           Defined Terms:     UMIR section 1.1 – “UMIR”
           Regulatory History:     In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                   commissions approved an amendment to section 1.1 that came into force on June 1, 2008 to
                                   replace the phrase “these Rules” with “UMIR”.



         “Access Person” means a person other than a Participant who is:
         (a)      a subscriber; or
         (b)      a user.
           Defined Terms:      NI 21-101 section 1.1 – “subscriber” and “user”
                               UMIR section 1.1 – “Participant”
                               UMIR section 1.2(2) – “person”



         “arbitrage account” means an account in which the holder makes a usual practice of
         buying and selling:
         (a)      securities in different markets to take advantage of differences in prices available in
                  each market; or
         (b)      securities which are or may become convertible or exchangeable by the terms of
                  the securities or operation of law into other securities in order to take advantage of
                  differences in prices between the securities.
           Defined Terms:     NI 21-101 section 1.4 – Interpretation -- “security”



         “Basis Order” means an order for the purchase or sale of listed securities or quoted
         securities:
         (a)      where the intention to enter the order has been reported by the Participant or
                  Access Person to a Market Regulator prior to the entry of the order;
         (b)      that will be executed at a price which is determined in a manner acceptable to a
                  Market Regulator based on the price achieved through the execution on that
                  trading day of one or more transactions in a derivative instrument that is listed on
                  an Exchange or quoted on a QTRS; and
         (c)      that comprise at least 80% of the component security weighting of the underlying
                  interest of the derivative instruments subject to the transaction or transactions
                  described in clause (b).
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               UMIR section 1.1 – “Access Person”, “Exchange”, “listed security”, “Market Regulator”,
                                                  “Participant”, “QTRS”, “quoted security” and “trading day”
           Regulatory History:     Effective April 8, 2005, the applicable securities commissions approved amendments to
                                   section 1.1 to add the definition of “Basis Order”.




Part 1 - Definitions and Interpretation                                                                               UMIR 1.1-1
January 1, 2013
         “basket trade” means a simultaneous purchase of at least 10 listed securities or quoted
         securities, provided that any restricted security comprises not more than 20% of the total
         value of the transaction.
           Defined Terms:       UMIR section 1.1 – “listed security”, “quoted security” and “restricted security”
           Regulatory History:      Effective February 25, 2005, the applicable securities commissions approved amendments to
                                    section 1.1 that came into force on May 9, 2005 to add the definition of “basket trade”.



         “best ask price” means the lowest price of an order on any marketplace as displayed in
         a consolidated market display to sell a particular security, but does not include the price
         of any order that is a Basis Order, Call Market Order, Closing Price Order, Market-on-
         Close Order, Opening Order, Special Terms Order or Volume-Weighted Average Price
         Order.
           Defined Terms:    NI 21-101 section 1.1 – “order”
                             NI 21-101 section 1.4 – Interpretation -- “security”
                             UMIR section 1.1 –      “Basis Order”, “Call Market Order”, “Closing Price Order”, “consolidated market
                                                     display”, “Market-on-Close Order”, “marketplace”, “Opening Order”, “Special
                                                     Terms Order” and “Volume-Weighted Average Price Order”
           Related Provision:       UMIR 1.2(8)
           Regulatory History:     Effective March 9, 2007, the applicable securities commissions approved an amendment to the
                                   definition of “best ask price” in section 1.1 to delete the phrase “Special Terms Order” and
                                   substitute “Basis Order, Call Market Order, Closing Price Order, Market-on-Close Order,
                                   Opening Order, Special Terms Order or Volume-Weighted Average Price Order”.



         “best bid price” means the highest price of an order on any marketplace as displayed
         in a consolidated market display to buy a particular security, but does not include the
         price of any order that is a Basis Order, Call Market Order, Closing Price Order, Market-
         on-Close Order, Opening Order, Special Terms Order or Volume-Weighted Average
         Price Order.
           Defined Terms:    NI 21-101 section 1.1 – “order”
                             NI 21-101 section 1.4 – Interpretation -- “security”
                             UMIR section 1.1 –      “Basis Order”, “Call Market Order”, “Closing Price Order”, “consolidated market
                                                     display”, ”Market-on-Close Order”, “marketplace”, “Opening Order”, “Special
                                                     Terms Order” and “Volume-Weighted Average Price Order”
           Related Provision:       UMIR 1.2(8)
           Regulatory History:     Effective March 9, 2007, the applicable securities commissions approved an amendment to the
                                   definition of “best bid price” in section 1.1 to delete the phrase “Special Terms Order” and
                                   substitute “Basis Order, Call Market Order, Closing Price Order, Market-on-Close Order,
                                   Opening Order, Special Terms Order or Volume-Weighted Average Price Order”.



“best independent bid price” means the best bid price, other than for an order that a dealer-
restricted person knows or ought reasonably to know has been entered by or on behalf of a
person that is a dealer-restricted person or an issuer-restricted person.
           Defined Terms:    NI 21-101 section 1.1 – “order”
                             UMIR section 1.1 – “best bid price”, “dealer-restricted person” and “issuer-restricted person”
                             UMIR section 1.2(2) – “person”
           Regulatory History:     Effective January 8, 2010, the applicable securities commissions approved amendments to
                                   section 1.1 to add the definition of “best independent bid price”.



Part 1 - Definitions and Interpretation                                                                                  UMIR 1.1-2
January 1, 2013
         “better price” means, in respect of each trade resulting from an order for a particular
         security:
         (a)      in the case of a purchase, a price that is at least one trading increment lower than
                  the best ask price at the time of the entry of the order to a marketplace provided
                  that, if the best bid price is one trading increment lower than the best ask price, the
                  price shall be at least one-half of one trading increment lower; and
         (b)      in the case of a sale, a price that is at least one trading increment higher than the
                  best bid price at the time of the entry of the order to a marketplace provided that, if
                  the best ask price is one trading increment higher than the best bid price, the price
                  shall be at least one-half of one trading increment higher.
           Defined Terms:      NI 21-101 section 1.1 - “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “best ask price”, “best bid price”, “marketplace” and “trading increment”
                               UMIR section 1.2(2) – “trade”
           Regulatory History: On April 13, 2012, the applicable securities commissions approved an amendment to section 1.1,
                               effective October 15, 2012, to delete and substitute the definition of “better price”. Prior to that
                               effective date, the definition provided:
                                   “better price” means, in respect of a particular security:
                                    (a)   a price lower than the best ask price, in the case of a purchase; and
                                    (b)   a price higher than the best bid price, in the case of a sale.



         “Board” means the board of directors or other governing body of a Market Regulator.
           Defined Terms:      UMIR section 1.1 – “Market Regulator”



         “bypass order” means an order that is:
         (a)      part of a designated trade; or
         (b)      to satisfy an obligation to fill an order imposed on a Participant or Access Person
                  by any provision of UMIR or a Policy
         and that is entered on a protected marketplace to execute as against the disclosed
         volume on that marketplace prior to the execution or cancellation of the balance of the
         order.
           Defined Terms:    NI 21-101 section 1.1 - “order”
                             UMIR section 1.1 –     “Access Person”, “designated trade”, “disclosed volume”, “marketplace”,
                                                    “Participant”, “Policy”, “protected marketplace” and “UMIR”
           Regulatory History:    Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                  section 1.1 to add the definition of “bypass order”.
                                  In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                  commissions approved an amendment to the definition of “bypass order” that came into force on
                                  June 1, 2008 to replace the phrase “Rule or” with “provision of UMIR or a”.



         “Canadian account” means an account other than a non-Canadian account.
           Defined Terms:    UMIR section 1.1 – “non-Canadian account”
           Regulatory History:    Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                  section 1.1 to add the definition of “Canadian account”.



Part 1 - Definitions and Interpretation                                                                                  UMIR 1.1-3
January 1, 2013
         “Call Market Order” means an order for the purchase or sale of one or more particular
         securities that is entered on a marketplace on a trading day to trade at a particular time
         or times established by the marketplace during that trading day at a price established by
         the trading system of the marketplace.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “marketplace” and ”trading day”



         “client order” means an order for the purchase or sale of a security received or
         originated by a Participant for the account of a client of the Participant or a client of an
         affiliated entity of the Participant, but does not include a principal order or a non-client
         order.
           Defined Terms:      NI 21-101 section 1.1 - “order”
                               NI 21-101 section 1.3(1) – “affiliated entity”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “Participant”, “principal order” and “non-client order”



         “Closing Price Order” means an order for the purchase or sale of a listed security or a
         quoted security entered on a marketplace and subject to the conditions that the order
         trade at the closing sale price of that security on that marketplace for that trading day
         and that the trade is executed subsequent to the establishment of the closing price.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “listed security”, “marketplace”, “quoted security” and “trading day”
                               UMIR section 1.2(2) – “trade”
           Regulatory History:     Effective March 9, 2007, the applicable securities commissions approved an amendment to
                                   section 1.1 to add the definition of “Closing Price Order”.



         “connected security” means, in respect of an offered security:
         (a)      a listed security or quoted security into which the offered security is immediately
                  convertible, exchangeable or exercisable unless the price at which the offered
                  security is convertible, exchangeable or exercisable is greater than 110% of the
                  best ask price of the listed security or quoted security at the commencement of the
                  restricted period;
         (b)      a listed security or quoted security of the issuer of the offered security or another
                  issuer that, according to the terms of the offered security, may significantly
                  determine the value of the offered security;
         (c)      if the offered security is a special warrant, a listed security or quoted security which
                  would be issued on the exercise of the special warrant; and
         (d)      if the offered security is an equity security, any other equity security of the issuer
                  that is a listed security or quoted security.
           Defined Terms:      UMIR section 1.1 – “best ask price”, “equity security”, “listed security”, “offered security”, “quoted
                                                  security” and “restricted period”



Part 1 - Definitions and Interpretation                                                                                   UMIR 1.1-4
January 1, 2013
           Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments to
                                   section 1.1 that came into force on May 9, 2005 to add the definition of “connected security”.
                                   Effective January 8, 2010, the applicable securities commissions approved amendments to
                                   section 1.1 to amend the definition of “connected security” to remove the word “or” at the end
                                   of clause (c) and replace it by the word “and”.



         “consolidated market display” means, in respect of a particular security, information
         on orders or trades from each marketplace on which such particular security trades that
         has been:
         (a)      produced by an information processor in a timely manner in accordance with Part
                  14 of the Marketplace Operation Instrument; or
         (b)      if there is no information processor, produced by an information vendor in
                  accordance with Part 7 of the Marketplace Operation Instrument.
           Defined Terms:      NI 21-101 section 1.1 – “information processor” and “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “marketplace” and “Market Operation Instrument”
                               UMIR section 1.2(2) – “trade”
           Regulatory History:     Effective March 9, 2007, the applicable securities commissions approved an amendment to
                                   section 1.1 to replace the definition of “consolidated market display”. Prior to that date, the
                                   definition provided:
                                          “consolidated market display” means, in respect of a particular security:
                                          (a) the consolidated feed respecting orders and trades produced by an information
                                              processor in accordance with section 7.3 of the Marketplace Operation Instrument
                                              provided such consolidated feed includes details of orders and trades from the
                                              principal market; or
                                          (b)   information regarding orders and trades on a marketplace produced by an information
                                                vendor for the purposes of the Marketplace Operation Instrument provided such
                                                information includes details of orders and trades from the principal market.




         “Dark Order” means:
         (a) an order no portion of which is displayed on entry on a marketplace in a
             consolidated market display; or
         (b) that portion of an order which on entry to a marketplace is not displayed in a
             consolidated market display if that portion may trade at a price other than the price
             displayed by that portion of the order included in the consolidated market display
         but does not include an order entered on a marketplace as:
         (c) part of an intentional cross;
         (d) a market order that is immediately executed in full on one or more marketplaces at
             the time of entry;
         (e) a limit order that is immediately executed in full on one or more marketplaces at the
             time of entry;
         (f) a Basis Order;




Part 1 - Definitions and Interpretation                                                                                UMIR 1.1-5
January 1, 2013
         (g) a Call Market Order if that Call Market Order may only trade with other Call Market
             Orders and the matching of Call Market Orders occurs less frequently than once
             every minute;
         (h) a Closing Price Order;
         (i)   a Market-on-Close Order;
         (j)   an Opening Order; or
         (k) a Volume-Weighted Average Price Order.
           Defined Terms:      NI 21-101 section 1.1 - “order”
                               UMIR section 1.1 – “Basis Order”, “Call Market Order”, “Closing Price Order”, “consolidated market
                                                  display”, “intentional cross”, “limit order”, “Market-on-Close Order”, “market
                                                  order”, “marketplace”, “Opening Order” and “Volume-Weighted Average Price
                                                  Order”
           Regulatory History: On April 12, 2012, the applicable securities commissions approved an amendment to section 1.1,
                               effective October 15, 2012, to add the definition of “Dark Order”.



         "dealer-restricted person" means, in respect of a particular offered security:
         (a)      a Participant that:
                  (i)     is an underwriter, as defined in applicable securities legislation, in a
                          prospectus distribution or a restricted private placement,
                  (ii)    is participating, as agent but not as an underwriter, in a restricted private
                          placement of securities and the Participant has been allotted or is otherwise
                          entitled to sell more than 25% of the securities to be issued under the
                          restricted private placement,
                  (iii)   has been appointed by an offeror to be the dealer-manager, manager or
                          soliciting dealer or adviser in respect of a securities exchange take-over bid
                          or issuer bid, or
                  (iv)    has been appointed by an issuer to be the soliciting dealer or adviser in
                          respect of obtaining securityholder approval for an amalgamation,
                          arrangement, capital reorganization or similar transaction that would result in
                          the issuance of securities that would be a distribution exempt from
                          prospectus requirements in accordance with applicable securities law,
                  where, in each case, adviser means an adviser whose compensation depends on
                  the outcome of the transaction;
         (b)      a related entity of the Participant referred to in clause (a) but does not include such
                  related entity, or any separate and distinct department or division of the Participant
                  if:
                  (i)     the Participant maintains and enforces written policies and procedures in
                          accordance with Rule 7.1 that are reasonably designed to prevent the flow of
                          information from the Participant regarding the offered security and the related
                          transaction,
                  (ii)    the Participant has no officers or employees that solicit client orders or
                          recommend transactions in securities in common with the related entity,
                          department or division, and

Part 1 - Definitions and Interpretation                                                                              UMIR 1.1-6
January 1, 2013
                  (iii)   the related entity, department or division does not during the restricted period
                          in connection with the restricted security:
                          (A)    act as a market maker (other than pursuant to Marketplace Trading
                                 Obligations),
                          (B)    solicit client orders, or
                          (C)    enter principal orders or otherwise engage in proprietary trading;
         (c)      a partner, director, officer, employee or a person holding a similar position or acting
                  in a similar capacity, of the Participant referred to in clause (a) or for a related
                  entity of the Participant referred to in clause (b); or
         (d)      any person acting jointly or in concert with a person described in clause (a), (b) or
                  (c) for a particular transaction.
           Defined Terms:       N 14-101 section 1.1(3) – “issuer bid” and “securities legislation”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 –     “client order”, “employee”, “Marketplace Trading Obligations”, “offered
                                                       security”, “Participant”, “principal order”, “related entity”, “restricted period”,
                                                       “restricted private placement” and “securities exchange take-over bid”
                                UMIR section 1.2(2) – “person”
           Related Provision:       UMIR Policy 1.2 Part 1 – “acting jointly or in concert”
           Regulatory History:      Effective February 25, 2005, the applicable securities commissions approved amendments to
                                    section 1.1 that came into force on May 9, 2005 to add the definition of “dealer-restricted
                                    person”.
                                    Effective January 8, 2010, the applicable securities commissions approved amendments to
                                    section 1.1 to amend the definition of “dealer-restricted person” to replace subclause (a)(ii) of
                                    the definition. Prior to that date, the subclause provided:
                                     (ii) is participating, as agent but not as an underwriter, in a restricted private placement of
                                          securities and:
                                           (A)    the number of securities to be issued under the restricted private placement would
                                                  constitute more than 10% of the issued and outstanding offered securities, and
                                           (B)    the Participant has been allotted or is otherwise entitled to sell more than 25% of
                                                  the securities to be issued under the restricted private placement.
                                    Effective August 26, 2011, the applicable securities commissions approved amendments to
                                    section 1.1 to replace the reference in the definition of “dealer-restricted person“ to “Market
                                    Maker Obligations” with “Marketplace Trading Obligations”.



         “derivatives market maker” means a person who performs the function ordinarily
         associated with a market maker or specialist on an Exchange or QTRS in connection
         with a derivative instrument.
           Defined Terms:       UMIR section 1.1 – “Exchange” and “QTRS”
                                UMIR section 1.2(2) – “person”



         “designated trade” means an intentional cross or a pre-arranged trade of a security
         that would be made at a price that:
         (a)      would not be less than the lesser of:
                  (i)  95% of the best bid price, and
                  (ii) 10 trading increments less than the best bid price; and
         (b)      would not be more than the greater of:


Part 1 - Definitions and Interpretation                                                                                      UMIR 1.1-7
January 1, 2013
                  (i)    105% of the best ask price, and
                  (ii)   10 trading increments more than the best ask price.
           Defined Terms:      NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “best ask price”, “best bid price”, “intentional cross”, “pre-arranged trade” and
                                                  “trading increment”
           Regulatory History:      Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                    section 1.1 to add the definition of “designated trade”.



         “disclosed volume” means the aggregate of the number of units of a security relating
         to each order for that security entered on a protected marketplace and displayed in a
         consolidated market display that is offered at a price below the intended price of a trade
         in the case of a purchase or that is bid at a price above the intended price of a trade in
         the case of a sale, but does not include the volume of:
         (a)      a Basis Order;
         (b)      a Call Market Order;
         (c)      a Market-on-Close Order;
         (d)      an Opening Order;
         (e)      a Special Terms Order; or
         (f)      a Volume-Weighted Average Price Order.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “Basis Order”, “Call Market Order”, “consolidated market display”, “Market-on-
                                                  Close Order”, “Opening Order”, “protected marketplace”, “Special Terms Order”
                                                  and “Volume-Weighted Average Price Order”
                               UMIR section 1.2 – “trade”
           Regulatory History:     Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                   section 1.1 to add the definition of “disclosed volume”.



         “document” includes a sound recording, videotape, film, photograph, chart, graph,
         map, plan, survey, book of account, and information recorded or stored by means of any
         device.
           Regulatory History:     Effective March 11, 2005, the applicable securities commissions approved an amendment to
                                   section 1.1 to add the definition of “document”.
                                  In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                  commissions approved an amendment to the definition of “document” that came into force on
                                  June 1, 2008 to replace the word “photographs” with “photograph”.



         “employee” includes any person who has entered into principal/agent relationship with
         a Participant in accordance with the terms and conditions established for such a
         relationship by any self-regulatory entity of which the Participant is a member.
           Defined Terms:      NI 21-101 section 1.1 – “self-regulatory entity”
                               UMIR section 1.1 – “Participant”
                               UMIR section 1.2(2) – “person”
           Regulatory History:     Effective May 16, 2003, the applicable securities commissions approved the amendment to add
                                   the definition of “employee”.




Part 1 - Definitions and Interpretation                                                                                UMIR 1.1-8
January 1, 2013
         “equity security” means any security of an issuer that carries a residual right to
         participate in the earnings of the issuer and, upon liquidation or winding-up of the issuer,
         in its assets.
           Defined Terms:       NI 21-101 section 1.4 – Interpretation -- “security”
           Regulatory History:      Effective February 25, 2005, the applicable securities commissions approved amendments to
                                    section 1.1 that came into force on May 9, 2005 to add the definition of “equity security”.



         “Exchange” means a person recognized by the applicable securities regulatory
         authority under securities legislation to carry on business as an exchange.
           Defined Terms:       NI 14-101 section 1.1(3) – “securities legislation” and “securities regulatory authority”
                                UMIR section 1.2(2) – “person”



         “Exchange-traded Fund” – repealed
           Regulatory History:      Effective January 8, 2010, the applicable securities commissions approved amendments to
                                    section 1.1 to repeal the definition of “Exchange-traded Fund”. Prior to that date, the definition
                                    provided:
                                          “Exchange-traded Fund” means a mutual fund:
                                          (a)   the units of which are:
                                                (i)    a listed security or a quoted security, and
                                                (ii)   in continuous distribution in accordance with applicable securities legislation;
                                                       and
                                          (b)   designated by the Market Regulator.



         “Exempt Exchange-traded Fund” means a mutual fund for the purposes the purposes
         of applicable securities legislation, the units of which:
         (a)      are a listed security or a quoted security; and
         (b)      are in continuous distribution in accordance with applicable securities legislation
         but does not include a mutual fund that has been designated by the Market Regulator to
         be excluded from this definition.
           Defined Terms:       NI 14-101 section 1.1(3) – “securities legislation”
                                UMIR section 1.1 – “listed security”, “Market Regulator” and “quoted security”
           Related Provision:       UMIR Policy 1.1, Part 2 – Definition of ‘’Exempt Exchange-traded Fund’’
           Regulatory History:      Effective January 8, 2010, the applicable securities commissions approved amendments to
                                    section 1.1 to add the definition of “Exempt Exchange-traded Fund”.
           General Commentary:             A current list of the securities which have been designated as being excluded from the
                                           definition of an “Exempt Exchange-traded Fund” is available on the website of the
                                           Investment Industry Regulatory Organization of Canada (at http://www.iiroc.ca).



         “failed trade” means a trade resulting from the execution of an order entered by a
         Participant or Access Person on a marketplace on behalf of an account and
         (a) in the case of a sale, other than a short sale, the account failed to make available
               securities in such number and form;



Part 1 - Definitions and Interpretation                                                                                     UMIR 1.1-9
January 1, 2013
         (b)      in the case of a short sale, the account failed to make:
                  (i)   available securities in such number and form, or
                  (ii)   arrangements with the Participant or Access Person to borrow securities in
                         such number and form; and
         (c)   in the case of a purchase, the account failed to make available monies in such
               amount,
         as to permit the settlement of the trade at the time on the date contemplated on the
         execution of the trade provided a trade shall be considered a “failed trade” irrespective of
         whether the trade has been settled in accordance with the rules or requirements of the
         clearing agency.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “Access Person”, “marketplace”, “Participant” and “short sale”
                               UMIR section 1.2 – “trade”
           Regulatory History:     On October 15, 2008, the applicable securities commissions approved amendments to section
                                   1.1 that came into force on October 14, 2008 to add the definition of “failed trade”.



         “foreign organized regulated market” means a market outside of Canada:
         (a)      that is an exchange, quotation or trade reporting system, alternative trading system
                  or similar facility recognized by or registered with a securities regulatory authority
                  that is an ordinary member of the International Organization of Securities
                  Commissions;
         (b)      on which the entry of orders and the execution or reporting of trades is monitored
                  for compliance with regulatory requirements at the time of entry and execution or
                  reporting by a self-regulatory organization recognized by the securities regulatory
                  authority or by the market if the market has been empowered by the securities
                  regulatory authority to monitor the entry of orders and the execution or reporting of
                  trades on that market for compliance with regulatory requirements; and
         (c)      that displays and provides timely information to information vendors, information
                  processors or persons providing similar functions respecting the dissemination of
                  data to market participants for that market of at least the price, volume and security
                  identifier of each trade at the time of execution or reporting of the trade on that
                  market,
         but, for greater certainty, does not include a facility of a market to which trades executed
         over-the-counter are reported unless:
         (d)      the trade is required to be reported and is reported to the market forthwith following
                  execution;
         (e)      at the time of the report, the trade is monitored for compliance with securities
                  regulatory requirements; and
         (f)      at the time of the report, timely information respecting the trade is provided to
                  information vendors, information processors or persons providing similar functions
                  respecting the dissemination of data to market participants for that market.
           Defined Terms:      NI 14-101 section 1.1(3) – “securities regulatory authority”




Part 1 - Definitions and Interpretation                                                                            UMIR 1.1-10
January 1, 2013
                               NI 21-101 section 1.1 – “alternative trading system”, “information processor” and “order”
                               UMIR section 1.2 – “person” and “trade”
           Regulatory History:     Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                   section 1.1 to add the definition of “foreign organized regulated market”.



         “hearing” means a disciplinary and enforcement proceeding commenced by a Market
         Regulator to determine whether a person has contravened a Requirement or is liable for
         the contravention of a Requirement and includes any procedural applications or motions
         in relation to those proceedings.
           Defined Terms:      UMIR section 1.1 – “Market Regulator” and “Requirements”
                               UMIR section 1.2(2) – “person”



         “Hearing Committee” means a standing committee of a Market Regulator comprised of
         persons selected in accordance with Schedule C.1 to the Investment Industry
         Regulatory Organization of Canada’s Transition Rule 1 – Hearing Committees and
         Hearing Panels Rule.
           Defined Terms:      UMIR section 1.1 – “Market Regulator”
           Regulatory History:      In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                    commissions approved amendments to the definition of “Hearing Committee” that came into
                                    force on June 1, 2008 to replace phrase “the Policy made under Rule 10.8” with “Schedule C.1
                                    to the Investment Industry Regulatory Organization of Canada’s Transition Rule 1 – Hearing
                                    Committees and Hearing Panels Rule”.
           Related Provisions:      Schedule C.1 to Transition Rule 1 of the Investment Industry Regulatory Organization of
                                    Canada



         “Hearing Panel” means the particular members of the Hearing Committee selected in
         accordance with Schedule C.1 to the Investment Industry Regulatory Organization of
         Canada’s Transition Rule 1 – Hearing Committees and Hearing Panels Rule to hear a
         particular disciplinary and enforcement proceeding.
           Defined Terms:      UMIR section 1.1 – “Hearing Committee”
           Regulatory History:      In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                    commissions approved amendments to the definition of “Hearing Panel” that came into force
                                    on June 1, 2008 to replace phrase “the Policy made under Rule 10.8” with “Schedule C.1 to
                                    the Investment Industry Regulatory Organization of Canada’s Transition Rule 1 – Hearing
                                    Committees and Hearing Panels Rule”.
           Related Provisions:      Schedule C.1 to Transition Rule 1 of the Investment Industry Regulatory Organization of
                                    Canada



         “hedge” means the purchase or sale of a security by a person to offset, in whole or in
         part, the risk assumed on a prior purchase or sale or to be assumed on a subsequent
         purchase or sale of that security or a related security.
           Defined Terms:      NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “related security”
                               UMIR section 1.2(2) – “person”



         “highly-liquid security” means a listed security or quoted security that:


Part 1 - Definitions and Interpretation                                                                                    UMIR 1.1-11
January 1, 2013
         (a)      has traded, in total, on one or more marketplaces as reported on a consolidated
                  market display during a 60-day period ending not earlier than 10 days prior to the
                  commencement of the restricted period:
                  (i)   an average of at least 100 times per trading day, and
                  (ii) with an average trading value of at least $1,000,000 per trading day; or
         (b)      is subject to Regulation M under the 1934 Act and is considered to be an “actively-
                  traded security” under that regulation.
           Defined Terms:      NI 14-101 section 1.1 – “1934 Act”
                               UMIR section 1.1 – “consolidated market display”, “listed security”, “marketplace”, “quoted security”,
                                                  “restricted period” and “trading day”
           Regulatory History:    Effective February 25, 2005, the applicable securities commissions approved amendments to
                                  section 1.1 that came into force on May 9, 2005 to add the definition of “highly-liquid security”.
           General Commentary:             A list of the securities which on any particular trading day qualify as a “highly-liquid security”
                                           is available on the website of the Investment Industry Regulatory Organization of Canada
                                           (at http://www.iiroc.ca).



         “insider” means a person who is an insider of an issuer for the purpose of applicable
         securities legislation.
           Defined Terms:      NI 14-101 section 1.1(3) – “securities legislation”
                               UMIR section 1.2(2) – “person”



         “intentional cross” means a trade resulting from the entry by a Participant or Access
         Person of both the order to purchase and the order to sell a security, but does not
         include a trade in which the Participant has entered one of the orders as a jitney order.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “Access Person”, “Participant” and “jitney order”
                               UMIR section 1.2(2) – “trade”
           Regulatory History:    Effective March 9, 2007, the applicable securities commissions approved an amendment to the
                                  definition of “intentional cross” in section 1.1 to insert the phrase “or Access Person” after the
                                  first occurrence of the word “Participant”.



         “internal cross” means an intentional cross between two accounts which are managed
         by a single firm acting as a portfolio manager with discretionary authority to manage the
         investment portfolio granted by each of the holders of the accounts and includes a trade
         in respect of which the Participant or Access Person is acting as a portfolio manager in
         authorizing the trade between the two accounts.
           Defined Terms:      UMIR section 1.1 – “Access Person”, “intentional cross” and “Participant”
                               UMIR section 1.2(2) – “trade”
           Regulatory History:     Effective March 9, 2007, the applicable securities commissions approved an amendment to
                                   section 1.1 to replace the definition of “internal cross”. Prior to that date, the definition provided:
                                          “internal cross” means an intentional cross between two client accounts of a Participant
                                          which are managed by a single firm acting as a portfolio manager with discretionary
                                          authority to manage the investment portfolio granted by each of the clients and includes a
                                          trade where the Participant is acting as a portfolio manager in authorizing the trade
                                          between the two client accounts.




Part 1 - Definitions and Interpretation                                                                                      UMIR 1.1-12
January 1, 2013
         “issuer-restricted person” means, in respect of a particular offered security:
         (a)      the issuer of the offered security;
         (b)      a selling securityholder of the offered security in connection with a prospectus
                  distribution or restricted private placement;
         (c)      an affiliated entity, an associated entity or insider of the issuer or selling
                  securityholder of the offered security as determined in accordance with the
                  provisions of applicable securities legislation but does not include a person who is
                  an insider of an issuer by virtue of clause (c) of the definition of “insider” under the
                  Securities Act (Ontario) and similar provisions of applicable securities legislation if
                  that person:
                  (i)    does not have, and has not had in the previous 12 months, any board or
                         management representation in respect of the issuer or selling securityholder;
                         and
                  (ii) does not have knowledge of any material information concerning the issuer
                         or its securities that has not been generally disclosed; or
         (d)      any person acting jointly or in concert with a person described in clause (a), (b) or
                  (c) for a particular transaction.
           Defined Terms:      NI 14-101 section 1.1(3) – “securities legislation”
                               N1 21-101 section 1.3(1) – “affiliated entity”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “insider”, “offered security” and “restricted private placement”
                               UMIR section 1.2(2) – “person”
           Related Provisions:     UMIR section 1.2(7) – interpretation of “associated entity”
                                   UMIR Policy 1.2 Part 1 – interpretation of “acting jointly or in concert”
           Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments to
                                   section 1.1 that came into force on May 9, 2005 to add the definition of “issuer-restricted
                                   person”.



         “jitney order” means an order entered on a marketplace by a Participant acting for or
         on behalf of another Participant.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               UMIR section 1.1 – “marketplace” and “Participant”



         “last independent sale price” – repealed
           Regulatory History:     Effective January 8, 2010, the applicable securities commissions approved amendments to
                                   section 1.1 to repeal the definition of “last independent sale price”. Prior to that date, the
                                   definition provided:
                                          “last independent sale price” means the last sale price of a trade, other than a trade that
                                          a dealer-restricted person knows or ought reasonably to know has been executed by or on
                                          behalf of a person that is a dealer-restricted person or an issuer-restricted person.



         “last sale price” means the price of the last sale of at least one standard trading unit of
         a particular security displayed in a consolidated market display but does not include the
         price of a sale resulting from an order that is:


Part 1 - Definitions and Interpretation                                                                                 UMIR 1.1-13
January 1, 2013
         (a)      a Basis Order;
         (b)      a Call Market Order;
         (c)      a Closing Price Order;
         (d)      a Special Terms Order unless the Special Terms Order has executed with an order
                  or orders other than a Special Terms Order; or
         (e)      a Volume-Weighted Average Price Order.
           Defined Terms:       NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “Basis Order”, “Call Market Order”, “Closing Price Order”, “consolidated market
                                                   display”, “Special Terms Order”, “standard trading unit” and “Volume-Weighted
                                                   Average Price Order”
           Related Provision:       UMIR section 1.2(4)
           Regulatory History:      Effective April 8, 2005, the applicable securities commissions approved an amendment to the
                                    definition of “last sale price” in section 1.1 to delete the phrase “Call Market Order” and
                                    substitute “Basis Order, Call Market Order or Volume-Weighted Average Price Order”.
                                   Effective March 9, 2007, the applicable securities commissions approved an amendment to
                                   section 1.1 to replace the definition of “last sale price”. Prior to that date, the definition provided:
                                          “last sale price” means the price of the last sale of at least one standard trading unit of a
                                          particular security displayed in a consolidated market display but does not include the price
                                          of a sale resulting from an order that is a Basis Order, Call Market Order or Volume-
                                          Weighted Average Price Order.



         “limit order” means an order to:
         (a)      buy a security to be executed at a specified maximum price; or
         (b)      sell a security to be executed at a specified minimum price.
           Defined Terms:       NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
           Related Provisions:      UMIR section 1.2(3)



         “listed security” means a security listed on an Exchange.
           Defined Terms:       UMIR section 1.1 – “Exchange”
                                NI 21-101 section 1.4 – Interpretation -- “security”



         “Market Integrity Official” means an employee of a Market Regulator designated by
         the Market Regulator to exercise the powers of the Market Regulator under UMIR.
           Defined Terms:       UMIR section 1.1 – “Market Regulator” and “UMIR”
           Regulatory History:       In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                     commissions approved an amendment to the definition of “Market Integrity Official” that came
                                     into force on June 1, 2008 to replace the phrase “these Rules” with “UMIR”.



         “Market Maker Obligations” – repealed
           Regulatory History:       Effective August 26, 2011, the applicable securities commissions approved amendments to
                                     section 1.1 to replace the definition of “Market Maker Obligations” with the definition of
                                     “Marketplace Trading Obligations”. Prior to that date, the definition of “Market Maker
                                     Obligations” read as follows:



Part 1 - Definitions and Interpretation                                                                                      UMIR 1.1-14
January 1, 2013
                                          “Market Maker Obligations” means obligations imposed by Marketplace Rules on a
                                          member or user or a person employed by a member or user to guarantee:
                                          (a) a two-sided market for a particular security on a continuous or reasonably continuous
                                              basis; and
                                          (b) the execution of orders for the purchase or sale of a particular security which are less
                                              than a minimum number of units of the security as designated by the marketplace.



         “Market-on-Close Order” means an order for the purchase or sale of a security entered
         on a marketplace on a trading day for the purpose of calculating and executing at the
         closing price of the security on that marketplace on that trading day.
           Defined Terms:       NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “marketplace” and “trading day”
           Regulatory History:     Effective March 9, 2007, the applicable securities commissions approved an amendment to
                                   section 1.1 to amend the definition of “Market-on-Close Order” to add the phrase “calculating
                                   and” prior to “executing”.



         “Market Operation Instrument” means National Instrument 21-101 – Marketplace
         Operation as amended, supplemented and in effect from time to time.


         “market order” means an order to:
         (a)      buy a security to be executed upon entry to a marketplace at the best ask price; or
         (b)      sell a security to be executed upon entry to a marketplace at the best bid price.
           Defined Terms:       NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “best ask price”, “best bid price” and “marketplace”
           Related Provision:       UMIR section 1.2(3)



         “Market Regulator” means:
         (a)      an Exchange, unless such Exchange monitors the conduct of its members
                  indirectly through a regulation services provider in which case, the regulation
                  services provider;
         (b)      a QTRS, unless such QTRS monitors the conduct of its users indirectly through a
                  regulation services provider in which case, the regulation services provider; and
         (c)      in respect of any other marketplace, the regulation services provider with whom
                  that marketplace has entered an agreement in accordance with the requirements
                  of the Trading Rules.
           Defined Terms:       NI 21-101 section 1.1 – “member”, “regulation services provider” and “user”
                                UMIR section 1.1 – “Exchange”, “marketplace”, “QTRS” and “Trading Rules”



         “marketplace” means:
         (a)      an Exchange;
         (b)      a QTRS; and


Part 1 - Definitions and Interpretation                                                                                 UMIR 1.1-15
January 1, 2013
         (c)      an ATS.
           Defined Terms:      NI 21-101 section 1.1 – “ATS”
                               UMIR section 1.1 – “Exchange” and “QTRS”



         “Marketplace Rules” means the rules, policies and other similar instruments adopted
         by an Exchange or a QTRS as approved by the applicable securities regulatory authority
         but not including any rules, policies or other similar instruments related solely to the
         listing of securities on an Exchange or to the quoting of securities on a QTRS.
           Defined Terms:      NI 14-101 section 1.1(3) – “securities regulatory authority”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “Exchange” and “QTRS”



         “Marketplace Trading Obligations” means obligations imposed by:
         (a)      Marketplace Rules on a member or user or a person employed by a member or
                  user to guarantee:
                  (i)    a two-sided market for a particular security on a continuous or reasonably
                         continuous basis, or
                  (ii)   the execution of orders for the purchase or sale of a particular security which
                         are less than a minimum number of units of the security as designated by the
                         marketplace; or
         (b)      contract between a marketplace and a member, user or subscriber to guarantee
                  the execution of orders for the purchase or sale of a particular security which are
                  less than a minimum number of units of the security as stipulated by the terms of
                  the contract provided such number is less than one standard trading unit and the
                  orders for the member, user or subscriber are automatically generated by the
                  trading system of the marketplace.
           Defined Terms:      NI 21-101 section 1.1 – “member”, “order”, “subscriber” and “user”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “marketplace”, “Marketplace Rules” and “standard trading unit”
                               UMIR section 1.2(2) – “person”
           Regulatory History: Effective August 26, 2011, the applicable securities commissions approved amendments to
                               section 1.1 to introduce the definition of “Marketplace Trading Obligations” to replace the definition
                               of “Market Maker Obligations”.



         “net cost” means the amount by which the sum of the total cost of the trade on the
         purchase of securities based on the purchase price on the marketplace and any
         commission charged to the client by the Participant exceeds the amount of any
         allowance, discount, rebate and any other benefit with a monetary value that is allowed
         to the client on the trade by the Participant or any other person.
           Defined Terms:      NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “marketplace” and “Participant”
                               UMIR section 1.2(2) – “person” and “trade”




Part 1 - Definitions and Interpretation                                                                                UMIR 1.1-16
January 1, 2013
         “net proceeds” means the amount by which the sum of the total proceeds of the trade
         on the sale of securities based on the sale price on the marketplace and the amount of
         any allowance, discount, rebate and other benefit with a monetary value that is allowed
         to the client on the trade by the Participant or any other person exceeds any commission
         charged to the client by the Participant.
           Defined Terms:      NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “marketplace” and “Participant”
                               UMIR section 1.2(2) – “person” and “trade”



         “non-Canadian account” means an account of a client of the Participant or a client of
         an affiliated entity of the Participant held by a Participant or an affiliated entity of a
         Participant and the client is considered to be a non-resident for the purposes of the
         Income Tax Act (Canada).
           Defined Terms:      NI 21-101 section 1.3(1) – “affiliated entity”
                               UMIR section 1.1 – “Participant”
           Regulatory History:     Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                   section 1.1 to add the definition of “non-Canadian account”.



         “non-client order” means an order for the purchase or sale of a security received or
         originated by a Participant for an account:
         (a)      for a partner, director, officer or a person holding a similar position or acting in a
                  similar capacity of the Participant or of a related entity of the Participant;
         (b)      for an employee of the Participant or of a related entity of the Participant who holds
                  approval from an Exchange or a self-regulatory entity; or
         (c)      which is considered to be an employee account or a non-client account by a self-
                  regulatory entity,
         but does not include a principal account.
           Defined Terms:      NI 21-101 section 1.1 – “order” and “self-regulatory entity”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “employee”, “Exchange”, “Participant”, “principal account” and “related entity”
                               UMIR section 1.2(2) – “person”



         “offered security” means all securities of the class of security that is, or will be upon
         issuance, a listed security or a quoted security and:
         (a)      is offered pursuant to a prospectus distribution or a restricted private placement;
         (b)      is offered by an offeror in a securities exchange take-over bid in respect of which a
                  take-over bid circular or similar document is required to be filed under securities
                  legislation;
         (c)      is offered by an issuer in an issuer bid in respect of which an issuer bid circular or
                  similar document is required to be filed under securities legislation; or
         (d)      would be issuable to a securityholder pursuant to an amalgamation, arrangement,
                  capital reorganization or similar transaction in relation to which proxies are being


Part 1 - Definitions and Interpretation                                                                                UMIR 1.1-17
January 1, 2013
                  solicited from securityholders that will receive the offered security in such
                  circumstances that the issuance would be a distribution exempt from prospectus
                  requirements in accordance with applicable securities legislation,
         provided that, if the security described in clauses (a) to (d) is a unit comprised of more
         than one type or class, each security comprising the unit shall be considered to be an
         “offered security”.
         Defined Terms:      NI 14-101 section 1.1(3) – “issuer bid” and “securities legislation”
                             NI 21-101 section 1.4 – Interpretation -- “security”
                             UMIR section 1.1 – “listed security”, “quoted security”, “restricted private placement” and “securities
                                                exchange take-over bid”
         Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments to
                                 section 1.1 that came into force on May 9, 2005 to repeal and replace the definition of “offered
                                 security”. Prior to that date, the definition provided:
                                      “offered security” means the security offered in a securities exchange take-over bid.



         “Opening Order” means an order for the purchase or sale of a security entered on a
         marketplace prior to the opening of trading on that marketplace on a trading day for the
         purpose of calculating and executing at the opening price of the security on that
         marketplace on that trading day provided an order shall cease to be an Opening Order if
         the order does not trade at the opening of trading of that security on that marketplace on
         that trading day.
         Defined Terms:      NI 21-101 section 1.1 – “order”
                             NI 21-101 section 1.4 – Interpretation -- “security”
                             UMIR section 1.1 – “marketplace” and “trading day”
         Regulatory History:     Effective March 9, 2007, the applicable securities commissions approved an amendment to
                                 section 1.1 to replace the definition of “Opening Order”. Prior to that date, the definition
                                 provided:
                                      “Opening Order” means an order for the purchase or sale of a security entered on a
                                      marketplace on a trading day for the purpose of calculating and executing at the opening
                                      price of the security on that marketplace on that trading day.



         “Participant” means:
         (a)      a dealer registered in accordance with securities legislation of any jurisdiction and
                  who is:
                  (i)     a member of an Exchange,
                  (ii)    a user of a QTRS, or
                  (iii)   a subscriber of an ATS; or
         (b)      a person who has been granted trading access to a marketplace and who performs
                  the functions of a derivatives market maker.
           Defined Terms:      NI 14-101 section 1.1(3) – “jurisdiction” and “securities legislation”
                               NI 21-101 section 1.1 –“ATS”, “member”, “subscriber” and “user”
                               UMIR section 1.1 – “derivatives market maker”, “Exchange”, “marketplace” and “QTRS”
                               UMIR section 1.2(2) – “person”




Part 1 - Definitions and Interpretation                                                                                 UMIR 1.1-18
January 1, 2013
         “Policy” means a policy statement adopted by a Market Regulator in connection with
         the administration or application of UMIR as such policy statement is amended,
         supplemented and in effect from time to time.
           Defined Terms:      UMIR section 1.1 – “Market Regulator” and “UMIR”
           Regulatory History:      In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                    commissions approved an amendment to the definition of “Policy” that came into force on
                                    June 1, 2008 to replace the phrase “these Rules” with “UMIR”.



         “pre-arranged trade” means a trade in respect of which the terms of the trade were
         agreed upon, prior to the entry of either the order to purchase or to sell on a
         marketplace, by the persons entering the orders or by the persons on whose behalf the
         orders are entered.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               UMIR section 1.1 – “marketplace”
                               UMIR section 1.2 – “person” and “trade”
           Regulatory History:     Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                   section 1.1 to add the definition of “pre-arranged trade”.




         “Pre-Borrow Security” means a security that has been designated by a Market
         Regulator to be a security in respect of which an order, that on execution would be a
         short sale, may not be entered on a marketplace unless the Participant or Access
         Person has made arrangements to borrow the securities that would be necessary to
         settle the trade prior to the entry of the order.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “Access Person”, “Market Regulator”, “marketplace”, “Participant” and “short
                                                  sale”
                               UMIR section 1.2 – “trade”
           Regulatory History:      On March 2, 2012, the applicable securities commissions approved an amendment to section
                                    1.1, effective October 15, 2012, to add the definition of “Pre-Borrow Security”.



         “principal account” means an account in which a Participant or a related entity of the
         Participant holds a direct or indirect interest other than an interest in the commission
         charged on a transaction.
           Defined Terms:      UMIR section 1.1 – “Participant” and “related entity”



         “principal order” means an order for the purchase or sale of a security received or
         originated by a Participant for a principal account.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “Participant” and “principal account”




Part 1 - Definitions and Interpretation                                                                               UMIR 1.1-19
January 1, 2013
         “Program Trade” means a trade resulting from a series of market orders for the
         purchase or sale of particular securities underlying an index that has been designated by
         a Market Regulator where such trade is undertaken in conjunction with a trade in a
         derivative the underlying interest of which is the index.
           Defined Terms:      NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “market order” and “Market Regulator”
                               UMIR section 1.2(2) – “trade”
           General Commentary:            A current list of the indices which have been designated as an “index” is available on the
                                          website of the Investment Industry Regulatory Organization of Canada
                                          (at http://www.iiroc.ca).



         “protected marketplace” means a marketplace that:
         (a)      disseminates order data in real-time and electronically to the information processor
                  or one or more information vendors in accordance with the Marketplace Operation
                  Instrument;
         (b)      permits dealers to have access to trading in the capacity as agent;
         (c)      provides fully-automated electronic order entry; and
         (d)      provides fully-automated order matching and trade execution.
           Defined Terms:      NI 21-101 section 1.1 –“information processor” and “order”
                               UMIR section 1.1 – “marketplace” and “Market Operation Instrument”
                               UMIR section 1.2 – “trade”
           Regulatory History:     Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                   section 1.1 to add the definition of “protected marketplace”.



         “Protected Party” means in respect of a Market Regulator:
         (a)      the Market Regulator;
         (b)      a director, officer or employee of the Market Regulator;
         (c)      a member of the Hearing Committee or of a committee appointed by the Board; or
         (d)      an independent contractor retained by the Market Regulator to provide services to
                  the Market Regulator.
           Defined Terms:      UMIR section 1.1 – “Board”, “employee”, “Hearing Committee” and “Market Regulator”



         “QTRS” means a recognized quotation and trade reporting system.
           Defined Terms:      N1 21-101 section 1.1 – “recognized quotation and trade reporting system”



         “quoted security” means a security quoted on a QTRS.
           Defined Terms:      NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “QTRS”




Part 1 - Definitions and Interpretation                                                                                UMIR 1.1-20
January 1, 2013
         “Regular Session” means the time period during a trading day when a marketplace is
         ordinarily open for trading, but does not include any extended or special trading facility of
         the marketplace.
           Defined Terms:       UMIR section 1.1 – “marketplace” and “trading day”



         “Regulated Person” means, in respect of the jurisdiction of a Market Regulator in
         connection with the conduct of a person:
         (a)      any marketplace for which the Market Regulator is the regulation services provider
                  or was the regulation services provider at the time of the conduct;
         (b)      any Participant or Access Person of a marketplace for which the Market Regulator
                  is the regulation services provider or was the regulation services provider at the
                  time of the conduct;
         (c)      any person to whom responsibility for compliance with UMIR by other persons are
                  extended in accordance with Rule 10.3 or to whom responsibility had been
                  extended at the time of the conduct;
         (d)      any person to whom the application of UMIR are extended in accordance with Rule
                  10.4 or to whom UMIR had been extended at the time of the conduct; and
         (e)      any person subject to a Marketplace Rule of a marketplace for which the Market
                  Regulator is the regulation services provider or was the regulation services
                  provider at the time of the conduct.
           Defined Terms:       NI 21-101 section 1.1 – “regulation services provider”
                                UMIR section 1.1 –      “Access Person”, “Market Regulator”, “marketplace”, “Marketplace Rules”,
                                                        “Participant” and “UMIR”
                                UMIR section 1.2(2) – “person”
           Related Provisions:      UMIR sections 10.3 and 10.4
           Regulatory History:      Effective February 6, 2004, the applicable securities regulators approved the addition of clause
                                    (e) of the definition of “Regulated Person”.
                                    In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                    commissions approved an amendment to the definition of “Regulated Person” that came into
                                    force on June 1, 2008 to replace the phrase “the Rules” with “UMIR”.



         “related entity” means, in respect of a particular person:
         (a)      an affiliated entity of the particular person which carries on business in Canada
                  and is registered as a dealer or adviser in accordance with applicable securities
                  legislation; and
         (b)      a person who has been designated by a Market Regulator in accordance with
                  subsection (3) of Rule 10.4 as a person who acts in conjunction with the particular
                  person.
           Defined Terms:       NI 14-101 section 1.1(3) – “securities legislation”
                                NI 21-101 section 1.3(1) – “affiliated entity”
                                UMIR section 1.1 – “Market Regulator”
                                UMIR section 1.2(2) – “person”
           Related Provision:       UMIR section 10.4(3)




Part 1 - Definitions and Interpretation                                                                                UMIR 1.1-21
January 1, 2013
         “related security” means, in respect of a particular security:
         (a)      a security which is convertible or exchangeable into the particular security;
         (b)      a security into which the particular security is convertible or exchangeable;
         (c)      a derivative instrument for which the particular security is the underlying interest;
         (d)      a derivative instrument for which the market price varies materially with the market
                  price of the particular security; and
         (e)      if the particular security is a derivative instrument, a security which is the
                  underlying interest of the derivative instrument or a significant component of an
                  index which is the underlying interest of the derivative instrument.
           Defined Terms:      NI 21-101 section 1.4 – Interpretation -- “security”



         “Requirements” means, collectively:
         (a)      UMIR;
         (b)      the Policies;
         (c)      the Trading Rules;
         (d)      the Marketplace Rules;
         (e)      any direction, order or decision of the Market Regulator or a Market Integrity
                  Official; and
         (f)      securities legislation,
         as amended, supplemented and in effect from time to time.
           Defined Terms:      NI 14-101 section 1.1(3) – “securities legislation”
                               UMIR section 1.1 – “Market Integrity Official”, “Market Regulator”, “Marketplace Rules”, “Policy”,
                                                  “Trading Rules” and “UMIR”
           Regulatory History:     Effective April 1, 2005, the applicable securities commissions approved amendments to section
                                   1.1 to amend the definition of “Requirements” by adding clause (f).
                                  In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                  commissions approved an amendment to the definition of “Requirements” that came into force
                                  on June 1, 2008 to replace the phrase “these Rules” with “UMIR”.



         “restricted period” means, for a dealer-restricted person or an issuer-restricted person,
         the period:
         (a)      in connection with a prospectus distribution or a restricted private placement of any
                  offered security, commencing two trading days prior to:
                  (i)    the day the offering price of the offered security is determined, if the
                         securities are to be issued at a fixed price as part of a non-continuous
                         distribution, or
                  (ii)   the issuance of the offered security, if the securities are issued as part of:
                         (A)     a continuous distribution,
                         (B)     a distribution at a non-fixed price permitted by National Instrument 44-
                                 101 – Short Form Prospectus Distributions, or




Part 1 - Definitions and Interpretation                                                                             UMIR 1.1-22
January 1, 2013
                         (C)     an at-the-market distribution for the purposes of National Instrument 44-
                                 102 – Shelf Distributions,
                  and ending on the date the selling process has ended and all stabilization
                  arrangements relating to the offered security are terminated provided that, if the
                  person is a dealer-restricted person, the period shall commence on the date the
                  Participant enters into an agreement or reaches an understanding to participate in
                  the prospectus distribution or restricted private placement of securities, whether or
                  not the terms and conditions of such participation have been agreed upon if that
                  date is later that determined for the purposes of clause (i) or (ii);
         (b)      in connection with a securities exchange take-over bid or issuer bid, commencing
                  on the date of dissemination of the securities exchange take-over bid circular or
                  issuer bid circular or similar document and ending with the termination of the
                  period during which securities may be deposited under such bid, including any
                  extension thereof, or the withdrawal of the bid; and
         (c)      in connection with an amalgamation, arrangement, capital reorganization or similar
                  transaction, commencing on the date of dissemination of the information circular
                  for such transaction and ending on the date for approval of the transaction by the
                  securityholders that will receive the offered security or the termination of the
                  transaction by the issuer or issuers.
           Defined Terms:      NI 14-101 section 1.1(3) – “issuer bid”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “dealer-restricted person”, “issuer-restricted person”, “offered security”,
                                                  “Participant”, “restricted private placement”, “securities exchange takeover-bid”
                                                  and “trading day”
                               UMIR section 1.2(2) – “person”
           Related Provisions:     UMIR section 1.2(6) – interpretation of “restricted period”
                                   UMIR Policy 1.2 Part 2 – interpretation of “selling process has ended”
           Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments to
                                   section 1.1 that came into force on May 9, 2005 to add the definition of “restricted period”.
                                   Effective January 8, 2010, the applicable securities commissions approved amendments to
                                   section 1.1 to amend the definition of “restricted period” to replace clause (a) of the definition.
                                   Prior to that date, the clause provided:
                                      (a)       in connection with a prospectus distribution or a restricted private placement of any
                                                offered security, commencing two trading days prior to the day the offering price of the
                                                offered security is determined and ending on the date the selling process has ended
                                                and all stabilization arrangements relating to the offered security are terminated
                                                provided that, if the person is a dealer-restricted person, the period shall commence on
                                                the date the Participant enters into an agreement or reaches an understanding to
                                                participate in the prospectus distribution or restricted private placement of securities,
                                                whether or not the terms and conditions of such participation have been agreed upon if
                                                that date is later;



         “restricted person" - repealed
           Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments to
                                   section 1.1 that came into force on May 9, 2005 to repeal the definition of “restricted person”.
                                   Prior to that date, the definition provided:
                                          “restricted person” means, in respect of a securities exchange take-over bid:
                                          (a)    the Participant appointed by the offeror to be dealer-manager or manager in respect of
                                                 such securities exchange take-over bid;




Part 1 - Definitions and Interpretation                                                                                    UMIR 1.1-23
January 1, 2013
                                          (b)   a related entity of the Participant;
                                          (c)   a partner, director, officer or a person holding a similar position or acting in a similar
                                                capacity, of the Participant or of a related entity of the Participant; or
                                          (d)   an employee of the Participant or of a related entity of the Participant.




         “restricted private placement” means a distribution of securities made pursuant to:
         (a)      section 2.3, 2.9 or 2.10 of National Instrument 45-106 – Prospectus and
                  Registration Exemptions; or
         (b)      section 2.1 of Ontario Securities Commission Rule 45-501 – Ontario Prospectus
                  and Registration Exemptions or similar provisions of applicable securities
                  legislation,
         and the number of securities to be distributed constitutes more than 10% of the issued
         and outstanding securities of the class subject to the distribution.
           Defined Terms:      NI 14-101 section 1.1(3) – “securities legislation”
                               NI 21-101 section 1.4 – Interpretation -- “security”
           Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments to
                                   section 1.1 that came into force on May 9, 2005 to add the definition of “restricted private
                                   placement”.
                                   Effective January 8, 2010, the applicable securities commissions approved amendments to
                                   section 1.1 to repeal and replace the definition of “restricted private placement”. Prior to that
                                   date, the definition provided:
                                          restricted private placement” means a distribution of offered securities made pursuant to
                                          clause 72(1)(b) of the Securities Act (Ontario) or section 2.3 of Ontario Securities
                                          Commission Rule 45-501 - Exempt Distributions or similar provisions of applicable
                                          securities legislation.



         “restricted security” means:
         (a)      the offered security; or
         (b)      any connected security.
           Defined Terms:      UMIR section 1.1 – “connected security” and “offered security”
           Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments to
                                   section 1.1 that came into force on May 9, 2005 to add the definition of “restricted security”.



         “Rules” - repealed.
           Regulatory History:     In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                   commissions approved an amendment to section 1.1 that came into force on June 1, 2008 to
                                   repeal the definition of “Rules”. Prior to that date, the definition provided:
                                          “Rules” means these Universal Market Integrity Rules as amended, supplemented and in
                                          effect from time to time.



         “securities exchange take-over bid” means a take-over bid where the consideration
         for the securities of the offeree is to be, in whole or in part, securities traded on a
         marketplace.




Part 1 - Definitions and Interpretation                                                                                     UMIR 1.1-24
January 1, 2013
           Defined Terms:      NI 14-101 section 1.1(3)- “take-over bid”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “marketplace”



         “short-marking exempt order” means an order for the purchase or sale of a security
         from account that is:
         (a)      an arbitrage account;
         (b)      the account of a person with Marketplace Trading Obligations in respect of a
                  security for which that person has obligations;
         (c)      a client, non-client or principal account:
                  (i)    for which order generation and entry is fully-automated, and
                  (ii)   which, in the ordinary course, does not have, at the end of each trading day,
                         more than a nominal position, whether short or long, in a particular security;
                         or
         (d)      a principal account that has acquired during a trading day a position in a particular
                  security in a transaction with a client that is unwound during the balance of the
                  trading day such that, in the ordinary course, the account does not have, at the end
                  of each trading day, more than a nominal position, whether short or long, in a
                  particular security.
           Defined Terms:      NI 21-101 section 1.1 – “order”
                               NI 21-101 section 1.4 – Interpretation -- “security”
                               UMIR section 1.1 – “arbitrage account”, “Marketplace Trading Obligations”, “principal account” and
                                                  “trading day”
                               UMIR section 1.2 – “person”
           Regulatory History:      On March 2, 2012, the applicable securities commissions approved an amendment to section
                                    1.1, effective October 15, 2012, to add the definition of “short-marking exempt order”.



         “short sale” means a sale of a security, other than a derivative instrument, which the
         seller does not own either directly or through an agent or trustee and, for this purpose, a
         seller shall be considered to own a security if the seller, directly or through an agent or
         trustee:
         (a)      has purchased or has entered into an unconditional contract to purchase the
                  security, but has not yet received delivery of the security;
         (b)      owns another security that is convertible or exchangeable into that security and
                  has tendered such other security for conversion or exchange or has issued
                  irrevocable instructions to convert or exchange such other security;
         (c)      has an option to purchase the security and has exercised the option;
         (d)      has a right or warrant to subscribe for the security and has exercised the right or
                  warrant; or
         (e)      has entered into a contract to purchase a security that trades on a when issued
                  basis and such contract is binding on both parties and subject only to the condition
                  of issuance or distribution of the security,



Part 1 - Definitions and Interpretation                                                                             UMIR 1.1-25
January 1, 2013
         but a seller shall be considered not to own a security if:
         (f)      the seller has borrowed the security to be delivered on the settlement of the trade
                  and the seller is not otherwise considered to own the security in accordance with
                  this definition;
         (g)      the security held by the seller is subject to any restriction on sale imposed by
                  applicable securities legislation or by an Exchange or QTRS as a condition of the
                  listing or quoting of the security; or
         (h)      the settlement date or issuance date pursuant to:
                  (i)     an unconditional contract to purchase,
                  (ii)    a tender of a security for conversion or exchange,
                  (iii)   an exercise of an option, or
                  (iv)    an exercise of a right or warrant
                  would, in the ordinary course, be after the date for settlement of the sale.
           Defined Terms:       NI 14-101 section 1.1(3) – “securities legislation”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “Exchange”, “QTRS” and “trades on a when issued basis”
           Related Provision:       UMIR Policy 1.1, Part 3 – Definition of ‘’Short Sale’’
           Regulatory History:      Effective August 27, 2004, the applicable securities commissions approved the amendment to
                                    add clause (h) to the definition of “short sale”.
                                   On October 15, 2008, the applicable securities commissions approved amendments to section
                                   1.1 that came into force on October 14, 2008 to amend the definition of “short sale”. Prior to that
                                   date, the definition provided:
                                          “short sale” means a sale of a security, other than a derivative instrument, which the
                                          seller does not own either directly or through an agent or trustee and, for this purpose, a
                                          seller shall be considered to own a security if the seller:
                                          (a)    has purchased or has entered into an unconditional contract to purchase the security,
                                                but has not yet received delivery of the security;
                                          (b)   has tendered such other security for conversion or exchange or has issued
                                                irrevocable instructions to convert or exchange such other security;
                                          (c)   has an option to purchase the security and has exercised the option;
                                          (d)   has a right or warrant to subscribe for the security and has exercised the right or
                                                warrant; or
                                          (e)   is making a sale of a security that trades on a when issued basis and the seller has
                                                entered into a contract to purchase such security which is binding on both parties and
                                                subject only to the condition of issuance of distribution of the security,
                                          but a seller shall be considered not to own a security if:
                                          (f)   the seller has borrowed the security to be delivered on the settlement of the trade and
                                                the seller is not otherwise considered to own the security in accordance with this
                                                definition;
                                          (g)   the security held by the seller is subject to any restriction on sale imposed by
                                                applicable securities legislation or by an Exchange or QTRS as a condition of the
                                                listing or quoting of the security; or
                                          (h)   the settlement date or issuance date pursuant to:
                                                (i)     an unconditional contract to purchase,
                                                (ii)    a tender of a security for conversion or exchange,
                                                (iii)   an exercise of an option, or
                                                (iv)    an exercise of a right or warrant
                                                would, in the ordinary course, be after the date for settlement of the sale.




Part 1 - Definitions and Interpretation                                                                                        UMIR 1.1-26
January 1, 2013
         “Short Sale Ineligible Security” means a security or a class of securities that has been
         designated by a Market Regulator to be a security in respect of which an order that on
         execution would be a short sale may not be entered on a marketplace for a particular
         trading day or trading days.
           Defined Terms:       NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “Market Regulator”, “marketplace”, “short sale” and “trading day”
           Related Provision:       UMIR Policy 1.1, Part 4 – Definition of ‘’Short Sale Ineligible Security’’
           Regulatory History:      On October 15, 2008, the applicable securities commissions approved amendments to section
                                    1.1 that came into force on October 14, 2008 to add the definition of “short sale ineligible
                                    security”.



         “significant shareholder” means any person holding separately, or in combination with
         other persons, more than 20 per cent of the outstanding voting securities of an issuer.
           Defined Terms:       NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.2(2) – “person”



         “Special Terms Order” means an order for the purchase or sale of a security:
         (a)      for less than a standard trading unit;
         (b)      the execution of which is subject to a condition other than as:
                  (i)     to price,
                  (ii)    to the date of settlement; or
                  (iii)   imposed by the marketplace on which the order is entered as a condition for
                          the entry or execution of the order; or
         (c)      that on execution would be settled on a date other than:
                  (i)     the third business day following the date of the trade, or
                  (ii)    any settlement date specified in a special rule or direction referred to in
                          subsection (2) of Rule 6.1 that is issued by an Exchange or a QTRS,
         but does not include an order that is a Basis Order, Call Market Order, Closing Price
         Order, Market-on-Close Order, Opening Order or Volume-Weighted Average Price
         Order.
           Defined Terms:       NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 - “Basis Order”, “Call Market Order”, “Closing Price Order”, “Exchange”, “Market-
                                                   on-Close Order”, “marketplace”, “Opening Order”, “QTRS”, “standard trading
                                                   unit” and “Volume-Weighted Average Price Order”
                                UMIR section 1.2(2) – “trade”
           Related Provision:       UMIR section 6.1
           Regulatory History:      Effective March 9, 2007, the applicable securities commissions approved an amendment to
                                    section 1.1 to replace the definition of “Special Terms Order”. Prior to that date, the definition
                                    provided:
                                          “Special Terms Order” means an order for the purchase or sale of a security:
                                          (a)   for less than a standard trading unit;
                                          (b)   the execution of which is subject to a condition other than as to price or date of
                                                settlement; or



Part 1 - Definitions and Interpretation                                                                                 UMIR 1.1-27
January 1, 2013
                                          (c)   that on execution would be settled on a date other than:
                                                (i)    the third business day following the date of the trade, or
                                                (ii)   any settlement date specified in a special rule or direction referred to in
                                                       subsection (2) of Rule 6.1 that is issued by an Exchange or a QTRS.



         “standard trading unit” means, in respect of:
         (a)      a derivative instrument, 1 contract;
         (b)      a debt security that is a listed security or a quoted security, $1,000 in principal
                  amount; or
         (c)      any equity or similar security:
                  (i)     1,000 units of a security trading at less than $0.10 per unit,
                  (ii)    500 units of a security trading at $0.10 or more per unit and less than $1.00
                          per unit, and
                  (iii)   100 units of a security trading at $1.00 or more per unit.
           Defined Terms:       NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “equity security”, “listed security” and “quoted security”
           Related Provision:       UMIR section 1.2(5)



         “trades on a when issued basis” means purchases or sales of a security to be issued
         pursuant to:
         (a)      a prospectus offering where a receipt for the final prospectus for the offering has
                  been issued by the applicable securities regulatory authority but the offering has
                  not closed and settled;
         (b)      a proposed plan of arrangement, an amalgamation or a take-over bid prior to the
                  effective date of the amalgamation or the arrangement or the expiry date of the
                  take-over bid; or
         (c)      any other transaction that is subject to the satisfaction of certain conditions,
         and the trade is to be settled only if the security is issued and the trade in the security
         prior to the issuance would not contravene the applicable securities legislation.
           Defined Terms:       NI 14-101 section 1.1(3) – “securities legislation”, “securities regulatory authority” and “take-over bid”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.2 – “trade”



         “trading day” means a calendar day during which trades are executed on a
         marketplace.
           Defined Terms:       UMIR section 1.1 – “marketplace”
                                UMIR section 1.2 – “trade”



         “trading increment” means the minimum difference in price at which orders may be
         entered in accordance with Rule 6.1.




Part 1 - Definitions and Interpretation                                                                                     UMIR 1.1-28
January 1, 2013
           Defined Terms:       NI 21-101 section 1.1 – “order”
           Related Provision:      UMIR section 6.1
           Regulatory History:      Effective May 16, 2008, the applicable securities commissions approved an amendment to
                                    section 1.1 to add the definition of “trading increment”.



         “Trading Rules” means National Instrument 23-101 as amended, supplemented and in
         effect from time to time.


         “UMIR” means those Rules adopted by the Investment Industry Regulatory
         Organization of Canada and designated by the Investment Industry Regulatory
         Organization of Canada as the Universal Market Integrity Rules as amended,
         supplemented and in effect from time to time.
           Regulatory History:      In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                    commissions approved an amendment to section 1.1 that came into force on June 1, 2008 to
                                    adopt the definition of “UMIR”.



         “Volume-Weighted Average Price Order” means an order for the purchase or sale of
         a security entered on a marketplace on a trading day for the purpose of executing trades
         at an average price of the security traded on that trading day on that marketplace or on
         any combination of marketplaces known at the time of the entry of the order.
           Defined Terms:       NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “marketplace” and “trading day”
                                UMIR section 1.2 – “trade”




         POLICY 1.1 - DEFINITIONS
         Part 1 – Definition of “connected security”
         The definition of a “connected security” includes, among other things, a security of the
         issuer of the offered security or another issuer that, according to the terms of the offered
         security, may “significantly determine” the value of the offered security. The Market
         Regulator takes the view that, absent other mitigating factors, a connected security
         “significantly determines” the value of the offered security, if, in whole or in part, it
         accounts for more than 25% of the value of the offered security.


         Part 2 – Definition of “Exempt Exchange-traded Fund”
         An “Exempt Exchange-traded Fund” is defined, in part, as a mutual fund for the
         purposes of applicable securities legislation, the units of which are a listed security or a
         quoted security and are in continuous distribution in accordance with applicable
         securities legislation. The definition excludes a mutual fund that has been designated by
         the Market Regulator to be excluded from the definition.
         As guidance, a mutual fund may be designated by the Market Regulator if it is
         determined that the trading price of units of the fund may be susceptible to manipulation


Part 1 - Definitions and Interpretation                                                                               UMIR 1.1-29
January 1, 2013
         due to a particular feature of the mutual fund. Factors which the Market Regulator would
         take into account in making a designation to exclude a particular mutual fund would be:
              •    the lack of liquidity or public float of the security (or the underlying securities
                   which comprise the portfolio of the mutual fund);
              •    the absence of the ability to redeem units at any time for a “basket” of the
                   underlying securities in addition to cash;
              •    the absence of the ability to exchange a “basket” of the underlying securities at
                   any time for units of the fund;
              •    the fact that the fund does not frequently make a net asset value calculation
                   publicly available; and
              •    the fact that there are no derivatives based on units of the fund, the underlying
                   index or the underlying securities are listed on a marketplace.
         None of these additional five factors is determinative in and of itself and each security
         will be evaluated on its own merits.


         Part 2.1 – Definition of “Pre-Borrow Security”
         Under the definition of a “Pre-Borrow Security”, the Market Regulator may designate a
         security in respect of which an order that on execution would be a short sale may not be
         entered on a marketplace unless the Participant or Access Person entering the order
         has made arrangements to borrow the securities that would be required to settle the
         trade prior to the entry of the order. In determining whether to make such a designation,
         the Market Regulator shall consider whether:
               •     based on information known to the Market Regulator, there is an increase in the
                     number, value or volume of failed trades in the particular security by more than
                     one Participant or Access Person;
               •     the number or pattern of failed trades is related to short selling; and
               •     the designation would be in the interest of maintaining a fair and orderly market.

         Part 3 – Definition of “Short Sale”
         Under the definition of “short sale”, a seller shall be considered to own a security under
         various circumstances including if the seller, directly or through an agent or trustee:
              •    owns another security that is convertible or exchangeable into that security and
                   has tendered such other security for conversion or exchange or has issued
                   irrevocable instructions to convert or exchange such other security;
              •    has an option to purchase the security and has exercised the option; or
              •    has a right or warrant to subscribe for the security and has exercised the right or
              •    warrant.
         In each of these circumstances, the seller must have taken all steps necessary to
         become legally entitled to the security, including having:
              •    made any payment required;



Part 1 - Definitions and Interpretation                                                        UMIR 1.1-30
January 1, 2013
              •    submitted to the appropriate person any required forms or notices; and
              •    submitted, if applicable, to the appropriate person any certificates for securities
                   to be converted, exchanged or exercised.


         Part 4 – Definition of “Short Sale Ineligible Security”
         Under the definition of a “short sale ineligible security”, the Market Regulator may
         designate a security or class of securities in respect of which an order that on execution
         would be a short sale may not be entered on a marketplace for a particular trading day
         or trading days. In determining whether to make such a designation, the Market
         Regulator shall consider whether:
              •    based on reports of failed trades submitted to the Market Regulator in
                   accordance with Rule 7.10 or other information known to the Market Regulator,
                   there is in a particular security or class of securities an unusual number or
                   pattern of failed trades by more than one Participant or Access Person;
              •    the number or pattern of failed trades is related to short selling; and
              •    the designation would be in the interest of maintaining a fair and orderly market.
           Defined Terms:       NI 14-101 section 1.1(3) – “securities legislation” and “securities regulatory authority”
                                NI 21-101 section 1.1 – “order”
                                NI 21-101 section 1.4 – Interpretation -- “security”
                                UMIR section 1.1 – “Access Person”, “connected security”, “Exempt Exchange-traded Fund”, “failed
                                                    trade”, “listed security”, “Market Regulator”, “marketplace”, “offered security”,
                                                    “Participant”, “Pre-Borrow Security”, “quoted security”, “short sale”, “Short Sale
                                                    Ineligible Security” and “trading day”
                                UMIR section 1.2 – “trade”
           Related Provision:       UMIR section 7.10
           Regulatory History:      Effective February 25, 2005, the applicable securities commissions approved amendments to
                                    the Policies under Rule 1.1 that came into force on May 9, 2005 to add Parts 1 and 2.
                                   In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                   commissions approved an amendment to Part 2 of Policy 1.1 that came into force on June 1,
                                   2008 to replace the phrase “the Rule” with “UMIR”.
                                    On October 15, 2008, the applicable securities commissions approved amendments to the
                                    Policies under Rule 1.1 that came into force on October 14, 2008 to add Parts 3 and 4.
                                    Effective January 8, 2010, the applicable securities commissions approved amendments to
                                    section 1.1 to repeal and replace Part 2 of Policy 1.1. Prior to that date, Part 2 provided:
                                       Part 2 – Definition of “Exchange-traded Fund”
                                       An “Exchange-traded Fund” is defined, in part, as a mutual fund designated by the Market
                                       Regulator as an exchange-traded fund for the purposes of UMIR. As guidance, an
                                       exchange-traded fund may be designated by the Market Regulator where it is determined
                                       that it would be difficult to manipulate the price of units of the mutual fund.
                                       It would be the intention of the Market Regulator that the designation of a security would be
                                       done after consultation with the Ontario Securities Commission or other applicable securities
                                       regulatory authority. Acceptance of the designation by applicable securities regulatory
                                       authorities would be a pre-condition to any designation of a security as an “Exchange-traded
                                       Fund”. Other factors which the Market Regulator would take into account are:
                                           •   the liquidity or public float of the security (or the underlying securities which comprise
                                               the portfolio of the mutual fund);
                                           •   whether the units are redeemable at any time for a “basket” of the underlying
                                               securities in addition to cash;
                                           •   whether a “basket” of the underlying securities may be exchanged at any time for units
                                               of the fund;



Part 1 - Definitions and Interpretation                                                                                     UMIR 1.1-31
January 1, 2013
                                          •      whether the fund tracks a recognized index on which information is publicly
                                                 disseminated and generally available through the financial media; and
                                          •      whether derivatives based on units of the fund, the underlying index or the underlying
                                                 securities are listed on a marketplace.
                                      None of these additional five factors is determinative in and of itself and each security will be
                                      evaluated on its own merits before a request is made to the applicable securities regulatory
                                      authority to concur in the designation.
                                   On March 2, 2012, the applicable securities commissions approved an amendment to Policy
                                   1.1, effective October 15, 2012, to add Part 2.1.
                                   On December 7, 2012, the applicable securities commissions approved an amendment to add
                                   the definition of “Electronic Trading Rules” which will come into force on March 1, 2013. See
                                   Amendments Pending Implementation at the end of this Rule.


           Amendments Pending Implementation:                  Refer to IIROC Notice 12-0363 – Rules Notice – Notice of Approval – UMIR
                                                               – Provisions Respecting Electronic Trading (December 7, 2012). On
                                                               December 7, 2012, the applicable securities commissions approved
                                                               amendments to Rule 1.1, to come into force on March 1, 2013, to add the
                                                               following definition of “Electronic Trading Rules”:
                                                                       “Electronic Trading Rules” means National Instrument 23-103
                                                                       Electronic Trading as amended, supplemented and in effect from time
                                                                       to time.
           Proposed Amendments:           For information on the current proposed amendments for Rule 1.1, refer to
                                          (i)      IIROC Notice 12-0104 – Rules Notice - Request for Comments – Dealer Member
                                                   Rules and UMIR – Consolidation of IIROC Enforcement, Procedural, Examination
                                                   and Approval Rules (March 23, 2012) which includes proposed amendments to
                                                   Rule 1.1 to repeal the definitions of “Hearing Committee” and “Hearing Panel” and
                                                   to change the defined term “Regulated Person” to “Subject Person”.
                                          (ii)     IIROC Notice 12-0315 – Rules Notice - Request for Comments – UMIR and Dealer
                                                   Member Rules – Proposed Provisions Respecting Third-Party Electronic Access to
                                                   Marketplaces (October 25, 2012) which includes proposed amendments to Rule 1.1
                                                   to:
                                                   (a) add the following definition of “direct electronic access”:
                                                               “direct electronic access” means an arrangement between a Participant
                                                               that is a member, user or subscriber and a client that permits the client to
                                                               electronically transmit an order containing the identifier of the Participant:
                                                               (a) through the systems of the Participant for automatic onward
                                                                   transmission to a marketplace; or
                                                               (b) directly to a marketplace without being electronically transmitted
                                                                   through the systems of the Participant.
                                                   (b) add the following definition of “foreign dealer equivalent”:
                                                               “foreign dealer equivalent” means a person registered in a category
                                                               analogous to that of investment dealer in a foreign jurisdiction that is a
                                                               signatory to the International Organization of Securities Commissions’
                                                               Multilateral Memorandum of Understanding.
                                                    (c) add the following definition of “order execution service”:
                                                               “order execution service” means a service that meets the requirements,
                                                               from time to time, under Dealer Member Rule 3200 – Minimum
                                                               Requirements for Dealer Members Seeking Approval under Rule 1300.1(t)
                                                               for Suitability Relief for Trades Not Recommended by the Member.
                                                   (d) amend clause (a) of the definition of “Participant” by:
                                                       (i)      deleting the word “or” at the end of subclause (ii);
                                                       (ii)     inserting the phrase “, or” at the end of subclause (iii), and
                                                       (iii)    inserting the following as subclause (iv):
                                                                (iv)    an investment dealer that is a party to a routing arrangement and
                                                                        who, in accordance with the applicable written agreement:




Part 1 - Definitions and Interpretation                                                                                          UMIR 1.1-32
January 1, 2013
                                                              (A) is able to enter orders directly to the marketplace without
                                                                  being electronically transmitted through the systems of the
                                                                  Participant and is authorized to set or adjust the various
                                                                  controls, policies or procedures respecting such orders, or
                                                              (B) has been authorized to perform on behalf of the Participant
                                                                  the setting or adjustment of a specific risk management or
                                                                  supervisory control, policy or procedure respecting an
                                                                  account in which the investment dealer or a related entity of
                                                                  the investment dealer holds a direct or indirect interest
                                                                  other than an interest in the commission charged on a
                                                                  transaction or reasonable fee for the administration of the
                                                                  account; or
                                          (e) add the following definition of “routing arrangement”:
                                                  “routing arrangement” means an arrangement under which a Participant
                                                  that is a member, user or subscriber permits an investment dealer or a
                                                  foreign dealer equivalent to electronically transmit an order relating to a
                                                  security:
                                                  (a) through the systems of the Participant for automatic onward
                                                      transmission to:
                                                        (i) a marketplace to which the Participant has access using the
                                                            identifier of the Participant, or
                                                        (ii) a foreign organized regulated market to which the Participant has
                                                             access directly or through a dealer in the other jurisdiction; or
                                                 (b) directly to a marketplace using the identifier of the Participant without
                                                     being electronically transmitted through the systems of the Participant.




Part 1 - Definitions and Interpretation                                                                          UMIR 1.1-33
January 1, 2013
                                                                  Universal Market Integrity Rules
                                                                       Rules & Policies


1.2      Interpretation
         (1)      Unless otherwise defined or interpreted, every term used in UMIR that is:
                  (a)   defined in subsection 1.1(3) of National Instrument 14-101 – Definitions has
                        the meaning ascribed to it in that subsection;
                  (b)   defined or interpreted in the Marketplace Operation Instrument has the
                        meaning ascribed to it in that National Instrument; and
                  (c)   a reference to a requirement of an Exchange or a QTRS shall have the
                        meaning ascribed to it in the applicable Marketplace Rule.


         (2)      For the purposes of UMIR, the following terms shall be as defined by applicable
                  securities legislation except that:
                  “person” includes any corporation, incorporated association, incorporated
                  syndicate or other incorporated organization.
                  “trade” includes a purchase or acquisition of a security for valuable consideration
                  in addition to any sale or disposition of a security for valuable consideration.


         (3)      In determining the value of an order for the purposes of Rule 6.3, Rule 6.4 and
                  Rule 8.1, the value shall be calculated as of the time of the receipt or origination of
                  the order and shall be calculated by multiplying the number of units of the security
                  to be bought or sold under the order by:
                  (a)   in the case of a limit order for the purchase of a security, the lesser of:
                        (i)     the specified maximum price in the order, and
                        (ii)    the best ask price;
                  (b)   in the case of a limit order for the sale of a security, the greater of:
                        (i)     the specified minimum price in the order, and
                        (ii)    the best bid price;
                  (c)   in the case of a market order for the purchase of a security, the best ask
                        price; and
                  (d) in the case of a market order for the sale of a security, the best bid price.


         (4)      For the purposes of determining the “last sale price”, if a sale of at least a standard
                  trading unit of a particular security has not been previously displayed in a
                  consolidated market display the last sale price shall be deemed to be the price:
                  (a)   of the last sale of the security on an Exchange, if the security is a listed
                        security;
                  (b)   of the last sale of the security on a QTRS, if the security is a quoted security;
                  (c)   at which the security has been issued or distributed to the public, if the
                        security has not previously traded on a marketplace; and


Part 1 - Definitions and Interpretation                                                            UMIR 1.2-1
January 1, 2013
                  (d)   that has been accepted by a Market Regulator, in any other circumstance.


         (5)      For the purposes of determining the price at which a security is trading for the
                  purposes of the definition of a “standard trading unit”, the price shall be the last
                  sale price of the particular security on the immediately preceding trading day.


         (6)      For the purposes of the definition of “restricted period”:
                  (a)    the selling process shall be considered to end:
                         (i)    in the case of a prospectus distribution, if a receipt has been issued for
                                 the final prospectus by the applicable securities regulatory authority and
                                 the Participant has allocated all of its portion of the securities to be
                                 distributed under the prospectus and all selling efforts have ceased,
                                 and
                         (ii)   in the case of a restricted private placement, the Participant has
                                 allocated all of its portion of the securities to be distributed under the
                                 offering;
                  (b)    stabilization arrangements shall be considered to have terminated on the
                         date that is the earlier of when:
                        (i)     in the case of a syndicate of underwriters or agents, the lead underwriter
                                or agent determines, in accordance with the syndication agreement, that
                                the syndication agreement has been terminated such that any purchase
                                or sale of a restricted security by a Participant after the time of
                                termination is not subject to the stabilization arrangements or otherwise
                                made jointly for the Participants that were party to the stabilization
                                arrangements, or
                        (ii)    the offered securities, exclusive of any securities that may be issued
                                pursuant to the exercise of an option granted to a dealer-restricted
                                person to cover over-allotment of securities in the distribution, are issued
                                and all statutory rights of withdrawal in connection with such issuance
                                have expired; and
                  (c)   if the offering price is determined by a formula involving trading activity in the
                        offered security or a connected security on one or more marketplaces for a
                        period of time, the offering price shall be considered to be determined on the
                        first trading day included in the calculation for the purposes of the formula.

         (7)      Where used to indicate a relationship with an entity, associated entity has the
                  meaning ascribed to the term "associate" in applicable securities legislation and
                  also includes any person of which the entity beneficially owns voting securities
                  carrying more than 10 per cent of the voting rights attached to all outstanding
                  voting securities of the person.


         (8)      For the purposes of determining the “best ask price” or the “best bid price” at any
                  particular time reference is made to orders contained in a consolidated market


Part 1 - Definitions and Interpretation                                                            UMIR 1.2-2
January 1, 2013
                  display for a marketplace that is then open for trading and in respect of which
                  trading in the particular security on that marketplace has not been:
                  (a) halted, suspended or delayed for regulatory purposes in accordance with
                      Rule 9.1; or
                  (b) halted, suspended or delayed in accordance with a Marketplace Rule or a
                      requirement of the marketplace.


POLICY 1.2 - INTERPRETATION
Part 1 – Meaning of “acting jointly or in concert”
The definitions of a “dealer-restricted person” and “issuer-restricted person” include a person
acting jointly or in concert with a person that is also a dealer-restricted person or an issuer-
restricted person, as applicable, for a particular transaction. For the purposes of these
definitions, “acting jointly or in concert” has a similar meaning to that phrase as defined in
section 91 of the Securities Act (Ontario) or similar provisions of applicable securities legislation,
with necessary modifications. In the context of these definitions only, it is a question of fact
whether a person is acting jointly or in concert with a dealer- or issuer-restricted person and,
without limiting the generality of the foregoing, every person who, as a result of an agreement,
commitment or understanding, whether formal or informal, with a dealer-restricted person or an
issuer-restricted person, bids for or purchases any restricted security will be presumed to be
acting jointly or in concert with such dealer- or issuer-restricted person.


Part 2 – Meaning of “selling process has ended”
The definition of “restricted period”, with respect to a prospectus distribution and a “restricted
private placement”, refers to the end of the period as the date that the selling process ends and
all stabilization arrangements relating to the offered security are terminated. Rule 1.2(6)(a)
provides interpretation as to when the selling process is considered to end. As further
clarification, the selling process is considered to end for a prospectus distribution when the
receipt for the prospectus has been issued, the Participant has distributed all securities
allocated to it and, is no longer stabilizing, all selling efforts have ceased and the syndicate is
broken. Selling efforts have ceased when the Participant is no longer making efforts to sell, and
there is no intention to exercise an over-allotment option other than to cover the syndicate’s
short position. If the Participant or syndicate subsequently exercises an over-allotment option in
an amount that exceeds the syndicate short position, the selling efforts would not be considered
to have ceased. Securities allocated to a Participant that are held and transferred to the
inventory account of the Participant at the end of the distribution are considered distributed.
Subsequent sales of such securities are secondary market transactions and should occur on a
marketplace subject to any applicable exemptions (unless the subsequent sale transaction is a
distribution by prospectus). To provide certainty around when the distribution has ended,
appropriate steps should be taken to move the securities from the syndication account to the
inventory account of the Participant.


Part 3 – “Ought Reasonably to Know”
Rule 2.2 prohibits a Participant or Access Person from doing various acts if the Participant or
Access Person “knows or ought reasonably to know” that a particular method, act or practice

Part 1 - Definitions and Interpretation                                                      UMIR 1.2-3
January 1, 2013
was manipulative or deceptive or that the effect of entering an order or executing a trade would
create or could reasonably be expected to create a false or misleading appearance of trading
activity or interest or an artificial price. Rule 2.3 prohibits a Participant or Access Person from
entering an order on a marketplace or executing a trade if the Participant or Access Person
“knows or ought reasonably to know” that the entry of the order or the execution of the trade
would result in the violation of various securities or regulatory requirements.
In determining what a person “ought reasonably to know” reference would be made to what a
Participant or Access Person would know, acting honestly and in good faith, and exercising the
care, diligence and skill that a reasonably prudent Participant or Access Person would exercise
in comparable circumstances. In essence, the test becomes what could a Participant or Access
Person have been expected to know if the Participant or Access Person had:
         •        adopted various policies and procedures as required by applicable securities
                  legislation, self-regulatory entities, UMIR and the Policies; and
         •        conscientiously followed or observed the policies and procedures.


Part 4 - Applicable Regulatory Standards
Rule 7.1 requires each Participant prior to the entry of an order on a marketplace to comply with
applicable regulatory standards with respect to the review, acceptance and approval of orders.
Each Participant that is a dealer must be a member of a self-regulatory entity. Each Participant
will be subject to the by-laws, regulations and policies as adopted from time to time by the
applicable self-regulatory entity. These requirements may include an obligation on the member
to “use due diligence to learn and remain informed of the essential facts relative to every
customer and to every order or account accepted.” While knowledge by a Participant of
“essential facts” of every customer and order is necessary to determine the suitability of any
investment for a client, such requirement is not limited to that single application. The exercise
of due diligence to learn essential facts “relative to every customer and to every order” is a
central component of the “Gatekeeper Obligation” embodied within the trading supervision
obligation under Rule 7.1 and 10.16. In addition, securities legislation applicable in a jurisdiction
may impose review standards on Participants respecting orders and accounts. The regulatory
standards that may apply to a particular order may vary depending upon a number of
circumstances including:
         •        the requirements of any self-regulatory entity of which the Participant is a member;
         •        the type of account from which the order is received or originated; and
         •        the securities legislation in the jurisdiction applicable to the order.
 Defined Terms:      NI 14-101 section 1.1(3) – “jurisdiction”, “securities legislation" and “securities regulatory authority”
                     NI 21-101 section 1.1 – “order” and “self-regulatory entity”
                     NI 21-101 section 1.4 – Interpretation -- “security”
                     UMIR section 1.1 –      “Access Person”, “best ask price”, “best bid price”, “connected security”, “consolidated
                                             market display”, “dealer-restricted person”, “Exchange”, “issuer-restricted person”, “last
                                             sale price”, “limit order”, “listed security”, “Market Operation Instrument”, “market order”,
                                             “marketplace”, “Marketplace Regulator”, “Marketplace Rule”, “offered security”,
                                             “Participant”, “Policy”, “QTRS”, “quoted security”, “restricted period”, “restricted private
                                             placement”, “restricted security”, “standard trading unit”, “trading day” and “UMIR”
                   UMIR section 1.2(2) – “person” and “trade”
 Related Provisions: UMIR section 1.1 – definitions of “last sale price” and “standard trading unit”
                         UMIR section 2.2. – Manipulative and Deceptive Activities
                         UMIR section 2.3 – Improper Orders and Trades


Part 1 - Definitions and Interpretation                                                                                          UMIR 1.2-4
January 1, 2013
                         UMIR section 6.3 – Exposure of Client Orders
                         UMIR section 6.4 – Trades to be on a Marketplace
                         UMIR section 7.1 – Trading Supervision Obligations
                         UMIR section 7.7 – Trading During Certain Securities Transactions
                         UMIR section 8.1 – Client-Principal Trading
                         UMIR section 9.1 – Regulatory Halts, Delays and Suspensions of Trading
                         UMIR section 10.16 – Gatekeeper Obligations of Directors, Officers and Employees of Participants and
                         Access Persons
 Regulatory History:     Effective February 25, 2005, the applicable securities commissions approved amendments that came into
                         force on May 9, 2005 to add subsections (6) and (7) to section 1.2 and to add Parts 1 and 2 of Policy 1.2.
                         Effective April 1, 2005, the applicable securities commissions approved amendments to add Part 3 and 4
                         of Policy 1.2.
                         In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                         commissions approved an amendment to section 1.2 that came into force on June 1, 2008 to replace the
                         phrase “these Rules” with “UMIR” and to Part 3 of Policy 1.2 to replace the phrase “and the Rules and”
                         with “, UMIR and the”.
                         Effective January 8, 2010, the applicable securities commissions approved amendments to subsection (6)
                         of section 1.2 to remove the word “and” at the end of clause (a), repeal and replace clause (b) and add
                         clause (c). Prior to that date, clause (b) provided:
                             (b)   stabilization arrangements shall be considered to have terminated in the case of a syndicate of
                                   underwriters or agents when, in accordance with the syndication agreement, the lead
                                   underwriter or agent determines that the syndication agreement has been terminated such that
                                   any purchase or sale of a restricted security by a Participant after the time of termination is not
                                   subject to the stabilization arrangements or otherwise made jointly for the Participants that were
                                   party to the stabilization arrangements.
                         Effective January 8, 2010, the applicable securities commissions approved amendments to add
                         subsection (8) to section 1.2.
                         Effective February 1, 2011, the applicable securities commissions approved amendments to add the
                         reference to “Rule 6.4” to subsection (3) of section 1.2. Prior to that date, subsection (3) provided:
                             (3)   In determining the value of an order for the purposes of Rule 6.3 and 8.1, the value shall be
                                   calculated as of the time of the receipt or origination of the order and shall be calculated by
                                   multiplying the number of units of the security to be bought or sold under the order by:
                                   (a)    in the case of a limit order for the purchase of a security, the lesser of:
                                          (i)    the specified maximum price in the order, and
                                          (ii)   the best ask price;
                                   (b)    in the case of a limit order for the sale of a security, the greater of:
                                          (i)    the specified minimum price in the order, and
                                          (ii)   the best bid price;
                                   (c)    in the case of a market order for the purchase of a security, the best ask price; and
                                   (d)    in the case of a market order for the sale of a security, the best bid price.
                          On December 7, 2012, the applicable securities commissions approved amendments to renumber clause
                          (c) of subsection 1.2 as clause (d) and to add new clause (c) which amendments will come into force on
                          March 1, 2013. See Amendments Pending Implementation at the end of this Rule.
 Guidance:               The following is the relevant text of Market Integrity Notice 2005-026 issued on July 28, 2005 under the
                         heading “Guidance – Securities Trading on Marketplaces in U.S. and Canadian Currencies”:
 Summary
 This Market Integrity Notice provides guidance on the obligations of a Participant or Access Person under the Universal Market
 Integrity Rules (“UMIR”) with respect to trading activity in a security that trades in both Canadian and U.S. currency on a
 marketplace. Generally, trades in a security denominated in Canadian currency will be treated as if the trades were made in a
 distinct security from trades denominated in U.S. currency for the purpose of determining acceptable arbitrage activity, the last
 sale price, best ask price and best bid price. However, trading activities in both currencies may be aggregated to determine
 whether the security qualifies as a “highly-liquid security”.
 UMIR defines a marketplace as a recognized exchange (“Exchange”), a recognized quotation and trade reporting system
 (“QTRS”) or an alternative trading system (“ATS”) that carries on business in Canada.
 Background
 In February, 2004, the Toronto Stock Exchange (“TSX”) began to allow issuers with a listed security that traded in Canadian
 currency to also trade that security in U.S. currency. The trading symbol used for a security trading in U.S. currency is the


Part 1 - Definitions and Interpretation                                                                                   UMIR 1.2-5
January 1, 2013
 standard TSX trading symbol followed by the suffix “.U”. Generally, the same trading options and features are available from the
 TSX for securities trading in U.S. currency as are available to securities trading in Canadian currency.
 UMIR Obligations
             Arbitrage Activity
 An “arbitrage account” is defined in UMIR as including an account in which the holder makes a usual practice of buying and selling
 securities “in different markets” to take advantage of differences in prices available “in each market”.
 Legitimate arbitrage activity occurs where one seeks to profit from differences in price where the same security is traded on two or
 more markets and, at a particular moment, the price on the two markets is different after currency conversion is taken into
 account. If a security trades on a Canadian marketplace in both Canadian and U.S. currencies, IIROC will consider a Participant
 or Access Person to be engaging in legitimate arbitrage activity where the Participant or Access Person treats the Canadian dollar
 book and the U.S. dollar book of the marketplace as “different markets” for the purposes of arbitrage activity.
 In accordance with an exemption from Rule 3.1 of UMIR, an arbitrage account is able to undertake a short sale below the last sale
 price if the “seller knows or has reasonable grounds to believe that an offer enabling the seller to cover the sale is then available
 and the seller intends to accept such offer immediately”.
             Highly-Liquid Securities and Trading During Certain Securities Transactions
 Rule 7.7 of UMIR governs the activities of dealers, issuers and others in connection with trading activity in a security during the
 period of time that certain transactions involving the issuance of that security or a related security are being undertaken including:
 a distribution of securities; a securities exchange take-over bid; an issuer bid; an amalgamation; an arrangement; a capital
 reorganization or similar transaction. Rule 7.7 prescribes acceptable activities and otherwise restricts trading activities to preclude
 manipulative conduct by persons with an interest in the outcome of the distribution of securities or other transactions.
 Under Rule 7.7, a “highly-liquid security” is exempt from certain of the restrictions and prohibitions governing trading activity during
 securities transactions. A “highly-liquid security” is defined as a listed security or quoted security that:
      •      has traded, in total, on one or more marketplaces as reported on a consolidated market display during a 60-day period
             ending not earlier than 10 days prior to the commencement of the “restricted period”:
             o    an average of at least 100 times per trading day, and
             o    with an average trading value of at least $1,000,000 per trading day; or
      •      is subject to Regulation M under the Securities Act of 1934 (United States) (“Reg M”) and is considered to be an
             “actively-traded security” under that regulation.
 IIROC maintains a list of securities which, based on data available to IIROC, meet the definition of a “highly-liquid security” as a
 result of achieving the required number of average daily trades and average daily trading value on Canadian marketplaces. The
 list maintained by IIROC does not contain listed securities or quoted securities that are inter-listed with a market in the United
 States and that are considered to be “actively-traded” under Reg M but which fail to meet the tests for average daily trades and
 average daily trading value on Canadian marketplaces. A separate list of highly-liquid securities is prepared for each trading day.
 For convenience, a summary identifies the securities which have been added or deleted from the list of highly-liquid securities on a
 particular trading day. Persons may rely on the list and summary prepared by IIROC or they may independently verify if a security
 meets the requirements of a “highly-liquid security” so long as they retain a record of the data they rely upon in verifying the
 requirements. The list of highly-liquid securities and the daily summary of changes is available on the IIROC website
 (at www.iiroc.ca) and may be accessed through the “Quick Links” on the homepage.
 If a security is traded on marketplaces in both Canadian and U.S. currencies, the trading activity in both currencies may be
 aggregated to determine whether the security meets the definition of a “highly-liquid security” for the purpose of the exemption
 from the requirements in Rule 7.7. If a security is traded on Canadian marketplaces in both Cdn$ and US$ and the security is on
 the list of “highly-liquid securities” maintained by IIROC, that status applies to the security regardless of the currency in which the
 trade is made.
           “Last Sale Price”, “Best Ask Price”, and “Best Bid Price”
 UMIR contains a number of rules which require that trading be conducted at the “last sale price” or at a price that is the same as or
 better than the “best ask price” or “best bid price”. In each case, this price is determined by reference to order or trade information
 contained in “a consolidated market display”, which is made up of order and trade information from those marketplaces to which
 the Participant or Access Person has access.
 If a security is traded in both Canadian and U.S. currencies on a marketplace to which a Participant or Access Person has access,
 the Participant or Access Person must, in effect, treat the security in each currency as a distinct security for the purposes of
 determining the “last sale price”, “best ask price” or “best bid price”. For example, if issuer ABC trades on a marketplace with
 orders and trades reported in Canadian currency under the symbol “ABC” and with orders and trades reported in U.S. currency
 under the symbol “ABC.U”, then the “last sale price”, “best ask price” or “best bid price” of:
       •      security “ABC” is determined by reference only to the sales, asks and bids of “ABC” in Canadian currency; and
       •      security “ABC.U” is determined by reference only to the sales, asks and bids of “ABC.U” in U.S. currency.




Part 1 - Definitions and Interpretation                                                                                      UMIR 1.2-6
January 1, 2013
 Amendments Pending Implementation:       Refer to IIROC Notice 12-0363 – Rules Notice – Notice of Approval – UMIR –
                                          Provisions Respecting Electronic Trading (December 7, 2012). On December 7,
                                          2012, the applicable securities commissions approved amendments to Rule 1.2, to
                                          come into force on March 1, 2013, by renumbering clause (c) as (d) and inserting the
                                          following as clause (c) of subsection (1):
                                               (c)   defined or interpreted in the Electronic Trading Rules has the meaning
                                                     ascribed to it in that National Instrument.




Part 1 - Definitions and Interpretation                                                                           UMIR 1.2-7
January 1, 2013
                                                             Universal Market Integrity Rules
                                                                  Rules & Policies


PART 2 – ABUSIVE TRADING
2.1      Just and Equitable Principles
         (1)      A Participant shall transact business openly and fairly and in accordance with just
                  and equitable principles of trade when:
                  (a)   trading on a marketplace; or
                  (b)   trading or otherwise dealing in securities which are eligible to be traded on a
                        marketplace.


         (2)      An Access Person shall transact business openly and fairly when:
                  (a)   trading on a marketplace; or
                  (b)   trading or otherwise dealing in securities which are eligible to be traded on a
                        marketplace.


POLICY 2.1 – JUST AND EQUITABLE PRINCIPLES
Part 1 – Examples of Unacceptable Activity
Rule 2.1 provides that a Participant shall transact business openly and fairly and in accordance
with just and equitable principles of trade when trading on a marketplace or trading or otherwise
dealing in securities that are eligible to be traded on a marketplace. The Rule also provides that
an Access Person shall transact business openly and fairly. As such, the Rule operates as a
general anti-avoidance provision.
Participants and Access Persons who intentionally organize their business and affairs with the
intent or for the purpose of avoiding the application of a Requirement may be considered to
have engaged in behaviour that is a failure to conduct business openly and fairly or in
accordance with just and equitable principles of trade. For example, the Market Regulator
considers that a person who is under an obligation to enter orders on a marketplace who “uses”
another person to make a trade off of a marketplace (in circumstances where an “off-market
exemption” is not available) to be violating the requirement to conduct business openly and
fairly or in accordance with just and equitable principles of trade. Similarly, the Market
Regulator considers that a person who enters into a transaction for the purpose of rectifying a
failure in connection with a failed trade prior to the time that a report must be filed in accordance
with Rule 7.10 and such person knows or ought reasonably to know that such transaction will
result in a failed trade to be engaging in “re-aging” for the purpose of avoiding reporting
obligations contrary to the requirement to conduct business openly and fairly or in accordance
with just and equitable principles of trade.
Certain patterns of activity that can be undertaken that affect the marketplace but do not reach
the level of manipulative and deceptive trading practices are nonetheless unavailable to
Participant and Access Persons. For example, Rule 4.1 dealing with frontrunning is specifically
tied to misuse of information when a Participant knows a client order will be entered.
Somewhere between the Participant who acts on certain knowledge of a client order and the
Participant who acts despite a single, uncertain expression of interest are the Participants that
repeatedly take advantage of expressions of interest in particular securities. Such Participants


Part 2 – Abusive Trading                                                                      UMIR 2.1-1
January 1, 2013
are not conducting business openly and fairly and in accordance with just and equitable
principles of trade. The “just and equitable principles” clause and the requirement to transact
business openly and fairly prevent such activity.
Without limiting the generality of the Rule, the following are examples of activities that would be
considered to be in violation of requirements to conduct business openly and fairly or in
accordance with just and equitable principles of trade:
         (a)      without the specific consent of the client, entering client and principal orders in
                  such a manner as to attempt to obtain execution of a principal order in priority to
                  the client order; (See Part 2 of Policy 5.3 – Client Priority for examples of the
                  prohibition on “intentional trading ahead”.)
         (b)      without the specific consent of the client, to vary the instructions of the client to
                  indicate that securities held by the client are to participate in a dividend
                  reinvestment plan such that the Participant would receive securities of the issuer
                  and would account to the client for the dividend in cash;
         (c)      without the specific consent of the lender of securities, to vary the arrangements in
                  respect of securities borrowed by the Participant to indicate that the borrowed
                  securities are to participate in a dividend reinvestment plan such that the
                  Participant would receive securities of the issuer and would account to the lender
                  for the dividend in cash; and
         (d)      when trading a security on a marketplace that is subject to Marketplace Trading
                  Obligations, intentionally entering on that marketplace on a particular trading day
                  two or more orders which would impose an obligation on the person subject to
                  Marketplace Trading Obligations:
                  (i)    execute with one or more of the orders, or
                  (ii)   purchase at a higher price or sell at a lower price with one or more of the
                         orders
                  in accordance with the Marketplace Trading Obligations that would not be imposed
                  if the orders had been entered on the marketplace as a single order or entered at
                  the same time.


Part 2 – Executing a Pre-arranged Trade or Intentional Cross
A Participant or Access Person intending to execute a pre-arranged trade or an intentional cross
is expected to take reasonable steps, in accordance with the “best price” obligations under Rule
5.2, prior to or on the execution of the pre-arranged trade or intentional cross to ensure that any
“better-priced” order on any protected marketplace is filled. In filling the “better-priced” orders,
the Participant or Access Person is expected to move the market in an orderly manner to the
price which will permit the trade to be executed on a marketplace. The prior approval of a
Market Regulator is required if a Participant or Access Person wants to undertake a pre-
arranged trade or intentional cross at a price that:
    •    will be less than the lesser of 95% of the best bid price and the best bid price less 10
         trading increments; or
    •    will be more than the greater of 105% of the best ask price and the best ask price plus
         10 trading increments.


Part 2 – Abusive Trading                                                                      UMIR 2.1-2
January 1, 2013
As a condition for granting approval of the trade, the Market Regulator may require the
Participant or Access Person to enter a series of orders on one or more protected marketplaces
over a period of time considered reasonable by the Market Regulator in order to move the
market price to the price at which the pre-arranged trade or intentional cross will occur. As a
general guideline, the time period will generally not be less than 5 minutes if the price variation
from the best ask price or best bid price, as applicable, is more than 5% but less than 10% and
not less than 10 minutes if the price variation is 10% or more.
If the price at which the pre-arranged trade or the intentional cross is to be made:
    •    will not be less than the lesser of 95% of the best bid price and the best bid price less 10
         trading increments; and
    •    will not be more than the greater of 105% of the best ask price and the best ask price
         plus 10 trading increments,
the orders will be considered to be part of a “designated trade” and on entry may be marked as
a “bypass order”. As a designated trade, the trade may execute on a marketplace if:
    •    orders included in the disclosed volume on the marketplace on which the designated
         trade is entered are filled prior to the execution of the designated trade; and
    •    subject to any qualification of the “best price” obligation in accordance with Part 1 of
         Policy 5.2, the Participant enters orders on each protected marketplace with a sufficient
         volume and at a price to fill the orders included in the disclosed volume of that protected
         marketplace concurrent with, or immediately following the execution of the designated
         trade.
If the designated trade could not then be executed on a marketplace, the Participant would be
entitled to complete the trade as an “off-marketplace” trade and to report the trade to a
marketplace.
The prior approval of the Market Regulator is not required for the entry of a “designated trade”.
 Defined Terms:    NI 21-101 section 1.1 – “order”
                   NI 21-101 section 1.4 – Interpretation -- “security”
                   UMIR section 1.1 – “Access Person”, “best ask price”, “best bid price”, “bypass order”, “client order”,
                                       “designated trade”, “disclosed volume”, “Exchange”, “failed trade”, “intentional cross”,
                                       “Market Regulator”, “marketplace”, “Marketplace Trading Obligations”, “Participant”,
                                       “pre-arranged trade”, “principal order”, “protected marketplace”, “Requirements”,
                                       “trading day” and “trading increment”
                   UMIR section 1.2(2) – “person” and “trade”
 Related Provisions:   UMIR section 7.10 and Part 2 of Policy 5.3
 Regulatory History:   Effective March 9, 2007, the applicable securities commissions approved an amendment to replace clause
                       (d) at the end of Part 1 of Policy 2.1. Prior to that date, the clause provided:
                            (d)   when trading a combined board lot/odd lot order for a listed security on an Exchange, entering
                                  the odd lot portion of the order prior to executing the board lot portion of the order as such order
                                  entry exposes the Registered Trader on the TSE or the Odd Lot Dealer on the CDNX to
                                  automatic odd lot trades at unreasonable prices.
                       Effective May 16, 2008, the applicable securities commissions approved amendments to Policy 2.1 to:
                       1.    replace the opening sentence of the last paragraph of Part 1 of Policy 2.1 which, prior to that date,
                            provided:
                                  Without limiting the generality of the Rule, the following are examples of activities by a
                                  Participant that would be considered to be in violation of just and equitable principles of trade:
                       2.    replace Part 2 of Policy 2.1 which, prior to that date, provided:
                                  Part 2 – Moving Markets to Execute a Trade
                                  A Participant or Access Person intending to execute a trade or a cross that will cause, during the
                                  course of a single trading day, a change in the price that is above the prevailing offer or below



Part 2 – Abusive Trading                                                                                                  UMIR 2.1-3
January 1, 2013
                                    the prevailing bid by an amount greater than $1 in a security selling below $20, or greater than
                                    $2 in a security selling at or above $20, shall obtain the prior approval of the Market Regulator.
                                    The Participant or Access Person shall move the market to the price of the cross or the final
                                    trade of a one-sided order (the "clean-up price") in an orderly manner over a time period as
                                    directed by the Market Regulator. The length of time required to move the market will depend on
                                    the circumstances and the particular security involved. As a guideline, 10 to 15 minutes will be
                                    required for each movement of $1 in price. Particular securities may require a longer period of
                                    time.
                                    If the Market Regulator is given notice of a proposed trade or cross under this Policy shortly
                                    before the close of trading on marketplaces or the principal market for the security, the Market
                                    Regulator may disallow the trade if, in the opinion of the Market Regulator, there is not sufficient
                                    time to move the market to the clean-up price in an orderly manner before the close.
                           On October 15, 2008, the applicable securities commissions approved amendments to Part 1 of Policy
                           2.1 that came into force on October 14, 2008 to delete and replace the second paragraph. Prior to that
                           date, the second paragraph of Part 1 of Policy 2.1 provided:
                                    Participants and Access Persons who intentionally organize their business and affairs with the
                                    intent or for the purpose of avoiding the application of a Requirement may be considered to have
                                    engaged in behaviour that is contrary to the just and equitable principles of trade. For example,
                                    the Market Regulator considers that a person who is under an obligation to enter orders on a
                                    marketplace who “uses” another person to make a trade off of a marketplace (in circumstances
                                    where an “off-market exemption” is not available) to be violating just and equitable principles of
                                    trade.
                           Effective August 26, 2011, the applicable securities commissions approved amendments to delete and
                           replace clause (d) of Part 1 of Policy 2.1. Prior to that date, clause (d) of Part 1 of Policy 2.1 provided:
                              (d)    when trading a security on a marketplace that is subject to Market Maker Obligations,
                                     intentionally entering on that marketplace on a particular trading day two or more orders which
                                     would impose an obligation on the Market Maker to:
                                     (i)    execute with one or more of the orders, or
                                     (ii)   purchase at a higher price or sell at a lower price with one or more of the orders
                                     in accordance with the Market Maker Obligations that would not be imposed on the Market
                                     Maker if the orders had been entered on the marketplace as a single order or entered at the
                                     same time.


 Guidance:                The following is the relevant text of Market Integrity Notice 2005-027 issued on July 29, 2005 under the
                          heading “Guidance – “Advantages” to the Purchaser of a Security”:
 Summary
 This Market Integrity Notice provides guidance on the application of the general principle that all advantages attached to a security
 go to the purchaser of the security on the execution of a trade.
 General Principle – All Advantages to the Purchaser
 In the ordinary course, all advantages attached to a security pass to the purchaser upon the execution of a trade. For this
 purpose, an advantage includes:
      •    a dividend or other distribution, including rights, to which holders of the same class of security as the purchased security
           become legally entitled after the date of the trade; and
      •    any security or securities into which the purchased security has been transformed by operation of law after the date of
           the trade (including as a result of: an amalgamation; an arrangement; a fundamental change; a take-over bid or issuer
           bid; a corporate reorganization or a similar transaction).
 At the time of settlement of the trade, these advantages must be provided to the purchaser. If the intention of the vendor of a
 security is to withhold on the sale of the security certain of the advantages that may accrue to ownership of that security, the sale
 must be conducted either:
      •    in accordance with the special rules established by the Exchange or QTRS on which the security is listed or quoted; or
      •    as a Special Terms Order where the conditions of the vendor have been disclosed to prospective purchasers and the
           purchaser has agreed to the conditions.
 For example, an issuer may publicly disclose that it is considering the payment of a special dividend or asking security holders to
 approve a stock split. If the issuer has not established a record date to give effect to these actions, the Exchange or QTRS on
 which the security is listed or quoted will not have established any special trading rules for the security. In these circumstances, a
 security holder who enters a Special Terms Order on a marketplace to sell units of this security with a settlement date which is
 expected to be after the payment of the special dividend or after giving effect to the stock split will be taken to have agreed to “sell”



Part 2 – Abusive Trading                                                                                                     UMIR 2.1-4
January 1, 2013
 the advantage of the special dividend or stock split to the purchaser. A prospective purchaser can not be taken to have agreed to
 the vendor withholding the advantage simply because the transaction is expected to settle on a date which is after the proposed
 target date for the dividend or stock split as announced by the issuer. The vendor’s condition on the trade must be specifically
 disclosed to the prospective purchaser prior to the prospective purchaser agreeing to undertake the trade.
 On the other hand, if the issuer has established a record date to give effect to these actions and the Exchange or QTRS on which
 the security is listed or quoted has established special trading rules for the security such that purchases of the security made on
 the marketplace on or after the time specified in the special trading rules will not receive the special dividend or the benefit of the
 stock split, then all trades on that marketplace will be undertaken in accordance with the special trading rules (unless the vendor
 and the purchaser mutually agree otherwise).
 Securities Trading on Multiple Marketplaces
 In accordance with Rule 6.1(2) of UMIR, a listed security or a quoted security which trades on any marketplace will be subject to
 any special rule or direction issued by the Exchange on which the security is listed or by the QTRS on which the security is quoted
 with respect to:
       •    clearing and settlement; and
       •    entitlement of the purchaser to receive a dividend, interest or any other distribution made or right given to holders of that
            security.
 This provision is designed to ensure that orders and trades in a particular security are comparable between each marketplace on
 which that security trades. If a security is listed on an Exchange and also trades on an ATS, the special trading rules established
 by the Exchange will apply to trades on the ATS. If a security is inter-listed between two or more Exchanges and QTRSs,
 Investment Industry Regulatory Organization of Canada (“IIROC”) will ensure that the same special trading rules apply on each of
 the marketplaces.
 Remedies for Failure to Provide Advantages on Settlement
 Under Rule 10.9 of UMIR, a Market Integrity Official may cancel any trade which, in the opinion of the Market Integrity Official, is
 unreasonable. If IIROC concludes that the price of a trade is unreasonable given the failure of the vendor to deliver all of the
 “advantages” of the purchased security that arose after the trade date, IIROC may cancel the trade irrespective of the period of
 time that may have elapsed between the execution of the trade and the date of settlement.
 Rule 2.1 requires both a Participant and an Access Person to transact business openly and fairly when trading on a marketplace.
 In the opinion of IIROC, if a Participant or Access Person enters into a trade with the intention of not delivering on settlement of the
 trade all of the advantages that flowed from the security following the execution of the trade that Participant or Access Person is in
 breach of the requirements of Rule 2.1 to conduct business openly and fairly and would be subject to appropriate disciplinary
 proceedings by IIROC.

 Guidance:                The following is the relevant text of IIROC Rules Notice 11-0043 issued on February 1, 2011 under the
                          heading “Guidance Note - UMIR – Guidance on ”Locked” and ”Crossed” Markets”:

 Questions and Answers
 The following are questions relating to the obligations of a Participant under UMIR in the context of a “locked” or “crossed” market
 and IIROC’s response to each question:
 5.    Is it a violation of UMIR to enter an order on a marketplace that “bids-through” or “offers-through” an order on
       another marketplace even if the order that “bids-through” or “offers-through” does not “trade”?
       Yes. Such behaviour is not in compliance with the Locked and Crossed Order Provisions. 1 In addition, IIROC is of the view
       that a Participant who intentionally “bids-through” (enters a purchase order that is booked on a marketplace at a price which
       is higher than an offer to sell that security on another protected marketplace) or “offers-through” (enters a sell order that is
       booked on a marketplace at a price which is lower than a bid to purchase that security on another protected marketplace) is
       in a breach of Rule 2.1 of UMIR governing just and equitable principles of trade since such orders will result in a “crossed
       market”. Furthermore, if the Participant is entering a client order when “bidding-through” or “offering-through”, the Participant
       may be in violation of the “best execution” requirements under Rule 5.1 to diligently pursue the execution of the client order
       on the most advantageous execution terms reasonably available under the circumstances.


 Disciplinary Proceedings:        In the Matter of Ronald David Johnson (“Johnson”) (September 13, 2002) OOS 2002-003
                                  Facts – During the period April 1999, to May 1999, Johnson, an Approved Person of the Alberta
                                  Stock Exchange employed by Canaccord Capital Corporation, participated in the distribution of
                                  shares of a private placement. The issuer of the private placement relied on a “close friends and
                                  business associates” exemption under the Securities Act (Alberta) to distribute the securities.
                                  Johnson place five clients in the private placement notwithstanding that the clients could not
                                  properly rely on the “close friends and business associates” exemption.



  1
      See section 6.4 of Companion Policy 23-101CP.



Part 2 – Abusive Trading                                                                                                     UMIR 2.1-5
January 1, 2013
                             Disposition – Johnson knew or should have known that the “close friends and business associates”
                             exemption provided by the securities legislation was not applicable in the case of the five clients
                             with whom he placed the securities. In doing so, he engaged in conduct that was unbecoming and
                             inconsistent with just and equitable principles of trade which was detrimental to the public interest.
                             Requirements Considered – Alberta Stock Exchange By-laws 8.27 and 16.01A.                  Comparable
                             UMIR Provision - Rule 2.1
                             Sanction - $12,000 fine and costs of $7,500
 Disciplinary Proceedings:   In the Matter of Norman Karl Jeske (“Jeske”) (December 12, 2002) OOS 2002-010
                             Facts – During the period of July 1, 1998 to February 1, 1999, Jeske, an investment advisor at
                             Dominick & Dominick Securities Inc., in the course of acting for a company engaged in a normal
                             course issuer bid failed to exercise due diligence in relation to the entry of orders by the company
                             for the purchase of its shares, including from accounts related to or affiliated with the company and
                             its insiders.
                             Disposition – In failing to exercise due diligence in relation to the entry of orders, Jeske’s conduct
                             or method of business was inconsistent with just and equitable principles of trade and detrimental
                             to the interests of public.
                             Requirements Considered – VSE Policy 21.10, VSE Rules B.4.16 and F.2.08, VSE By-law 5.01(2).
                             Comparable UMIR Provision - Rule 2.1.
                             Sanction - $12,500 fine and costs of $1,000; disgorgement of $2,392 in gains; suspended from
                             access to the Toronto Stock Exchange for 30 days

 Disciplinary Proceedings:   In the Matter of Luke Roger Beresford Smith (“Smith”) (October 24, 2002) OOS 2002-011
                             Facts – Between October 21, 1996 and December 21, 1996, Smith, an Investment Advisor with
                             C.M. Oliver & Co. Ltd, effected or participated in trades on behalf of three client accounts who
                             engaged in a pattern of initiating buy and sell orders for a particular security and at substantially the
                             same time and at substantially the same price between the clients’ accounts.
                             Disposition – The trades amongst the clients’ accounts could have created the appearance of an
                             artificial market that could have unduly disturbed the normal market condition, and could have
                             created a misleading appearance of trading activity for the particular security. Smith failed in his
                             role as a gatekeeper and his conduct was inconsistent with just and equitable principles of trade.
                             Requirements Considered – VSE By-law 5.01(2). Comparable UMIR Provision - Rule 2.1 and
                             Policy 2.1, reference made to “gatekeeper function” (Rule 10.16 effective April 1, 2005)
                             Sanction - $7,500 fine and costs of $2,500

 Disciplinary Proceedings:   In the Matter of Garett Steven Prins (“Prins”) (April 1, 2003) OOS 2003-001
                             Facts – On several occasions between November 22, 2001 and July 18, 2002, Prins informed a
                             registered trader at another dealer of pending client orders for particular securities. The registered
                             trader used this information to enter beneficial trades in the particular securities.
                             Disposition – Prins acted contrary to just and equitable principles of trade when he disclosed
                             information of pending client trades to a trader at another dealer.
                             Requirements Considered – TSX Rule 7-106(1)(b) and Rules 2.1(1) and 4.1(1)(c)
                             Sanction - $50,000 fine and costs of $15,000; Suspended from access to the Toronto Stock
                             Exchange for 3 months

 Disciplinary Proceedings:   In the Matter of Douglas Francis Corrigan (“Corrigan”) (May 28, 2003) OOS 2003-002
                             Facts - Corrigan, an investment advisor at Dominick & Dominick Securities Inc. was assigned the
                             account of Client X, an insider of Tree Brewing Co. Ltd. (“Tree Brewing”), a VSE-listed issuer.
                             Between August 1, 1998 and March 31, 1999, Corrigan effected or participated in trades of shares
                             of Tree Brewing on behalf of Client X which involved a pattern of uneconomic and repetitive trading
                             whereby Client X sold and subsequent re-purchase of a comparable number of shares of Tree
                             Brewing for the purpose of deferring payment for the securities traded.
                             Disposition - Corrigan had an obligation to closely monitor the trading by the client and use due
                             diligence to learn the essential facts each order he accepted. In failing to discharge his due
                             diligence obligations and failing to recognize the “red flags” Duke failed to discharge his
                             “gatekeeper” obligation and engaged in conduct which was inconsistent with just and equitable
                             principles of trade.
                             Requirements Considered – VSE By-law 5.01(2). Comparable UMIR Provision - Rule 2.1 and
                             Policy 2.1, reference made to “gatekeeper function” (Rule 10.16 effective April 1, 2005)
                             Sanction - $10,000 fine and costs of $3,000; disgorgement of $5,492 in gains



Part 2 – Abusive Trading                                                                                                 UMIR 2.1-6
January 1, 2013
 Disciplinary Proceedings:   In the Matter of Dean Duke (“Duke”) (May 28, 2003) OOS 2003-003
                             Facts – Duke, a trader at Canaccord Capital Corporation was assigned the account of Client X, an
                             insider of Tree Brewing Co. Ltd. (“Tree Brewing), a VSE-listed issuer. Between August 1, 1998
                             and March 31, 1999, Duke effected or participated in trades of shares of Tree Brewing on behalf of
                             Client X which involved a pattern of uneconomic and repetitive trading whereby Client X sold and
                             subsequent re-purchase of a comparable number of shares of Tree Brewing for the purpose of
                             deferring payment for the securities traded.
                             Disposition – Duke had an obligation to closely monitor the trading by Client X and use due
                             diligence to learn the essential facts of each order he accepted. In failing to discharge his due
                             diligence obligations and failing to recognize the “red flags” Duke failed to discharge his
                             “gatekeeper” obligation and engaged in conduct which was inconsistent with just and equitable
                             principles of trade.
                             Requirements Considered – VSE By-law 5.01(2). Comparable UMIR Provision - Rule 2.1 and
                             Policy 2.1
                             Sanction - $20,000 fine and costs of $3,000; disgorgement of $3,633.57 in gains

 Disciplinary Proceedings:   Rule 2.1(1) was considered In the Matter of Frank Patrick Greco (“Greco”) (May 28, 2003)
                             Decision 2003-004. See Disciplinary Proceedings under Rule 4.1.

 Disciplinary Proceedings:   In the Matter of Garnet Glen Ferguson (“Ferguson”) (November 6, 2003) OOS 2003-008
                             Facts – On September 25, 2000, Ferguson, a registered representative, while in possession of
                             material non-public information, entered into a pre-arranged transaction with a promoter of an
                             issuer of a Canadian Venture Exchange Inc. listed stock to purchase shares of the company on
                             behalf of six of his clients. The trade materially upticked the price of the stock. Subsequently,
                             between October 2-6, 2000, and prior to the material information respecting the issuer being
                             partially disclosed generally, Ferguson sold the shares of the company in “solicited” sales for three
                             of the clients at a significant premium.
                             Disposition – In purchasing securities on behalf of his clients while in possession of material
                             information, which he knew or ought to have know had not been generally disclosed, and for do so
                             in the context of effecting a new high trade where he ought to have known that the effect of such a
                             purchase would be to create an abnormal market condition for that security, Ferguson’s conduct
                             was inconsistent with just and equitable principles of trade and detrimental to the public interest.
                             Requirements Considered – CDNX Rules F.2.18(4)(a) and F.2.01(2). Comparable UMIR Provision
                             - Rule 2.1 and Policy 2.1
                             Sanction - $15,000 fine and costs of $2,500; disgorgement of $1,095 in gains

 Disciplinary Proceedings:   In the Matter of Brian Alexander Kaufman (“Kaufman”) (November 6, 2003) OOS 2003-009
                             Facts – Between July 2000 and February 2001, Kaufman, a registered representative, caused a
                             series of trades to be transacted on behalf of his client who was engaged in suspicious trading
                             activities which included perceived undeclared short sales, uneconomical trading and up-ticked
                             purchases in thinly traded securities. Despite knowing these facts, Kaufman appeared to execute
                             sell orders without reasonable knowledge that the apparent long sales were in fact covered by
                             freely tradeable shares.
                             Disposition – The failed settlements, uneconomic trading and market dominance in a thinly traded
                             security by the client ought to have put Kaufman on a heightened state of alert for possible market
                             abuses. Kaufman should have not continued to execute sales for his clients without ensuring that
                             the accounts were long or without credible evidence that his clients held freely tradeable shares in
                             other accounts to cover those sales. In failing to identify these red flags Kaufman failed to act as a
                             “gatekeeper” and engaged in conduct which was inconsistent with just and equitable principles of
                             trade and detrimental to the public interest.
                             Requirements Considered – CDNX Rules F.1.01(1), F.2.01(2) and E.1.01. Comparable UMIR
                             Provision - Rule 2.1 and Policy 2.1
                             Sanction - $10,000 fine and costs of $4,000, disgorgement of $1,363.82 in gains; strict supervision
                             for 6 months; successful completion of the Conduct and Practices Handbook examination

 Disciplinary Proceedings:   In the Matter of Linda Grace Malinowski (“Malinowski”) (November 26, 2003) OOS 2003-011
                             Facts – In her capacity as sales assistant, Malinowski was responsible for entering orders for one
                             stock on behalf of clients and at the direction of the investment advisor for whom she worked.
                             Between February 1 and June 9 of 2000 she was responsible for entering unsolicited buy orders
                             on behalf of clients that were alleged to be engaged in trading which created a false and
                             misleading appearance of trading activity in the stock and in certain instances, created artificial



Part 2 – Abusive Trading                                                                                               UMIR 2.1-7
January 1, 2013
                             prices. Malinowski raised concerns about the trading of the clients, but was told by her IA that she
                             shouldn’t be concerned. She did not escalate the matter further and continued to take orders from
                             the clients.
                             Disposition - Persons entering orders on behalf of clients have a gatekeeper responsibility to guard
                             against entering orders for clients who may appear to be engaging in manipulative and deceptive
                             trading. Malinowski failed in her duty as gatekeeper and hence constituted conduct contrary to just
                             and equitable principles of trade.
                             Requirements Considered – Section 17.09(1)(b) of the General By-law of the TSX and Rule 7-
                             106(1)(b) of the Rules of the TSX. Comparable UMIR Provision – Rule 2.1(1)
                             Sanction - $10,000 fine; successful completion of the Conduct and Practices Handbook
                             examination

 Disciplinary Proceedings:   In the Matter of David Avery Little (“Little”) (December 22, 2003) OOS 2003-014
                             Facts – Between July 4 and July 12, 2002, Little, a registered representative at Yorkton Securities
                             Inc. (“Yorkton”), instructed traders at Yorkton to jitney sell orders for EQT shares held by Yorkton in
                             an Inventory Account. Shortly after the execution of each jitney sell order, Little caused an order to
                             be entered on behalf of a client, who was also an insider of EQT (“Related Client”), to purchase
                             small quantities of EQT shares at prices in excess of the price at which Little had sold the shares.
                             Five of these Related Client orders and trades entered and executed during the relevant period
                             produced up ticks.
                             Disposition – When a registrant acts for an insider of an issuer in whose securities trades are
                             made, the registrant must exercise a higher level of due diligence to learn the essential facts
                             relative to the orders. In failing to take greater care when accepting and executing unsolicited
                             orders for a Related Client Little failed to act as a “gatekeeper” and failed to act in accordance with
                             just and equitable principles of trade.
                             Requirements Considered – Rules 2.1(1) and 10.4(1)(a)
                             Sanction - $12,500 fine and costs of $2,500

 Disciplinary Proceedings:   In the Matter of Kai Tolpinrud (“Tolpinrud”) (January 16, 2004) OOS 2004-001
                             Facts – Canaccord Capital Corporation employed Tolpinrud to trade for institutions, quasi-
                             institutional clients, and corporate clients and at the same time permitted him to trade his personal
                             account and inventory accounts. In reliance on this arrangement, between March 1, 2001 and
                             March 11, 2002 Tolpinrud took advantage of client orders and information when acting as agent for
                             the purchase and sale of securities to commit numerous infractions and contraventions including
                             frontrunning, trading opposite his clients, improper client-principal trading, failing to give client
                             orders priority when he entered client and non-client orders and other infractions.
                             Disposition – Tolpinrud engaged in trading practices which contravened the requirements of the
                             CDNX and the TSE and were inconsistent with just and equitable principles of trade and
                             detrimental to the interests of the public.
                             Requirements Considered – TSE Rule 4-405(1), CDNX Rules C.2.17, F.2.01, F.2.03, F.2.04,
                             F.2.05, F.2.10(2)(f), F.2.18 (8), G.3.01(6). Comparable UMIR Provisions – Rule 2.1, 2.2, 4.1, 5.3
                             Sanction - $110,000 fine and costs of $21,500; disgorgement of $29,925 gain; permanent
                             withdrawal of access to the TSX-VN, TSX and all other marketplaces regulated by RS

 Disciplinary Proceedings:   In the Matter of Gerald Douglas Phillips (“Phillips”) (February 26, 2004) SA 2004-002
                             Facts – On June 26, 2003, Phillips, a registered representative entered a client market sell order at
                             a $0.70 limit in the exchange book even though there were pending buy orders in the TSX’s special
                             terms book against which the client’s order could have traded at a better price.
                             Disposition – In failing to make an effort to fill the client’s market order at the better price offered in
                             the special terms book, Phillips caused his dealer to breach its best price obligation to the client
                             and acted in a manner which was inconsistent with just and equitable principles of trade.
                             Requirements Considered – Rules 2.1(1)(a), 5.2 and 10.4(1)(a)
                             Sanction - $10,000 fine and costs of $3,500

 Disciplinary Proceedings:   In the Matter of Louis Anthony De Jong (“DeJong”) and Dwayne Barrington Nash (“Nash”)
                             (July 29, 2004) Decision 2004-004
                             Facts – DeJong and Nash were both employees of Credit Suisse First Boston Canada Inc.
                             (“CSFB”). Client X advised DeJong that he was interested in buying a large block of BCE shares
                             which CSFB recently acquired in an unrelated transaction. In order to deliver the shares to client X
                             at the agreed upon price, DeJong and Nash made improper use of a CSFB error account to




Part 2 – Abusive Trading                                                                                                   UMIR 2.1-8
January 1, 2013
                             document a loss to CSFB and sold the shares to client X in an improper off-marketplace
                             transaction. RS alleged that Nash and DeJong violated Rule 2.1(1), for which they were liable
                             under Rule 10.4(1)(a).
                             Held - While Rule 10.4(1)(a) extends liability to employees for breaches of Rule 2.1, to the extent
                             that the acts of DeJong and Nash fell factually within Rule 6.4 of UMIR, RS lacked the jurisdiction
                             and authority to extend liability to DeJong and Nash under Rule 10.4(1)(a).
                             Requirements Considered – Rules 2.1(1), 6.4 and 10.4(1)(a)
                             Disposition – charges against DeJong and Nash dismissed

 Disciplinary Proceedings:   In the Matter of CIBC World Markets Inc., (“CIBC”) Scott Mortimer and Carl Irizawa
                             (December 21, 2004) SA 2004-008
                             Facts – From March to December, 2002, a group of related clients with accounts at CIBC engaged
                             in suspicious trading in stocks and warrants listed on the TSX and the TSX Venture Exchange.
                             The trading was carried out through numerous accounts held by the client group at CIBC, its
                             affiliates and an unrelated investment dealer, and involved the alleged manipulation of illiquid
                             derivative securities through a series of set-up trades entered through a Direct Market Access
                             account at CIBC and another dealer and crosses between accounts held by the client group at
                             CIBC.
                             Disposition – Both the investment advisor and his sales assistant failed to fulfill their respective
                             gatekeeper responsibilities by failing to recognize the “red flags” upon entry of the crosses and
                             upon review of the crosses the day after they were conducted. The “red flags” ought to have
                             caused them to further scrutinize the clients’ trading and escalate their issues of concern to
                             supervisory personnel.
                             A Participant is responsible for ensuring that it adequately supervises all trading, including Direct
                             Market Access trading. The policies and procedures employed by CIBC were not adequate in that
                             they did not focus on the potentially manipulative or deceptive nature of the client trading and as a
                             result CIBC failed to recognize the “red flags” posed by the nature of the related clients trading.
                             Requirements Considered – Sections 2-401(5) and 7-106(1)(b) of the Toronto Stock Exchange
                             Rules and Rule 2.1(1), 7.1(1) and Policy 7.1
                             Sanction -
                             CIBC -             $700,000 fine and costs of $92,500; undertakings involving strict supervision
                                                and training of staff
                             Scott Mortimer -   $50,000 fine and costs of $15,000
                             Carl Irizawa -     $20,000 fine and costs of $7,500
 Disciplinary Proceedings:   In the Matter of Glen Grossmith (“Grossmith”) (July 18, 2005) SA 2005-004
                             Facts – In February of 2005, Grossmith, a trader employed with UBS Securities Canada Inc. (“UBS
                             Canada”) tried to conceal trading improprieties conducted by another trader at UBS Canada’s US
                             affiliate by altering an existing Canadian client trade ticket, creating a false and misleading “chat”
                             communication and failing to be forthcoming regarding these circumstances during UBS Canada’s
                             investigation of the trading irregularities.
                             Disposition – Grossmith’s alteration of a trade ticket and failure to act in a forthcoming manner with
                             UBS Canada’s compliance department’s investigation of the trading irregularities constituted
                             conduct inconsistent with just and equitable principles of trade and resulted in UBS Canada
                             violating certain audit trail requirements under UMIR.
                             Requirements Considered – Rules 2.1(1)(a), 10.3(4), 10.4(1)(a) and 10.11(1)
                             Sanction - $75,000 fine and costs of $25,000; suspension from RS regulated marketplaces for 3
                             months; 6 months strict supervision
 Disciplinary Proceedings    In the Matter of Ricardo Mashregi (“Mashregi”) (October 14, 2005) DN 2005-007
                             Facts – Between October 2003 and February 2005, Mashregi, a registered trader at Dundee
                             Securities Corporation engaged in a practice which involved the entry of anonymous non-client
                             overlapping orders (buy side order was higher than or equal to the price of the sell order) on both
                             sides of the market prior to 9:28 a.m. and subsequently canceling or changing one or both of the
                             orders between 9:28 a.m. and the opening of the market. By entering orders in this manner,
                             Mashregi positioned himself for a guaranteed fill in the opening session and avoided the
                             application of the TSX trading mechanism that allocates which orders will receive a complete fill at
                             the opening.




Part 2 – Abusive Trading                                                                                               UMIR 2.1-9
January 1, 2013
                             Disposition – The positioning of anonymous non-client overlapping orders in order to guarantee a
                             fill in the opening session and avoid the application of the TSX trading mechanism that allocates
                             which orders will receive a complete fill at the opening constituted conduct which was contrary to
                             just and equitable principles of trade.
                             Requirements Considered – Rule 2.1
                             Sanction - $50,000 fine and costs of $10,000
 Disciplinary proceedings:   In the Matter of Ian Scott Douglas (“Douglas”) (December 14, 2005) DN 2005-009
                             Facts – Between July 2003 and December 2003, Douglas, a junior trader at Dundee Securities
                             Corporation engaged in a practice which involved the entry of anonymous non-client overlapping
                             orders (buy side order was higher than or equal to the price of the sell order) on both sides of the
                             market prior to 9:28 a.m. and subsequently canceling or changing one or both of the orders
                             between 9:28 a.m. and the opening of the market. By entering orders in this manner, Douglas
                             positioned himself for a guaranteed fill in the opening session and avoided the application of the
                             TSX trading mechanism that allocates which orders will receive a complete fill at the opening.
                             Disposition – The positioning of anonymous non-client overlapping orders in order to guarantee a
                             fill in the opening session and avoid the application of the TSX trading mechanism that allocates
                             which orders will receive a complete fill at the opening constituted conduct which was contrary to
                             just and equitable principles of trade.
                             Requirements Considered – Rule 2.1
                             Sanction – $30,000 fine and costs of $15,000

 Disciplinary Proceedings:   In the Matter of Dale Alfred Michaud (“Michaud”) (January 11, 2006) DN 2006-001
                             Facts – On October 10, 2003, Michaud, a trader at Canaccord Capital Corporation received an
                             order to buy 1 million shares of a TSXV issuer at $0.15 on behalf of a number of client and non-
                             client accounts. The buy order was to be sent to a Jitney Dealer to be executed as an arranged
                             cross with accounts at the Jitney Dealer. Shortly after placing the buy order with the Jitney Dealer,
                             and prior to the execution of the arranged cross, Michaud entered a non-client day order to buy
                             10,000 shares of the issuer at $0.16 at a time when the prevailing bid price for the issuer was
                             $0.18.
                             Disposition – By entering his buy order at a price which was lower than the prevailing bid price at a
                             time when he knew or ought to have known that the order would have to be “taken out” before the
                             Jitney Dealer could execute the cross, Michaud acted contrary to just and equitable principles of
                             trade.
                             Requirements Considered – Rule 2.1
                             Sanction - $15,000 fine and costs of $10,000; disgorgement of $210 gain

 Disciplinary Proceedings:   In the Matter of Margaret Alice Coleman (“Coleman”) and Judy Gail Koochin
                             (“Koochin”) (April 5, 2006) DN 2006-002
                             Facts – Between June 24, 2004 and September 30, 2004, Coleman, a registered representative
                             and Trading Officer at a CIBC World Markets Inc. (“CIBC WM”) branch and Koochin, a registered
                             futures contract representative at the same branch, entered a series of buy orders for a TSXV
                             issuer on behalf of a client who had an interest in maintaining the market price of the issuer.
                             During the relevant period, the client submitted 27 orders for the purchase of the issuer’s shares in
                             a manner that suggested that the client was maintaining the market price within a pre-determined
                             range. In all but two instances (where orders were entered by a trading assistant) Koochin or
                             Coleman submitted the orders to the TSXV by means of an electronic connection to the
                             computerized order management and routing system of CIBC WM.
                             Disposition – In failing to recognize the “red flags” associated with the pattern of orders submitted
                             by the client and for entering orders they knew or ought to have known reasonably could have
                             been expected to create an artificial price in the shares, Koochin and Coleman’s conduct was
                             contrary to just and equitable principles of trade.
                             Requirements Considered – Rule 2.1
                             Sanction –
                             Coleman: $150,000 fine and costs of $13,125; 6 months strict supervision
                             Koochin: $75,000 fine and costs of $6,562.50; 6 months strict supervision

 Disciplinary Proceedings:   In the Matter of Kevin Moorhead (“Moorhead”) (May 22, 2008) DN 2008-001
                             Facts – Between August 29, 2005 and October 27, 2005, Moorhead and/or his assistant, on
                             Moorhead’s instructions, entered orders on a marketplace for certain securities with the intention of




Part 2 – Abusive Trading                                                                                            UMIR 2.1-10
January 1, 2013
                             establishing an artificial and/or a high closing bid price in order to improve the daily profit and loss
                             position of shares held in Moorhead’s inventory account and/or to assist a trader at another firm to
                             increase the daily profit or reduce the daily loss in his inventory account.
                             Disposition – By entering orders on a marketplace that were not justified by any real demand for
                             the securities Moorhead knew that his order entry activity would create, or could reasonably be
                             expected to create, an artificial price for the securities contrary to Rule 2.2 and Policy 2.2 of UMIR.
                             Requirements Considered – Rule 2.2(1), 2.2(2)(b) and Policy 2.2
                             Sanction – $40,000 fine and costs of $10,000 and suspension from all RS regulated marketplaces
                             for three months.

 Disciplinary Proceedings:   In the Matter of Tony D’Ugo (“D’Ugo”) (April 6, 2010) DN 10-0093
                             Facts – During the period from January 21 to February 13, 2008, D’Ugo, a registered
                             representative at BMO InvestorLine Inc., entered orders and executed trades in shares of a
                             company on the TSX Venture Exchange for a client and his related accounts with the intention of
                             keeping the closing price of the security at or above $3.00 per share, so that the client would avoid
                             margin calls from some firms that would be made if the price fell below $3.00. D’Ugo also accepted
                             trading instructions in respect of three client accounts from a person not authorized in writing to
                             provide such instructions.
                             Disposition – D’Ugo entered orders and executed trades for a client and his associates that he
                             knew or ought to have known created or could reasonably have been expected to create, an
                             artificial price and/or bid for the security contrary to UMIR 2.2(2)(b), 10.4(1) and 10.16(1)(b) and he
                             accepted trading instructions in respect of three client accounts from a person not authorized in
                             writing to provide such instructions contrary to UMIR 2.1(1) and 10.4(1).
                             Requirements Considered – Rules 2.1, 2.2(2)(b), 10.4(1) and 10.16(1)(b).
                             Sanctions – D’Ugo was fined $40,000, ordered to pay $15,000 in costs, suspended from access to
                             IIROC-regulated marketplaces for 2 years from March 15, 2010, required to re-write and complete
                             the Conduct and Practices Handbook examination prior to resuming his employment with a
                             brokerage firm and is subject to one year of close supervision by his employer firm when resuming
                             employment with a brokerage firm.

 Disciplinary Proceedings:   In the Matter of Clark Alexander Squires (“Squires”) (October 6, 2010) DN 10-0263
                             Facts – On February 11, 2009, while employed as a registered representative at Brant Securities
                             Ltd. (“Brant”), Squires solicited sell orders for three clients in the securities of a publicly-traded
                             company listed on the TSX while also holding the position of director with the company. Squires
                             did not inform the clients or his firm’s compliance department that he was in possession of material
                             undisclosed information about the company when soliciting the sell orders. The company issued a
                             press concerning the material information after the sell orders were executed. Brant’s compliance
                             department thereafter identified the sales of the security in the client accounts and cancelled the
                             transactions with the concurrence of Squires.
                             Disposition – Under the terms of a Settlement Agreement, Squires admitted that he failed to
                             transact his business in a manner that was open, fair and in accordance with just and equitable
                             principles of trade when he traded on information that was not generally available to other market
                             participants and by failing to inform his compliance department of the circumstances.
                             Requirements Considered – Rules 2.1, and 10.3(4).
                             Sanctions – Squires agreed to a $20,000 fine and $5,000 in costs.
 Disciplinary Proceedings:   In the Matter of National Bank Financial (“NBF”), Paul Clarke (“Clarke”) and Todd O’Reilly
                             (“O’Reilly”) (January 21, 2011) DN 11-0029 and DN 11-0030
                             Facts – Between April 2006 and June 2007, Clarke, a Registered Representative, and O’Reilly, an
                             Investment Representative, both employed at the NBF Halifax retail branch (the “Halifax
                             Representatives”), placed orders through the Montreal Retail Trade Desk rather than through
                             NBF’s automated order entry system. NBF’s automated system required a complete record of
                             audit trail requirements for order entry. The Montreal Retail Trade Desk, however, routinely
                             accepted orders from the Halifax Representatives without identifying the client accounts for which
                             the orders were placed and did not keep adequate records of the required audit trail information.
                             Among other things, trade tickets were inadequate as they were not time-stamped or failed to
                             include the order price and/or quantity and in certain cases trade tickets were not available. In
                             addition, the Halifax Representatives were permitted to hold trades executed through the Montreal
                             Retail Trade Desk in a firm inventory account (the “Accumulation Account”) for up to 30 days
                             without allocating them to client accounts as distinct from the standard T+3 settlement date stated
                             in NBF’s policy and procedure. The ability to enter orders without identifying a client account and to



Part 2 – Abusive Trading                                                                                               UMIR 2.1-11
January 1, 2013
                           delay allocation to client accounts allowed clients of the Halifax Representatives to access firm
                           capital for up to 30 days, caused uncertainty regarding ownership of certain positions, and resulted
                           in the ability of the Halifax Representatives to grant preferential treatment to their clients.
                           Although supervision failings with respect to both the Halifax Representatives and Montreal Retail
                           Trade Desk were continually highlighted by NBF during the relevant period, corrective measures
                           were not effected in a timely manner. Subsequent to an IIROC investigation, NBF overhauled the
                           retail trade desk compliance practices and procedures regarding the Accumulation Account and
                           governing the Montreal Retail Trade Desk. There were no client complaints or losses claimed as a
                           result of NBF’s conduct, nor unpaid accounts by any client and NBF suffered no losses as a result
                           of the exposure to credit risk.
                           Disposition – NBF admitted in a settlement agreement that it failed to fully and properly supervise
                           the Halifax Representatives and the Montreal Retail Trade Desk and failed on receipt or origination
                           of certain orders to record specific information relating to the orders as required. Participants must
                           supervise their employees to ensure that trading in securities on a marketplace is carried out in
                           compliance with the applicable requirements, which include provisions of securities legislation,
                           UMIR, National Instrument 23-101 - Trading Rules and the Marketplace Rules of any applicable
                           Exchange. Participants must comply strictly with audit trail requirements. Such compliance is a
                           cornerstone of effective compliance and supervision. A complete and proper audit trail is the
                           foundation on which Participants demonstrate and evidence compliance with regulatory
                           requirements.
                           Clarke and O’Reilly admitted in a settlement agreement that they failed to transact business openly
                           and fairly and in accordance with just and equitable principles of trade as they effected improper
                           post-execution allocations of trades and granted preferential treatment to certain clients on more
                           than one occasion by entering orders without identifying the client account and delaying the
                           allocation of the executed trades to client accounts. In addition they admitted to causing
                           contraventions of UMIR by failing on receipt or origination of certain orders to record specific
                           information relating to the orders as required.
                           Requirements Considered – Rule 2.1, 7.1 10.3(4), 10.4(1), 10.11(1), Policy 2.1, and 7.1
                           Sanction - NBF agreed to a $250,000 fine and $30,000 in costs, Clarke agreed to a fine of
                           $110,000 and costs of $5,000 and O’Reilly agreed to a fine of $15,000 and $2,500 in costs.


 Proposed Amendments:          For information on the current proposed amendments to Rule 2.1 of UMIR – Just and Equitable
                               Principles, refer to IIROC Notice 12-0104 – Rules Notice - Request for Comments – Dealer
                               Member Rules and UMIR – Consolidation of IIROC Enforcement, Procedural, Examination and
                               Approval Rules (March 23, 2012) which includes proposed amendments to repeal Rule 2.1 of
                               UMIR upon the introduction of a consolidated standard of conduct rule in conjunction with the
                               Dealer Member Rules. Policy 2.1 would also be repealed with the substance of the Policy
                               being incorporated into a new Rule 2.1 “Specific Unacceptable Activities”.




Part 2 – Abusive Trading                                                                                           UMIR 2.1-12
January 1, 2013
                                                                Universal Market Integrity Rules
                                                                     Rules & Policies


2.2      Manipulative and Deceptive Activities
         (1)      A Participant or Access Person shall not, directly or indirectly, engage in or
                  participate in the use of any manipulative or deceptive method, act or practice in
                  connection with any order or trade on a marketplace if the Participant or Access
                  Person knows or ought reasonably to know the nature of the method, act or
                  practice.

         (2)      A Participant or Access Person shall not, directly or indirectly, enter an order or
                  execute a trade on a marketplace if the Participant or Access Person knows or
                  ought reasonably to know that the entry of the order or the execution of the trade
                  will create or could reasonably be expected to create:
                  (a)   a false or misleading appearance of trading activity in or interest in the
                        purchase or sale of the security; or
                  (b)   an artificial ask price, bid price or sale price for the security or a related
                        security.

         (3)      For greater certainty, the entry of an order or the execution of a trade on a
                  marketplace by a person in accordance with the Marketplace Trading Obligations
                  shall not be considered a violation of subsection (1) or (2) provided such order or
                  trade complies with applicable Marketplace Rules or terms of the contract with the
                  marketplace and the order or trade was required to fulfill applicable Marketplace
                  Trading Obligations.


POLICY 2.2 – MANIPULATIVE AND DECEPTIVE ACTIVITIES
Part 1 – Manipulative or Deceptive Method, Act or Practice
There are a number of activities which, by their very nature, will be considered to be a
manipulative or deceptive method, act or practice. For the purpose of subsection (1) of Rule 2.2
and without limiting the generality that subsection, the following activities when undertaken on a
marketplace constitute a manipulative or deceptive method, act or practice:
         (a)      making a fictitious trade;
         (b)      effecting a trade in a security which involves no change in the beneficial or
                  economic ownership; and
         (c)      effecting trades by a single interest or group with the intent of limiting the supply of
                  a security for settlement of trades made by other persons except at prices and on
                  terms arbitrarily dictated by such interest or group.
If persons know or ought reasonably to know that they are engaging or participating in these or
similar types of activities those persons will be in breach of subsection (1) of Rule 2.2
irrespective of whether such method, act or practice results in a false or misleading appearance
of trading activity or interest in the purchase or sale of a security or an artificial ask price, bid
price or sale price for a security or a related security.


Part 2 – Abusive Trading                                                                         UMIR 2.2-1
January 1, 2013
Part 2 – False or Misleading Appearance of Trading Activity or Artificial Price
For the purposes of subsection (2) of Rule 2.2 and without limiting the generality of that
subsection, if any of the following activities are undertaken on a marketplace and create or
could reasonably be expected to create a false or misleading appearance of trading activity or
interest in the purchase or sale of a security or an artificial ask price, bid price or sale price, the
entry of the order or the execution of the trade shall constitute a violation of subsection (2) of
Rule 2.2:
         (a)      entering an order or orders for the purchase of a security with the knowledge that
                  an order or orders of substantially the same size, at substantially the same time
                  and at substantially the same price for the sale of that security, has been or will be
                  entered by or for the same or different persons;
         (b)      entering an order or orders for the sale of a security with the knowledge that an
                  order or orders of substantially the same size, at substantially the same time and at
                  substantially the same price for the purchase of that security, has been or will be
                  entered;
         (c)      making purchases of, or offers to purchase, a security at successively higher
                  prices or in a pattern generally of successively higher prices;
         (d)      making sales of or offers to sell a security at successively lower prices or in a
                  pattern generally of successively lower prices;
         (e)      entering an order or orders for the purchase or sale of a security to:
                  (i)     establish a predetermined sale price, ask price or bid price,
                  (ii)    effect a high or low closing sale price, ask price or bid price, or
                  (iii)   maintain the sale price, ask price or bid price within a predetermined range;
         (f)      entering an order or a series of orders for a security that are not intended to be
                  executed;
         (g)      entering an order for the purchase of a security without, at the time of entering the
                  order, having the ability or the reasonable expectation to make the payment that
                  would be required to settle any trade that would result from the execution of the
                  order;
         (h)      entering an order for the sale of a security without, at the time of entering the order,
                  having the reasonable expectation of settling any trade that would result from the
                  execution of the order; and
         (i)      effecting a trade in a security, other than an internal cross, between accounts
                  under the direction or control of the same person.
         If persons know or ought reasonably to know that they are engaging or participating in
         these or similar types of activities those persons will be in breach of subsection (2) of
         Rule 2.2 irrespective of whether such activity results in a false or misleading appearance
         of trading activity or interest in the purchase or sale of a security or an artificial ask price,
         bid price or sale price for a security or a related security.




Part 2 – Abusive Trading                                                                         UMIR 2.2-2
January 1, 2013
Part 3 – Artificial Pricing
For the purposes of subsection (2) of Rule 2.2, an ask price, bid price or sale price will be
considered artificial if it is not justified by real demand or supply in a security. Whether or not a
particular price is "artificial" depends on the particular circumstances.
Some of the relevant considerations in determining whether a price is artificial are:
         (a)      the prices of the preceding trades and succeeding trades;
         (b)      the change in the last sale price, best ask price or best bid price that results from
                  the entry of the order on a marketplace;
         (c)      the recent liquidity of the security;
         (d)      the time the order is entered and any instructions relevant to the time of entry of
                  the order; and
         (e)      whether any Participant, Access Person or account involved in the order:
                  (i)        has any motivation to establish an artificial price, or
                  (ii)       represents substantially all of the orders entered or executed for the
                             purchase or sale of the security.
         The absence of any one or more of these considerations is not determinative that a price
         is or is not artificial.
 Defined Terms:          NI 21-101 section 1.1 – “order”
                         NI 21-101 section 1.4 – Interpretation -- “security”
                         UMIR section 1.1 – “Access Person”, “best ask price”, “best bid price”, “consolidated market display”, “internal
                                             cross”, “last sale price”, “Marketplace Trading Obligations”, “Market Regulator”,
                                             “marketplace”, “Marketplace Rules”, “Participant” and “related security”
                         UMIR section 1.2(2) – “person” and “trade”
 Related Provisions:         UMIR Policy 1.2 Part 3 – interpretation of “ought reasonably to know”
 Regulatory History:         Effective April 1, 2005, the applicable securities commissions approved an amendment to repeal and
                             replace Rule 2.2 and Policy 2.2. Prior to that date, Rule 2.2 and Policy 2.2 provided:
                                 2.2   Manipulative or Deceptive Method of Trading
                                       (1) A Participant or Access Person shall not, directly or indirectly, use nor knowingly facilitate
                                           nor participate in the use of any manipulative or deceptive method of trading in connection
                                           with the entry of an order or orders to trade on a marketplace for the purchase or sale of
                                           any security which creates or which could reasonably be expected to create a false or
                                           misleading appearance of trading activity or an artificial price for the security or a related
                                           security.
                                       (2)   Without limiting the generality of subsection (1), the following activities when undertaken on
                                             a marketplace constitute deceptive and manipulative methods of trading:
                                             (a) making a fictitious trade;
                                             (b)   effecting a trade in a security which involves no change in the beneficial or economic
                                                   ownership;
                                             (c)   effecting trades by a single interest or group with the intent of limiting the supply of a
                                                   security for settlement of trades made by other persons except at prices and on terms
                                                   arbitrarily dictated by such interest or group; and
                                             (d)   purchasing a security with the intention of making a sale of the same or a different
                                                   number of units of the security or a related security on a marketplace at a price which
                                                   is below the price of the last sale of a standard trading unit of such security displayed
                                                   in a consolidated market display.
                                       (3)   Without limiting the generality of subsection (1), the following activities shall be considered
                                             deceptive and manipulative methods of trading when undertaken on a marketplace with the
                                             intention of creating a false or misleading appearance of trading activity or an artificial price
                                             for a security or a related security:




Part 2 – Abusive Trading                                                                                                         UMIR 2.2-3
January 1, 2013
                                        (a)   entering an order or orders for the purchase of a security with the knowledge that an
                                              order or orders of substantially the same size, at substantially the same time and at
                                              substantially the same price for the sale of that security, has been or will be entered by
                                              or for the same or different persons;
                                        (b)   entering an order or orders for the sale of a security with the knowledge that an order
                                              or orders of substantially the same size, at substantially the same time and at
                                              substantially the same price for the purchase of that security, has been or will be
                                              entered;
                                        (c)   making purchases of, or offers to purchase, a security at successively higher prices;
                                        (d)   making sales of or offers to sell a security at successively lower prices;
                                        (e)   entering an order or orders for the purchase or sale of a security to:
                                              (i)    establish a predetermined price or quotation,
                                              (ii)   effect a high or low closing price or closing quotation, or
                                              (iii) maintain the trading price, ask price or bid price within a predetermined range;
                                                    and
                                        (f)   entering a series of orders for a security that are not intended to be executed.
                                  (4)   A price will be considered artificial if the price is not justified by real demand or supply in a
                                        security.
                                  (5)   For the purposes of subsection (4), a price in a security may be considered not justified by
                                        real demand or supply if:
                                        (a)   the price is higher or lower than the previous price and the market immediately returns
                                              to the previous price following the trade; and
                                        (b)   the bid price is raised or the ask price is lowered by an order which, at the time of
                                              entry, is the only order at that price and the order is cancelled prior to trading.

                           POLICY 2.2 – MANIPULATIVE AND DECEPTIVE METHOD OF TRADING
                           Part 1 – Artificial Pricing
                           For the purposes of Rule 2.2, a price will be considered artificial if it is not justified by real demand or
                           supply in a stock. Whether or not a particular price or quotation is "artificial" depends on the particular
                           circumstances. A price may be artificial if it is higher or lower than the previous price and the market
                           immediately returns to that previous price following the trade. A quotation may be artificial if it raises or
                           lowers the bid or offering, is the only bid or offering at that price and is removed without trading.
                           However, these factors are only indications and are not on their own evidence that a given price or
                           quotation is artificial. Consideration will also be given to whether any Participant, Access Person or
                           account involved in the order has any motivation to establish an artificial price.
                           Some of the relevant considerations in determining whether an order is proper are:
                           (a)   the prices of the immediately preceding and succeeding trades;
                           (b)   the change in price or quotation that would result from carrying the instruction or entering the
                                 order;
                           (c)   the time the order is entered, or any instructions relevant to the time of executing the order;
                           (d)   the effect that such a change would have on other Participants or Access Persons who are or
                                 who have been interested in the stock; and
                           (e)   whether or not the person entering the order is associated with a promotional group or other
                                 group with an interest in effecting an artificial price, either for banking and margin purposes or for
                                 purposes of effecting a distribution of the securities of the issuer.
                           Where the order is coming from a non-principal account, the responsibility for deciding whether or not
                           an order has been entered with the bona fide intention of buying and selling shares or to establish an
                           artificial price or quotation lies with the Participant, and specifically with the person(s) responsible for
                           handling the order. Each case must be judged on its own merits. Orders which are intended to or
                           which affect an artificial price or quotation are more likely to appear at year end of a month, quarter or
                           year or on and the date of the expiry of options on the listed security.
                       Effective August 26, 2011, the applicable securities commissions approved amendments to subsection
                       2.2(3) to (a) insert after the phrase “Marketplace Rules” the phrase “or terms of the contract with the
                       marketplace”; and to (b) delete each occurrence of the phrase “Market Maker Obligations” and substitute
                       “Marketplace Trading Obligations”. Prior to that date, Rule 2.2(3) provided:
                                 (3)    For greater certainty, the entry of an order or the execution of a trade on a marketplace by a
                                        person in accordance with the Market Maker Obligations shall not be considered a violation




Part 2 – Abusive Trading                                                                                                    UMIR 2.2-4
January 1, 2013
                                          of subsection (1) or (2) provided such order or trade complies with applicable Marketplace
                                          Rules and the order or trade was required to fulfill applicable Market Maker Obligations.
                          On March 2, 2012, the applicable securities commissions approved an amendment to repeal clause (d) of
                          Part 1 of Policy 2.2 effective October 15, 2012. Prior to that effective date, this provision provided:
                              (d)   purchasing a security with the intention of making a sale of the same or a different number of
                                    units of the security or a related security on a marketplace at a price which is below the price of
                                    the last sale of a standard trading unit of such security displayed in a consolidated market display.

 Guidance:                      The following is the text of Market Integrity Notice 2002-010 issued on June 26, 2002 under the
                                heading “Changes in Beneficial and Economic Ownership”:
 Background
 Following discussions with traders and compliance staff of Participants, IIROC wishes to confirm the types of trades that, in the
 opinion of IIROC, do not involve a change in beneficial and economic ownership. In addition, IIROC wishes to confirm the
 treatment of trades that do not involve a change in beneficial and economic ownership. To assist traders and Participants in
 complying with the Universal Market Integrity Rules (“UMIR”), this Market Integrity Notice outlines some guidelines and examples
 for the treatment of orders that do not constitute a change in beneficial and economic ownership.
 Historically, the TSX Venture Exchange (formerly the Canadian Venture Exchange) required trades between spouses to be
 executed off-marketplace. The Toronto Stock Exchange (the “TSX”), however, viewed these trades as changes in beneficial
 ownership and required such trades to be executed on a marketplace. Effective April 1, 2002, the requirements of UMIR replaced
 the previous market integrity components of the rules of TSX and TSX VE. The requirements of UMIR must be applied consistently
 to Participants, regardless of which marketplace the trade occurs upon. Consequently, it is the position of IIROC that trades that
 involve a change in beneficial and economic ownership must be traded upon a marketplace on which the Participant is a member,
 participating organization, user or subscriber.
 To this end, Rule 6.4 of UMIR requires trades to be executed on a marketplace where a Participant is acting as principal or agent
 unless the trade falls within one of the exemptions to the rule. For instance, a Participant that interposes itself between the trades
 of a client (e.g. the dealer purchases as principal from the client and sells as principal to the client) creates two transactions, which
 similarly creates a change in beneficial and economic ownership. Such trades are not permitted as off-marketplace transactions.
 Conversely, trades that do not involve a change in beneficial and economic ownership must be executed off-marketplace.
 Manipulative or Deceptive Method of Trading
 Trades that do not constitute either a change in beneficial ownership or a change in economic ownership should not take place on
 a marketplace as such trades constitute a deceptive and manipulative method of trading pursuant to Rule 2.2 of UMIR. For
 example, a transfer of stock between an individual and a wholly-owned corporation, although constituting a change in beneficial
 ownership, does not constitute a change in economic ownership and therefore must be done off-marketplace.
 Trades for Tax Reasons
 Participants receive many requests each year to facilitate large volume or value trade transactions between spouses, for income
 tax or RRSP purposes, off-marketplace. A trade for tax purposes may only be executed off-marketplace without prior consultation
 with IIROC provided the trade:
      •    does not constitute a legal or beneficial change in ownership of the security;
      •    is not an action to evade tax or securities laws and does not contravene UMIR, or the rules and policies of the exchange
           upon which the trade would otherwise occur; and
      •    is executed at a price that is within the context of the market for that particular security at the time of the trade.
 Trades between spouses that are executed for tax reasons are viewed by IIROC to constitute a change in both beneficial and
 economic ownership and therefore would have to be executed on a marketplace. This requirement applies where a person sells
 securities to the RRSP of their spouse. However, the contribution of securities to a spousal RRSP does not constitute a trade (as
 there is no valuable consideration) and must be executed off-marketplace.
 Gifts or Charitable Donations
 Security transfers that are gifts or charitable donations are to be executed off-marketplace, even if the transfer is facilitated by a
 Participant. Such transfers are done without consideration or payment and therefore do not constitute “trades” pursuant to
 applicable securities legislation, including the Securities Act (Ontario).
 Examples
 The following examples illustrate trades that would not constitute a change in beneficial and economic ownership:
      •    A client executing a simultaneous purchase and sale for one account for income tax purposes or for the purpose of
           revaluing a portfolio. Such trades do not constitute a change in beneficial or economic ownership and therefore are to be
           executed off-marketplace.
      •    A client executing a trade with a corporation would constitute a change in beneficial and economic ownership and would
           have to be executed on a marketplace unless the corporation is 100% owned by the individual in which case it would not
           constitute a change in economic ownership and would be required to be executed off-marketplace.




Part 2 – Abusive Trading                                                                                                        UMIR 2.2-5
January 1, 2013
      •    A client transferring securities from their personal account to their RRSP would not constitute a change in beneficial or
           economic ownership and the trade must be executed off-marketplace whether on not the transfer was in the form of a
           sale of the securities to the RRSP or a contribution of the securities to the RRSP as a premium.
      •    A client transferring securities to a spouse for tax purposes and valuable consideration would constitute a change in
           beneficial and economic ownership and therefore the transfer should be executed on a marketplace. A gift of securities
           to a spouse or the contribution of securities to a spousal RRSP would not constitute a trade and the transfer should be
           completed off-marketplace.

 Guidance:                The following is the text of Market Integrity Notice 2002-021 issued on December 16, 2002 under the
                          heading “Prohibition Against Establishing Artificial Prices”:
 Participants are reminded that under Rule 2.2 of the Universal Market Integrity Rules (“UMIR”) trading activities undertaken with
 the intention of creating an artificial price for a security or a related security will be considered deceptive and manipulative methods
 of trading. In particular, it will be considered manipulative or deceptive to enter an order or orders for the purchase or sale of a
 security with the intention of creating a false or misleading appearance of trading activity or an artificial price for the security to:
      •    Establish a predetermined price or quotation,
      •    Affect a high or low closing price or closing quotation, or
      •    Maintain the trading price, ask price or bid price within a predetermined range.
 The responsibility of deciding whether or not an order has been entered with the intention of establishing an artificial price or
 quotation lies initially with the Participant, and specifically with the person or persons responsible for handling the order. If a
 Participant has provided access to the trading system of an exchange or other marketplace to “eligible clients” pursuant
 to the rules of the marketplace, the Participant nonetheless is fully responsible for all orders entered by such clients.
 As noted in Policy 2.2, orders that are intended to affect or which affect an artificial price or quotation are more likely to appear at
 the end of a month, quarter or year. As December 31st represents the end of a month, quarter and year in addition to being
 traditionally a lower trading volume day, it is particularly susceptible to the entry of orders that may affect an artificial price or
 quotation. With year-end approaching, Participants are to ensure that provisions of Rule 2.2 and Policy 2.2 are brought to
 the attention of their trading staff and compliance departments and that appropriate steps are taken to review client
 activities.

 Guidance:                The following is the text of Market Integrity Notice 2003-002 issued on January 13, 2003 under the
                          heading “Prohibition on Double Printing”:
 Investment Industry Regulatory Organization of Canada (“IIROC”) wishes to remind Participants of the prohibition on “double
 printing”. The term “double printing” refers to two trades being made on a marketplace when only one trade was required to
 execute an order. For example, double printing occurs when a firm with a client order to buy purchases stock as principal (into
 inventory) and then crosses the stock to the client, effecting two trades on a marketplace to satisfy the client order. This practice
 creates artificial volume and results in inflated trading volume figures for both the firm and the marketplace, damaging the
 credibility of both the marketplace and its trading statistics.
 Given the creation of artificial volume, double printing may constitute a manipulative and deceptive method of trading contrary to
 Rule 2.2 of the Universal Market Integrity Rules (“UMIR”). Rule 2.2 of UMIR prohibits firms from using, knowingly facilitating or
 participating in the use of any manipulative or deceptive method of trading in connection with the entry of an order or orders to
 trade on a marketplace for the purchase or sale of any security which creates or which could reasonably be expected to create a
 false or misleading appearance of trading activity or an artificial price for the security or a related security. Double printing may also
 result in a violation of client priority requirements contrary to Rule 5.3 of UMIR.
 IIROC will be monitoring for double printing through its ongoing market surveillance activities as well as through periodic trade
 desk reviews of firms. Firms are encouraged to examine their trading practices and order handling procedures to ensure that
 orders are being marked and handled in accordance with UMIR. Violations may result in enforcement action being initiated by
 IIROC.

 Guidance:                The following is the relevant portion of Market Integrity Notice 2004-021 issued on August 26, 2004 under
                          the heading “Entry of Off-Setting Market-on-Close Orders”:
 A Participant or Access Person must ensure that market orders entered on the Market-on-Close Facility of the Toronto Stock
 Exchange are accurate and that any change or cancellation of such order must be entered prior to 3:40 p.m. Certain efforts by a
 Participant and Access Person to offset its Market MOC Order after 3:40 p.m. may be considered a manipulative or deceptive
 trading practice and would be subject to disciplinary proceedings by the Market Regulator.
 Background
 The Market-on-Close Facility (“MOC Facility”) of the Toronto Stock Exchange (“TSX”) permits the entry of market orders to trade at
 the closing price (“Market MOC Order”) from 7:00 a.m. to 3:40 p.m. At 3:40 p.m., the TSX calculates and broadcasts the order
 imbalance for each of the securities participating in the MOC Facility indicating whether the imbalance is on the buy or sell side
 and the size of the imbalance. After 3:40 p.m., only limit orders on the opposite side of the market as the imbalance (“Limit MOC
 Order”) may be entered into the MOC Facility. The MOC Facility is “blind” as there is no transparency with respect to particular
 orders entered as Market MOC Orders or Limit MOC Orders. A Market MOC Order entered prior to 3:40 p.m. may not be amended



Part 2 – Abusive Trading                                                                                                      UMIR 2.2-6
January 1, 2013
 or cancelled at any time after 3:40 p.m. and any Limit MOC Order entered prior to 4:00 p.m. may not be amended or cancelled at
 any time after 4:00 p.m.
 Recently, there has been a circumstance in the MOC Facility where a Participant has sought to “correct a situation” by entering a
 Limit MOC Order at a price that virtually assured that a Market MOC Order for the account of the same person would cross with
 the Limit MOC Order and the trade resulting from this cross was subsequently cancelled by the Participant. Participants have
 enquired whether an offsetting Limit MOC Order may be entered into the MOC Facility for the account of the same person, either
 to limit the ability of other Participants to trade against an erroneous order or to affect the price that the Market MOC Order would
 receive.
 Position of the Market Regulator
 It is the position of the Market Regulator that the entry by a Participant or Access Person of a Limit MOC Order to off-set a Market
 MOC Order entered by that Participant or Access Person constitutes a “wash trade”. It is unacceptable for a Participant or Access
 Person to undertake a “wash trade”, directly or indirectly, even in circumstances where the Participant or Access Person is trying
 to “correct” an erroneous Market MOC Order. The conduct of a “wash trade” will result in disciplinary proceedings by IIROC
 against the Participant or Access Person.
 Rule 2.2 of the Universal Market Integrity Rules prohibits “affecting a trade in a security which involves no change in the beneficial
 or economic ownership”. In addition, Rule 2.2. provides that the entry of an order or orders for the purchase of a security with the
 knowledge that an order or orders of substantially the same size, at substantially the same time and at substantially the same price
 for the sale of that security, has been or will be entered by or for the same person will be considered a manipulative and deceptive
 methods of trading if undertaken with the intention of creating a false or misleading appearance of trading activity or an artificial
 price.
 A Participant or Access Person should take every precaution to ensure that Market MOC Orders entered into the MOC Facility are
 accurate. In particular, it is recommended that all Market MOC Orders be reviewed and confirmed prior to 3:40 p.m. If a Participant
 has arranged a trade with another party to be completed in the MOC Facility at the closing price, it is incumbent on each of the
 prospective parties to the trade to assure themselves that the order for the other side of the trade has been entered into the MOC
 Facility prior to 3:40 p.m. such that the MOC imbalance for that security broadcast by the TSX at 3:40 p.m. is accurate.
 If a Participant or Access Person becomes aware at any time prior to 3:40 p.m. that a Market MOC Order has been entered in
 error, the Participant or Access Person may cancel the order. If a Participant or Access Person becomes aware at any time after
 3:40 p.m. that it has entered a Market MOC Order in error, the Participant or Access Person shall immediately contact the Market
 Surveillance Section of Investment Industry Regulatory Organization of Canada at 416.646.7220 and provide the particulars of the
 order.
 If Market Surveillance determines that it would be in the interest of a fair and orderly market to permit the Participant or Access
 Person to enter an off-setting Limit MOC Order for a Market MOC Order previously entered for the account of the same person,
 Market Surveillance will specifically authorize the entry of the off-setting order. Market Surveillance will issue a notice to the effect
 that the closing imbalance previously disclosed by the TSX should be adjusted.
 In determining whether to permit the entry of an off-setting order for the amount of the error or a lesser amount, Market
 Supervision will consider:
      •    the possible impact of the erroneous Market MOC Order on the closing price;
      •    the extent to which trading activity may have already occurred in the affected security based on the MOC imbalance
           report; and
      •    whether there is sufficient time to issue a notice to the market of the adjustment to the imbalance report.

 Guidance:                The following is the text of Market Integrity Notice 2005-004 issued on March 4, 2005 under the heading
                          “Double Printing and the Entry of Orders”:
 Prohibition on “Double Printing”
 Investment Industry Regulatory Organization of Canada (“IIROC”) considers that “double printing” creates a false or misleading
 appearance of trading activity contrary to the provisions of Rule 2.2 of the Universal Market Integrity Rules (“UMIR”) that prohibits
 a manipulative or deceptive method of trading. The term “double printing” occurs when two trades are made on a marketplace
 when only one trade was necessary to execute an order.
 IIROC issued Market Integrity Notice 2003-002 on January 13, 2003 dealing with the issue of “double printing” and Market Integrity
 Notice 2003-007 on March 27, 2003 dealing with order marking. To assist Participants in complying with the prohibition on “double
 printing”, this Market Integrity Notice provides additional examples of how orders should be handled and marked, particularly when
 there are multiple marketplaces trading the same securities. These examples are provided for guidance only and illustrate IIROC’s
 position under specific scenarios. If a Participant is unclear on how to handle or mark an order in a particular situation, the
 Participant is encouraged to contact IIROC for guidance.
 Examples of Orders for More than 50 Standard Trading Units
 This Market Integrity Notice clarifies that a Participant will not be considered to have engaged in “double printing” if the Participant:
      •    executes, as principal, with a client order for more than 50 standard trading units that could not be filled, in accordance
           with the terms of the client order, by orders displayed in a consolidated market display for any single marketplace; and




Part 2 – Abusive Trading                                                                                                      UMIR 2.2-7
January 1, 2013
      •    subsequently executes trades with certain of the orders displayed in the consolidated market display at the same price
           as the principal trade with the client.
 For each of the examples, assume that:
      •    a Participant receives a client order to buy 100,000 shares of XYZ at a price of $10.00 per share; and
      •    the shares of XYZ are traded on two marketplaces: the Exchange and ATS1.
           Example 1:
 If the consolidated market display indicates that the Exchange has orders to sell 30,000 shares of XYZ at a price of $10.00 per
 share, the Participant would be able to either:
      •    execute, as principal on either the Exchange or ATS1, a cross with the client for the 100,000 shares and then execute
           principal trades with any or all of the orders indicated in the consolidated market display; or
      •    purchase, as agent for the client, the 30,000 shares offered on the Exchange and then enter a principal-client cross for
           70,000 shares on either the Exchange or ATS1.
           Example 2:
 If the consolidated market display indicates that the Exchange has orders to sell 30,000 shares and ATS1 has orders to sell
 70,000 shares at $10.00 per share, the Participant would be able to either:
      •    execute, as principal on either the Exchange or ATS1, a cross with the client for the 100,000 shares and then execute
           principal trades with any or all of the orders on the Exchange or ATS1 indicated in the consolidated market display; or
      •    purchase, as agent for the client, the 30,000 shares offered on the Exchange and the 70,000 shares offered on ATS1.
 While the number of shares offered on the two marketplaces is sufficient to satisfy the purchase order from the client, the number
 of shares offered on any one marketplace will not. Given the uncertainties of being able to execute trades in both marketplaces,
 the Participant may trade with the client as principal and then execute principal trades with any or all of the orders outstanding on
 one or both of the marketplaces and will not be considered to have engaged in “double printing”.
 If the Participant does not have trading access to ATS1, the Participant would be able to either:
      •    execute, as principal on the Exchange, a cross with the client for the 100,000 shares and then execute principal trades
           with any or all of the orders on the Exchange indicated in the consolidated market display; or
      •    purchase, as agent for the client, the 30,000 shares offered on the Exchange and then enter a principal-client cross on
           the Exchange for 70,000 shares.
           Example 3:
 If the consolidated market display indicates that the Exchange has orders to sell 30,000 shares at $10.00 per share but there is
 also an “iceberg order” to sell an undisclosed volume of 70,000 shares at the same price, the Participant would be able to either:
      •    execute, as principal on either the Exchange or ATS1, a cross with the client for the 100,000 shares and then execute
           principal trades with the orders indicated in the consolidated market display and with the previously undisclosed volume
           of the iceberg order; or
      •    purchase, as agent for the client, the 30,000 shares offered on the Exchange and then enter a principal-client cross on
           the Exchange or ATS1 for 70,000 shares.
 Only orders and volume disclosed in a consolidated market display available to the Participant will be considered when
 determining whether the execution of a trade would constitute double printing.
           Example 4:
 If the consolidated market display indicates that the Exchange has orders to sell a total of 100,000 shares of XYZ at a price of
 $10.00 per share, the Participant would enter the client order to purchase 100,000 shares on the Exchange.
 The Participant must not:
      •    execute a principal-client cross of 100,000 shares on either the Exchange or ATS1 and then purchase as principal the
           shares offered on the Exchange; nor
      •    purchase as principal the shares offered on the Exchange and then execute a principal-client cross of 100,000 shares
           on the Exchange or ATS1.
  Since the client order can be executed through the entry of one order, the involvement of the Participant in the transaction in a
  principal capacity would constitute “double printing”.
 Handling of Orders for Less than 50 Standard Trading Units
 Under UMIR, if a Participant receives a client order for 50 standard trading units or less with a value of $100,000 or less the
 Participant must, subject to certain exceptions listed in Rule 6.3 of UMIR, enter the client order on a marketplace. In accordance
 with the provisions of Rule 6.3, the Participant may execute the client order upon receipt at a better price than orders indicated in a
 consolidated market display. If the Participant executes the client order against a principal order or non-client order at a better
 price, Rule 8.1 of UMIR requires that the Participant must have taken reasonable steps to ensure that the price is the best
 available price for the client taking into account the condition of the market at the time.




Part 2 – Abusive Trading                                                                                                    UMIR 2.2-8
January 1, 2013
 Since the Participant is executing as principal at a better price than the one indicated in a consolidated market display, it would not
 be considered “double printing” if the Participant, subsequent to the trade with the client, unwound all or part of the position
 acquired in the trade with the client by executing trades with the “inferior-priced” orders.
 For the purposes of UMIR, 50 standard trading units would be:
      •    5,000 units of a security trading at $1.00 or more per unit;
      •    25,000 units of a security trading at $0.10 or more per unit and less than $1.00 per unit; and
      •    50,000 units of a security trading at less than $0.10 per unit.

 Guidance:                The following is the relevant text of Market Integrity Notice 2005-029 issued on September 1, 2005, under
                          the heading “Guidance –Entering Orders on Both Sides of the Market”:
 Summary
 This Market Integrity Notice provides guidance relating to the entry of orders on both sides of the market for the benefit of the
 same person. Subject to certain limited exceptions, the entry of orders on both sides of the market for the benefit of the same
 person will be considered to be manipulative and deceptive contrary to Rule 2.2 of the Universal Market Integrity Rules (“UMIR”).
 General Prohibition
 Rule 2.2(1) of UMIR prohibits any manipulative or deceptive method, act or practice in connection with any order or trade on a
 marketplace. A Participant or Access Person is prohibited from entering an order on a marketplace if the Participant or Access
 Person knows or ought reasonably to know that any resulting trade will be either fictitious or involve no change in beneficial or
 economic ownership.
 Similarly, a Participant or Access Person will have contravened Rule 2.2(2) if the Participant or Access Person knows or ought
 reasonably to know that the entry of the order or the execution of the trade will create or could reasonably be expected to create:
      •    a false or misleading appearance of trading activity in or interest in the purchase or sale of the security; or
      •    an artificial ask price, bid price or sale price for the security or related security.
 A Participant or an Access Person will be considered to have engaged in “wash trading”, a type of manipulative and deceptive
 activity, if the Participant or Access Person knows or ought reasonably to know that:
      •    orders for the purchase and for the sale of the same security are being entered on a marketplace;
      •    the orders are for the benefit of an account or accounts which have the same economic and beneficial owner or are
           under the direction or control of the same person; and
      •    the orders have the potential of trading with each other.
 Market Integrity Notice 2004-021 – Entry of Off-Setting Market-on-Close Orders issued on August 26, 2004 sets out the position of
 Investment Industry Regulatory Organization of Canada (“IIROC”) that the entry by a Participant or Access Person into the Market-
 on-Close Facility operated by The Toronto Stock Exchange (“TSX”) of a Limit MOC Order to off-set a Market MOC Order entered
 by that Participant or Access Person constitutes a “wash trade”. It is unacceptable for a Participant or Access Person to undertake
 a “wash trade”, directly or indirectly, even in circumstances where the Participant or Access Person is trying to “correct” an
 erroneous Market MOC Order that may not otherwise be cancelled in the Market-on-Close Facility.
 Exceptions from the General Prohibition
 IIROC will not consider a Participant or Access Person to be engaging in a manipulative or deceptive activity if the “wash trade”
 arises in the following circumstances:
      •    Trades Executed When Order Entered In Error – If a Participant or Access Person enters an order in error on a
           marketplace which executes against an existing order for the same beneficial or economic owner, the resulting “wash
           trade” will not be considered manipulative or deceptive provided the Participant or Access Person immediately contacts
           the Market Surveillance Section of IIROC (at 416.646.7220 in Toronto or 604.643.6505 in Vancouver) for specific
           guidance based on the particular circumstances including the cancellation of the “wash trade”.
      •    Trades Executed by an Automated Program Trading System – If a Participant or Access Person uses an automated
           program trading system to generate orders, the matching of orders for the same beneficial or economic owner will not be
           treated as a manipulative or deceptive activity provided the Participant or Access Person has taken reasonable steps to
           ensure that the automated program trading system does not enter orders the may execute as a “wash trade” on a
           regular basis.
      •    Orders Generated by a Marketplace – If a Participant is a market maker in accordance with the Marketplace Rules of
           an Exchange or QTRS and the trading system of the Exchange or QTRS automatically generates orders in accordance
           with the Marketplace Rules in respect of the applicable Market Maker Obligations, the matching of principal orders, in
           whole or in part, with an automatically generated order will not be treated as a manipulative or deceptive activity.
      •    Consent of IIROC - If a Participant or Access Person is unable for any reason to cancel an existing order that the
           Participant or Access Person is otherwise entitled to cancel (e.g. for temporary technology problems experienced by the
           Participant or Access Person), IIROC may specifically permit a Participant or Access Person to enter additional orders
           that may execute as a “wash trade” if the Market Surveillance Section of IIROC is satisfied that the entry of such orders
           would be in the interest of a fair and orderly market.



Part 2 – Abusive Trading                                                                                                     UMIR 2.2-9
January 1, 2013
           As set out in Market Integrity Notice 2004-021, Market Surveillance may in some cases specifically authorize the entry of
           an off-setting Limit MOC Order for a Market MOC Order in the Market-on-Close Facility of the TSX. In determining
           whether to permit the entry of an off-setting order for the amount of an error or a lesser amount, Market Surveillance will
           consider:
                 o    the possible impact of the erroneous Market MOC Order on the closing price;
                 o    the extent to which trading activity may have already occurred in the affected security based on the MOC
                      imbalance report; and
                 o    whether there is sufficient time to issue a notice to the market of the adjustment to the imbalance report.

 Guidance:                 The following is the relevant text of Market Integrity Notice 2005-030 issued on September 1, 2005, under
                           the heading “Guidance – Avoiding Double Printing in the Use of an Error Account”:
 Summary
 This Market Integrity Notice provides guidance relating to the proper use of an error account to avoid the appearance of “double
 printing”, including the circumstances when securities should be transferred into an error account and the method for transferring
 the securities out of the account.
 Background
 Rule 6.4 of the Universal Market Integrity Rules (“UMIR”) requires that a Participant execute all trades, whether acting as principal
 or as agent, through the entry of an order on a marketplace, subject to the exemptions set out in Rule 6.4. One of the exemptions
 set out in Rule 6.4 allows a Participant to adjust by a journal entry an error in connection with a client order. If a Participant must
 take a position in a security as a result of a trading error, the Participant should utilize an error account to facilitate the correction of
 the error and unwind the position in order to provide a verifiable audit trail.
 General Obligations
 If a Participant has made an error in the trading of a client order, the Participant generally will be obliged to take a position in the
 security (either a short position or a long position depending on the error made) within the error account. The transfer of the
 position between the error account and the client’s account or the client accumulation account should be executed as a journal
 transaction and must not be executed on the marketplace.
 Once the position has been transferred to the error account, the Participant shall:
      •    unwind the position by executing a trade on a marketplace; or
      •    retain the position by transferring the security by a journal entry to an inventory account or, if the position is to be
           accepted by the employee of the Participant who made the error, to the appropriate non-client account.
 If the Participant attempts to unwind the position, the order entered on a marketplace should be marked as a “principal order”. If
 the Participant transfers the position from the error account to an appropriate inventory account by way of a journal entry, the
 Participant subsequently may trade the securities in the same manner as the Participant would any other inventory position.
 Investment Industry Regulatory Organization of Canada (“IIROC”) would consider transactions to be “double printing” contrary to
 Rule 2.2 of UMIR if the Participant were to execute a cross on a marketplace to move the securities that were the subject of the
 error:
       •    from the client account to the error account; or
       •    from the error account to an inventory account or non-client account.
 Extraordinary Circumstances
 If the circumstances of an error are such that a Participant can not comply with the guidance set out in this Market Integrity Notice,
 the Participant should immediately contact the Market Surveillance Section of Market Regulation Services Inc. (at 416.646.7220 in
 Toronto or 604.643.6505 in Vancouver) for specific guidance based on the particular circumstances.

 Guidance:                 The following is the relevant text of Market Integrity Notice 2006-004 issued on February 6, 2006 under
                           the heading “Guidance – Facilitation of a Client Special Settlement Trade and Double Printing”:
 Summary
 This Market Integrity Notice provides guidance on the ability of a Participant to enter into an “off-marketplace” principal transaction
 with a client for settlement other than on the third business day following the trade (“special settlement”). The Participant must
 concurrently execute as principal a trade on a marketplace for the same price and volume for settlement on the third business day
 following the trade (“regular settlement”).
 Prohibition on “Double Printing”
 Investment Industry Regulatory Organization of Canada (“IIROC”) has issued Market Integrity Notice 2003-002 – Prohibition on
 Double Printing and Market Integrity Notice 2005-004 – Double Printing and the Entry of Orders dealing with the subject of “double
 printing”. IIROC considers that double printing creates a false or misleading appearance of trading activity contrary to the
 provisions of Rule 2.2 of the Universal Market Integrity Rules (“UMIR”) that prohibits a manipulative or deceptive method of trading.
 The term “double printing” applies when two trades are made on a marketplace when only one trade was necessary to execute the
 order.




Part 2 – Abusive Trading                                                                                                        UMIR 2.2-10
January 1, 2013
 Facilitation of a Client Special Settlement Trade
 In the ordinary course, if a client wishes to execute a special settlement trade, the order would be entered on a marketplace as a
 “Special Terms Order” as the settlement of any trade resulting from the execution of the Special Terms Order would occur on a
 date other than the third business day following the date of the trade. However, there is no guarantee that such an order would
 trade even if the price of the order was better than that offered in the regular market.
 In order to ensure a timely execution of the trade, a client may ask a Participant to facilitate a special settlement on the purchase
 or sale of a security. To accomplish this, the Participant would execute the Special Terms Trade with the client as principal and
 then immediately unwind its position with a further principal trade in the regular market.
 Rule 6.4 requires a Participant, acting as principal or agent, to trade in a listed security or a quoted security only by means of the
 entry of an order on a marketplace, unless the trade is specifically exempted under that Rule. Rule 6.4 would appear to require the
 Participant to print both the special settlement take-on trade from the client and the regular settlement unwinding trade to the
 marketplace.
 In order to avoid the appearance of “double printing”, IIROC is of the view that a Participant should not execute the special
 settlement take-on trade on a marketplace if, concurrent with the execution of the special settlement trade, the Participant
 executes a regular settlement (T+3) trade as principal on a marketplace at the same price and volume. In these circumstances, the
 Participant must ensure that its audit trail reflects the concurrent nature of the trades. In practical terms, IIROC recognizes that the
 “unwinding” trade on the marketplace must be executed first in order to establish the price and volume for the “take-on” trade.
 An exemption from Rule 6.4 of UMIR will not be required if a Participant executes the special settlement take-on trade from the
 client “off-marketplace” and the Participant executes an unwinding trade on a marketplace as principal provided the unwinding
 trade is:
      •    undertaken concurrent with the execution of the special settlement trade;
      •    at the same price as the special settlement trade; and
      •    for the same volume as the special settlement trade.
 If the unwinding trade is not at the same time, price and volume, the Participant must execute the take-on trade on a marketplace
 as a Special Terms Order.
 If the unwinding trade by the Participant involves the Participant selling as principal, the sale will not be considered a “short sale” if
 the special settlement trade will be settled prior to the settlement of the unwinding trade.

 Guidance:                The following is the relevant text of Market Integrity Notice 2006-008 issued on March 10, 2006 under the
                          heading “Guidance – Use of the Market-on-Close Facility”:
 Summary
 This Market Integrity Notice provides guidance relating to the entry of a “market order” in the Market-on-Close Facility (“MOC
 Facility”) of the Toronto Stock Exchange (“TSX”) and the circumstances under which the subsequent entry of a limit order on the
 other side of the market may be considered a manipulative and deceptive activity by Investment Industry Regulatory Organization
 of Canada (“IIROC”) for the purposes of the Universal Market Integrity Rules (“UMIR”).
 Background
 The Market-on-Close Facility of the TSX permits the entry of market orders to trade at the closing price (“Market MOC Order”) from
 7:00 a.m. to 3:40 p.m. At 3:40 p.m., the TSX calculates and broadcasts the order imbalance for each of the securities participating
 in the MOC Facility indicating whether the imbalance is on the buy or sell side and the size of the imbalance. After 3:40 p.m., only
 limit orders on the opposite side of the market as the imbalance (“Limit MOC Order”) may be entered into the MOC Facility. The
 MOC Facility is “blind” as there is no transparency with respect to particular orders entered as Market MOC Orders or Limit MOC
 Orders. A Market MOC Order entered prior to 3:40 p.m. may not be amended or cancelled at any time after 3:40 p.m. and any
 Limit MOC Order entered prior to 4:00 p.m. may not be amended or cancelled at any time after 4:00 p.m. At 4:00 p.m. the orders in
 the MOC Facility are combined with outstanding orders in the central limit order book of the TSX Regular Session to calculate the
 Closing Price.
 It is expected that a Market MOC Order is essentially “price insensitive” and that the person entering such an order is prepared to
 trade at any price that may be as much as 10% higher or lower than the price of the last sale in the Regular Session of the TSX
 prior to 4:00 p.m. The primary consideration of the person entering such an order is the guarantee of being able to trade at the
 closing price. For example, in the case of a person who maintains a portfolio of securities that tracks the performance of an index,
 orders to buy and sell securities to reflect an index rebalancing need to be filled at the closing price so that the performance of the
 portfolio continues to match the performance of the index. Similarly, if a person will be entering into a swap contract that is based
 on the closing price that person is essentially “neutral” on the level of the closing price provided they are able to obtain that price.
 Persons who are essentially “price insensitive” for these or similar reasons should properly be the investors who determine the
 order imbalance in the MOC Facility that is broadcast at 3:40 p.m. Persons who are “sensitive” to the closing price would respond
 to the imbalance and have the opportunity to provide liquidity through the entry of Limit MOC Orders following the broadcast of the
 imbalance till 4:00 p.m. A person who had entered a Market MOC Order but is “price sensitive” may be restricted or prohibited
 from entering an “off-setting” Limit MOC Order if the broadcast of the imbalance indicates that the closing price may move in the
 opposite direction to that which the person anticipated.




Part 2 – Abusive Trading                                                                                                     UMIR 2.2-11
January 1, 2013
 General Prohibition on Wash Trades in the MOC Facility
 Rule 2.2(1) of UMIR prohibits any manipulative or deceptive method, act or practice in connection with any order or trade on a
 marketplace. A Participant or Access Person is prohibited from entering an order on a marketplace if the Participant or Access
 Person knows or ought reasonably to know that any resulting trade will be either fictitious or involve no change in beneficial or
 economic ownership (a “wash trade”).
 Similarly, a Participant or Access Person will have contravened Rule 2.2(2) if the Participant or Access Person knows or ought
 reasonably to know that the entry of the order or the execution of the trade will create or could reasonably be expected to create:
      •    a false or misleading appearance of trading activity in or interest in the purchase or sale of the security; or
      •    an artificial ask price, bid price or sale price for the security or related security.
 A Participant or an Access Person will be considered to have engaged in “wash trading”, a type of manipulative and deceptive
 activity, if the Participant or Access Person knows or ought reasonably to know that:
      •    orders for the purchase and for the sale of the same security are being entered on a marketplace;
      •    the orders are for the benefit of an account or accounts which have the same economic and beneficial owner or are
           under the direction or control of the same person; and
      •    the orders have the potential of trading with each other.
 Market Integrity Notice 2004-021 – Entry of Off-Setting Market-on-Close Orders issued on August 26, 2004 sets out the position of
 IIROC that the entry by a Participant or Access Person into the MOC Facility of a Limit MOC Order to “off-set” a Market MOC
 Order entered by that Participant or Access Person constitutes a “wash trade”.
 Exceptions from the General Prohibition
 IIROC recognizes that a particular trader can be trading multiple strategies at the same time. For example, the trader may have
 orders that are benchmarked to the closing price (such as for the purpose of the index rebalancing or swap contract described
 above) while trading an inventory for “fundamental” reasons (e.g. buy low/sell high). In these circumstances, the trader could enter
 Market MOC Orders prior to 3:40 p.m. and then enter Limit MOC Orders in reaction to the broadcast of a large imbalance.
 However, the entry of the Limit MOC Order would prompt IIROC to contact the trader who would have to demonstrate that the
 Limit MOC Order was not entered simply to “off-set” a Market MOC Order (that might otherwise trade at a “bad” price) but to
 achieve a valid investment strategy. If time permits, a trader who wishes to enter a Limit MOC Order in these circumstances is
 urged to contact the Market Surveillance Section of IIROC (at 416.646.7220 in Toronto) to confirm that the entry of such an order
 would be viewed as acceptable by IIROC.
 On the other hand, a fundamental trader would have a hard time demonstrating that a Market MOC Order was, in fact, price
 insensitive. If a fundamental trader entered a Market MOC Order then off-set the order following the broadcast of the MOC
 imbalance with the entry of a Limit MOC Order, that trader would not be able to claim to be working two different strategies.
 Instead, IIROC would take the position that the order pattern would create inaccurate or misleading MOC imbalance messages in
 a manner which is manipulative and deceptive for the purposes of UMIR.
 Market Integrity Notice 2005-029 set out a number of circumstances in which IIROC will not consider a Participant or Access
 Person to be engaging in a manipulative or deceptive activity if a “wash trade” occurs. With particular reference to the MOC
 Facility, Market Supervision may in some cases specifically authorize the entry of an off-setting Limit MOC Order for a Market
 MOC Order to correct an erroneous Market MOC Order that would not otherwise be capable of amendment or cancellation after
 3:40 p.m. In determining whether to permit the entry of an off-setting order for the amount of an error or a lesser amount, Market
 Supervision will consider:
      •    the possible impact of the erroneous Market MOC Order on the closing price;
      •    the extent to which trading activity may have already occurred in the affected security based on the MOC imbalance
           report; and
      •    whether there is sufficient time to issue a notice to the market of the adjustment to the imbalance report.

 Guidance:                The following is the relevant text of Market Integrity Notice 2007-015 issued on August 10, 2007 under the
                          heading “Guidance – Specific Questions Related to Trading on Multiple Marketplaces”. Additional
                          text is set out under Rules 3.1, 5.1, 5.2 and 7.1
 Summary
 This Market Integrity Notice provides guidance on specific questions related to the obligations of a Participant or Access Person
 under the rules and policies of the Universal Market Integrity Rules (“UMIR”) with respect to trading on multiple marketplaces.
 Background
 Investment Industry Regulatory Organization of Canada (“IIROC”) issued Market Integrity Notice 2006-017 – Guidance –
 Securities Trading on Multiple Marketplaces (September 1, 2006) which provides general guidance on the obligations of a
 Participant or Access Person under UMIR with respect to trading activity in a security that trades on more than one marketplace. In
 particular, that Notice provides guidance on:
      •    the determination of “last sale price” for the purpose of Rule 3.1 of UMIR (and “last independent sale price” for the
           purpose of Rule 7.7 of UMIR) and the lowest price at which a Participant or Access Person may make a short sale;



Part 2 – Abusive Trading                                                                                                     UMIR 2.2-12
January 1, 2013
      •    the best execution obligation of a Participant under Rule 5.1 of UMIR and when a Participant is expected to consider
           possible liquidity on a marketplace that does not provide pre-trade transparency;
      •    the best price obligation of a Participant under Rule 5.2 of UMIR, including marketplaces that must be considered in
           determining “best price”; and
      •    compliance with the client priority rule under Rule 5.3 of UMIR.
 IIROC also issued Market Integrity Notice – 2006-020 – Guidance - Compliance Requirements for Trading on Multiple
 Marketplaces (October 30, 2006) which provided guidance on the various compliance requirements of a Participant under UMIR
 with respect to the handling of orders and trades in a security that trades on more than one marketplace. In particular, that Notice
 provided guidance on:
      •    audit trail requirements for orders transmitted to a “manual” marketplace;
      •    compliance testing for orders entered and trades executed on multiple marketplaces;
      •    handling of “Day”, “Good Till Cancelled” and “Market” orders in the context of different hours of operation of
           marketplaces;
      •    entry of client orders that are not immediately tradable;
      •    whether a Participant is required to consider orders on a marketplace that is not then open for trading;
      •    order marking requirements on marketplaces that do not support certain marker type;
      •    the “best price” obligation of a Participant with respect to orders entered by a client with “direct market access”; and
      •    the obligation of a Participant to monitor marketplaces for trading opportunities that have historically not provided
           liquidity for a particular security.
 This Market Integrity Notice addresses specific questions related to trading on multiple marketplaces and supplements the
 guidance already provided in these two Market Integrity Notices.
 Questions and Answers
 The following is a list of questions regarding the obligations of a Participant or an Access Person with respect to trading in a
 security that trades on more than one marketplace. UMIR defines a marketplace as a recognized exchange (“Exchange”), a
 recognized quotation and trade reporting system (“QTRS”) or an alternative trading system (“ATS”) that carries on business in
 Canada.
      2.   How is a Participant to test for potential “high closing” and artificial bids or offers when marketplaces have
           differing hours of operation?
           Part 7.1 of UMIR requires that a Participant adopt policies and procedures that are adequate to ensure compliance with
           the requirements of UMIR. In accordance with Policy 7.1, a Participant must determine the level and nature of testing
           which is appropriate based on the size and type of business conducted by the Participant. “High closing” and the entry of
           an ask price or bid price on a marketplace that is not justified by the real demand or supply in a security are examples of
           artificial pricing. One of the relevant considerations in determining whether a price is artificial is if the Participant, Access
           Person or account involved in the order has a motivation to establish an artificial price. For example, if the valuation of a
           particular portfolio is based on the closing sale or bid prices of the “principal marketplace”, IIROC would expect that the
           compliance testing appropriate for that account would be to monitor sales or orders on the “principal marketplace”, since
           orders or trades, as applicable, on that marketplace may be susceptible to artificial pricing. Similarly, if margin
           requirements are based on the closing sale price on the marketplace that last trades a particular security, IIROC would
           expect that a Participant would have appropriate compliance testing of last sale prices on the “last marketplace”.

 Guidance:                The following is the relevant text of IIROC Rules Notice 11-0043 issued on February 1, 2011 under the
                          heading “Guidance Note -- UMIR – Guidance on "Locked” and ”Crossed” Markets”:
 Questions and Answers
 The following are questions relating to the obligations of a Participant under UMIR in the context of a “locked” or “crossed” market
 and IIROC’s response to each question:
      4.   May an order to purchase a security be entered on a marketplace if an order to sell the same security at the
           same price has been entered on another marketplace by the same person or group of persons?
           No. Not only is the market being intentionally locked contrary to the Locked and Crossed Order Provisions but Rule 2.2
           of UMIR prohibits a Participant or Access Person from entering an order on a marketplace if the Participant or Access
           Person knows or ought reasonably to know that the entry of the order will create, or could reasonably be expected to
           create, a false or misleading appearance of trading activity in or interest in the purchase or sale of the security. If the
           orders for purchase and sale had been entered on the same marketplace, the orders would have executed and the
           resulting trade would be considered a “wash trade”. In the view of IIROC, a Participant or Access Person that enters an
           order on one marketplace for the purchase of a security and enters another order for the sale of the same security at the




Part 2 – Abusive Trading                                                                                                      UMIR 2.2-13
January 1, 2013
             same price on another marketplace for the benefit of the same person or group of persons has engaged in a
             manipulative and deceptive activity contrary to Rule 2.2. 1
        4.   Are all “rebate arbitrage” strategies acceptable?
             No. Under a “make-or-take” trading fee model, a marketplace rewards persons who post limit orders on its marketplace
             by paying a “make” or “liquidity providing” rebate fee. Conversely, a marketplace charges a “take” fee for an order that
             interacts with the posted limit orders. The marketplace generally profits from the spread on the price it pays for liquidity
             and charges for orders that trade with such liquidity. Currently, each marketplace may establish the fees it pays or
             charges for orders that either “make” or “take” liquidity. 2
             If a market participant intentionally creates or continues a “locked” market in an attempt to maximize the amount of
             liquidity rebates that the market participant earns, such behaviour is not in compliance with the Locked and Crossed
             Order Provisions and is therefore not in compliance with Rule 2.3 of UMIR dealing with improper orders and trades. In
             addition, Rule 2.2 of UMIR prohibits a Participant or Access Person from entering an order on a marketplace if the
             Participant or Access Person knows or ought reasonably to know that the entry of the order will create or could
             reasonably be expected to create a false or misleading appearance of trading activity in or interest in the purchase or
             sale of the security. In the view of IIROC, a Participant or Access Person is engaging in an activity analogous to “double
             printing” contrary to Rule 2.2 of UMIR if the Participant or Access Person enters orders on a protected marketplace that,
             upon execution, is followed immediately by the entry on a protected marketplace of an order for the same security at the
             same price on the other side of the market which has the effect of creating or continuing a “locked” market.

    Disciplinary Proceedings:    In the Matter of Douglas Christie (“Christie”) (September 5, 2002) OOS 2002-002
                                  Facts – Christie was employed as a Registered Trader (“RT”). One of his stocks of responsibility
                                  was Mosaid Technologies (“Mosaid”). Christie’s compensation was based on trading profits and was
                                  calculated based on the closing month’s inventory balance with all long positions written to the
                                  posted bid. On February 28, 2001 and between June 22 to 29, 2001, Christie engaged in a pattern
                                  of entering buy orders for Mosaid moments before the close of trading which had the effect of
                                  increasing the bid price. In all cases the bids expired unfilled at the end of the day.
                                  Disposition – During the relevant periods, Christie entered bids in a listed security on behalf of a
                                  principal or non-client account when the effect of such action was to establish an artificial quotation
                                  or a high closing quotation in the listed security. Christie knew that his firm calculated the value of
                                  his inventory account based on the closing bids on all long positions, and in entering the high
                                  closing bids, he did so for his own financial purposes without the intention of buying or fulfilling his
                                  responsibilities as an RT.
                                  Requirements Considered – TSX Rule 4-202 and Policy 4-202. Comparable UMIR Provision - Rule
                                  2.2 and Policy 2.2
                                  Sanction - $15,000 fine and costs of $6,000

    Disciplinary Proceedings:    In the Matter of Erica Fearn (“Fearn”) (October 28, 2002) OOS 2002-007
                                  Facts – From October 1997 to November 1998, Fearn, an investment advisor, engaged in a pattern
                                  of non-economic trading in client accounts which had a pre-existing debit positions in their accounts.
                                  Fearn’s practice involved buying, and immediately thereafter selling the same share positions in the
                                  client’s account for the sole purpose of causing the clients’ account debit position to be re-aged,
                                  thereby postponing payment for the debits in the client accounts.
                                  Disposition – Fearn effected or participated in trades when her client did not have the ability of bona
                                  fide intention to properly settle the transactions and for the purpose of deferring payment for the
                                  securities traded. As a result of this trading, the normal market price for those securities was unduly
                                  disturbed and created an abnormal market condition.
                                  Requirements Considered – VSE By-law 5.02(4)(a). Comparable UMIR Provision - Rule 2.2 and
                                  Policy 2.2
                                  Sanction - $7,000 voluntary payment and $3,000 for costs
    Disciplinary Proceedings:    In the Matter of John Andrew Scott (“Scott”) (November 13, 2003) OOS 2003-010
                                  Facts – Between February 1, 2000 and July 5, 2000, Scott and his sales assistant entered orders on
                                  behalf of a group of clients who actively traded a material amount of shares of a particular company.


1
       Reference should also be made to Part 3 of the Trading Rules which sets out activities by a client that may be considered
       manipulation and fraud.
2
       Fees established by a marketplace must comply with the access requirements in National Instrument 21-101. See section 5.1
       of National Instrument 21-101 and section 7.1 of Companion Policy 21-101CP for provisions related to exchanges and
       quotation and trade reporting systems and section 6.13 of National Instrument 21-101 and section 8.2 of Companion Policy 21-
       101 CP for provisions related to alternative trading systems.



Part 2 – Abusive Trading                                                                                                    UMIR 2.2-14
January 1, 2013
                             The trading conducted on behalf of these clients created a false and misleading appearance of
                             trading activity in the particular stock and in certain instances, created artificial prices for the stock.
                             Scott also engaged in improper off-marketplace transactions in shares of the stock for his own
                             personal account.
                             Disposition – Scott used or knowingly participated in the use of a manipulative or deceptive method
                             of trading in connection with the purchase and sale of stock which created a false or misleading
                             appearance of trading activity or an artificial price for the security.
                             Requirements Considered – Sections 11.01 and 11.26 of the General By-law of the TSX, Part XIV
                             of the Rulings and Directions of the Board of the TSX, Rule 4-202 and Policy 4-202 of the TSX.
                             Comparable UMIR Provision - Rule 2.2 and Policy 2.2
                             Sanction - $125,000 fine and costs of $35,000; disgorgement of $53,765.85; Suspension from RS
                             regulated marketplaces for a period of 2 years
 Disciplinary Proceedings:   Rule 2.2 was considered In the Matter of Kai Tolpinrud (“Tolpinrud”) (January 16, 2006) OOS
                             2004-001. See Disciplinary Proceedings under Rule 2.1.

 Disciplinary Proceedings:   In the Matter of UBS Securities Canada Inc. (“UBS Canada”) (October 8, 2004) SA 2004-006
                             Facts – Despite warnings by RS and the release of Market Integrity Notices on the issue of double-
                             printing UBS Canada continued to engage in a pattern of double printing from September 2003 to
                             July 2004, whereby instead of buying or selling in to the market to fill client orders, UBS bought or
                             sold through its inventory account and subsequently crossed inventory buys and sells to fill client
                             orders. UBS Canada also failed to develop and implement appropriate policies and procedures, and
                             test such policies and procedures, in relation to its trading on marketplaces regulated by RS, despite
                             repeated deficiencies being identified by RS through its Trade Desk Review program.
                             Disposition – The practice of double printing violated the UMIR prohibition against manipulative and
                             deceptive methods of trading. In allowing a continued pattern of double printing despite the issuance
                             by RS of market integrity notices regarding double printing and for its failure to develop and
                             implement appropriate policies and procedures in relation to its trading on marketplaces regulated
                             by RS, UBS Canada failed to fulfill its compliance and supervisory obligations.
                             Requirements Considered – Rules 2.2(1), 10.11(3), 7.1(1) and Policy 7.1
                             Sanction - $2,000,000 fine and costs of $100,000; retainer of an independent consultant to review
                             existing supervisory and compliance systems

 Disciplinary Proceedings:   In the Matter of W. Scott Leckie (July 19, 2005) SA 2005-005
                             Facts – Between April and June of 2003, the trader employed a short selling strategy on behalf of a
                             client by trading through Dealer One. When the trader was unable to borrow shares to cover the
                             client’s short position, he opened an account on behalf of the client at another Participant (“Dealer
                             Two”) where he believed he could borrow the shares. When he was subsequently unable to borrow
                             the shares at Dealer Two, he sold short shares in the client’s account at Dealer Two and bought the
                             shares in the client’s account at Dealer One to cover the outstanding short position. During the
                             relevant period the trader engaged in a practice of entering into, and covering short positions, by
                             trading between the two client accounts at Dealers One and Two.
                             Disposition – Effecting trades in securities which involved no change in beneficial or economic
                             ownership was “wash trading” and constituted a manipulative and deceptive method of trading.
                             Requirements Considered – Rules 2.2(2)(b) and 10.4(1)(a)
                             Sanction - $100,000 fine and costs of $20,000
 Disciplinary Proceedings:   In the Matter of Ian Macdonald, Edward Boyd, Peter Dennis and David Singh (July 28, 2005)
                             SA 2005-006
                             Facts – In August of 2004, RBC DS and another Participant agreed to execute trades in two
                             securities in the Market-on-Close facility (”MOC”) of the TSX by the entry of market orders on
                             opposite sides of the market. RBC DS entered its required orders for RBC DS inventory accounts.
                             The other Participant subsequently failed to enter the agreed counterparty orders. This resulted in a
                             MOC imbalance, which was broadcast at 3:40 pm. RBC DS then entered offsetting limit MOC
                             orders for RBC DS inventory accounts to limit its potential liability created by the MOC imbalance.
                             Disposition - Entry by employees of a Participant of limit MOC orders to off-set market MOC orders
                             entered by those employees for that Participant, even in circumstances where the employees are
                             trying to “correct” an existing MOC imbalance, were “wash trades” and constituted a manipulative
                             and deceptive method of trading.
                             Requirements Considered – Rules 2.2(1), 2.2(2)(b) and 10.4(1)(a)




Part 2 – Abusive Trading                                                                                                  UMIR 2.2-15
January 1, 2013
                             Sanction –
                             Ian Macdonald        $90,000 fine and costs of $35,000
                             Edward Boyd          $60,000 fine and costs of $20,000
                             David Singh          $60,000 fine and costs of $20,000
                             Peter Dennis         $20,000 fine and costs of $7,000
 Disciplinary Proceedings:   In the Matter of Alfred Simon Gregorian (“Gregorian”) (April 12, 2006) DN 2006-003
                             Facts – Between September 1, 2002 and May 31, 2003, and between November 1, 2003 and
                             January 12, 2004, Gregorian, an investment advisor at Research Capital Corporation, participated
                             in his clients’ use of manipulative methods of trading in connection with the purchase and sale of
                             securities in International Wex Technologies Inc (“WXI”), a TSXV listed issuer. Between September
                             1, 2002 and May 31, 2003, Gregorian placed 801 orders for shares of WXI for the accounts of two
                             clients from orders provided by insiders of WXI who held trading authorizations over the clients’
                             accounts. The pattern of order entry and trading involved placing bids in the market when the share
                             price of WXI was under pressure and executing uptick purchases to “correct” intra-day downticks in
                             the price of WXI in an effort to improperly support the price of the WXI shares.
                             Between November 1, 2003 and January 12, 2004, Gregorian participated in his client’s use of
                             manipulative methods of trading in connection with the purchase of shares of WXI by engaging in a
                             pattern of trading which was not consistent with a bona fide effort to accumulate shares of WXI over
                             time at the most favourable prices and represented an overall pattern of trading at prices higher
                             than would otherwise been dictated by market forces.
                             Disposition – The nature and extent of the trading in the clients’ accounts coupled with the
                             extraordinary commission charges and frequency of uneconomic trading evidences Gregorian’s
                             knowing participation in the manipulative and deceptive methods of trading that occurred in the
                             clients’ accounts.
                             Requirements Considered – Rule 2.2
                             Sanction - $39,000 fine and disgorgement of $16,260 of financial benefit to Gregorian; suspension
                             from RS regulated marketplaces for 5 years
 Disciplinary Proceedings:   In the Matter of Michael Bond (“Bond”) and Sesto DeLuca (“DeLuca”) (June 4, 2007) DN 2007-
                             003
                             Facts – Between April 4, 2005 and July 29, 2005, Bond, an inventory trader employed by W.D.
                             Latimer Co. Limited, created an artificial bid price for the shares of three thinly traded TSX Venture
                             Exchange listed issuers (the “Securities”) when he entered several buy orders late in the trading
                             session for the Stocks that were unlikely to be filled.
                             Between April 2005 and July 2005, DeLuca was the person responsible for supervising trading at
                             W.D. Latimer, which including supervising Bond. DeLuca failed to review unfilled orders placed by
                             Bond, thereby allowing Bond to create an artificial bid price for the Securities.
                             Disposition – By entering orders to buy the Securities when he knew or ought reasonably to have
                             known that the entry of such orders could create or could reasonably be expected to create an
                             artificial bid price for the Securities Bond breached UMIR 2.2(2)(b). Deluca, by failing to review
                             unfilled orders placed by Bond breached Rule 7.1(4) Policy 7.1 of UMIR.
                             Requirements Considered – Rules 2.2(2)(b), 7.1(4) and Policy 7.1
                             Sanction – Bond – $100,000 fine, costs of $25,000 and suspension from access to all
                                        marketplaces regulated by RS for a period of two years
                                           DeLuca – reprimanded for his conduct

 Disciplinary Proceedings: In the Matter of Luc St. Pierre (“St. Pierre”) (December 31, 2007) DN 2007-006
                             Facts – Between February 2, 2005 and May 19, 2005, St. Pierre, acting on behalf of a client entered
                             31 orders to purchase shares of Halo Resources Ltd. (“HLO”), an issuer whose shares trade on the
                             TSX Venture Exchange (“TSXV”). All of the orders entered by St. Pierre (which were generally for
                             one or two board lots) were executed at a price which was higher than the preceding independent
                             transaction for shares of HLO, and in case of 16 orders, their execution was the last trade of the day
                             for HLO shares.
                             Further, St. Pierre administered accounts for three clients who were either associated with each
                             other or associated with Golden Hope Mines Ltd. (“GNH”), an issuer whose shares are traded on
                             the TSXV. Through St. Pierre, these three clients executed trades representing 56% of the total
                             trading volume in GNH on the TSXV, of which forty-five trades, or 46% of the total trading volume in
                             GNH, were between the three clients and were submitted to St. Pierre within seconds of each other.
                             In addition to the majority of such trades not being properly marked as “crosses”, sale orders



Part 2 – Abusive Trading                                                                                             UMIR 2.2-16
January 1, 2013
                             entered by the three clients were systematically entered prior to purchase orders in order to facilitate
                             the transfer of debit and credit positions between the clients’ accounts.
                             Disposition – By entering orders on a marketplace when he knew or ought to have known that the
                             entry of such orders could create an artificial price for the securities, St Pierre breached Rule 2.2
                             and Policy 2.2 of UMIR
                             Requirements Considered – Rule 2.2 and Policy 2.2.
                             Sanction – A Hearing Panel imposed a fine of $40,000, costs in the amount of $70,000, suspension
                             of access to all marketplaces regulated by IIROC for a period of 5 years, successful completion of
                             the Conduct and Practices Handbook examination before the Respondent may be employed with a
                             Participant, and heightened supervision for the length of the 5 year suspension if employed with a
                             Participant.

 Disciplinary Proceedings:   In the Matter of Kevin Moorhead (“Moorhead”) (May 22, 2008) DN 2008-001
                             Facts – Between August 29, 2005 and October 27, 2005, Moorhead and/or his assistant, on
                             Moorhead’s instructions, entered orders on a marketplace for certain securities with the intention of
                             establishing an artificial and/or a high closing bid price in order to improve the daily profit and loss
                             position of shares held in Moorhead’s inventory account and/or to assist a trader at another firm to
                             increase the daily profit or reduce the daily loss in his inventory account.
                             Disposition – By entering orders on a marketplace that were not justified by any real demand for the
                             securities Moorhead knew that his order entry activity would create, or could reasonable be
                             expected to create, an artificial price for the securities contrary to Rule 2.2 and Policy 2.2 of UMIR.
                             Requirements Considered – Rule 2.2(1), 2.2(2)(b) and Policy 2.2
                             Sanction – $40,000 fine and costs of $10,000 and suspension from all RS regulated marketplaces
                             for three months.

 Disciplinary Proceedings:   In the Matter of Martin Fabi (“Fabi”) (October 27, 2008) DN 08-0159
                             Facts – On December 31, 2007 Fabi, a Registered Representative with MF Global Canada Co.,
                             acting on instructions from a client, executed trades on the TSX Venture Exchange for 6 listed
                             equities at or near the end of the trading day resulting in the “up-ticking” of the closing price of the
                             securities. The client, a fund manager, managed a portfolio of securities that included the 6
                             securities, and which represented approximately 68% of the market value of the fund’s portfolio.
                             Disposition – The purpose of Rule 2.2 and Policy 2.2 is to protect the marketplace from manipulative
                             and deceptive trading activity and artificial pricing. Given the timing and circumstances surrounding
                             the entry of the orders at or near the end of the trading day, and based on conversations Fabi had
                             with the fund manager prior to the entry of the orders, Fabi ought to have known that the fund
                             manager had a motivation to effect a high closing sale price for the securities. By entering orders
                             and executing trades on a marketplace that Fabi ought to have known would create an artificial
                             price for the securities Fabi failed to fulfill his gatekeeper obligation and acted contrary to Rule 2.2
                             and Policy 2.2.
                             Requirements Considered – Rules 2.2(2)(b) and 10.4(1) and Policy 2.2.
                             Sanction – $15,000 fine and costs of $5,000
 Disciplinary Proceedings:   In the Matter of Luc St. Pierre (“St Pierre”) (November 18, 2008) DN 08-0195
                             Sanction – $30,000 fine and costs of $70,000; suspension of access to all IIROC regulated
                             marketplaces for 5 years; successful completion of the Conduct and Practices Handbook
                             examination; and heightened supervision for a period of 5 years if employed by a Participant.

 Disciplinary Proceedings:   Rule 2.2 was considered In the Matter of Tony D’Ugo (“D’Ugo”) (April 6, 2010) DN 10-0093. See
                             Disciplinary Proceedings under Rule 2.1.

 Disciplinary Proceedings:   In the Matter of Francesco Mauro (“Mauro”) and Scott Fraser Harding (“Harding”) (May 25,
                             2010) DN 10-0149
                             Facts – Between December 14, 2006 and January 24, 2007 (the “Relevant Period”), Mauro was
                             employed with CIBC World Markets Inc. (“CIBC”) as a registered representative, branch manager,
                             and officer (trading securities) and Harding worked as an associate investment advisor with Mauro
                             and entered most orders for Mauro’s clients. During the Relevant Period, Harding entered
                             unsolicited orders and executed trades on behalf of a client in the shares of a listed company on the
                             TSX Venture Exchange that was the subject of a private placement at $1.00 per unit, facilitated by
                             CIBC. Harding entered 46 buy orders in the client’s account when the price of the security fell below
                             $1.00 and traded below $1.00 for 20 trading days, of which 24 were active orders that traded at or
                             above the posted offer price upon entry, 14 were entered in the last hour of trading and restored the



Part 2 – Abusive Trading                                                                                               UMIR 2.2-17
January 1, 2013
                             share price of the security to close at or near $1.00 after a price decline, 13 established the closing
                             price of the shares, 12 established the closing price at $1.00, 6 had a limit price of $1.00 and traded
                             entirely at the posted offer price of $1.00; and 7 had a limit price of $1.00 and traded entirely at
                             successive prices up to $1.00. Mauro had a duty to supervise Harding’s execution of trades. In
                             conducting his reviews, while his computer terminal permitted him to review up-to-the-minute trading
                             in his branch, including trade times, Mauro did not actively monitor this.
                             Disposition – Under the terms of a Settlement Agreement, Harding admitted that between
                             December 14, 2006 and January 24, 2007 he failed in his role as a gatekeeper. He entered orders
                             and executed trades on behalf of a client for a listed company on the TSX Venture Exchange that
                             he ought to have known could reasonably be expected to create an artificial price for the security
                             contrary to UMIR 2.2(2)(b) and UMIR Policy 2.2 (e), for which he is liable under UMIR 10.4(1).
                             Mauro admitted under the terms of the Settlement Agreement, that during the Relevant Period he
                             did not meet the standard required of him in his role as a supervisor by failing to fully and properly
                             supervise Harding as necessary, to ensure that he complied with UMIR and its Policies, contrary to
                             UMIR 7.1 (4) and Policy 7.1.
                             Requirements Considered – Rules 2.1, 2.2(2)(b), 10.4(1), 10.16(1)(b), 7.1(4) and Policy 2.2(e) and
                             7.1.
                             Sanctions – Harding agreed to a $40,000 fine and $10,000 in costs. Mauro agreed to $25,000 fine
                             and $5,000 in costs.
 Disciplinary Proceedings:   In the Matter of James Martin MacMenamin (“MacMenamin”) (June 3, 2010) DN 10-0162
                             Facts – MacMenamin, while a trader employed by Jones, Gable & Company Limited, was paid 50%
                             of any profits (realized and unrealized) that he generated in a proprietary inventory account that he
                             operated. On a monthly basis, for compensation purposes, the long positions in the proprietary
                             inventory account were valued at their closing bid price. For the month of April 2008, the valuation
                             day for the proprietary inventory account was April 25, 2008, on which date MacMenamin placed a
                             day buy order late in the day for shares of a security trading on the TSX Venture Exchange at a limit
                             price $0.07 greater than the previous trade, and $0.07 higher than the prevailing best bid price. The
                             day buy order became the closing bid price for April 25, 2008, creating an unrealized profit in the
                             proprietary inventory account, which otherwise would have incurred an unrealized loss.
                             MacMenamin further entered orders on behalf of the proprietary inventory account between
                             November 19 and December 9, 2008, that he did not intend to execute in order to entice an
                             algorithmic trading program to join or displace him from the best displayed bid or offer price for the
                             shares of certain securities. When the algorithm joined or displaced his order, MacMenamin
                             cancelled his order and then bought or sold from the algorithm order that had joined or displaced his
                             order. This activity enabled MacMenamin to purchase shares at a lower cost and to sell shares at a
                             higher price.
                             Disposition – Under the terms of a Settlement Agreement, MacMenamin admitted that on April 25,
                             2008, he entered an order on behalf of a proprietary inventory account that he knew or ought to
                             have known would create or could reasonably be expected to create an artificial closing bid price for
                             the shares, contrary to UMIR 2.2(2)(b) and UMIR Policy 2.2, for which he is liable under UMIR
                             10.4(1); and that between November 19 and December 9, 2008, he entered orders on behalf of a
                             proprietary inventory account that he knew or ought to have known he did not intend to execute,
                             contrary to UMIR 2.2(2)(a) and UMIR Policy 2.2, for which he is liable under UMIR 10.4(1).
                             Requirements Considered – Rules 2.1, 2.2(2)(a),(b), 10.4(1) and Policy 2.2.
                             Sanctions – MacMenamin agreed to a $25,000 fine and $5,000 in costs.

 Disciplinary Proceedings:   In the Matter of TD Securities Inc. (“TDSI”), Kenneth Nott (“Nott”), Aidin Sadeghi (“Sadeghi”),
                             Christopher Kaplan (“Kaplan”), Robert Nemy (“Nemy”) and Jake Poulstrup (“Poulstrup”)
                             (collectively, the “Individual Respondents”) (December 20, 2010) DN 10-0338
                             Facts – The Individual Respondents were all TSX Registered Traders hired by TDSI to work as
                             Inventory Traders (also called Proprietary Traders). Between May 1 to October 31, 2005 (the
                             “Relevant Period”), each of the Individual Respondents entered high closing bids on either NEX,
                             TSX-V or TSX to purchase one or more of five illiquid stocks (collectively, the “Five Stocks”). The
                             collective trading pattern of the Individual Respondents revealed that orders in the illiquid stocks
                             were placed very late in the day in small lots that set the closing bids day after day, week after
                             week, and month after month. TDSI had at its disposal a number of display “tools” that could be
                             selected to assist in monitoring and supervising the traders, however, there was no tool available in
                             the Relevant Period to monitor real time orders (i.e. bids and offers). TDSI was only provided with
                             reports (e.g. high month end closings) that did not include any information regarding bids and offers.
                             Consequently, TDSI did not have a systematic procedure to review orders.




Part 2 – Abusive Trading                                                                                              UMIR 2.2-18
January 1, 2013
                             Disposition – An artificial bid price results when there is an intention to establish a price that is not
                             justified by real demand or supply in a security. In the Relevant Period, the Individual Respondents
                             made closing bids in the context of the market with the intention that the bids would not trade but
                             instead would stand as the closing bid at the end of the trading day thereby increasing the value of
                             their inventory positions (which were calculated on the basis of the closing bids) and increasing their
                             compensation and access to capital. The circumstantial evidence of motive and trading patterns (the
                             frequency of setting the closing bids, late time of the closing bid orders, bidding in small lots and the
                             illiquid nature of the stocks), supported an inference on a balance of probabilities that the Individual
                             Respondents intended to engage in the improper practice of entering artificial closing bids in the
                             Five Stocks. This finding was buttressed by direct evidence of instant messages and telephone calls
                             between the Individual Respondents which showed concern for monthly ranking, the value of the
                             adjusted cost base in a month other than a pay period month end and a willingness to manipulate
                             the market for personal reasons. In the Relevant Period, Nott entered 230 artificial closing bids;
                             Sadeghi entered 3 artificial closing bids; Kaplan entered 37 artificial closing bids; Nemy entered 38
                             artificial closing bids; and Poulstrup entered 14 artificial closing bids, all of which were in
                             contravention of UMIR 2.2(2)(b) and UMIR Policy 2.2.
                             There was no proof, however, that TDSI failed to comply with its UMIR Rule 7.1 and UMIR Policy
                             7.1 trading supervision obligations and this allegation was dismissed. TDSI did not have a real time
                             software surveillance system during the Relevant Period to detect the time and sequence of bids
                             and offers in the marketplace. Demonstrating a pattern of late bids by a trader was one the factors
                             relied on in drawing an inference of artificial closing bids, however the time required to do so was
                             beyond the capacity of TDSI as the end of the day trading of a stock would have to be printed from
                             the Firm Book every day for sufficient days to reveal a pattern of late bids. In the circumstances, the
                             random review approach employed by TDSI was reasonable and realistic. Moreover, TDSI
                             deserved credit for the manner in which it monitored and detected bidding improprieties in one of
                             the Five Stocks and for the prompt filing of a Gatekeeper Report after the discovery of a wash trade
                             between Nott and Sadeghi. While there was a fundamental flaw in the TDSI compliance monitoring
                             system employed following the Relevant Period to evaluate whether there had been improper
                             trading, as it had not been configured to generate alerts for late bids that were below the last sale
                             and thus made within the “context of the market”, (as was the case with the Individual
                             Respondents), this was due to an honest but erroneous interpretation of UMIR Policy. The correct
                             interpretation is that the process of bidding within the context of the market in order to maintain the
                             value of a stock contravenes UMIR and bidding must be in accordance with true market supply and
                             demand.
                             Requirements Considered – Rule 2.2(2)(b), 7.1 and Policy 2.2, 7.1.
                             Sanction – The Hearing Panel determined in the case of all the Individual Respondents that there
                             be no order of suspension as they had not obtained employment at all, or for a significant period of
                             time, since September, 2008, and that except for Sadeghi, they be under close supervision for six
                             months, the terms of which would be determined by an employer. Additional penalties and orders
                             were imposed as follows:
                                  •    Nott: (a) a fine of $15,000.00; and (b) costs of $5,000.00.
                                  •    Sadeghi: (a) a fine of $5,000.00. The Hearing Panel noted that there would be no order
                                       for supervision and strongly recommended that the close supervision order in effect be
                                       rescinded.
                                  •    Kaplan: (a) a fine of $35,000.00; and (b) costs of $15,000.00. In addition, the Hearing
                                       Panel ordered that the trade restrictions in effect cease to apply to Kaplan immediately.
                                  •    Nemy: (a) a fine of $75,000.00; and (b) costs of $37,500.00.
                                  •    Poulstrup: (a) a fine of $20,000.00; and (b) costs of $10,000.00. In addition, the Hearing
                                       Panel ordered that trade restrictions in effect cease to apply to Poulstrup immediately.
                             Review – IIROC staff has filed a Notice of Request for Hearing and Review to the Ontario Securities
                             Commission for a review of the decision of the IIROC Hearing Panel, dated November 30, 2010,
                             relating to TDSI.

 Disciplinary Proceedings:   In the Matter of Gary John Williamson (“Williamson”) (February 28, 2011) DN 11-0085
                             Facts – Between January 1, 2008 and February 29, 2008, Williamson, a trader employed by Global
                             Maxfin Capital Inc. (“Global Maxfin”), entered numerous bid orders on the TSX Venture Exchange
                             (“TSXV”) for an illiquid security very late in the trading day. All the orders were entered as day
                             orders, none of the orders were filled and all increased the closing bid price. Given the illiquidity of
                             the security and the short length of time the orders were open, Williamson’s bid orders had virtually
                             no prospect of being filled. Global Maxfin earned revenue through proprietary trading. Williamson




Part 2 – Abusive Trading                                                                                                UMIR 2.2-19
January 1, 2013
                             was assigned an individual inventory account and was the only person who entered orders in his
                             inventory account. Williamson’s inventory account was valued daily for all the long positions at the
                             closing bid and all short positions at the closing offer. Williamson was aware of his profit and loss
                             position and was compensated based on commissions earned as well as profits and losses within
                             his inventory account. Prior to the impugned trading activity, Williamson was indebted to Global
                             Maxfin in excess of $32,000 as a result of a foreign exchange error and trading losses in his
                             inventory account. Williamson’s monthly compensation was partially reduced to pay down his
                             indebtedness to Global.
                             Disposition – Pursuant to a Settlement Agreement, Williamson admitted that between January 1,
                             2008 and February 29, 2008, he entered orders on the TSXV that he knew or ought reasonably to
                             have known would create or could reasonably be expected to create an artificial bid price contrary to
                             UMIR 2.2(2)(b) and UMIR Policy 2.2 for which he is liable under UMIR 10.4(1). Williamson entered
                             orders to purchase securities of an issuer without any intention that the orders would be executed
                             and for no bona fide purpose. Williamson entered the orders with the intention of establishing a high
                             closing bid price in order to improve the unrealized daily profit and loss position of the shares held in
                             his inventory account and thereby to misrepresent the performance of the security. The high closing
                             bid prices were artificial in that they were not justified by any real demand for the securities, and
                             misrepresented the performance and actual demand for the securities to the market and to other
                             market participants. The impugned transactions served to overstate the unrealized profits or
                             understate the unrealized losses for the security in his inventory account.
                             Requirements Considered – Rule 2.2(2)(b),10.4(1) and Policy 2.2
                             Sanction – Williamson agreed to pay a fine of $40,000; to a suspension of access to an IIROC-
                             regulated marketplace for a period of 6 months; and to pay costs in the amount of $5,000.

 Disciplinary Proceedings:   In the Matter of Donald Dean MacKenzie (“MacKenzie”) (May 12, 2011) DN 11-0152
                             Facts – Between September 2007 and June 2008, MacKenzie, a registered representative with
                             RBC Dominion Securities Inc. (“RBCDS”), entered numerous late bid orders for an illiquid security
                             on the Toronto Stock Exchange (“TSX”), in various non-arm’s length accounts at RBCDS.
                             Mackenzie entered the orders with the intention of establishing a high closing bid price to narrow the
                             spread between the closing bid and ask prices because he felt the assigned market maker was not
                             discharging his Market Maker Obligations and maintaining a fair and orderly market for the security.
                             Upon detecting the pattern of late bid orders, RBCDS internally disciplined the Mackenzie.
                             Disposition – Pursuant to a Settlement Agreement, MacKenzie admitted that between September,
                             2007 and June 2008, he entered orders on the TSX that he knew or ought reasonably to have
                             known would create or could reasonably be expected to create an artificial bid price contrary to
                             UMIR 2.2(2)(b) and UMIR Policy 2.2 for which he is liable under UMIR 10.4(1). The closing bid
                             orders had no bona fide purpose and were entered to establish a high closing bid price in order to
                             narrow the spread between the bid price and the ask price. In so doing, MacKenzie misrepresented
                             the performance and actual demand for the security to the market and to other market participants.
                             Requirements Considered – Rule 2.2(2)(b),10.4(1) and Policy 2.2
                             Sanction – MacKenzie agreed to pay a fine of $20,000; to a prohibition on seeking re-registration
                             approval with any Dealer Member of IIROC for a period of 3 months; and to pay costs in the amount
                             of $5,000.

 Disciplinary Proceedings:   In the Matter of David Charles Parkinson (“Parkinson”) (February 22, 2012) DN 12-0061
                             Facts – Between November and December 2007, and in March, 2008, (the “Relevant Period”)
                             Parkinson, a Registered Representative employed by CIBC World Markets Inc. (“CIBC WM”),
                             entered orders and executed trades on the TSX Venture Exchange (“TSXV”) for two securities on
                             behalf of a client, that maintained and supported the price of the securities at a level predetermined
                             by Parkinson’s client. In particular, Parkinson entered closing trades and closing bids in the
                             securities for the client’s accounts causing end of day upticks in the sale price and bid price. Margin
                             was granted on the securities at Parkinson’s request on behalf of the client, which was calculated by
                             CIBC WM using a stock’s closing bid price. Parkinson’s client entered a settlement agreement with
                             the Ontario Securities Commission admitting that between June 2007 and April 2008 he engaged in
                             trading that had the effect of maintaining and/or increasing the closing price of one of the securities
                             which was traded in the CIBC WM account.
                             Disposition – Pursuant to a Settlement Agreement, Parkinson admitted that in the Relevant Period
                             he entered orders and trades on behalf of a client that he ought reasonably have known would
                             create or could reasonably be expected to create an artificial price for two TSXV securities, contrary
                             to UMIR 2.2(2)(b) and UMIR Policy 2.2 for which he is liable under UMIR 10.4(1). Parkinson had a
                             gatekeeper obligation to be aware of and alert to potential or known manipulative and deceptive
                             activity.



Part 2 – Abusive Trading                                                                                                UMIR 2.2-20
January 1, 2013
                             Requirements Considered – Rule 2.2(2)(b),10.4(1) and Policy 2.2
                             Sanction – Parkinson agreed to pay a fine of $30,000; to a suspension of access to an IIROC-
                             regulated marketplace for a period of 6 months from termination of his employment; and to pay
                             costs in the amount of $10,000.
 Disciplinary Proceedings:   In the Matter of William Geddes (“Geddes”) (March 15, 2012) DN 12-0098
                             Facts – Between December 2007 and October, 2008, (the “Relevant Period”) Geddes, a Registered
                             Representative with National Bank Financial Ltd. (“NBF”) entered buy orders for a security listed on
                             the Toronto Stock Exchange (TSX) in his and his wife’s accounts (the “Geddes Accounts”), to
                             increase the closing price of the security as its share price was generally in decline. Geddes’ client
                             accounts also held positions in the same security. The orders Geddes placed were uneconomic due
                             to the high commission costs which they generated. Geddes sold few of the shares in the Geddes
                             Accounts, however, and did not profit from the increase in the value of his clients’ monthly account
                             statements caused by the entry of the buy orders for the security.
                             Disposition – Pursuant to a Settlement Agreement, Geddes admitted that in the Relevant Period he
                             entered buy orders he ought reasonably to have known would create or could reasonably be
                             expected to create an artificial sale price for the security, contrary to UMIR 2.2(2) and UMIR Policy
                             2.2, for which he is liable under UMIR 10.4.
                             Requirements Considered – Rule 2.2(2), 10.4 and Policy 2.2
                             Sanction – Geddes agreed to pay a fine of $30,000, a 60 day suspension from registration,
                             successful completion of the Conduct and Practices Handbook Course and to pay costs in the
                             amount of $1,500.
 Disciplinary Proceedings:   In the Matter of Vinh-Phat Nguyen-Qui (“Nguyen-Qui”) (October 11, 2012) DN 12-0298
                             Facts – Between October and December 2009 (the “Relevant Period”), Nguyen-Qui, a Registered
                             Representative employed by W.D. Latimer Co. Limited, entered buy and sell orders on the TSX in
                             the pre-opening market and cancelled them prior to market opening for the sole objective of
                             acquiring a better chronological position once the market opened. Nguyen-Qui also entered short
                             sale orders in the pre-opening market without designating them as short sales and/or at a price
                             below the last sale price as indicated in the consolidated market display.
                             Disposition – In the Relevant Period, Nguyen-Qui entered orders he knew or ought to reasonably
                             have known would create or could reasonably be expected to create, a false or misleading
                             appearance of trading activity or interest in the purchase or sale of the security, contrary to UMIR
                             2.2(2)(a); entered short sale orders in the pre-opening market without proper designation contrary to
                             UMIR 6.2(1)(b)(viii); and entered short sale orders in the pre-opening market below the last sale
                             price, contrary to UMIR 3.1(1).
                             Requirements Considered – Rule 2.2(2)(a), 3.1(1) and 6.2(1)(b)(viii).
                             Sanction – The Hearing Panel imposed a prohibition on Nguyen-Qui from accessing the market as a
                             Registered Representative for a period of two months and a fine of $10,000 for the first violation
                             plus fines of $5,000 for each of the two additional violations; Nguyen-Qui was also required to take
                             the Trader Training Course again and pay costs in the amount of $10,000.
 Disciplinary Proceedings:   In the Matter of James William Watson (“Watson”) (October 29, 2012) DN 12-0319

                             Facts – Between November 2010 and April 2011 (the “Relevant Period”), Watson, a trader
                             employed by Jones Gable & Company Limited, entered orders for a security listed on the TSXV to
                             effect a high closing bid price that misrepresented the performance and actual demand for the
                             security and artificially increased the value of the position in the security held in Watson’s inventory
                             account.
                             Disposition – Pursuant to a Settlement Agreement Watson admitted that in the Relevant Period, he
                             entered orders on the TSXV that he knew or ought to reasonably have known would create or could
                             reasonably be expected to create, a false or misleading appearance of trading activity or interest in
                             the purchase or sale of the security or an artificial bid price for the security, contrary to UMIR 2.2(2)
                             and Policy 2.2.
                             Requirements Considered – Rule 2.2(2) and Policy 2.2.
                             Sanction – Watson agreed to pay a $10,000 fine, to a suspension of access to IIROC-regulated
                             marketplaces for a period of 14 days, as well as to pay costs in the amount of $1,500.


  Proposed Guidance:              For information on current proposed guidance, refer to IIROC Notice 12-0221 - Rules Notice –
                                  Request for Comments – UMIR – Proposed Guidance on Certain Manipulative and Deceptive
                                  Trading Activities (July 17, 2012), the relevant portion of which reads as follows:



Part 2 – Abusive Trading                                                                                                UMIR 2.2-21
January 1, 2013
 1.        Risks to Market Integrity from Certain Strategies Using Automated Order Systems
 An important development related to technology’s impact on market integrity is the advent of various trading strategies effected by
 automated order systems at high speed and including activity commonly referred to as “algorithmic trading” or “high frequency
 trading” (“HFT”). The increase in the use of automated order systems in the trading of securities has been valued by some market
 participants for its perceived benefits to market efficiency, but it has also led to concerns that such high velocity trading may
 enable abusive practices in the securities markets on a larger scale and pose systemic risks to market integrity.
 The submission of large numbers of orders across multiple marketplaces in Canada, often with the use of direct electronic access
 to marketplaces, presents significant challenges for monitoring trading activity and enforcing existing securities regulations. IIROC
 recognizes that many complex trading strategies that may be potentially abusive and manipulative may be facilitated by the
 sophisticated technological infrastructure and communication systems often employed by users of automated order systems.
 Active focus is being placed by the regulators on monitoring for and pursuing illegal practices, including strategies linked to
 algorithmic and HFT trading that are of a manipulative nature whether in a known or novel form.
 While market abuse may be facilitated as a result of technological developments, it is the abusive nature of the practice, not the
 means through which the practice is conducted, that produces deleterious impacts to market integrity. Accordingly, manipulative
 and deceptive trading practices are prohibited whether such activities are conducted manually or electronically and whether
 conducted with or without the use of automated order systems and direct electronic access. An Access Person, Participant or any
 client that manipulates the market by any means has engaged in misconduct that is prohibited under UMIR or otherwise under
 securities legislation.
 Participants are further reminded that as gatekeepers to the securities market, they must develop and implement appropriate
 policies and procedures to effectively address, detect, prevent and report manipulative and deceptive activity, in accordance with
 the requirements of Policy 7.1, failing which disciplinary action may be taken against the firm, its management and its directors. As
 part of each trade desk review undertaken by staff of IIROC, the policies and procedures that have been adopted by a Participant
 will be reviewed in regard to their adequacy to detect and prevent violations of Requirements in light of the type and volume of
 business undertaken by the Participant. As applicable, this would include assessing whether firms have adequate testing and
 controls related to trading strategies that may be implemented by users of an automated order system to detect and prevent
 potential trading abuses. The review of the policies and procedures does not, however, constitute an approval of the policies and
 procedures by IIROC.
 2.        Questions and Answers
 The following is a list of questions regarding the obligations of a Participant or Access Person under UMIR with respect to
 manipulative or deceptive acts or practices in the context of the use of automated order systems and direct electronic access to
 marketplaces together with IIROC’s response to each question:
      1. Are there trading strategies which could be employed through an automated order system that IIROC considers
         manipulative and deceptive practices?
         Yes. Use of the following strategies through an automated order system as part of “algorithmic trading”, “high frequency
         trading” or any other means of trading will be considered by IIROC to be manipulative and deceptive activities that
         contravene Rule 2.2 or otherwise violate securities legislation:
           •    Layering: It is the position of IIROC that placing a bona fide order on one side of the market while simultaneously
                “layering” orders in the consolidated market display on the other side of the market without intention to trade is a
                contravention of Rule 2.2(2) and Policy 2.2, Parts 2 and 3 as inducing a false or misleading appearance of trading
                activity or artificial price. In this case, the purpose of the “layering” is to “bait” other market participants to react and
                trade with the bona fide order on the other side of the market at an artificial price.
           •    Quote Stuffing: It is the position of IIROC that the input by a Participant or Access Person of excessive market
                data messages with the intent to “flood” systems and create “information arbitrage” opportunities for itself, is a
                contravention of Rule 2.2(1) as an activity which, by its very nature, will be considered to be a manipulative or
                deceptive method, act or practice.
           •    Quote Manipulation: IIROC is concerned about potential manipulative activity intended to affect the price at which
                dark orders that are tied to prices on visible markets, trade in dark pools or visible markets. It is the position of
                IIROC that entering non-bona fide orders on visible markets in an attempt to change the best bid price and/or the
                best ask price and affect the price calculation at which a trade will occur with a dark order, contravenes Rule 2.2(1),
                (2)(b) and Policy 2.2, Part 2(e). This activity (which may be combined with liquidity detection) results in a trade with
                a dark order at an improved price, following which orders are removed from the visible market.
           •    Spoofing: It is the position of IIROC that the entry of non-bona fide orders in the pre-opening on a marketplace
                that displays a “Calculated Opening Price” (indicating the price at which trading would commence based on the
                orders entered to that point on the marketplace), with the intent of affecting the Calculated Opening Price to the




Part 2 – Abusive Trading                                                                                                       UMIR 2.2-22
January 1, 2013
                     advantage of the party that entered the order, contravenes Rule 2.2(2) and Policy 2.2, Part 2(f).
                •    Abusive Liquidity Detection: IIROC is of the view that strategies which enter orders (disclosed or iceberg during
                     the pre-open, or “pinging” 3) to detect the existence of a large buyer or seller with the intention to trade ahead of,
                     rather than with, the large buyer or seller, is a manipulative and deceptive practice contrary to Rule 2.2(1). This
                     strategy harms the large trading interest when after a profitable price movement, the trades are reversed, or in the
                     event the price moves contrary to the position taken, the trading interest of the large buyer or seller may be viewed
                     as a free option to trade against.
          3. Is there an exception from the prohibition on manipulative and deceptive trading available for persons with
             Marketplace Trading Obligations?
              Rule 2.2 confirms that the entry of an order or the execution of a trade on a marketplace by a person in accordance with
              the Marketplace Trading Obligations shall not be considered a violation of prohibitions on manipulative and deceptive
              activities provided such order or trade complies with applicable Marketplace Rules or marketplace requirements and the
              order or trade was required to fulfill applicable Marketplace Trading Obligations. However, a person with Marketplace
              Trading Obligations that manipulates the market in any way for personal financial purposes without the intention of fulfilling
              their obligations would be considered to contravene Rule 2.2. In addition, a person with Marketplace Trading Obligations
              that “takes advantage” of a party to a trade would be considered not to be trading “openly and fairly” and such trades
              would be subject to regulatory intervention by cancellation. 4
          4. In what circumstances would IIROC consider that a Participant or Access Person is not participating in a
             manipulative or deceptive activity while engaging in algorithmic or high frequency trading strategies?
              In the view of IIROC, the regulatory initiatives that have been undertaken are targeted only to curbing potentially harmful
              and manipulative trading behaviours, without restraint on legitimate trading activity and strategies that do not put market
              integrity at risk. Algorithmic and HFT trading are components of the current market structure and some of the strategies
              may benefit market quality even while others do not.
              For example, passive market making strategies consisting of the submission of limit orders that provide liquidity to the
              marketplace at specified prices are an important source of liquidity. While the firm engaging in passive market making may
              sometimes take liquidity if necessary to liquidate a position rapidly, the primary sources of profits are from earning the
              spread by buying at the bid and selling at the offer and capturing any liquidity rebates offered by marketplaces to liquidity-
              supplying orders. 5
              As well, some HFT arbitrage strategies seek to capture pricing inefficiencies between related products or markets such as
              discrepancies between the price of an Exchange-traded Fund and the underlying basket of stocks, and may involve
              trading with a firm using a passive market making strategy, in which case both firms profit from the trade.
              Some “directional” HFT strategies also exist which may be straightforward and contribute to the quality of price discovery
              in a stock, such as establishing a position in the belief that the price of a stock has moved away from its “fundamental
              value” and will return to such value.
    3.        Impact on Existing Guidance
    This Rules Notice supplements earlier guidance on manipulative and deceptive trading practices and guidance related to trading
    supervision obligations. In particular, reference should be made to the guidance issued on the following topics:
          •     “double printing”: Market Integrity Notice 2003-002 – Guidance - Prohibition on Double Printing (January 13, 2003);
                Market Integrity Notice 2005-004– Guidance - Double Printing and the Entry of Orders (March 4, 2005); Market Integrity
                Notice 2005-030– Guidance - Avoiding Double Printing in the Use of an Error Account (September 1, 2005); Market
                Integrity Notice 2006-004 – Guidance - Facilitation of a Client Special Settlement Trade and Double Printing (February
                6, 2006) and IIROC Notice 11-0043 – Rules Notice – Guidance Note - Guidance on “Locked” and “Crossed” Markets –
                Question 4 (February 1, 2011);
          •     “wash trades”: Market Integrity Notice 2004-021– Guidance -Entry of Off-Setting Market-on-Close Orders (August 26,
                2004); Market Integrity Notice 2005-029– Guidance - Entering Orders on Both Sides of the Market (September 1, 2005);


3
         A “pinging” order is a tradeable order that can be used to search for and access all types of non-displayed liquidity, including in
         dark pools and dark orders on displayed marketplaces.
4
         See IIROC Notice 12-0112 – Rules Notice – Request for Comments – Proposed Guidance on Regulatory Intervention for the
         Variation or Cancellation of Trades (March 30, 2012) at p. 14.
5
         See, however, IIROC Notice 11-0043 - Guidance on “Locked” and “Crossed” Markets (February 1, 2011) where it is discussed
         at Question 4 that If a market participant intentionally creates or continues a “locked” market in an attempt to maximize the
         amount of liquidity rebates that the market participant earns, such behaviour is not in compliance with the Locked and Crossed
         Order Provisions and is therefore not in compliance with Rule 2.3 of UMIR dealing with improper orders and trades. In addition,
         in the view of IIROC, a Participant or Access Person is engaging in an activity analogous to “double printing” contrary to Rule
         2.2 of UMIR if the Participant or Access Person enters orders on a protected marketplace that, upon execution, is followed
         immediately by the entry on a protected marketplace of an order for the same security at the same price on the other side of
         the market which has the effect of creating or continuing a “locked” market.



Part 2 – Abusive Trading                                                                                                       UMIR 2.2-23
January 1, 2013
          Market Integrity Notice 2006-008– Guidance - Use of the Market-on-Close Facility (March 10, 2006); and IIROC Notice
          11-0043 – Rules Notice Guidance Note - Guidance on “Locked” and “Crossed” Markets – Question 3 (February 1,
          2011);
     •    “artificial prices”: Market Integrity Notice 2002-021 – Guidance - Prohibition Against Establishing Artificial Prices
          (December 16, 2002) and Market Integrity Notice 2007-015 – Guidance - Specific Questions Related to Trading on
          Multiple Marketplaces- Question 2 (August 10, 2007);
     •    “improper orders and trades”: IIROC Notice 11-0043 – Rules Notice Guidance Note - Guidance on “Locked” and
          “Crossed” Markets explaining that the entry of an order that does not comply with the Locked and Crossed Order
          Provisions in the CSA Trading Rules will constitute a violation of Rule 2.3 and may constitute a violation of other
          provisions of UMIR; and
     •     “trading supervision”: Market Integrity Notice 2005-006 – Guidance - Obligations of an “Access Person” and
          Supervision of Persons with “Direct Access” (March 4, 2005); Market Integrity Notice 2007-010 – Guidance -
          Compliance Requirements for Dealer Sponsored Access (April 20, 2007); Market Integrity Notice 2007-011 – Guidance
          - Compliance Requirements for Order Execution Services (April 20, 2007); Market Integrity Notice 2008-003 – Guidance
          – Supervision of Algorithmic Trading (January 18, 2008), and IIROC Notice 09-0081– Rules Notice – Guidance Note –
          UMIR - Specific Questions Related to Supervision of Algorithmic Trading (March 20, 2009).




Part 2 – Abusive Trading                                                                                          UMIR 2.2-24
January 1, 2013
                                                                                 Universal Market Integrity Rules
                                                                                       Rules & Policies


2.3       Improper Orders and Trades
          A Participant or Access Person shall not enter an order on a marketplace or execute a
          trade if the Participant or Access Person knows or ought reasonably to know that that
          the entry of the order or the execution of the trade would not comply with or would result
          in the violation of:
          (a)       applicable securities legislation;
          (b)       applicable requirements of any self-regulatory entity of which the Participant or
                    Access Person is a member;
          (c)       the Marketplace Rules of the marketplace on which the order is entered;
          (d)       the Marketplace Rules of the marketplace on which the trade is executed; and
          (e)       UMIR and the Policies.
            Defined Terms:       NI 14-101 section 1.1(3) – “securities legislation”
                                NI 21-101 section 1.1 – “order” and “self-regulatory entity”
                                UMIR section 1.1 – “Access Person”, “marketplace”, “Marketplace Rules”, “Participant”, “Policy”
                                                   and “UMIR”
                                UMIR section 1.2(2) – “trade”
            Related Provisions:      UMIR Policy 1.2 Part 3 – interpretation of “ought reasonably to know”
            Regulatory History:      Effective April 1, 2005, the applicable securities commissions approved an amendment to add
                                     Rule 2.3.
                                    In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities
                                    commissions approved an amendment to Rule 2.3 that came into force on June 1, 2008 to
                                    replace the phrase “the Rules and” with “UMIR and the”.
            Guidance:                The following is the relevant text of IIROC Rules Notice 11-0043 issued on February 1, 2011
                                     under the heading “Guidance Note -- UMIR – Guidance on ”Locked” and ”Crossed”
                                     Markets”:
            Background
            A “locked market” occurs when there are multiple marketplaces trading the same security and a bid (offer) on one
            marketplace is posted at the same price as an offer (bid) on another marketplace. Had both orders been entered onto
            the same marketplace the bid and the offer would have matched and a trade would have been executed. There are
            two ways for a locked market to be unlocked:
                ●      typically, more buyers and sellers appear resulting in subsequent trades and immediate correction; or
                •     one of the participants involved in the lock removes its order and places the order on another marketplace to
                      immediately execute the trade.
            In contrast, a “crossed market” occurs when one participant’s bid (offer) on one marketplace is higher (lower) than
            another participant’s offer (bid) on a different marketplace. A crossed market condition between marketplaces usually
            does not last for a long period of time as someone will usually take advantage of the arbitrage opportunity.
            With the significant increase in order message traffic in recent years, the prevalence of “locked” and “crossed” markets
            has increased if for no other reason than the different latencies in the systems of Participants, Access Persons,
            services providers, data vendors and marketplaces. The volume of order message traffic is expected to continue to
            expand with increased use of algorithmic trading and dealer sponsored market access. As such, the incidences of
            “locked” and “crossed” markets that have been unintentionally created will continue to increase.
            Effective January 28, 2010, the Trading Rules were amended and among the provisions implemented on that date
            were the Locked and Crossed Order Provisions. 1 The amendments introduced section 6.2 of the Trading Rules which
            provide:


1
      See Canadian Securities Administrators Notice, Notice of Technical Corrections to Amendments to National Instrument 23-101
      Trading Rules, (2009) 32 OSCB 10503. That publication provided notice that the Locked and Crossed Order Provisions were




Part 2 – Abusive Trading                                                                                                 UMIR 2.3-1
January 1, 2013
                    A marketplace participant shall not intentionally [emphasis added]
                    (a)   enter on a marketplace a protected order to buy a security at a price that is the same as or higher than the
                          best protected offer; or
                    (b)   enter on a marketplace a protected order to sell a security at a price that is the same as or lower than the
                          best protected bid.
          For the purposes of the Trading Rules, a marketplace participant includes a Participant or Access Person under
          UMIR. 2 Rule 2.3 of UMIR provides that a Participant or Access Person shall not enter an order on a marketplace or
          execute a trade if the Participant or Access Person knows or ought reasonably to know that the entry of the order or
          the execution of the trade would not comply with a number of requirements including applicable securities legislation.
          As such, the entry of an order that does not comply with the Locked and Crossed Order Provisions will
          constitute a violation of Rule 2.3 and may constitute a violation of other provisions of UMIR.
          Questions and Answers
          The following are questions relating to the obligations of a Participant under UMIR in the context of a “locked” or
          “crossed” market and IIROC’s response to each question:
               1.         Is the entry of any order that results in a “locked market” a violation of a Participant’s or Access
                          Person’s obligations under the Locked and Crossed Order Provisions or UMIR?
                          Not necessarily. Companion Policy 23-101CP recognizes that locked or crossed markets may occur
                          unintentionally and several examples of “unintentional” locks are set out in the Companion Policy. 3 IIROC
                          will measure compliance with the requirements based on the information which a Participant or Access
                          Person has or should have had at the time of the entry of the order on a marketplace and how that
                          information has been used in making their order routing decisions.
                          IIROC recognizes that “locked” or “crossed” markets may be created unintentionally as a result of:
                            •    “race conditions” when competing orders are entered on protected marketplaces at essentially the
                                 same time with neither party having knowledge of the other order at the time of entry;
                            •    ordinary differences in processing times and latencies between the systems of the Participant or
                                 Access Person, the various marketplaces, service providers, the information processor and
                                 information vendors;
                            •    a failure, malfunction or material delay in the systems of a Participant or Access Person,
                                 marketplace, service provider, information processor or information vendor;
                            •    the use of a “bypass order” by a Participant or Access Person (generally in connection with the “best
                                 price” obligations of the Participant pursuant to the Order Protection Rule to orders on protected



    to come into effect on January 28, 2010 and not on February 1, 2011, the implementation date of other amendments to Part 6
    of the Trading Rules related to the introduction of “a framework to require all visible, immediately accessible, better-price limit
    orders to be filled before other limit orders at inferior prices, regardless of the marketplace where the order in entered” (“Order
    Protection Rule”). When the Order Protection Rule became effective on February 1, 2011, the Locked and Crossed Order
    Provisions became section 6.5 of the Trading Rules.
2
    Reference should be made to section 1.1 of the Trading Rules for the definitions of “protected order”, “protected bid” and
    “protected offer”.
3
    See subsection (2) of section 6.4 of Companion Policy 23-101CP which provides:
         Section 6.5 of the Instrument prohibits a marketplace participant from intentionally locking or crossing a market. This
         would occur, for example, when a marketplace participant enter a locking or crossing order on a particular marketplace or
         marketplaces to avoid fees charged by a marketplace or to take advantage of rebates offered by a particular marketplace.
         There are situations where a locked or crossed market may occur unintentionally and provides for the following examples:
         (a) when a marketplace participant routes multiple directed-action orders that are marked immediate-or-cancel to a
             variety of marketplaces and because of latency issues, a locked or crossed market results”.
         (b) the locking or crossing order was displayed at a time when the marketplace displaying the locked or crossed order
             was experiencing a failure, malfunction or material delay of its systems, equipment or ability to disseminate
             marketplace data;
         (c)   the locking or crossing order was displayed at a time when a protected bid was higher than a protected offer;
         (d) the locking or crossing order was posted after all displayed liquidity was executed and a reserve order generated a
             new visible bid above the displayed offer or offer below the displayed bid.




Part 2 – Abusive Trading                                                                                                       UMIR 2.3-2
January 1, 2013
                           marketplaces when using a “directed action order” or when intending to execute certain types of
                           trades on a foreign organized regulated market) that has the effect of initially “bypassing” hidden
                           liquidity at better prices and that hidden liquidity emerges immediately after the execution of the
                           bypass order;
                      •    marketplaces having different mechanisms to “restart” trading following a halt in trading for either
                           regulatory or business purposes; and
                      •    the execution of Opening Orders or Market-on-Close on a particular protected marketplace when
                           trading is on-going (in the case of Opening Orders) or continues (in the case of Market-on-Close
                           Orders) on at least one other protected marketplace.
                   In addition, it will not be considered to be an intentional “lock” of markets when securities legislation requires
                   that the order be entered on or executed on a particular marketplace. For example, an order may be entered
                   on a particular marketplace when an order is already displayed on another marketplace on the other side of
                   the market at the same price, if the securities being sold are subject to resale restrictions in the United States
                   are sold in Canada on a “designated offshore securities market” under Rule 904 of Regulation S of the
                   Securities Act of 1933. 4 However, the requirement to execute the order on a particular marketplace or class
                   of marketplace would not permit the intentional entry of an order that would have the effect of “crossing” the
                   markets.
                   If a Market Integrity Official of IIROC determines that a Participant or Access Person has entered an order
                   which locks or crosses the market in circumstances which are contrary to the Locked and Crossed Order
                   Provisions or UMIR, IIROC may require the Participant or Access Person to take steps to “unlock” or
                   “uncross” the market.
            2.      Is a Participant required to move a properly “booked” order on one marketplace to another
                    marketplace to trade with an order that was subsequently entered on that other marketplace where
                    the latter order caused a “locked market”?
                   No. A Participant is not required to “migrate” a resting order on a marketplace to another marketplace to
                   trade with an order that resulted in a “locked market”. Insofar as a Participant has not “bid-through” or
                   “offered-through” an order on another marketplace when entering an order on the “resting” marketplace, a
                   Participant is under no obligation to move its resting order to another marketplace to trade with an order
                   entered after the “booked” order was entered. For greater certainty, if an order is entered on a marketplace
                   at a price which at the time of entry would not be executable against better-priced orders visible on a
                   protected marketplace, the Participant is in compliance with “best execution” obligations.
                   Nonetheless, a Participant may decide to “migrate” a client order to the other marketplace to increase the
                   probability of execution. In making such a decision under the “best execution” obligation of the Participant,
                   the Participant would have to give due consideration to the possible loss of priority if the existing order is
                   moved and the likelihood of full execution should the order be moved to that other marketplace. The
                   circumstances under which a Participant would move an order to another marketplace are based on the
                   “best execution” policies and procedures adopted by the Participant.
                   IIROC expects that the policies and procedures adopted by a Participant to achieve “best execution” will set
                   out the circumstances under which properly “booked” client orders will “migrate” and that the Participant will
                   inform its clients of such policy and its implications. In the view of IIROC, the adoption of such policy and its
                   communication to clients will reduce the likelihood of client confusion with respect to the question of “when
                   and where” client orders will trade. 5
            3.     May an order to purchase a security be entered on a marketplace if an order to sell the same security
                   at the same price has been entered on another marketplace by the same person or group of
                   persons?
                   No. Not only is the market being intentionally locked contrary to the Locked and Crossed Order Provisions
                   but Rule 2.2 of UMIR prohibits a Participant or Access Person from entering an order on a marketplace if the


4
    Previously only the Toronto Stock Exchange and TSX Venture Exchange qualified as a “designated offshore securities
    market”. Reference should be made to Market Integrity Notice 2006-006 – Guidance – Sale of Securities Subject to Certain
    United States Securities Laws (February 16, 2006). On March 8, 2010, CNSX Markets Inc. announced that CNSX and Pure
    Trading had “designated offshore securities market” status from the United States Securities and Exchange Commission.
5
    In many ways, the expectations of IIROC are comparable to what IIROC expects in the handling of a client “Good-Till -
    Cancelled Order” that has been booked on a marketplace that either opens later or closes earlier than other marketplaces
    trading the same security.




Part 2 – Abusive Trading                                                                                                  UMIR 2.3-3
January 1, 2013
                    Participant or Access Person knows or ought reasonably to know that the entry of the order will create, or
                    could reasonably be expected to create, a false or misleading appearance of trading activity in or interest in
                    the purchase or sale of the security. If the orders for purchase and sale had been entered on the same
                    marketplace, the orders would have executed and the resulting trade would be considered a “wash trade”. In
                    the view of IIROC, a Participant or Access Person that enters an order on one marketplace for the purchase
                    of a security and enters another order for the sale of the same security at the same price on another
                    marketplace for the benefit of the same person or group of persons has engaged in a manipulative and
                    deceptive activity contrary to Rule 2.2. 6
               4.   Are all “rebate arbitrage” strategies acceptable?
                    No. Under a “make-or-take” trading fee model, a marketplace rewards persons who post limit orders on its
                    marketplace by paying a “make” or “liquidity providing” rebate fee. Conversely, a marketplace charges a
                    “take” fee for an order that interacts with the posted limit orders. The marketplace generally profits from the
                    spread on the price it pays for liquidity and charges for orders that trade with such liquidity. Currently, each
                    marketplace may establish the fees it pays or charges for orders that either “make” or “take” liquidity. 7
                    If a market participant intentionally creates or continues a “locked” market in an attempt to maximize the
                    amount of liquidity rebates that the market participant earns, such behaviour is not in compliance with the
                    Locked and Crossed Order Provisions and is therefore not in compliance with Rule 2.3 of UMIR dealing with
                    improper orders and trades. In addition, Rule 2.2 of UMIR prohibits a Participant or Access Person from
                    entering an order on a marketplace if the Participant or Access Person knows or ought reasonably to know
                    that the entry of the order will create or could reasonably be expected to create a false or misleading
                    appearance of trading activity in or interest in the purchase or sale of the security. In the view of IIROC, a
                    Participant or Access Person is engaging in an activity analogous to “double printing” contrary to Rule 2.2 of
                    UMIR if the Participant or Access Person enters orders on a protected marketplace that, upon execution, is
                    followed immediately by the entry on a protected marketplace of an order for the same security at the same
                    price on the other side of the market which has the effect of creating or continuing a “locked” market.
               5.   Is it a violation of UMIR to enter an order on a marketplace that “bids-through” or “offers-through” an
                    order on another marketplace even if the order that “bids-through” or “offers-through” does not
                    “trade”?
                    Yes. Such behaviour is not in compliance with the Locked and Crossed Order Provisions. 8 In addition, IIROC
                    is of the view that a Participant who intentionally “bids-through” (enters a purchase order that is booked on a
                    marketplace at a price which is higher than an offer to sell that security on another protected marketplace) or
                    “offers-through” (enters a sell order that is booked on a marketplace at a price which is lower than a bid to
                    purchase that security on another protected marketplace) is in a breach of Rule 2.1 of UMIR governing just
                    and equitable principles of trade since such orders will result in a “crossed market”. Furthermore, if the
                    Participant is entering a client order when “bidding-through” or “offering-through”, the Participant may be in
                    violation of the “best execution” requirements under Rule 5.1 to diligently pursue the execution of the client
                    order on the most advantageous execution terms reasonably available under the circumstances.
               6.   During a “crossed” market, may a Participant or Access Person execute against the order that has
                    caused a “crossed” market or the order that was “bid-through” or “offered-through”?
                    Yes. The entry of an order that is a “bid-through” or “offer-through” will result in a “crossed” market. If the
                    Participant or Access Person has not taken reasonable efforts to avoid the “bid-through” or “offer-through”,
                    the Participant or Access Person will have violated UMIR. However, IIROC also recognizes that, with the
                    significant increases in order message traffic, the incidence of “crossed” markets will also increase without
                    any breach of UMIR having occurred. Once markets are “crossed”, IIROC is of the view that the entry of a
                    subsequent order that has the effect of “uncrossing”, or contributing to the uncrossing of, the markets is
                    allowed under UMIR and the Order Protection Rule. 9


6
    Reference should also be made to Part 3 of the Trading Rules which sets out activities by a client that may be considered
    manipulation and fraud.
7
    Fees established by a marketplace must comply with the access requirements in National Instrument 21-101. See section 5.1
    of National Instrument 21-101 and section 7.1 of Companion Policy 21-101CP for provisions related to exchanges and
    quotation and trade reporting systems and section 6.13 of National Instrument 21-101 and section 8.2 of Companion Policy 21-
    101 CP for provisions related to alternative trading systems.
8
    See section 6.4 of Companion Policy 23-101CP.
9
    See section 6.5 of the Trading Rules and section 6.4 of Companion Policy 23-101CP.




Part 2 – Abusive Trading                                                                                                 UMIR 2.3-4
January 1, 2013
                     For example, if a security is offered on a protected marketplace at $10 and a bid at $11 is entered on
                     another protected marketplace, the entry of the bid at $11 is a “bid-through” and has violated the
                     requirements of UMIR. A Participant or Access Person that subsequently trades with the offer at $10 or the
                     bid at $11 has not violated its obligations under UMIR or the Locked and Crossed Order Provisions provided
                     there are no offers below $10 or bids above $11 on any other protected marketplace. Trading to take
                     advantage of opportunities presented by “crossed” markets fits the UMIR definition of activities permitted by
                     an arbitrage account.
                7.   If markets are “locked”, may a Participant or Access Person intentionally enter an order that would
                     have the effect of increasing the volume displayed at the bid or the ask price?
                     No. Once a Participant or Access Person is aware that the market is locked, the intentional entry of any limit
                     order on a protected marketplace at the price at which the lock has occurred will be considered to not in
                     compliance with the Locked and Crossed Order Provisions.
                8.   What happens if a Participant or Access Person uses an order type or order router functionality that
                     is designed to “reprice” orders and the repricing locks the market?
                     Both the Locked and Crossed Order Provisions and UMIR preclude a Participant or Access Person from
                     intentionally “locking” the market. In the view of IIROC, the Participant or Access Person bears the
                     responsibility if its use of an order type or order router functionality which “reprices” orders which results in
                     their order being repriced to a level that creates a locked market. If the repricing leads to a locked market, or
                     increases the volume of orders displayed at the locked price, the Participant or Access Person will be
                     considered to have intentionally locked the market. Furthermore, the Participant or Access Person bears
                     this responsibility even in circumstances where the actual repricing of the order is being undertaken by a
                     third party such as a service provider or a marketplace.
                9.   May a client instruct the entry of an order that has the effect of creating or continuing a “locked” or
                     “crossed” market?
                     No. Although in the ordinary course, the Participant’s “best execution” obligation would require that the
                     Participant follow its client’s instructions with respect to the handling of an order, compliance with the “best
                     execution” obligation is subject to compliance with applicable regulatory requirements. In light of this, if the
                     client prefers that their order be executed on a particular marketplace, the client may consent to the order
                     being withheld from entry on a marketplace until such time as the prevailing market prices would permit the
                     entry of the order without locking or crossing the market.
                10. May a client electronically enter an order that has the effect of creating or continuing a “locked” or
                    “crossed” market?
                     No. The Participant has the obligation to ensure that orders entered electronically by a client (either with
                     direct market access to a marketplace 10 or with a connection to the order management system of the
                     Participant) does not intentionally lock or cross the market.
                     IIROC recognizes that not all Participants that provide direct market access to clients may currently have this
                     ability. IIROC expects that such Participants will immediately take steps to modify their systems or their
                     procedures for the handling of orders from clients with direct market access in such a way as to permit the
                     Participant to comply with its obligations. IIROC expects that each Participant will have made the necessary
                     modifications within 90 days following the date of this Rules Notice.
                11. May the policies and procedures adopted by a Participant allow it to exclude from consideration
                    protected orders displayed on a particular marketplace?
                     No. The policies and procedures adopted by a Participant to ensure against the intentional locking or
                     crossing of markets must provide that the Participant take account of all protected orders. For example, a
                     Participant may have established a practice of trading on marketplaces that disclose the identifier of the
                     Participant in the order and trade information disseminated by that marketplace. In that case, the policies
                     and procedures adopted to ensure compliance with the Locked and Crossed Market Order Provisions must
                     take account of protected orders displayed by a marketplace that does not disclose Participant identifiers.
                     The Participant would be able to withhold the entry of an order until it could be entered on a preferred
                     marketplace without locking or crossing the market. However, in these circumstances, if the order to be
                     entered is a client order subject to Rule 6.3 of UMIR dealing with the immediate exposure on a transparent
                     marketplace of orders for 50 standard trading units or less, the Participant must have the specific instruction


10
     See Market Integrity Notice 2007-010 – Guidance – Compliance Requirements for Dealer-Sponsored Access Trading (April 20,
     2007).




Part 2 – Abusive Trading                                                                                                   UMIR 2.3-5
January 1, 2013
                   of the client to withhold the order from entry on a marketplace until such time as the prevailing market prices
                   would permit the entry of the order on a marketplace that discloses the identifier of Participants without
                   locking or crossing the market.
               12. Is there an exception from the prohibition on intentionally “locking” or “crossing” markets available
                   for persons with market making obligations?
                   No. Even if a person with market making obligations on a particular marketplace has agreed to maintain a
                   two-sided market with a specified “spread” between the best bid price and best ask price on that
                   marketplace, the market maker may not intentionally enter orders that have the effect of creating, or adding
                   to, a “locked” or “crossed” market.
               13. Are there restrictions on the limit price at which various specialty orders may be entered?
                   No. For example, an Opening Order entered on a particular marketplace may be entered with a bid price
                   that is at or above the best ask price then displayed on a marketplace which is open for trading or with an
                   ask price that is at or below the best bid price then displayed on a marketplace which is open for trading. In
                   these circumstances, the person entering the order does not know what the prevailing market price will be at
                   the time the particular marketplace opens for trading and therefore has not “intentionally” locked or crossed
                   the market. The same holds for orders which are entered to trade at a calculated price or a price that will be
                   established at a future point in time (such as Closing Price Orders, Market-on-Close Orders, Call Market
                   Orders and Volume Weighted Average Price Orders). A Closing Price Order may be entered on a
                   marketplace to trade at the closing sale price of that security on that marketplace on that trading day even
                   though, in the case of an order to buy, the closing price may be at or above the best ask price then displayed
                   on another marketplace or, in the case of an order to sell, the closing price may be at or below the best bid
                   price then displayed on another marketplace.




Part 2 – Abusive Trading                                                                                               UMIR 2.3-6
January 1, 2013
                                                                               Universal Market Integrity Rules
                                                                                      Rules & Policies


PART 3 – SHORT SELLING
3.1      Restrictions on Short Selling – Repealed


POLICY 3.1 – RESTRICTIONS ON SHORT SELLING – Repealed
Part 1 – Entry of Short Sales Prior to the Opening – Repealed
Part 2 – Short Sale Price When Trading Ex-Distribution – Repealed
Regulatory History:      Effective August 27, 2004, the applicable securities commissions approved the amendment to add clause
                         (g) to subsection (2).
                         Effective April 8, 2005, the applicable securities commissions approved an amendment to clause (f) of
                         subsection (2) of Rule 3.1 to add subclause (iv).
                         Effective March 9, 2007, the applicable securities commissions approved an amendment to clause (f) of
                         subsection (2) of Rule 3.1 to add subclause (v).
                         Effective May 16, 2008, the applicable securities commissions approved an amendment to add clause (h) to
                         subsection (2).
                         In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities commissions
                         approved an amendment to clause (h) at subsection (2) of Rule 3.1 that came into force on June 1, 2008 to
                         replace the phrase “Rule or” with “provision of UMIR or a ”.
                         Effective January 8, 2010, the applicable securities commissions approved amendments to subsection (2)
                         of section 3.1 to replace the words “Exchange-traded Fund” by “Exempt Exchange-traded Fund”.
                         Effective August 26, 2011, the applicable securities commissions approved amendments to repeal and
                         replace clause (2)(b) of section 3.1. Prior to that date, clause (2)(b) provided:
                               (b)   made in furtherance of the applicable Market Maker Obligations in accordance with the
                                     Marketplace Rules.
                         On March 2, 2012, the applicable securities commissions approved amendments to repeal Rule 3.1 and
                         Policy 3.1 effective October 15, 2012. Prior to that date, Rule 3.1 and Policy 3.1 provided:
                               3.1     Restrictions on Short Selling
                                       (1)   Except as otherwise provided, a Participant or Access Person shall not make a short
                                             sale of a security on a marketplace unless the price is at or above the last sale price.


                                       (2)   A short sale of a security may be made on a marketplace at a price below the last sale
                                             price if the sale is:
                                             (a)   a Program Trade in accordance with Marketplace Rules;
                                             (b)   made in furtherance of the applicable Marketplace Trading Obligations of that
                                                   marketplace;
                                             (c)   for an arbitrage account and the seller knows or has reasonable grounds to
                                                   believe that an offer enabling the seller to cover the sale is then available and the
                                                   seller intends to accept such offer immediately;
                                             (d)   a Program Trade in accordance with Marketplace Rules;
                                             (e)   made in furtherance of the applicable Marketplace Trading Obligations of that
                                                   marketplace;
                                             (f)   for an arbitrage account and the seller knows or has reasonable grounds to
                                                   believe that an offer enabling the seller to cover the sale is then available and the
                                                   seller intends to accept such offer immediately;
                                             (g)   a Program Trade in accordance with Marketplace Rules;




Part 3 – Short Selling                                                                                                     UMIR 3.1-1
January 1, 2013
                                                (h)   a Program Trade in accordance with Marketplace Rules;
                                                (i)   made in furtherance of the applicable Marketplace Trading Obligations of that
                                                      marketplace;
                                                (j)   for an arbitrage account and the seller knows or has reasonable grounds to
                                                      believe that an offer enabling the seller to cover the sale is then available and the
                                                      seller intends to accept such offer immediately;
                                                (k)   for the account of a derivatives market maker and is made:
                                                      (i)    in accordance with the market making obligations of the seller in connection
                                                             with the security or a related security, and
                                                      (ii)   to hedge a pre-existing position in the security or a related security;
                                                (l)   the first sale of the security on any marketplace made on an ex-dividend, ex-
                                                      rights or ex-distribution basis and the price of the sale is not less than the last
                                                      sale price reduced by the cash value of the dividend, right or other distribution;
                                                (m)   the result of:
                                                      (i)    a Call Market Order,
                                                      (ii)   a Market-on-Close Order,
                                                      (iii) a Volume-Weighted Average Price Order,
                                                      (iv) a Basis Order, or
                                                      (v)    a Closing Price Order;
                                                (n)   a trade in an Exempt Exchange-traded Fund; or
                                                (o)   made to satisfy an obligation to fill an order imposed on a Participant or Access
                                                      Person by any provision of UMIR or a Policy.


                                 POLICY 3.1 – RESTRICTIONS ON SHORT SELLING
                                 Part 1 – Entry of Short Sales Prior to the Opening
                                 Prior to the opening of a marketplace on a trading day, a short sale may not be entered on that
                                 marketplace as a market order and must be entered as a limit order and have a limit price at or
                                 above the last sale price of that security as indicated in a consolidated market display (or at or
                                 above the previous day’s close reduced by the amount of a dividend or distribution if the security will
                                 commence ex-trading on the opening).


                                 Part 2 – Short Sale Price When Trading Ex-Distribution
                                 When reducing the price of a previous trade by the amount of a distribution, it is possible that the
                                 price of the security will be between the trading increments. (For example, a stock at $10 with a
                                 dividend of $0.125 would have an ex-dividend price of $9.875. A short sale order could only be
                                 entered at $9.87 or $9.88.) Where such a situation occurs, the price of the short sale order should
                                 be set no lower than the next highest price. (In the example, the minimum price for the short sale
                                 would be $9.88, being the next highest price at which an order may be entered to the ex-dividend
                                 price of $9.875).
                                 In the case of a distribution of securities (other than a stock split) the value of the distribution is not
                                 determined until the security that is distributed has traded. (For example, if shareholders of ABC Co.
                                 receive shares of XYZ Co. in a distribution, an initial short sale of ABC on an ex-distribution basis
                                 may not be made at a price below the previous trade until XYZ Co. has traded and a value
                                 determined).
                                 Once a security has traded on an ex-distribution basis, the regular short sale rule applies and the
                                 relevant price is the previous trade.

 Guidance:                The following is the relevant portion of Market Integrity Notice 2004-020 issued on August 13, 2004 under
                          the heading “Sales of Restricted Securities”:
 Investment Industry Regulatory Organization of Canada (“IIROC”) has recently received a number of inquiries as to whether a sale
 involving a “restricted” security should be marked as a “short sale”. For the purposes of the definition of a “short sale” under the
 Universal Market Integrity Rules, a person will be considered not to own a particular security if the securities they hold are subject
 to a restriction on sale imposed by:
    •   applicable securities legislation; or




Part 3 – Short Selling                                                                                                           UMIR 3.1-2
January 1, 2013
    •   a requirement of a marketplace as a condition of listing or quoting the security.
 If the holder of a security which is subject to a restriction on sale, whether imposed by securities legislation or the rules of a
 marketplace, enters an order on a marketplace for the sale of such security before the expiration of the restrictions on sale
 imposed by securities legislation or the rules of a marketplace, the order must be marked as a “short sale”. In order to
 comply with applicable securities legislation and regulatory requirements, an order for the sale of “restricted” securities should
 marked be as a “short sale” even where the sale restrictions will expire prior to the settlement date of the trade resulting from the
 execution of the order.

 Guidance:               The following is the relevant text of Market Integrity Notice 2005-023 issued on July 29, 2005 under the
                         heading “Guidance – Securities Trading on Multiple Marketplaces”. Market Integrity Notice 2005-023
                         was repealed and replaced by Market Integrity Notice 2006-017 issued on September 1, 2006 under the
                         heading “Guidance – Securities Trading on Multiple Marketplaces”. Additional text is set out from
                         Market Integrity Notice 2005-023 under Rules 5.2, 5.3, 7.7 and 8.1:
 Summary
 This Market Integrity Notice provides guidance on the obligations of a Participant or Access Person under the rules and policies of
 the Universal Market Integrity Rules (“UMIR”) with respect to trading activity in a security that trades on more than one
 marketplace. UMIR defines a marketplace as a recognized exchange (“Exchange”), a recognized quotation and trade reporting
 system (“QTRS”) or an alternative trading system (“ATS”) that carries on business in Canada.
 Background
 National Instrument 21-101 (“Marketplace Operation Instrument”) and National Instrument 23-101 (“Trading Rules”) (together, the
 “ATS Rules”) envisage different marketplaces trading the same securities. Market Regulation Services Inc. (“RS”) is recognized as
 a self-regulatory organization by the Alberta Securities Commission, British Columbia Securities Commission, Manitoba Securities
 Commission, Ontario Securities Commission and, in Quebec, by the Autorité des marchés financiers (the “Recognizing
 Regulators”) and authorized to be a regulation services provider for the purposes of the ATS Rules. RS adopted, and the
 Recognizing Regulators approved, UMIR as the integrity trading rules that would apply in any marketplace that retains RS as its
 regulation services provider.
 Currently, RS has been retained to be the regulation services provider for: the Toronto Stock Exchange (“TSX”), TSX Venture
 Exchange (“TSX V”) and Canadian Trading and Quotation System (“CNQ”), each as an Exchange; and for Bloomberg Tradebook
 Canada Company, Liquidnet Canada Inc. and Markets Securities Inc. (“MSI”), each as an ATS. Until very recently, none of these
 marketplaces executed trades in a security which was also traded on another marketplace. Certain securities are now inter-listed
 between CNQ and TSX V. It is the intention of MSI that upon commencement of operations it will allow trading in all securities
 which are listed on the TSX. In the future, MSI may expand its trading of securities to include securities which are listed on CNQ
 or TSX V.
 Requirements Under UMIR
 UMIR contains a number of rules which require that trading be conducted at the “last sale price”, or at a price that is the same as
 or better than the “best ask price” or “best bid price”. In each case, this price will be determined by reference to order or trade
 information contained in “a consolidated market display”, which is made up of order and trade information from those marketplaces
 to which a Participant or Access Person has access. Specifically, a Participant is required to refer to order and trade information
 from each:
    •    Exchange of which they are a member;
    •    QTRS of which they are a user; and
    •    ATS of which they are a subscriber.
 In addition, a Participant would be required to refer to order and trade information from a particular marketplace if the Participant
 has entered into a contractual arrangement as an “introducing broker” with another dealer as “carrying broker” and that other
 dealer is a subscriber, user or member of the marketplace.
 An Access Person is required to refer to order and trade information from each:
    •    Exchange or QTRS to which they have been granted access rights either directly or by means of an electronic connection
         to the order routing system of a member or user;
    •    QTRS of which they are a user; and
    •    ATS of which they are a subscriber.
 Presently, an Access Person who is a subscriber to an ATS would take into consideration order and trade information from that
 ATS, as well as:
    •    the TSX if they have been granted access to the order routing system of a Participant pursuant to TSX Policy 2-501; and
    •    the TSX V if they have been granted access to the order routing system of a Participant pursuant to the “Direct Access
         Rules” of the TSX V.
 While the ATS Rules as originally adopted in 2001 contemplated the existence of a “market integrator” and, in the alternative,
 required each marketplace to maintain an electronic connection to every other marketplace that traded the same securities, both



Part 3 – Short Selling                                                                                                    UMIR 3.1-3
January 1, 2013
 concepts were removed from the ATS Rules with amendments that were effective in 2004. As such, marketplaces are not
 required to have the capacity to route orders to other marketplaces which have better prices.
 As a result, the obligation to monitor information on orders entered on and trades executed on the marketplaces to which a
 Participant or Access Person has access falls to the Participant or Access Person. However, neither UMIR nor the ATS Rules
 requires a Participant or an Access Person to maintain trading access to every Canadian marketplace on which a security may
 trade.
 Each Participant and Access Person should also note that, while Rule 10.15 of UMIR provides that each security shall be assigned
 a unique symbol for trading purposes, securities which are presently inter-listed between CNQ and TSX V have different trading
 symbols on each marketplace. Notwithstanding the difference in trading symbols, a Participant must have adequate procedures in
 place to ensure that order and trade information from each marketplace to which the Participant has access is taken into account
 for the purposes of complying with the applicable requirements of UMIR.
 There are five rules under UMIR for which the requirement to monitor order and trade information from multiple marketplaces is
 most important. Rule 3.1 applies to both a Participant and an Access Person while Rules 5.2, 5.3, 7.7 and 8.1 apply only to a
 Participant. As additional marketplaces develop and as the means for distributing market data on orders and trades evolves, RS
 will review the rules and guidance provided with respect to dealing with securities trading on multiple marketplaces.
           Rule 3.1 – Restrictions on Short Selling
 Rule 3.1 of UMIR provides that, subject to certain exemptions, neither a Participant nor an Access Person may make a short sale
 below the "last sale price". In turn, the term "last sale price" is defined as the price of the last sale of at least one standard trading
 unit displayed in "a consolidated market display". As set out in Market Integrity Notice 2005-018 (June 10, 2005), RS is proposing
 to replace the definition of a “consolidated market display” with the concept of an “applicable market display” which contains
 information on orders and trades on those marketplaces to which a Participant or Access Person has access. As such, a
 Participant or Access Person may not make a short sale below the “last sale price” of that security as such price is reported for the
 marketplaces to which the Participant or Access Person has trading access. Specifically, the lowest price at which a Participant or
 Access Person may make a short sale will be the lesser of:
      •    the last sale price of the security on the marketplace on which the Participant or Access Person enters the short sale
           order; or
      •    the last sale price of the security on any other marketplace to which the Participant or Access Person has access
           provided such trade occurred subsequent to the last sale on the marketplace on which the Participant or Access Person
           enters the short sale order.
 If the order for the short sale would be immediately executed on entry on a marketplace at a price which complies with Rule 3.1
 due to the last sale price on another marketplace to which the Participant or Access Person has access, the bundled order may be
 marked as “short exempt” if that marker is available on the marketplace on which the order is entered (such as the TSX). If the
 order is entered on a marketplace which does not provide for the inclusion of a “short exempt” marker (such as the TSX V or
 CNQ), the trade should be identified as a “short sale”.
 Example #1: Canadian security ABC is trades on both Marketplace D and Marketplace E. Participant X has trading access to
 Marketplace D only. Participant X executes a short sale of ABC on Marketplace D, based upon the last sale price on Marketplace
 D, even though the last sale price of ABC on Marketplace E was higher at the time of the sale. Participant X is in compliance with
 the short sale rule.
 Example #2: Canadian security ABC trades on both Marketplace D and Marketplace E. Participant X has trading access to both
 Marketplace D and Marketplace E. Participant X executes a short sale of ABC on Marketplace D, based upon the last sale price
 on Marketplace E that is more recent than the last sale on Marketplace D, even though the last sale price of ABC on Marketplace
 D was higher than that on Marketplace E at the time of the short sale. Participant X is in compliance with the short sale rule.

 Guidance:                The following is the relevant text of Market Integrity Notice 2005-024 issued on July 27, 2005 under the
                          heading “Guidance – Short Sales Made in Furtherance of Market Maker Obligations”. Effective as of
                          October 15, 2012, the guidance in Market Integrity Notice 2005-024 was repealed and replaced by
                          that set out in IIROC Notice 12-0300 – Rules Notice – Guidance Note – UMIR – Guidance on “Short
                          Sale“ and “Short-Marking Exempt“ Order Designations (October 11, 2012).
 Summary
 This Market Integrity Notice provides guidance relating to the exemption from the price restrictions on short sales under the
 Universal Market Integrity Rules (“UMIR”) if the sale is made by a person pursuant to their Market Maker Obligations.
 Definition of “Market Maker Obligations”
 UMIR defines “Market Maker Obligations” as the obligations imposed by rules of an exchange (“Exchange”) or quotation and trade
 reporting system (“QTRS”) on a member or user (a “Market Maker”), to guarantee:
      •    a two-sided market for a particular security on a continuous or reasonably continuous basis; and
      •    the execution of orders for the purchase or sale of a particular security which are less than a minimum number of units of
           the security as designated by the marketplace (a “Minimum Guaranteed Fill”).




Part 3 – Short Selling                                                                                                        UMIR 3.1-4
January 1, 2013
 Presently, Registered Traders and Specialists under the market making system of the Toronto Stock Exchange and Market
 Makers under the market making system of the Canadian Quotation and Trade Reporting System are considered to have Market
 Maker Obligations. Since Odd Lot Dealers on the TSX Venture Exchange do not have an obligation to maintain a continuous or
 reasonably continuous two-sided market, their activities do not qualify as Market Maker Obligations.
 Exemption from the Price Restriction on Short Sales
 Under Rule 3.1 of UMIR, a short sale may not be made at a price which is less than the last sale price of the security. If a sale is
 being executed in accordance with Market Maker Obligations, the sale will be exempt from this price restriction and should be
 marked as a “short exempt” trade. If a marketplace does not have such a marker available the trade should be marked in the
 same manner as a sale from a “long” position.
 Given the requirement under Market Maker Obligations to maintain a two-sided market and to provide automatic execution of
 orders which are less than the Minimum Guaranteed Fill, Investment Industry Regulatory Organization of Canada is of the view
 that a Market Maker may execute a trade with an order at the “best bid price” that is for the Minimum Guaranteed Fill or less by
 making a short sale that is exempt from the general price restriction under Rule 3.1. A Market Maker may make such an exempt
 short sale even if the Market Maker is already in a short position with respect to the particular security. In addition, trades which
 are automatically generated by the trading system of the Exchange or QTRS to fulfill Market Maker Obligations may be made at a
 price which is less than the last sale price of the security.
 A trade executed by a Market Maker which is not pursuant to Market Maker Obligations is subject to the price restrictions on short
 sales and should be properly marked as a “short sale”.

 Guidance:                The following is the relevant text of Market Integrity Notice 2005-025 issued on July 27, 2005 under the
                          heading “Guidance – Bundling Orders from a Long and Short Position”. Effective as of October 15,
                          2012, the guidance in Market Integrity Notice 2005-025 was repealed and replaced by that set out in
                          IIROC Notice 12-0300 – Rules Notice – Guidance Note – UMIR – Guidance on “Short Sale“ and
                          “Short-Marking Exempt“ Order Designations (October 11, 2012).
 Summary
 This Market Integrity Notice provides guidance on the obligations of a Participant or Access Person under the Universal Market
 Integrity Rules (“UMIR”) with respect to the entry of orders and the execution of trades involving the bundling together of sale
 orders from a long position and a short position.
 General Requirement
 Generally, a sale order from a long position may not be bundled together with a sale order from a short position and entered on a
 marketplace as a single order. The orders should be entered separately, one being entered as a sale order from a long position
 and the other entered as a sale order from a short position and marked with the appropriate designation as required by Rule 6.2 of
 UMIR.
 Exceptions
 A sale order from a long position may be bundled with a sale order from a short position if:
      •    the bundled order is entered on a marketplace for the account or accounts of a single beneficial owner; or
      •    the bundled order is part of an intentional cross.
 These exceptions are not available in certain circumstances and a bundled order involving sales from both a long and a short
 position must not be entered on a marketplace:
       •    prior to the opening of trading on that marketplace as the “short” element of the order might adversely impact the price
            at which the security opens for trading on that marketplace; or
       •    during a trading session when all trades in a particular security are executed at a single price.
 Marking a Bundled Order
 On entry, the bundled order should be marked as “short exempt” if that marker is available on the marketplace on which the order
 is entered (such as the Toronto Stock Exchange). If the order is entered on a marketplace which does not provide for the inclusion
 of a “short exempt” marker (such as the TSX Venture Exchange and Canadian Trading and Quotation System Inc.), the trade
 should not be identified as a “short sale”.
 Compliance with Short Sale Restrictions
 The short sale component of the trade will be considered to comply with the requirement under Rule 3.1 that a short sale not be
 undertaken at a price less than the last sale price. In executing a bundled order, the long portion of the order will be deemed to
 have traded first. If the bundled order does not fully execute in a single transaction, the Participant or Access Person must ensure
 that the short portion of a bundled order does not execute at a price lower than the last sale price.
 A sale from a long position, at a price that is below the previous sale price, can be used as the last sale price for a subsequent
 short sale by the same beneficial holder of the security. However, a person will be considered to have undertaken a manipulative
 or deceptive activity contrary to Rule 2.2. of UMIR if that person purchases a security at a price for the purpose of establishing a
 last sale price to facilitate a short sale at that price. For example Client X, who wishes to sell short a total of 1,000 shares can not
 purchase 100 shares at a price lower than the immediately preceding last sale and then execute a short sale of 1,100 shares at the
 first purchase price.



Part 3 – Short Selling                                                                                                      UMIR 3.1-5
January 1, 2013
 Guidance:                The following is the relevant text of Market Integrity Notice 2005-028 issued on July 29, 2005 under the
                          heading “Guidance – Sale of Securities Subject to Transfer Restrictions Only in the United
                          Securities”:
 Summary
 This Market Integrity Notice provides guidance on the requirements under the Universal Market Integrity Rules (“UMIR”) with
 respect to the sale of securities which are subject to transfer restrictions only in the United States or to residents of the United
 States and are otherwise “freely-tradable” on a Canadian marketplace (a ”U.S. Restricted Security”).
 Background
 A Participant may be asked by a client to facilitate the sale or transfer of a listed security or a quoted security that qualifies as a
 U.S. Restricted Security due to transfer restrictions imposed pursuant to securities legislation in the United States, particularly Rule
 144A under the Securities Act of 1933. Such restrictions do not preclude a person who is not a resident of the United States from
 purchasing the securities on a marketplace in Canada.
 However, if the securities to be sold or transferred are subject to restrictions on transfer imposed by Canadian securities legislation
 or the marketplace on which the securities are listed or quoted, any transaction must comply with those requirements. For
 guidance on the sale on a marketplace of securities in these circumstances, reference should be made to Market Integrity Notice
 2004-020 – Sales of Restricted Securities issued on August 13, 2004.
 Entry of Orders for the Sale of a U.S. Restricted Security
 As a general rule, an order for the sale of a U.S. Restricted Security may be entered on a marketplace as:
      •    part of an intentional cross at a price between the best ask price and the best bid price when the Participant knows that
           the purchaser is not a resident of the United States or otherwise subject to the transfer restriction; or
      •    a Special Terms Order (that is subject to the condition that the purchaser not be a resident of the United States).
 Orders entered as an intentional cross at a price between the best ask price and the best bid price may be executed on a
 marketplace without concern about potential interference by a party who may not be qualified to acquire the securities.
 If a Participant enters an order on a marketplace to sell a U.S. Restricted Security as a Special Terms Orders at a price below the
 best bid price, the Participant must contact each Participant and Access Person who has entered orders disclosed in a
 consolidated market display at a better price than the price of the Special Terms Order and offer to satisfy their orders up to the
 volume of the Special Terms Order provided the Participant or Access Person is eligible to purchase the U.S. Restricted Security.
 If each Participant or Access Person with a better-priced order is either unwilling or unable to acquire the U.S. Restricted Security,
 the Special Terms Order may be executed at an inferior price with a party that is able to acquire the U.S. Restricted Security.
 Marking Orders for the Sale of a U.S. Restricted Security
 An order to sell a U.S. Restricted Security entered on a marketplace will be considered to be a “short sale” for the purposes of the
 definition under Rule 1.1 of UMIR unless the seller has a reasonable belief that they will be able to deliver the security without
 restriction on the settlement date of the trade. Since the restriction under Rule 144A ceases to have effect when the security is
 acquired on a marketplace by a person who is not resident in the United States, the sell order may be marked in accordance with
 Rule 6.2(1)(b)(ix) as “short exempt”, being a short sale that is exempt from the restriction under Rule 3.1 that the sale be
 completed at a price not less than the last sale price of the security.

 Guidance:                The following is the relevant text of Market Integrity Notice 2006-006 issued on February 17, 2006 under
                          the heading “Guidance – Sale of Securities Subject to Certain United States Securities Laws”:
 Summary
 This Market Integrity Notice provides guidance relating to a transfer of securities into Canada from the United States in reliance on
 Rule 904 under Regulation S - Rules Governing Offers and Sales Made Outside the United States Without Registration Under the
 Securities Act of 1933 (“Regulation S”).
 Background
 A Participant may be asked by a client to facilitate the sale into Canada of a security that was privately placed in the United States
 and is listed, quoted or traded on a marketplace in Canada. Such a security is subject in the United States to the jurisdiction of the
 United States Securities and Exchange Commission (“SEC”). A Participant may transfer such a security into Canada where the
 Participant complies with all relevant United States and Canadian securities laws.
 In Regulation S, the SEC has set out a regime whereby certain securities offered and sold outside the United States need not be
 registered with the SEC. A Participant may rely on Regulation S when facilitating the sale of a security on a marketplace in
 Canada from the United States. In conducting such a sale, the Participant must ensure compliance with Regulation S and all other
 relevant United States securities laws.
 Sale into Canada as an “Offshore Transaction” under Rule 904 of Regulation S
 One of the general conditions of Rule 904 under Regulation S is that an offer, sale or resale of the securities must be made in an
 “offshore transaction”. An “offshore transaction” can be, among other things:




Part 3 – Short Selling                                                                                                      UMIR 3.1-6
January 1, 2013
      •    a transaction where no offer is made to a person in the United States and the transaction is executed through the
           facilities of a "designated offshore securities market" where neither the seller nor any person acting on its behalf knows
           that the transaction has been prearranged with a buyer in the United States; or
      •    a transaction where no offer is made to a person in the United States and where the buyer must be outside the United
           States or the seller and any person acting on its behalf must reasonably believe the buyer is outside the United States.
 As of February 17, 2006, the Toronto Stock Exchange (“TSX”) and the TSX Venture Exchange (“TSXV”) are the marketplaces in
 Canada that qualify as a “designated offshore securities market” for the purposes of Regulation S. A Participant may satisfy the
 requirements for an “offshore transaction” by facilitating the sale into Canada of a security through the facilities of the TSX or TSXV
 if:
      •    neither the Participant nor the selling client “knows that the transaction has been prearranged with a buyer in the United
           States”; or
      •    the Participant follows the procedure set out in Market Integrity Notice 2005-028 - Sale of Securities Subject to Transfer
           Restrictions Only in the United States.
 However, if the sale is completed through the facilities of a marketplace in Canada that does not qualify as a “designated
 offshore securities market”, IIROC is of the view that the Participant must comply with the procedure set out in Market Integrity
 Notice 2005-028 and ensure that the order is entered on the marketplace as:
      •    part of an intentional cross at a price between the best ask price and the best bid price when the Participant knows that
           the purchaser is outside the United States and complies with any other restrictions on ownership; or
      •    a Special Terms Order that is subject to the condition that the purchaser be outside the United States and complies with
           any other restrictions on ownership.
 If the Participant enters the order on the Canadian marketplace as a Special Terms Order at a price below the best bid price, the
 Participant must contact each Participant and Access Person who has entered orders disclosed in a consolidated market display at
 a better price than the price of the Special Terms Order and offer to satisfy their orders up to the volume of the Special Terms
 Order provided the Participant or Access Person is a purchaser outside the United States and complies with any other restrictions
 on ownership. If each Participant or Access Person with a better-priced order is either unwilling or unable to acquire the security,
 the Special Terms Order may be executed at an inferior price with a party that is able to acquire the security.
 It is the responsibility of the Participant to ensure compliance with all relevant aspects of Regulation S including, but not limited to,
 the offshore transaction requirement. In particular, a Participant must ensure that the sale into Canada is bona fide and not, for
 example, for the purpose of “washing off” a legend with resale restrictions imposed on “restricted securities” under Rule 144A
 under the Securities Act of 1933 (United States) to facilitate the immediate re-sale of the securities into the United States. If a
 Participant is unsure of any of its obligations under United States securities laws, including sales pursuant to rules under
 Regulation S other than Rule 904, IIROC recommends that the Participant consult with United States legal counsel.
 Order Marking on a Canadian Marketplace
 As set out in Market Integrity Notice 2005-028, if a Participant is asked to facilitate the sale into Canada of a security that is subject
 to resale restrictions in the United States, for example, by virtue of having been acquired under Rule 144A or Regulation D under
 the Securities Act of 1933, then an order to sell that security entered on a Canadian marketplace will generally be considered to be
 a “short sale” for the purposes of the definition under Rule 1.1 of UMIR. However, as the restriction will “disappear” upon the
 execution of a trade in Canada that complies with requirements of securities legislation in the United States, the sell order may be
 marked in accordance with Rule 6.2(1)(b)(ix) as “short exempt” on those marketplaces and facilities that permit that marker (and
 otherwise marked “short” if the “short exempt” marker is not supported) if the Participant effects the trade for “regular delivery” and
 the Participant would need to borrow free-trading securities to complete settlement while arranging for the removal of any
 restrictive legend. If the trade is completed as a Special Terms Order with “delayed delivery” to allow time before settlement for
 the removal of any restrictive legend, the sale will be considered to have been made from a “long” position and will not be marked
 as “short”.

 Guidance:                The following is the relevant text of Market Integrity Notice 2006-010 issued on April 7, 2006 under the
                          heading “Guidance – Short Sale Designations and Restrictions”. Effective as of October 15, 2012,
                          the guidance in Market Integrity Notice 2006-010 was repealed and replaced by that set out in
                          IIROC Notice 12-0300 – Rules Notice – Guidance Note – UMIR – Guidance on “Short Sale“ and
                          “Short-Marking Exempt“ Order Designations (October 11, 2012).

 Summary
 This Market Integrity Notice provides guidance relating to the conduct of short sales and the need to designate such orders on
 entry on a Canadian marketplace as “short” or “short exempt” for the purposes of the Universal Market Integrity Rules (“UMIR”).
 Questions and Answers
 The following is a list of frequently asked questions regarding the conduct of “short sales” (including the appropriate order
 designation and the application of price restrictions in particular circumstances) and the response of Investment Industry
 Regulatory Organization of Canada (“IIROC”) to each:
      1.   Must a sell order be marked “short” if the security is trading on a marketplace on a “when issued” basis?




Part 3 – Short Selling                                                                                                        UMIR 3.1-7
January 1, 2013
           If a person has entered into a contract to purchase a security by subscription to an offering or purchase on a “when
           issued” basis over-the-counter or on a marketplace or would become the holder of such security as a result of an
           arrangement, amalgamation or take-over bid, that person may sell such “when issued” securities on a marketplace
           which has posted a “when issued” market for that security and the order for the sale will be considered to be from a long
           position and should not be marked “short”.
           However, if a marketplace has a “regular” market in units of that security which are issued and outstanding any sell order
           entered in the “regular” market by that person for the sale of their “when-issued” security, the sale will be considered a
           “short sale” and must be marked as such in accordance with Rule 6.2 of UMIR.
           If a person does not have an entitlement to receive a security when that security is issued, any sale of that security in
           either the “when issued” or the “regular” market will be considered to be a “short sale”.
           For a more detailed discussion of issues related to securities trading on a “when issued” basis, reference should be
           made to Market Integrity Notice 2006-002 – Guidance - “When Issued” Trading (January 30, 2006).
      2.   What price restrictions apply to the short sale of a security that has not previously traded on a Canadian
           marketplace?
           Under Rule 3.1 of UMIR, a short sale may not be made at a price which is less than the “last sale price”. The term “last
           sale price” is defined in Rule 1.1 of UMIR as the “price of the last sale of at least one standard trading unit of a particular
           security displayed in a consolidated market display but does not include the price of a sale resulting from an order that is
           a Basis Order, Call Market Order or Volume-Weighted Average Price Order.” The consolidated market display includes
           information on order or trades on an Exchange, QTRS or ATS operating in Canada. Information on trades which have
           occurred outside of Canada does not establish a last sale price for a security.
           In accordance with Rule 1.2(4) of UMIR, if a security has not previously traded on a Canadian marketplace the “last sale
           price” shall be deemed to be the price at which the security has been issued or distributed to the public.
      3.   What restrictions apply to the entry of a short sale on a marketplace prior to the marketplace opening for
           trading?
           In accordance with Part 1 of Policy 3.1 of UMIR, a short sale may not be entered on a marketplace prior to the opening
           of that marketplace for trading as a market order. In these circumstances, the short sale must be entered as a limit order
           and have a limit price at or above the last sale price of that security as indicated in a consolidated market display (or at
           or above the previous day’s close reduced by the amount of a dividend or distribution if the security will commence ex-
           trading on the opening).
      4.   Must an order to sell a security subject to a U.S. resale restriction be marked “short” when the order is entered
           on a Canadian marketplace?
           If a Participant is asked to facilitate the sale into Canada of a security that is subject to resale restrictions in the United
           States, for example, by virtue of having been acquired under Rule 144A or Regulation D under the Securities Act of
           1933, then an order to sell that security entered on a Canadian marketplace will generally be considered to be a “short
           sale” for the purposes of the definition under Rule 1.1 of UMIR. However, as the restriction will “disappear” upon the
           execution of a trade in Canada that complies with requirements of securities legislation in the United States, the sell
           order may be marked as “short exempt” in accordance with Rule 6.2 of UMIR on those marketplaces and facilities that
           permit that marker (and otherwise marked “short” if the “short exempt” marker is not supported) if the Participant effects
           the trade for “regular delivery” and the Participant would need to borrow free-trading securities to complete settlement
           while arranging for the removal of any restrictive legend. If the trade is completed as a Special Terms Order with
           “delayed delivery” to allow time before settlement for the removal of any restrictive legend, the sale will be considered to
           have been made from a “long” position and will not be marked as “short”.
           For a more detailed discussion of issues related to sales of securities subject to a U.S. resale restriction, reference
           should be made to Market Integrity Notice 2006-006 – Guidance - Sale of Securities Subject To Certain United States
           Securities Laws (February 17, 2006).
      5.   Must an order to sell a security that is subject to a resale restriction under applicable Canadian securities
           legislation (for example a four-month “private placement” hold period) be marked “short”?
           For the purposes of the UMIR definition of a “short sale”, a person will be considered not to own a security if the security
           is subject to a restriction on sale imposed by applicable Canadian securities legislation or a Canadian marketplace as a
           condition of listing or quoting the security.
           A holder of a security which is subject to such a sale restriction who enters an order on a Canadian marketplace for the
           sale of the security before the expiration of the sale restriction must mark the sale order as “short”. This obligation to
           mark the order as “short” applies even if the sale restriction will expire prior to the settlement date of the trade.
           For a more detailed discussion of the trading of restricted securities, reference should be made to Market Integrity Notice
           2004-020 – Sales of Restricted Securities (August 13, 2004).
      6.   A person holds an option and intends to pay the exercise price of the option from the proceeds of the sale of
           the securities that will be issued on the exercise of the option. Must the sell order be designated as “short”?




Part 3 – Short Selling                                                                                                       UMIR 3.1-8
January 1, 2013
           The definition of “short sale” in Rule 1.1 of UMIR states that a seller shall be considered to own a security if the seller
           “has an option to purchase the security and has exercised the option”. Since the holder of the option has not done
           everything required to exercise the option (including the payment of the exercise price) at the time of the proposed sale,
           any sell order for the underlying securities must be designated as “short” and will be subject to the price restrictions
           under Rule 3.1 of UMIR.
      7.   Must an order be marked “short” where it is a bundled order of a “long” and “short” position?
           Generally, sell orders from both a long position and a short position may not be bundled together. However, a sale order
           from a long position may be bundled with a sale order from a short position if:
                •     the bundled order is entered on a marketplace for the account or accounts of a single beneficial owner; or
                •     the bundled order is part of an intentional cross.
           These exceptions are not available in certain circumstances and a bundled order involving sales from both a long and a
           short position must not be entered on a marketplace:
                  •   prior to the opening of trading on that marketplace as the “short” element of the order might adversely impact
                      the price at which the security opens for trading on that marketplace; or
                  •   during a trading session when all trades in a particular security are executed at a single price.
           On entry, an order bundling a “long” and a “short” order together should be marked as “short exempt” if that marker is
           available on the marketplace on which the order is entered. If the order is entered on a marketplace which does not
           provide for the inclusion of a “short exempt” marker, the sell order should not be designated as a “short sale”. In
           executing a bundled order, the long portion of the order will be deemed to have traded first. The short portion of the
           order will be deemed to comply with the price restriction requirement under Rule 3.1 of UMIR. If the bundled order does
           not fully execute in a single transaction, the Participant or Access Person must ensure that the short portion of the order
           does in fact comply with the price restriction requirement under Rule 3.1.
           Reference should be made to Market Integrity Notice 2005-025 – Bundling Orders from a Long and Short Position (July
           27, 2005).

 Guidance:                The following is the relevant text of Market Integrity Notice 2006-017 issued on September 1, 2006 under
                          the heading “Guidance – Securities Trading on Multiple Marketplaces”. Additional text is set out under
                          Rules 5.1, 5.2, 5.3, 7.7 and 8.1:
 Background
 National Instrument 21-101 (“Marketplace Operation Instrument”) and National Instrument 23-101 (“Trading Rules”) (together, the
 “ATS Rules”) envisage different marketplaces trading the same securities. Investment Industry Regulatory Organization of
 Canada (“IIROC”) is recognized as a self-regulatory organization by the Alberta Securities Commission, British Columbia
 Securities Commission, Manitoba Securities Commission, Ontario Securities Commission (“OSC”) and, in Quebec, by the Autorité
 des marchés financiers (the “Recognizing Regulators”) and authorized to be a regulation services provider for the purposes of the
 ATS Rules. IIROC adopted, and the Recognizing Regulators approved, UMIR as the integrity trading rules that would apply in any
 marketplace that retains IIROC as its regulation services provider.
 Currently, IIROC has been retained to be the regulation services provider for: the Toronto Stock Exchange (“TSX”), TSX Venture
 Exchange (“TSXV”) and Canadian Trading and Quotation System (“CNQ”), each as an Exchange; and for Bloomberg Tradebook
 Canada Company (“Bloomberg”), Liquidnet Canada Inc. (“Liquidnet”), Perimeter Markets Inc. (“BlockBook”) and Shorcan ATS
 Limited (“Shorcan”), each as an ATS.
 CNQ has received approval of the OSC to vary its recognition order to offer trading in securities listed on other Exchange through
 a facility to be known as “Pure Trading” and IIROC will act as the regulation services provider for trading through that facility. Pure
 Trading is expected to launch the first phase of operations on October 12, 2006 with a cross printing facility. The second phase
 consisting of a full continuous auction market will be launched four to six weeks later. Liquidnet has notified the applicable
 securities regulatory authorities that Liquidnet expects to vary its operations by the end of 2006 to allow the matching of orders for
 Canadian listed securities rather than acting solely as an order router. TriAct Canada Marketplace LP (“MATCH Now”) has notified
 the OSC that it intends to launch operations as an ATS that would trade Canadian listed securities. IIROC has received an
 application to act as the regulation services provider for MATCH Now, which expects to launch operations by the end of 2006.
 Conforming UMIR to the Requirements of the Canadian Securities Administrators
 On July 14, 2006, the Canadian Securities Administrators (“CSA”) published a Notice of Proposed Amendments to National
 Instrument 21-101 – Marketplace Operation and Companion Policy 21-101CP and National Instrument 23-101 – Trading Rules
 and Companion Policy 23-101CP (the “CSA Notice”). In the CSA Notice, the CSA clarified their requirements with regard to
 information on orders and trades that each Participant is to take into account when fulfilling best execution obligations. In
 particular, the CSA confirmed their view “that availability of pre-trade and post-trade information is essential to facilitate best
 execution and market integrity, especially with multiple marketplaces trading the same securities”. Although the CSA review of
 “trade-through” and “best execution” obligations generally is ongoing, the CSA proposed to clarify their requirements by amending
 Companion Policy 23-101CP to add the following section:




Part 3 – Short Selling                                                                                                     UMIR 3.1-9
January 1, 2013
           In order to meet best execution obligations, we [the CSA] expect that a dealer will take into account order
           information from all marketplaces where a particular security is traded (not just marketplaces where a dealer is
           a participant) and take steps to access orders, as appropriate. This may include making arrangements with
           another dealer who is a participant of a particular marketplace or routing an order to a particular marketplace,
           where appropriate.
 In the CSA Notice, the CSA indicated that further amendments to the ATS Rules may be proposed on the completion of the study
 following Concept Paper 23-403 – Developments in Market Structure and Trade-Through Obligations published by the CSA on
 July 22, 2005. The provisions of UMIR and their interpretation and application would be modified to conform to the positions
 adopted by the CSA. Upon the publication of the proposed amendments to the ATS Rules respecting trade-through obligations,
 IIROC will issue additional Market Integrity Notices to request comments on proposed amendments to UMIR and to provide further
 guidance on trading practices that may be required as a direct consequence of the final position adopted by the CSA with respect
 to trade-through obligations.
 Until such time as there is an information processor to provide pre-trade and post trade information consolidated for all
 marketplaces, the current “market-driven solution” to data consolidation that relies on information vendors may be subject to
 certain limitations on the ability to integrate data from certain marketplaces based on the basic operating features of those
 marketplaces. In these circumstances, IIROC recognizes that the constraints on the availability of trade information may impact
 the ability of a Participant or Access Person to fully comply with the requirements of UMIR.
 UMIR contains a number of rules which require that trading be conducted at the “last sale price”, or at a price that is the same as
 or better than the “best ask price” or “best bid price”. Each of these prices has been determined by reference to order or trade
 information contained in “a consolidated market display”, which contained orders and trade information from each marketplace to
 which the Participant or Access Person has trading access. Specifically, a Participant has been required to refer to order and
 trade information from each:
      •    Exchange of which they are a member;
      •    QTRS of which they are a user;
      •    ATS of which they are a subscriber; and
      •    a particular marketplace if the Participant has entered into a contractual arrangement as an “introducing broker” with
           another dealer as “carrying broker” and that other dealer was a subscriber, user or member of that marketplace.
 With the publication of the CSA Notice, the CSA clarified that each Participant should make reference to order or trade information
 from each marketplace trading the particular security that has been provided by the marketplace to an information vendor. In
 order to ensure that the provisions and application of UMIR conform to the requirements of the CSA, IIROC:
      •    is issuing this Market Integrity Notice which repeals and replaces Market Integrity Notice 2005-023 – Guidance –
           Securities Trading on Multiple Marketplaces (July 29, 2005) and Market Integrity Notice 2005-015 – Guidance –
           Complying with “Best Price” Obligations (May 12, 2005); and
      •    will be proposing the amendment of Part 1 of Policy 5.2 to remove as qualifications on the “best price”
           obligation factors related to access to information, access to marketplaces and consideration of foreign
           markets.
 Summary of Basic Operating Features of Current Marketplaces
 Appendix “A” includes a summary of the basic features, as of August 22, 2006, of each of the marketplaces for which IIROC acts
 as a regulation services provider. Information is also provided on:
      •    the Pure Trading facility of CNQ as approved by the OSC;
      •    the proposed changes in the operations of Liquidnet which remain subject to the approval of the applicable regulatory
           authorities; and
      •  the proposed operations of MATCH Now which remain subject to the approval of the OSC.
  The summary of features includes:
      •    a description of the marketplace operation model;
      •    the type of securities traded;
      •    access requirements;
      •    provisions for pre-trade transparency;
      •    provisions for post-trade transparency; and
      •    the hours of operation.
 The summary is provided in the context of assisting Participants and Access Persons to ascertain their obligations in accordance
 with the requirements of the CSA as set out in the CSA Notice when trading a security that is eligible to be traded on multiple
 marketplaces. This summary is not meant to be comprehensive of all facilities and features offered, or to be offered, by a
 particular marketplace. Reference should be made to the rules and policies of the marketplace or to material provided by each
 marketplace for a more detailed description of their operations. The information on the proposed changes in operation by
 Liquidnet and the proposed operation by MATCH Now is based on their current intentions and may change prior to
 implementation.



Part 3 – Short Selling                                                                                                  UMIR 3.1-10
January 1, 2013
              Order Transparency
    None of BlockBook, Bloomberg and Liquidnet provides pre-trade transparency as contemplated by Part 7 of the Marketplace
    Operation Instrument of any orders entered on their marketplace. Upon launch of operations, MATCH Now will not provide pre-
    trade transparency of any orders 1. While Shorcan provides pre-trade transparency by means of a web-page available through a
    connection to Reuters, data disseminated in this manner may not be readily incorporated into data feeds provided by other
    information vendors. Each of CNQ, TSX and TSXV provides pre-trade transparency of all orders with the data disseminated
    through a number of information vendors. Upon launch of operations, Pure Trading intends to provide pre-trade transparency of all
    orders with the data disseminated through a number of information vendors.
    BlockBook uses proprietary signalling to indicate to all subscribers the presence of liquidity and pricing of liquidity based on certain
    parameters. In the case of Liquidnet, subscribers are informed if another subscriber has a matching “indication of liquidity”,
    following which a one-on-one negotiation of orders may take place. Reference should be made to Appendix “A” for a summary
    description of these features.
              Trade Transparency
    In accordance with the requirements of the Marketplace Operation Instrument, each marketplace must provide details of each
    trade to an information vendor in a timely manner. Bloomberg and Liquidnet do not provide post-trade transparency as each
    marketplace presently operates as an order router with orders entered on their system being executed on other marketplaces or
    organized regulated markets. While BlockBook and Shorcan provide post-trade transparency by means of a web-page available
    through Reuters, data disseminated in this manner may not be readily incorporated into data feeds provided by other information
    vendors. In addition, BlockBook presently disseminates trade information through TSXDatalinx though no data vendors currently
    offer this data other than through the web-page available through Reuters. Upon the launch by Liquidnet of trading in Canada of
    TSX-listed securities in Canadian funds, post-trade transparency in such securities will be provided by means of a web-page
    available through Reuters (in a manner similar to BlockBook and Shorcan). Each of CNQ, TSX and TSXV provides full post-trade
    transparency of all trades executed on their marketplace with the data disseminated through a number of information vendors.
    Upon launch of operations, both Pure Trading and MATCH Now intend to provide full post-trade transparency of all trades
    executed on their marketplace with the data disseminated through a number of information vendors.
              Limited Access to a Marketplace
    BlockBook limits access to its marketplace to registered dealers and qualified institutional investors that have become subscribers.
    In the case of each of the Exchanges, TSX, TSXV and CNQ (including the “Pure Trading” facility), access to the marketplace is
    limited to dealers that have become “members” of the Exchange. Shorcan limits access to its marketplace to dealers that have
    become subscribers and who enter orders as principal (and not as agent on behalf of clients). MATCH Now will limit access to its
    marketplace to registered dealers who become subscribers. Bloomberg and Liquidnet limit subscribers to “institutional investors”
    (other than dealers). As a result of the differences in access criteria, if a Participant is acting on behalf of a client, the Participant
    would not be able to access orders on Bloomberg, Liquidnet or Shorcan and, if the Participant is acting as principal, the Participant
    would not be able to access orders on Bloomberg or Liquidnet. A Participant that is not a subscriber to Shorcan may not jitney an
    order through a dealer that is a subscriber to Shorcan.
              Manual or Fully-Automated Marketplaces
    With the exception of Shorcan, all of the other marketplaces approved to date provide for fully-automated electronic order entry by
    persons with access. Each of Bloomberg and Liquidnet currently operate as order routers and do not execute or match orders on
    their marketplaces. Upon the launch by Liquidnet of trading in Canada of TSX-listed securities in Canadian funds, order entry will
    be fully automated and trading will occur based on anonymous and direct negotiations conducted electronically between
    subscribers. Each of BlockBook, CNQ, Pure Trading, MATCH Now, TSX and TSXV provide or will provide fully-automated order
    matching and trade execution (and, as such, an order entered on their trading system is electronically and immediately executable
    whether or not the order has been visible in a consolidated market display). On the other hand, Shorcan is a “manual”
    marketplace in which all orders are physically entered on the marketplace by employees of Shorcan and all “indications of interest”
    provided by subscribers to an employee of Shorcan must be confirmed by an employee of Shorcan before entry into the Shorcan
    trading system as an order.
              Requirements Under UMIR
    There are six rules under UMIR for which the requirement to monitor order and trade information from multiple marketplaces is
    most important. Rule 3.1 applies to both a Participant and an Access Person while Rules 5.1, 5.2, 5.3, 7.7 and 8.1 apply only to a
    Participant. As additional marketplaces develop and as the means for distributing market data on orders and trades evolves
    (including the possible introduction of an information processor in response to the CSA Notice), IIROC will review the rules and
    guidance provided with respect to dealing with securities trading on multiple marketplaces. The guidance provided in this
    Market Integrity Notice may be further varied or altered depending upon amendments to the ATS Rules adopted following
    the completion of the review initiated by Concept Paper 23-403 – Developments in Market Structure and Trade-Through
    Obligations.



1
       MATCH Now will provide real-time aggregate liquidity information (symbol and side) to the order routing system used by
       subscribers. This information will not be transparent to subscribers. However, it will provide their routing systems with an
       indication of those securities for which there is a reasonable likelihood that an order routed to MATCH Now will trade.



Part 3 – Short Selling                                                                                                          UMIR 3.1-11
January 1, 2013
 As indicated in the “Summary of Basic Features of Current Marketplaces”, not all marketplaces provide transparency for orders
 entered on that marketplace and the provisions for post-trade transparency vary between marketplaces. In addition, not all
 marketplaces may be accessed by either Participants or Access Persons and not all marketplaces provide fully-automated order
 matching and trade execution. These differences in data dissemination, marketplace access and market structure impact on the
 steps which a Participant or Access Person must take in order to comply with UMIR.
           Rule 3.1 – Restrictions on Short Selling
 Rule 3.1 of UMIR provides that, subject to certain exemptions, neither a Participant nor an Access Person may make a short sale
 below the "last sale price". In turn, the term "last sale price" is defined as the price of the last sale of at least one standard trading
 unit displayed in "a consolidated market display" but excludes the price of a trade resulting from a Basis Order, Call Market Order
 or Volume-Weighted Average Price Order.
 In the absence of an information processor, trade information disseminated by certain marketplaces is not readily incorporated into
 data feeds provided by other information vendors. IIROC is of the view that a Participant or Access Person when determining the
 “last sale price” of a particular security may rely on trade information from the “principal market” for the trading of that security. In
 determining “last sale price” for the purpose of Rule 3.1 (and “last independent sale price” for the purpose of Rule 7.7), IIROC
 would consider a marketplace to be the “principal market” for the trading of the security if:
      •    trade data from the marketplace is disseminated in real-time and electronically through one or more information vendors;
      •    in the previous calendar year, the marketplace had the largest trading volume for that security as among the
           marketplaces that disseminated trade data in real-time and electronically through one or more information vendors; and
      •    the security continues to be traded on that marketplace.
 If a security has not traded on any marketplace for at least one calendar year, IIROC would consider the “principal market” to be:
      •    in the case of a listed or quoted security, the marketplace on which the security was first listed or quoted and on which
           the security continues to trade; or
      •    in the case of security other than a listed security or quoted security, the marketplace on which the security was first
           traded and continues to trade.
 As at the date of this Market Integrity Notice, the “principal market” for any listed security is the Exchange on which the security is
 listed subject to the following exceptions:
      •    XPEL Technologies Corp. which trades on the TSXV under the symbol “DAP.U” while also listed on CNQ under the
           symbol “XPEL” and for which the “principal market” is CNQ; and
      •    United Reef Limited which trades on CNQ under the symbol “URPL” while also listed on the TSXV under the symbol
           “URP” and for which the “principal market” is TSXV.
 In the view of IIROC, the lowest price at which a Participant or Access Person may make a short sale will be the lesser of:
      •    the last sale price of the security on the principal market; or
      •    the last sale price of the security on the marketplace on which the Participant or Access Person enters the short sale
           order provided such trade occurred subsequent to the last sale on the principal market.
 If the order for the short sale would be immediately executed on entry on a marketplace at a price which complies with Rule 3.1
 due to the last sale price on the principal market, the order may be marked as “short exempt” if that marker is available on the
 marketplace on which the order is entered. If the order is entered on a marketplace which does not provide for the inclusion of a
 “short exempt” marker (such as the TSXV or CNQ), the trade should be identified as a “short sale”.
 In the opinion of IIROC, MATCH Now will operate as a “Call Market” in addition to having certain features of a continuous market.
 As a result of this “hybrid” structure, any trade on MATCH Now will not establish the “last sale price”.

 Guidance:                The following is the relevant text of Market Integrity Notice 2007-003 issued on February 28, 2007 under
                          the heading “Guidance – ‘Principal Market’ Determination for 2007”.
 RS initially set out its criteria for the determination of the “principal market” in Market Integrity Notice 2006-017 – Guidance –
 Securities Trading on Multiple Marketplaces (September 1, 2006). In determining “last sale price” for the purpose of Rule 3.1 and
 “last independent sale price” for the purpose of Rule 7.7, RS considers a marketplace to be the “principal market” for the trading of
 the security if:
      •    trade data from the marketplace is disseminated in real-time and electronically through one or more information vendors;
      •    in the previous calendar year, the marketplace had the largest trading volume for that security as among the
           marketplaces that disseminated trade data in real-time and electronically through one or more information vendors; and
      •    the security continues to be traded on that marketplace.
 For securities that were listed on an Exchange on January 1, 2007, the “principal market” during 2007 is the Exchange on which
 the security is listed subject to the following exceptions:
      •    XPEL Technologies Corp. which trades on CNQ under the symbol “XPEL” while also listed on the TSXV under the
           symbol “DAP.U” and for which the “principal market” is TSXV; and




Part 3 – Short Selling                                                                                                       UMIR 3.1-12
January 1, 2013
         •    United Reef Limited which trades on CNQ under the symbol “URPL” while also listed on the TSXV under the symbol
              “URP” and for which the “principal market” is TSXV.
    For any security that was not listed or traded on a marketplace as of January 1, 2007, RS would consider the “principal market”
    during 2007 to be:
         •    in the case of a listed or quoted security, the marketplace on which the security is first listed or quoted and on which the
              security continues to trade; or
         •    in the case of security other than a listed security or quoted security, the marketplace on which the security is first traded
              and continues to trade.
    If a security that was listed on an exchange as of January 1, 2007 “inter-lists” during the 2007 calendar year on another exchange,
    the exchange on which the security was listed as of January 1, 2007 will remain the “principal market” throughout 2007 provided
    the security continues to trade on that exchange. If the security “delists” from the original exchange, the second exchange will
    become the “principal market” for the balance of 2007 after the date the security is delisted from the original exchange.

    Guidance:           The following is the relevant text of Market Integrity Notice 2007-014 issued on July 6, 2007 under the heading
                        “Guidance – “Exemption of Certain Inter-listed Securities from Price Restrictions on Short Sales”.
    Summary
    This Market Integrity Notice provides notice that the Investment Industry Regulatory Organization of Canada (“IIROC”) has
    granted, effective July 6, 2007, an exemption from the price restrictions on a short sale for the purposes of the Universal Market
    Integrity Rules (“UMIR”) in the case of a short sale of a listed security that is also listed on an exchange in the United States.
    Background
    Section 3.1 of UMIR provides that a Participant or an Access Person may not make a short sale on a marketplace unless the price
    is at or above the last sale price for that security or certain exceptions apply.
    On June 13, 2007, the SEC approved amendments to remove the price restrictions on short sales as set out in Rule 10a-1 as well
    as any short sale price test of any self-regulatory organization, including the requirements of the New York Stock Exchange and
    Nasdaq. In addition, the amendments prohibit any self-regulatory organization from having a price test. These amendments were
    effective July 3, 2007 with a compliance date indicated of July 6, 2007.
    Based on trading statistics of Canadian marketplaces for April of 2007, securities which are inter-listed with an exchange in the
    United States account for approximately 55% of the value of securities traded and approximately 30% of the volume of securities
    traded. In addition, approximately 25% of trades on a Canadian marketplace involve a short sale (including sales which qualify as
    “short exempt” from the price restrictions under Rule 3.1 of UMIR). These numbers indicate the significant extent to which trading
    on Canadian marketplaces may be impacted by the decision of the SEC to repeal price restrictions on short sales. In the view of
    IIROC, to have a markedly different standard for short sales on a marketplace as compared to trades in the same security on an
    organized regulated market in the United States would put marketplaces at a competitive disadvantage.
    Exemption from Price Restrictions on Short Sales of Certain Inter-listed Securities
    In light of the decision of the SEC to remove price restrictions on short sales, IIROC granted, effective July 6, 2007, an exemption
    from the price restrictions on a short sale under Rule 3.1 of UMIR in respect of securities which are inter-listed on an exchange in
    the United States. For the purposes of UMIR, the Toronto Stock Exchange (“TSX”), TSX Venture Exchange (“TSXV”) and CNQ
    currently qualify as an “Exchange”. If a security is listed on an Exchange and is also listed on an exchange in the United States, a
    short sale of the security may be entered on any marketplace, including an alternative trading system, that trades the security and
    permits the use of the “short exempt” marker. Securities which trade on an ECN in the United States but are not otherwise listed
    on an exchange 2 in the United States do not qualify for the exemption.
    If a particular marketplace does not support the “short exempt” marker provided for under Rule 6.2 of UMIR, the order must be
    marked as “short”. In this circumstance, if the marketplace system enforces compliance with the price restrictions on short sales,
    the marketplace may suspend the automatic enforcement of the price restrictions on securities covered by the exemption. If a
    marketplace is unable to suspend the automatic enforcement of the price restrictions on securities covered by the exemption, short
    sales of exempt securities on that marketplace will continue to be executed at a price not less than the last sale price of the
    security.
    In order to assist marketplaces, Participants, Access Persons and their respective service providers in giving effect to this
    exemption, a list of the securities which are inter-listed between the TSX and an exchange in the United States as of June 15,
    2007 is attached as Appendix “A”. 3 [Appendix “A” is not reproduced.] A number of securities are presently inter-listed between the
    TSXV and an exchange in the United States. However, the TSXV does not support the “short exempt” marker and the securities
    are not otherwise traded on a marketplace that does support the “short exempt” marker.




2
       An exchange is a market that is registered as an “exchange” under the Exchange Act of 1933 (United States). In particular, it
       should be noted that an ECN, the Bulletin Board and the Pink Sheets are NOT an “exchange”
3
       The TSX publishes monthly a list of securities that are inter-listed with an exchange in the United States in the TSX Monthly
       Review.



Part 3 – Short Selling                                                                                                        UMIR 3.1-13
January 1, 2013
 Guidance:               The following is the relevant text of Market Integrity Notice 2007-015 issued on August 10, 2007 under the
                         heading “Guidance – Specific Questions Related to Trading on Multiple Marketplaces”. Additional
                         text is set out under Rules 2.2, 5.1, 5.2 land 7.1
 Questions and Answers
 The following is a list of questions regarding the obligations of a Participant or an Access Person with respect to trading in a
 security that trades on more than one marketplace. UMIR defines a marketplace as a recognized exchange (“Exchange”), a
 recognized quotation and trade reporting system (“QTRS”) or an alternative trading system (“ATS”) that carries on business in
 Canada.
      1.   What are the procedures for the sale of a security that is subject to transfer restrictions in the United States on
           a marketplace that does not qualify as a “designated offshore securities market” under Regulation S of the
           United States Securities Act of 1933?
           Rule 904 under Regulation S (“Regulation S”) of the Securities Act of 1933 (United States) provides that, subject to
           certain conditions, the offer, sale or resale of securities made in an “offshore transaction” are exempt from registration
           with the SEC. Under Rule 904, an “offshore transaction” includes a transaction in which no offer is made to a person in
           the United States and the transaction is executed through the facilities of a “designated offshore securities market”
           provided neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a
           buyer in the United States. Currently, the Toronto Stock Exchange (“TSX”) and the TSX Venture Exchange (“TSXV”) are
           the marketplaces in Canada that qualify as a “designated offshore securities market” for the purposes of Regulation S.
           Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill certain better-priced orders on a
           marketplace before executing a trade at an inferior price on another marketplace. (Reference should be made to Market
           Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplaces (September 1, 2006) and Market
           Integrity Notice 2007-002 – Amendment Approval – Provisions Respecting Competitive Marketplaces (February 26,
           2007) for a discussion of the circumstances when the “best price” obligation arises.) In the context of a Participant
           facilitating the sale of a US Restricted Security that trades on more than one marketplace, the Participant handling the
           order has an obligation to execute the trade on a marketplace with the better-priced orders before executing a trade at
           an inferior price on a marketplace that qualifies as a “designated offshore securities market” under Regulation S.
           To the extent that a Participant trades with orders on a marketplace that does not qualify as a “designated offshore
           securities market”, a Participant must comply with the procedures set out in Market Integrity Notice 2005-028 – Sale of
           Securities Subject to Transfer Restrictions Only in the United States (July 29, 2005). As set out in that notice, an order
           for the sale of a US Restricted Security may be entered on a marketplace as:
                •    part of an intentional cross at a price between the best ask price and the best bid price when the Participant
                     knows that the purchaser is not a resident of the United States or otherwise subject to the transfer restrictions;
                     or
                •    a Special Terms Order (that is subject to the condition that the purchaser not be a resident of the United
                     States).
           Orders entered as an intentional cross at a price between the best ask price and the best bid price as indicated in a
           consolidated market display may be executed on a marketplace without concern about potential interference by a party
           who may not be qualified to acquire the securities.
           If the order is entered as a Special Terms Order at a price below “better-priced” orders in a consolidated market display
           in respect of which the Participant owes a “best price” obligation under Rule 5.2, the Participant must contact each
           Participant and Access Person who has disclosed orders at a better price than the price of the Special Terms Order and
           offer to satisfy their orders up to the volume of the Special Terms Order provided the Participant or Access Person is
           eligible to purchase the US Restricted Security. If each Participant or Access Person with a better-priced order is either
           unwilling or unable to acquire to acquire the U.S. Restricted Security, the Special Terms Order may be executed at an
           inferior price with a party that is able to acquire the US Restricted Security. Reference should be made to Market
           Integrity Notice 2006-006 – Guidance - Sale of Securities Subject to Certain United States Securities Laws (February 17,
           2006) for additional guidance on “offshore transactions” under Rule 904 of Regulation S and order marking requirements
           under UMIR for orders involving the sale of a U.S. Restricted Security.
      3.   What is the lowest price at which a Participant or Access Person may make a short sale of securities which are
           inter-listed on an exchange in the United States?
           On June 13, 2007, the SEC approved amendments to Rule 10a-1 and Regulation SHO that will remove price restrictions
           on short sales as set out in Rule 10a-1 as well as any short sale price test of any self-regulatory organization. In
           addition, the amendments will prohibit any self-regulatory organization from having a price test. These amendments
           became effective July 3, 2007 with a compliance date of July 6, 2007.
           In light of the decision of the SEC to remove price restrictions on short sales, IIROC published Market Integrity 2007-014
           – Guidance – Exemption of Certain Inter-Listed Securities from Price Restrictions on Short Sales (July 6, 2007) which
           granted, effective July 6, 2007, an exemption from the price restrictions on a short sale under Rule 3.1 of UMIR in
           respect of securities which are inter-listed on an exchange in the United States. For the purposes of UMIR, the Toronto
           Stock Exchange (“TSX”), TSX Venture Exchange (“TSXV”) and CNQ currently qualify as an “Exchange”. If a security is




Part 3 – Short Selling                                                                                                   UMIR 3.1-14
January 1, 2013
              listed on an Exchange and is also listed on an exchange in the United States, a short sale of the security may be entered
              on any marketplace, including an ATS, which trades the security and permits the use of a “short exempt” marker.
              Securities which trade on an ECN in the United States but are not other otherwise listed on an exchange 4 in the United
              States do not qualify for the exemption.
              If a particular marketplace does not support the “short exempt” marker provided for under Rule 6.2 of UMIR, the order
              must be marked “short”. In this circumstance, if the marketplace system enforces compliance with the price restrictions
              on short sales, the marketplace may suspend the automatic enforcement of the price restrictions on securities covered
              by the exemption. If a marketplace is unable to suspend the automatic enforcement of the price restrictions on securities
              covered by the exemption, short sales of exempt securities on that marketplace will continue to be executed at a price
              not less than the last sale price of the security (see question 4 below).
         4.   What is the lowest price at which a Participant or Access Person may make a short sale of securities which are
              not inter-listed on an exchange in the United States?
              Rule 3.1 of UMIR provides that, subject to certain exemptions, neither a Participant nor an Access Person may make a
              short sale below the “last sale” price. In turn, the term “last sale price” is defined as the price of the last sale of at least
              one standard trading unit displayed in a “consolidated market display”. As set out in Market Integrity Notice 2006-017 –
              Guidance – Securities Trading on Multiple Marketplaces (September 1, 2006), IIROC is of the view that, in the context of
              a security that trades on more than one marketplace, the lowest price at which a Participant or Access person may make
              a short sale will be the lesser of:
                   •     the last sale price of the security on a principal market; or
                   •     the last sale price of the security on the marketplace on which the Participant or Access Person enters the
                         short sale order provided such trade occurred subsequent to the last sale on the principal market.
              The following assumption and chart provides the basis for the two examples below:
              Assume that a particular security is listed on an Exchange that is the “principal market” and on two ATSs.

                   Marketplace            Bid Price            Ask Price                 Last Sale        Time of Last Sale
                 Principal Market            $9.90               $10.10                   $10.00              11:15 a.m.
                 ATS 1                       $9.90               $10.20                   $9.90               11:05 a.m.
                 ATS 2                       $9.89               $10.20                   $10.05              10:15 a.m.
              Example 1:            A Participant wishes to enter an order to sell shares “short” at the lowest possible price.
                                    The lowest price at which a Participant or Access Person would be able to enter a short sale on any
                                    of the above marketplaces would be $10.00 (being the “last sale price” on the Principal Market).
                                    The “last sale prices” on ATS 1 and ATS 2 were established prior to the last sale on the Principal
                                    Market, and as such, do not set the short sale price.
              Example 2:            Assume that all factors remain unchanged, however the last sale on ATS 1 ($9.90) is more recent
                                    (11:20 a.m.).
                                    A Participant or Access Person would be able to enter a short sale on:
                                         •    the Principal Market at $10.00 (being the “last sale price” on that marketplace);
                                         •    ATS 1 at $9.90 (as the last sale price on ATS 1 was established subsequent to the last
                                              sale on the Principal Market); and
                                         •    ATS 2 at $10.00 (as the $10.05 last sale on ATS 2 was prior to the $10.00 last sale on the
                                              Principal Market)

    Guidance:                The following is the relevant text of Market Integrity Notice 2008-002 issued on January 11, 2008 under
                             the heading “Guidance – ‘Principal Market’ Determination for 2008”.
    Determination of “Principal Market”
    IIROC initially set out its criteria for the determination of the “principal market” in Market Integrity Notice 2006-017 – Guidance –
    Securities Trading on Multiple Marketplaces (September 1, 2006). In determining “last sale price” for the purpose of Rule 3.1 and
    “last independent sale price” for the purpose of Rule 7.7, IIROC considers a marketplace to be the “principal market” for the trading
    of the security if:
         •    trade data from the marketplace is disseminated in real-time and electronically through one or more information vendors;
         •    in the previous calendar year, the marketplace had the largest trading volume for that security as among the
              marketplaces that disseminated trade data in real-time and electronically through one or more information vendors; and



4
       An exchange is a market that is registered as an “exchange” under the Exchange Act of 1933 (United States). In particular, it
       should be noted that an ECN, the Bulletin Board and the Pink Sheets are NOT an “exchange”.



Part 3 – Short Selling                                                                                                            UMIR 3.1-15
January 1, 2013
         •    the security continues to be traded on that marketplace.
    For securities that were listed on an Exchange on January 1, 2008, the “principal market” during 2008 is the Exchange on which
    the security is listed subject to the following exceptions:
         •    Roxmark Mines Limited, which is listed on CNQ under the symbol “RMKL” while also listed on TSXV under the symbol
              “RMK and for which the “principal market” is TSXV; and
         •    United Reef Limited which trades on CNQ under the symbol “URPL” while also listed on the TSXV under the symbol
              “URP” and for which the “principal market” is TSXV.
    For any security that was not listed or traded on a marketplace as of January 1, 2008, IIROC would consider the “principal market”
    during 2008 to be:
          •    in the case of a listed or quoted security, the marketplace on which the security is first listed or quoted and on which the
               security continues to trade; or
          •    in the case of security other than a listed security or quoted security, the marketplace on which the security is first
               traded and continues to trade.
    If a security that was listed on an exchange as of January 1, 2008 “inter-lists” during the 2008 calendar year on another exchange,
    the exchange on which the security was listed as of January 1, 2008 will remain the “principal market” throughout 2008 provided
    the security continues to trade on that exchange. If the security “delists” from the original exchange, the second exchange will
    become the “principal market” for the balance of 2008 after the date the security is delisted from the original exchange.

    Guidance:                The following is the relevant text of IIROC Notice 08-0101 issued on September 23, 2008 under the
                             heading “Guidance Note – UMIR – Restated Reminder Respecting Obligations in the Conduct of
                             Short Sales” which revised and replaced Rules Notice 08-0098 issued on September 22, 2008 under the
                             heading “Guidance Note – UMIR – Reminder Respecting Obligations in the Conduct of Short Sales”.
    Summary
    On September 22, 2008, the Ontario Securities Commission (“OSC”) issued an amended and restated order (“Restated
    Temporary Order”) that amended the order of the OSC dated September 19, 2008 (“Original Temporary Order”) prohibiting the
    short sale of certain financial issuers listed on the Toronto Stock Exchange (“TSX”) that are inter-listed with exchanges in the
    United States (“Financial Sector Issuers”). 5 The Original Temporary Order was issued by the OSC as a precautionary measure to
    prevent regulatory arbitrage with respect to short selling in Ontario of the Financial Sector Issuers as a result of initiatives by the
    Securities and Exchange Commission (“SEC”) and to promote fair and orderly markets in Ontario for trading in the securities of the
    Financial Sector Issuers. The SEC issued an amended order on September 21, 2008 and the Restated Temporary Order supports
    changes made by the SEC. The Restated Temporary Order applies until October 3, 2008 unless extended by the OSC.
    This IIROC Notice provides a reminder to Participants and Access Persons respecting their obligations generally in the handling of
    a short sale and specific guidance on the obligations of Participants and Access Person in complying with the Revised Temporary
    Order. As a result of the issuance of the Revised Temporary Order, this IIROC Notice revises and replaces guidance set
    out in IIROC Notice 08-0098 – Rules Notice – Guidance Note – UMIR – Reminder Respecting Obligations in the Conduct of
    Short Sales.
    As part of its monitoring of market activity, IIROC undertakes surveillance of short selling activity on Canadian marketplaces.
    Given the concern with short selling activity evidenced by regulators in the United States and the United Kingdom, IIROC will
    increase its surveillance of short selling activity on Canadian marketplaces and, in particular, short selling activity in securities of
    issuers in the financial sector that are not covered by the Temporary Order. IIROC will report to the OSC and the Canadian
    Securities Administrators on trends in short selling activity on Canadian marketplace and on compliance with the terms of the
    Restated Temporary Order.
    General Obligations in the Handling of Short Sales
    Section 3.1 of UMIR provides that a Participant or an Access Person may not make a short sale on a marketplace unless the price
    is at or above the last sale price for that security or unless certain exceptions apply. Presently, securities which are inter-listed
    between an Exchange in Canada and an exchange in the United States are exempt from the price restrictions. This exemption
    continues in place but is superseded by the provisions of the Restated Temporary Order which, subject to the exemptions listed in
    the Temporary Order, precludes short sales in securities of a Financial Sector Issuer between September 20, 2008 and October 3,
    2008.
    Under Rule 6.2 of UMIR, any order that is entered on a marketplace that would on execution be a short sale must be marked as a
    “short” or “short exempt” order. Under Rule 7.1, a Participant must have adequate policies and procedures to ensure that orders
    handled by that Participant (including orders that have been directly entered electronically by clients) are properly marked. Each
    Participant is expected to have compliance procedures to test to ensure that orders are being properly marked.


5
       The text of the Original Temporary Order is available on the website of the OSC at
            http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20080919_cert-fin-sect-issuers.pdf.
       The text of the Restated Temporary Order is available on the website of the OSC at
            http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20080922_amend_cert-fin-sect-issuers.pdf.



Part 3 – Short Selling                                                                                                        UMIR 3.1-16
January 1, 2013
 In light of the concerns expressed and actions taken by securities regulators in Canada and foreign jurisdictions with
 respect to short selling activity, IIROC would expect that Participants and Access Persons will devote additional attention
 and resources to ensuring compliance with the requirements on the handling of short sales, including the Restated
 Temporary Order, at least until the securities regulators have determined what further action may be necessary.
 Questions and Answers
 The following is a list of the questions regarding the application of the Restated Temporary Order to trading in securities of the
 Financial Sector Issuers and IIROC’s response to each:
      1.   Does the Revised Temporary Order only preclude a short sale of a Financial Sector Issuer on the TSX?
           No. While each Financial Sector Issuer is listed on the TSX, the Revised Temporary Order precludes:
                  •    the entry of an order that on execution would be a short sale on any marketplace on which securities of the
                       Financial Sector Issuer trade;
                  •    the execution of a short sale in an over-the-counter transaction.
           In addition to the TSX, securities of a Financial Sector Issuer may presently be traded on the “Pure Trading” facility of
           Canadian Trading and Quotation System (“CNQ”), Chi-X Canada ATS Limited (“Chi-X”), Liquidnet Canada Inc.
           (“Liquidnet”), “BlockBook” and “Omega ATS” operated by Perimeter Markets Inc. and “MATCH Now” operated by TriAct
           Canada Marketplace LP.
      2.   Does the Revised Temporary Order only apply to the common shares of the Financial Sector Issuer?
           Yes. The Revised Temporary Order applies only to the trading of common securities of a Financial Sector Issuer. The
           following is the list of issuers covered by the Revised Temporary Order.
                                                           Name                                      Root Ticker

                      Aberdeen Asia-Pacific Income Investment Company Ltd.                               FAP

                      Bank of Montreal                                                                   BMO

                      Bank of Nova Scotia (The)                                                          BNS

                      Canadian Imperial Bank Of Commerce                                                  CM

                      Fairfax Financial Holdings Limited                                                 FFH

                      Kingsway Financial Services Inc.                                                   KFS

                      Manulife Financial Corporation                                                     MFC

                      Quest Capital Corp.                                                                 QC

                      Royal Bank of Canada                                                                RY

                      Sun Life Financial Inc.                                                            SLF

                      Thomas Weisel Partners Group Inc.                                                  TWP

                      Toronto-Dominion Bank (The)                                                         TD

                      Merrill Lynch & Co., Canada Ltd.                                                   MLC

      3.   Does the Revised Temporary Order permit an exemption for “block facilitation”?
           The Revised Temporary Order specifically permits a short sale to be conducted by a Participant acting as principal to
           facilitate a transaction with a client that has a current market value of $200,000 or more in a single transaction, or in
           several transactions at approximately the same time, provided that the position is liquidated or hedged as soon as
           possible following the completion of the short sales.
           If the exemption provided in the Revised Temporary Order is not applicable, a Participant may facilitate a
           purchase by the client, by the Participant acting as agent in accumulating the stock in an average price account which is
           then journalled to the client at the average price. Alternatively, if the Participant is to facilitate the transaction as
           principal, the Participant would have to accumulate a long position as principal and then cross that position to the client.
           In the ordinary course, IIROC would consider this practice to constitute “double printing” and be contrary to Rule 2.2 of
           UMIR. For this reason, IIROC will consent to trade from the principal position to the client being executed “off-
           marketplace” in accordance with exemptions from Rule 6.4 of UMIR. A Participant who wishes to facilitate a client
           purchase of a block in this manner should contact Market Surveillance by fax at 416.646.7261 or by e-mail at
           surveillance@iiroc.ca prior to commencing the accumulation of stock as principal.
      4.   Can a Participant make a short sale from inventory in order to move the market price down to a level to facilitate
           a principal take-on trade from a client if the size and price of the trade have been agreed to between the
           Participant and the client?



Part 3 – Short Selling                                                                                                   UMIR 3.1-17
January 1, 2013
           Yes. Effective May 16, 2008, UMIR was amended with the issuance of Market Integrity Notice 2008-008 – Notice of
           Approval – Provisions Respecting “Off-Marketplace” Trades (May 16, 2008) that capped the obligation to fill better-priced
           orders in the case of certain pre-arranged trades and intentional crosses to the disclosed volume of better-priced orders.
           Once orders have been entered to displace the better-priced orders on all protected marketplaces, a designated cross
           may be executed on a marketplace or, if necessary, off-marketplace. Participants may enter orders of sufficient size to
           displace all protected marketplaces provided the total volume entered does not exceed the size of the designated trade.
      5.   What is a Participant expected to do if it suspects a client is making or has made a short sale without declaring
           that the sale in fact is from a short position?
           Securities legislation in each provincial jurisdiction requires that a person declare to a dealer handling a sell order that
           the sale would constitute a short sale. Rule 2.3 of UMIR provides that a Participant shall not enter an order on a
           marketplace if the Participant knows or ought reasonably to know that an order does not comply with applicable
           securities legislation. Under Rule 10.16 of UMIR, if a Participant believes that there may have been a violation of Rule
           2.3 of UMIR, the Participant is under an obligation to diligently conduct a review and, if such review concludes that there
           may have been a violation, to provide a “Gatekeeper Report” to IIROC.
      6.   What is a Participant or Access Person expected to do with respect to short sale orders for a security of a
           Financial Sector Issuer that were outstanding at the time of the issuance of the Revised Temporary Order?
           If a Participant or Access Person has entered a short sale order on a marketplace that was still outstanding at the end of
           trading on September 19, 2008, the Participant or Access Person is expected to take reasonable efforts to remove the
           order prior to the opening of trading in the Financial Sector Issuer on the marketplace on Monday, September 22, 2008.
           If a Participant has received a client or non-client order for the short sale of a Financial Sector Issuer prior to the
           issuance of the Original Temporary Order, the Participant may not enter the short sale order on a marketplace or
           execute the order in an over-the-counter trade while the Revised Temporary Order remains in effect unless the
           execution of the short sale is exempted by the terms of the Revised Temporary Order.
      7.   What steps should a Participant take to ensure that clients with “direct market access” do not enter short sale
           orders for a Financial Sector Issuer while the Revised Temporary Order is in effect?
           The Participant has the obligation to ensure that any orders entered on a marketplace or entered in accordance with
           applicable securities legislation and the requirements of UMIR. The Participant must therefore take steps that will
           prevent the entry of short sale orders contrary to the Revised Temporary Order. If the trading system of the Participant
           is not capable of blocking short sale orders in securities of a Financial Sector Issuer, the Participant must take steps to
           immediately notify each client that has such direct market access of the terms of the Revised Temporary Order and the
           Participant should monitor sell orders entered by such clients to ensure that the clients have not attempted to circumvent
           the Revised Temporary Order by not properly marking orders as “short”.
      8.   Are there any exemptions from the Revised Temporary Order?
           A short sale in a security of a Financial Sector Issuer may be made if the short sale is:
                •    part of a “Program Trade” (being a trade resulting from a series of market orders for the purchase or sale of
                     particular securities underlying an index, which includes all S&P/TSX indices and sub-indices, if such trade is
                     undertaken in conjunction with a trade in a derivative or Exchange-traded Fund the underlying interest of
                     which is the index) made in accordance with the requirements of the TSX related to a “program trade” (e.g. the
                     transaction must be for a least 80% of the component weighting of the index);
                •    pursuant to the Market Maker Obligations imposed by the TSX on the market maker for the Financial Sector
                     Issuer or any Exchange-traded Fund of which the Financial Sector Issuer is a component provided the market
                     maker (provided the short sale is made in accordance with conditions as set out in the Revised Temporary
                     Order);
                •    for the account of a derivatives market maker and is made:
                          o     in accordance with the market making obligations of the seller in connection with the security or a
                                related security (including an Exchange-traded Fund of which the Financial Sector Issuer is a
                                component), and
                          o     to hedge a pre-existing position in the security or a related security;
                •    the sale of an Exchange-trade Fund;
                •    required as part of the “best price” obligation of a Participant to fill better-priced orders on a protected
                     marketplace following the execution of a sale from a long position on another marketplace;
                •    conducted as a result of the automatic exercise or assignment of an equity option, or in connection with
                     settlement of a futures contract, held prior to the issuance of the Revised Temporary Order due to expiration of
                     the option or futures contract;
                •    of a security that is subject to a restriction on sale imposed by applicable securities legislation or by an
                     Exchange as a condition of the listing of the security and the sale is made under an exemption from the
                     prospectus requirements in accordance with applicable securities legislation; or




Part 3 – Short Selling                                                                                                   UMIR 3.1-18
January 1, 2013
                   •    conducted to adjust a pre-existing hedged derivative position in order to maintain the risk exposure that
                        existed at the time the Original Temporary Order became effective.
         9.   Under the Revised Temporary Order may a short sale be made in a security of a Financial Sector Issuer if the
              sale would be exempt from the price restrictions on short sales under Rule 3.1 of UMIR?
              No. Unless the trade is exempt from the Revised Temporary Order under one of the exemptions described in the
              answer to question 8, a short sale may NOT be made in the securities of a Financial Sector Issuer even though such a
              transaction would otherwise qualify for an exemption from price restrictions on a short sale under Rule 3.1 of UMIR.
              Rule 3.1 permits a short sale below the last sale price on behalf of an arbitrage account when the seller knows or has
              reasonable grounds to believe that an offer enabling the seller to cover the sale is then available and the seller intends to
              accept such offer immediately. There is not a similar exemption under the Revised Temporary Order. As such, a person
              engaging in arbitrage activity must receive an execution on the buy side before entering a sell order on a marketplace to
              “offset” the purchase. Similarly, algorithms for trading in securities of Financial Sector Issuers must be programmed to
              comply with the prohibition on the short sale of a Financial Sector Issuer (e.g. reconfigured to enter the buy-side orders
              first followed by the entry of the sell side only after the purchase has been completed) or otherwise disabled.
         10. Will marketplaces be able to “system enforce” compliance with the Revised Temporary Order for Participants
             and Access Persons?
              Given the exemptions which are available under the Revised Temporary Order and the fact that the Revised Temporary
              Order may only be in effect until October 3, 2008, Participants and Access Persons should not expect that marketplaces
              will be able to provide a marketplace level solution during the term of the Revised Temporary Order.
              IIROC has proposed amendments to UMIR to provide for a “Short Sale Ineligible Security”. Presently, those
              amendments are being reviewed by the securities regulatory authorities. Until such amendments can be implemented,
              the responsibility for compliance with the prohibition under the Revised Temporary Order is with the Participant and
              Access Person.

    Guidance:               The following is the relevant text of IIROC Notice 08-0121 issued on October 6, 2008 under the heading
                            “Guidance Note – Extension of the Prohibition of Short Sales of Financial Sector Issuers”.
    Summary
    On October 3, 2008, the Ontario Securities Commission (“OSC”) issued an order (“Extension Order”) extending until 11:59 p.m. on
    October 8, 2008 the prohibition on the short sale of certain financial issuers listed on the Toronto Stock Exchange (“TSX”) that are
    inter-listed with exchanges in the United States (“Financial Sector Issuers”). 6 On September 22, 2008, the OSC issued an
    amended and restated order (“Restated Temporary Order”) that amended the order of the OSC dated September 19, 2008
    (“Original Temporary Order”). The Extension Order, Restated Temporary Order and Original Temporary Order were issued by the
    OSC as a precautionary measure to prevent regulatory arbitrage with respect to short selling in Ontario of the Financial Sector
    Issuers as a result of initiatives by the Securities and Exchange Commission (“SEC”) and to promote fair and orderly markets in
    Ontario for trading in the securities of the Financial Sector Issuers. The SEC issued an amended order on October 1, 2008 that
    will expire at the same time as the Extension Order.
    Guidance on the Handling of Short Sales
    The Extension Order has deleted Aberdeen Asia-Pacific Income Investment Company Ltd. from the list of Financial Sector Issuers.
    The Extension Order also clarified the ambit of certain exemptions from the prohibition related to a short sale conducted by:
         •     a registered dealer acting as principal to facilitate with a client or counterparty a securities transaction with a value of
               $200,000 or more or a derivatives transaction with notional value of $200,000 or with a notional value of $200,000 or
               more; and
         •     a writer of a call option that effects a short sale in a common equity security of a Financial Sector Issuer as a result of
               assignment following exercise by the holder of the call.
    On September 23, 2008, the Investment Industry Regulatory Organization of Canada issued IIROC Notice 08-0101 – Rules Notice
    – Guidance Note – UMIR – Restated Reminder Respecting Obligations in the Conduct of Short Sales. Except for the modifications
    and clarifications made by the Extension Order as described above, the guidance provided in IIROC Notice 08-0101 remains
    applicable. The guidance provided in IIROC Notice 08-0101 under the heading “General Obligations in the Handling of Short
    Sales” will remain applicable after the expiry of the Extension Order.

    Guidance:               The following is the relevant text of IIROC Notice 09-0007 issued on January 9, 2009 under the heading
                            “Guidance Note – ‘Principal Market’ Determination for 2009”.


6
       The text of the Extension Order is available on the website of the OSC at
            http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20081003_cert-fin-sect-issuers.pdf.
       The text of the Restated Temporary Order is available on the website of the OSC at
            http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20080922_amend_cert-fin-sect-issuers.pdf .
       The text of the Original Temporary Order is available on the website of the OSC at
            http://www.osc.gov.on.ca/Enforcement/Proceedings/RAD/rad_20080919_cert-fin-sect-issuers.pdf.



Part 3 – Short Selling                                                                                                       UMIR 3.1-19
January 1, 2013
    Summary
     This Rules Notice provides guidance on:
       •       the use of the concept of “principal market” in the application of the Universal Market Integrity Rules (“UMIR); and
       •       the determination for the 2009 calendar year of the “principal market” for each listed security.
    UMIR Requirements
    The concept of “principal market” is used in the application of two UMIR provisions:
       •       Rule 3.1 – Restrictions on Short Selling; and
       •       Rule 7.7 – Trading During Certain Securities Transactions.
    Under Rule 3.1, unless other exempted, a short sale may not be made at a price which is less than the “last sale price”. Under
    Rule 7.7, a Participant that is involved as an underwriter, agent or adviser in certain securities transactions may not, unless
    otherwise provided or exempted, purchase or bid for securities that are the subject of the transaction at a price which is above the
    “last independent sale price”. In determining the “last sale price” for the purpose of Rule 3.1 and the “last independent sale price”
    for the purpose of Rule 7.7, the Investment Industry Regulatory Organization of Canada (“IIROC”) accepts that a Participant or
    Access Person may rely on the price of the last applicable trade of a standard trading unit of the particular security on the “principal
    market” for that security. IIROC has adopted this position since not all marketplaces presently disseminate trade information in a
    manner that permits the information to be readily incorporated into data feeds provided by information vendors. 7 Reference should
    be made to Market Integrity Notice 2007-003 – Guidance – Principal Market Determination for 2007 (February 28, 2007) for
    additional guidance on how the concept of “principal market” is used in the application of these two rules.
               Proposed Amendment to Rule 3.1 – Restrictions on Short Selling
    On September 7, 2007, IIROC proposed various amendments UMIR including a proposal to repeal price restrictions on short sales
    (the “tick rule”). 8 On October 15, 2008, the IIROC published notice of the approval by the applicable securities regulatory
    authorities of certain of these amendments to UMIR. 9 The proposal to repeal the tick rule was deferred because of the then
    prevailing market conditions and the fact that the regulatory framework governing short selling is under active review in the United
    States and other foreign jurisdictions. IIROC will continue to monitor developments in the Canadian market and new initiatives
    taken by foreign regulators with respect to short sales and failed trades and determine what additional actions should be taken. If
    IIROC pursues and the applicable securities regulatory authorities approve the amendment to UMIR to repeal the tick
    test, there would be no need to determine the price of the last sale on the “principal market” when conducting a short sale.
               Proposed Amendment to Rule 7.7 – Trading During Certain Securities Transactions
    On March 21, 2008, IIROC proposed various amendments UMIR including a proposal to peg the price restriction on purchases of
    a restricted security to the “best independent bid price” at the time of the entry of the order rather than the “last independent sale
    price” immediately prior to the execution of the order. 10 The proposal is currently being reviewed by the applicable securities
    regulatory authorities. If the applicable securities regulatory authorities approve the amendment to UMIR to peg price
    restrictions to the “best independent bid price”, there would be no need to determine the price of the last sale on the “principal
    market” when a Participant subject to Rule 7.7 is purchase or bids for a restricted security.
    Determination of “Principal Market” for 2009
    IIROC initially set out its criteria for the determination of the “principal market” in Market Integrity Notice 2006-017 – Guidance –
    Securities Trading on Multiple Marketplaces (September 1, 2006). IIROC considers a marketplace to be the “principal market” for
    the trading of the security if:
           •     trade data from the marketplace is disseminated in real-time and electronically through one or more information vendors;
           •     in the previous calendar year, the marketplace had the largest trading volume for that security as among the
                 marketplaces that disseminated trade data in real-time and electronically through one or more information vendors; and




7
       While BlockBook and Liquidnet provide post-trade transparency by means of a web-page available through Reuters, data
       disseminated in this manner may not be readily incorporated into data feeds provided by other information vendors. In
       addition, BlockBook presently disseminates trade information through TSXDatalinx though no data vendors currently offer this
       data other than through the web-page available through Reuters.
8
       Market Integrity Notice 2007-017 – Request for Comments – Provisions Respect Short Sales and Failed Trades (September 7,
       2007).
9
       IIROC Notice 08-0143 – Rules Notice – Notice of Approval – UMIR – Provisions Respecting Short Sales and Failed Trades
       (October 15, 2008).
10
       Market Integrity Notice 2008-005 – Request for Comments – Provisions Respecting Trading during Certain Securities
       Transactions (March 21, 2008).



Part 3 – Short Selling                                                                                                        UMIR 3.1-20
January 1, 2013
                 the security continues to be traded on that marketplace.
 For securities that were listed on an Exchange 11 on January 1, 2009, the “principal market” during 2009 is the Exchange on which
 the security is listed. For any security that was not listed or traded on a marketplace as of January 1, 2009, IIROC would consider
 the “principal market” during 2009 to be:
           •     in the case of a listed or quoted security, the marketplace on which the security is first listed or quoted and on which the
                 security continues to trade; or
           •     in the case of security other than a listed security or quoted security, the marketplace on which the security is first
                 traded and continues to trade.
     If a security that was listed on an Exchange as of January 1, 2009 “inter-lists” during the 2009 calendar year on another
     Exchange, the Exchange on which the security was listed as of January 1, 2009 will remain the “principal market” throughout
     2009 provided the security continues to trade on that Exchange. If the security “delists” from the original exchange, the second
     exchange will become the “principal market” for the balance of 2009 after the date the security is delisted from the original
     Exchange.

 Guidance:                     The following is the relevant text of IIROC Notice 10-0095 issued on April 6, 2010 under the heading
                               “Guidance Note – ‘Principal Market’ Determination for 2010”.
 Summary
     This Rules Notice provides guidance on:
       •       the use of the concept of “principal market” in the application of the Universal Market Integrity Rules (“UMIR); and
       •       the determination for the 2010 calendar year of the “principal market” for each listed security.
 UMIR Requirements
 The concept of “principal market” is used in the application of two UMIR provisions:
       •       Rule 3.1 – Restrictions on Short Selling; and
       •       Rule 7.7 – Trading During Certain Securities Transactions.
 Under Rule 3.1, unless other exempted, a short sale may not be made at a price which is less than the “last sale price”. Under
 Rule 7.7, a Participant that is involved as an underwriter, agent or adviser in certain securities transactions may not, unless
 otherwise provided or exempted, purchase or bid for securities that are the subject of the transaction at a price which is above the
 “last independent sale price”. In determining the “last sale price” for the purpose of Rule 3.1 and the “last independent sale price”
 for the purpose of Rule 7.7, the Investment Industry Regulatory Organization of Canada (“IIROC”) accepts that a Participant or
 Access Person may rely on the price of the last applicable trade of a standard trading unit of the particular security on the “principal
 market” for that security A Participant or Access Person may also rely on other sources for determining the last applicable trade
 including the “Consolidated Last Sale Price” disseminated by the information processor or as compiled in a timely manner from
 data from each marketplace by a services provider or by the Participant or Access Person directly. Reference should be made to
 Market Integrity Notice 2007-003 – Guidance – Principal Market Determination for 2007 (February 28, 2007) for additional
 guidance on how the concept of “principal market” is used in the application of these two rules.
               Proposed Amendment to Rule 3.1 – Restrictions on Short Selling
 On September 7, 2007, IIROC proposed various amendments UMIR including a proposal to repeal price restrictions on short sales
 (the “tick rule”). 12 On October 15, 2008, the IIROC published notice of the approval by the applicable securities regulatory
 authorities of certain of these amendments to UMIR. 13 The proposal to repeal the tick rule was deferred because of the then
 prevailing market conditions and the fact that the regulatory framework governing short selling is under active review in the United
 States and other foreign jurisdictions. On February 24, 2010, the United States Securities and Exchange Commission proposed to
 introduce a restriction on the price at which short sales may be made (orders for a short sale may only be entered at a limit price
 which is one trading increment above the National Best Bid at the time the order is entered) if the price of the security has declined
 10% or more from the closing price on the previous day. If IIROC pursues and the applicable securities regulatory authorities
 approve an amendment to UMIR to either repeal the tick test or to base the tick test on a price at least one trading
 increment above the “best bid price” at the time of entry of the short sale order, there would be no need to determine the
 price of the last sale on the “principal market” when conducting a short sale.
               Amendment to Rule 7.7 – Trading During Certain Securities Transactions
 On January 8, 2010, IIROC published notice that the applicable securities regulatory authorities had approved various
 amendments UMIR including a proposal to peg the price restriction on purchases of a restricted security to the “best independent


11
       UMIR defines an “Exchange” as a person recognized by a securities regulatory authority in Canada under securities legislation
       to carry on business as an exchange in Canada.
12
       Market Integrity Notice 2007-017 – Request for Comments – Provisions Respect Short Sales and Failed Trades (September 7,
       2007).
13
       IIROC Notice 08-0143 – Rules Notice – Notice of Approval – UMIR – Provisions Respecting Short Sales and Failed Trades
       (October 15, 2008).



Part 3 – Short Selling                                                                                                         UMIR 3.1-21
January 1, 2013
 bid price” at the time of the entry of the order rather than the “last independent sale price” immediately prior to the execution of the
 order. 14 However, the amendment to clause (a) of subsection (4) of Rule 7.7 respecting the change in determination of price
 restrictions during a restricted period from the last independent sale price of a security at the time of the execution of the order to
 the best independent bid price at the time of the entry of the order has been deferred until May 8, 2010, being 120 days following
 the date of approval of the amendments by the applicable securities regulatory authorities. Once this amendment is
 implemented on May 8, 2010, there would be no need to determine the price of the last sale on the “principal market” when a
 Participant which is subject to Rule 7.7 purchases or bids for a restricted security.
 Determination of “Principal Market” for 2010
 IIROC considers a marketplace to be the “principal market” for the trading of the security if:
         •    trade data from the marketplace is disseminated in real-time and electronically through one or more information vendors;
         •    in the previous calendar year, the marketplace had the largest trading volume for that security as among the
              marketplaces that disseminated trade data in real-time and electronically through one or more information vendors; and
         •    the security continues to be traded on that marketplace. 15
 For securities that were listed on an Exchange 16 on January 1, 2010, that Exchange will qualify as the “principal market” during
 2010. In addition, Alpha will also qualify as the “principal market” during 2010 in respect of certain securities. 17
 For any security that was not listed or traded on a marketplace as of January 1, 2010, IIROC would consider the “principal market”
 during 2010 to be:
         •    in the case of a listed or quoted security, the marketplace on which the security is first listed or quoted and on which the
              security continues to trade; or
         •    in the case of security other than a listed security or quoted security, the marketplace on which the security is first
              traded and continues to trade.
     If a security that was listed on an Exchange as of January 1, 2010 “inter-lists” during the 2010 calendar year on another
     Exchange, the Exchange on which the security was listed as of January 1, 2010 will remain the “principal market” throughout
     2010 provided the security continues to trade on that Exchange. If the security “delists” from the original exchange, the second
     exchange will become the “principal market” for the balance of 2010 after the date the security is delisted from the original
     Exchange.

 Disciplinary Proceedings:          In the Matter of Salman Partners Inc. (“Salman”), Sameh Magid (“Magid”), William Burk
                                    (“Burk”) and Ian Todd (“Todd”) (February 18, 2005) SA 2005-001
                                    Facts – Between April 1, 2002 and July 30, 2002, Salman engaged in a paired trading strategy with
                                    one of its institutional clients which it erroneously believed constituted arbitrage trading. The
                                    arrangement did not in fact constitute arbitrage trading for the purposes of UMIR, and as such, the
                                    trades entered as part of the strategy did not benefit from the various exemptions provided for
                                    under UMIR, and caused Salman to violate numerous UMIR provisions. In April 2002, Salman
                                    engaged in trading in a second issuer that resulted in certain transactions being recorded off-
                                    market when those transactions ought to have been posted on an exchange. Finally, in another
                                    trade, Salman failed to properly supervise a trader’s attempt to cover a short position in an issuer
                                    when a client submitted a buy order in the same security. Throughout these events, Salman failed
                                    to maintain a proper audit trail for their order flow.
                                    Disposition – Salman failed to develop and implement appropriate policies and procedures to fulfill
                                    its compliance and supervisory obligations in relation to its trading on marketplaces regulated by
                                    RS, including failing to ensure that employees with supervisory responsibilities had clearly defined
                                    roles and responsibilities and that audit trail requirements were complied with. Several senior
                                    officers were found to have failed in their supervisory responsibilities as well.
                                    Requirements Considered – Rules 3.1, 5.3(6), 6.2(1)(b)(viii) and (x), 6.4, 7.1 and 10.11(1) and
                                    Policy 7.1
                                    Sanction -
                                    Salman Partners Inc. -         $600,000 fine and costs of $90,000


14
       IIROC Notice 10-0006 - Rules Notice – Notice of Approval – UMIR – Provisions Respecting Trading During Certain Securities
       Transactions (January 8, 2010).
15
       IIROC initially set out its criteria for the determination of the “principal market” in Market Integrity Notice 2006-017 – Guidance –
       Securities Trading on Multiple Marketplaces (September 1, 2006).
16
       UMIR defines an “Exchange” as a person recognized by a securities regulatory authority in Canada under securities legislation
       to carry on business as an exchange in Canada.
17
       Based on information available to IIROC, IIROC will accept that for 2010, Alpha is the principal market for the following
       securities: HAP.WT; MPC.C; TWF.DB; and WIF.P.



Part 3 – Short Selling                                                                                                        UMIR 3.1-22
January 1, 2013
                             Sameh Magid -             $80,000 fine and costs of $15,000; personal undertakings
                             William Burk -            $30,000 fine
                             Ian Todd -                $30,000 fine

 Disciplinary Proceedings:   Rule 3.1 was considered In the Matter of Vinh-Phat Nguyen-Qui (“Nguyen-Qui”) (October 11,
                             2012) DN 12-0298. See Disciplinary Proceedings under Rule 2.2.




Part 3 – Short Selling                                                                                        UMIR 3.1-23
January 1, 2013
                                                                                  Universal Market Integrity Rules
                                                                                        Rules & Policies


3.2      Prohibition on the Entry of Orders
         (1)      A Participant or Access Person shall not enter an order to sell a security on a
                  marketplace that on execution would be a short sale:
                  (a)      unless the order is marked as a short sale in accordance with subclause
                           6.2(1)(b)(viii); or
                  (b)      if the security is a Short Sale Ineligible Security at the time of the entry of the
                           order.


         (2)      Clause (a) of subsection (1) does not apply to an order that has been designated
                  as a “short-marking exempt order” in accordance with subclause 6.2(1)(b)(ix).


         (3)      Clause (b) of subsection (1) does not apply to an order entered on a marketplace:
                  (a)      in furtherance of the Marketplace Trading Obligations of that marketplace;
                  (b)      for the account of a derivatives market maker and is entered:
                           (i)      in accordance with the market making obligations of the seller in
                                    connection with the security or a related security, and
                           (ii)     to hedge a pre-existing position in the security or a related security;
                  (c)      as part of a Program Trade in accordance with Marketplace Rules;
                  (d) to satisfy an obligation to fill an order imposed on a Participant or Access
                      Person by any provision of UMIR or a Policy; or
                  (e) that is of a class of security or type of transaction that has been designated
                      by a Market Regulator.
 Defined Terms:         NI 21-101 section 1.1 – “order”
                        NI 21-101 section 1.4 – Interpretation -- “security”
                        UMIR section 1.1 – “Access Person”, “derivatives market maker”, “hedge”, “Market Regulator”, “marketplace”,
                        “Marketplace Rules”, “Marketplace Trading Obligations”, “Participant”, “Policy”, “Program Trade”, “related
                        security”, “short sale”, “short-marking exempt order”, “Short Sale Ineligible Security” and “UMIR”
 Regulatory History:             On October 15, 2008, the applicable securities commissions approved amendments to UMIR to add
                                 section 3.2 that came into force on October 14, 2008.
                              Effective August 26, 2011, the applicable securities commissions approved amendments to Rule 3.2 to
                              replace in subsection (2) the phrase “an Exchange or QTRS in accordance with the Marketplace Rules”
                              with “a marketplace” and to replace the phrase “applicable Market Maker Obligations” with “Marketplace
                              Trading Obligations of that marketplace” and to replace clause (a) of subsection (3) of Rule 3.2. Prior to
                              that date, these provisions read as follows:
                                   (2)   Clause (a) of subsection (1) does not apply to an order automatically generated by the trading
                                         system of an Exchange or QTRS in accordance with the Marketplace Rules in respect of the
                                         applicable Market Maker Obligations.
                                   (3)   Clause (b) of subsection (1) does not apply to an order entered on a marketplace:
                                         (a)   in furtherance of the applicable Market Maker Obligations in accordance with the
                                               Marketplace Rules of that marketplace;
                              On March 2, 2012, the applicable securities commissions approved amendments to section 3.2,
                              effective October 15, 2012, to delete the reference in clause (a) of subsection (1) to “or subclause
                              6.2(1)(b)(ix)” and to repeal and replace subsection (2). Prior to that date, these provisions read as
                              follows:



Part 3 – Short Selling                                                                                                       UMIR 3.2-1
January 1, 2013
                         (1)   (a) unless the order is marked as a short sale in accordance with subclause 6.2(1)(b)(viii)
                                   or subclause 6.2(1)(b)(ix); or
                         (2)   Clause (a) of subsection (1) does not apply to an order automatically generated by the
                               trading system of a marketplace in respect of the Marketplace Trading Obligations of that
                               marketplace.




Part 3 – Short Selling                                                                                        UMIR 3.2-2
January 1, 2013
                                                                   Universal Market Integrity Rules
                                                                        Rules & Policies


PART 4 – FRONTRUNNING
4.1      Frontrunning
         (1)      A Participant with knowledge of a client order that on entry could reasonably be
                  expected to affect the market price of a security, shall not, prior to the entry of such
                  client order,
                  (a)   enter a principal order or a non-client order on a marketplace, foreign
                        organized regulated market or other market, including any over-the-counter
                        market, for the purchase or sale of the security or any related security;
                  (b)   solicit an order from any other person for the purchase or sale of the security
                        or any related security; or
                  (c)   inform any other person, other than in the necessary course of business, of
                        the client order.


         (2)      A Participant does not contravene subsection (1) if:
                  (a)   no director, officer, partner, employee or agent of the Participant who made
                        or participated in making the decision to enter a principal order or non-client
                        order or to solicit an order had actual knowledge of the client order;
                  (b)   an order is entered or trade made for the benefit of the client for whose
                        account the order is to be made;
                  (c)   an order is solicited to facilitate the trade of the client order;
                  (d)   a principal order is entered to hedge a position that the Participant had
                        assumed or agreed to assume before having actual knowledge of the client
                        order provided the hedge is:
                        (i)    commensurate with the risk assumed by the Participant, and
                        (ii)   entered into in accordance with the ordinary practice of the Participant
                               when assuming or agreeing to assume a position in the security;
                  (e)   a principal order is made to fulfil a legally binding obligation entered into by
                        the Participant before having actual knowledge of the client order; or
                  (f)   the order is entered for an arbitrage account.


POLICY 4.1 – FRONTRUNNING
Part 1 – Examples of Frontrunning
Rule 4.1 provides that no Participant shall trade in equities or derivatives to take advantage of
information concerning a client order that has not been entered on a market place that
reasonably can be expected to change the prices of the equities or the related options or futures
contracts. Without limiting the generality of the Rule, the following are examples of transactions
covered by the prohibition:




Part 4 - Frontrunning                                                                            UMIR 4.1-1
January 1, 2013
         (a)      a transaction in an option, including an option where the underlying interest is an
                  index, when the Participant has knowledge of the unentered client order for the
                  underlying securities;
         (b)      a transaction in a future where the underlying interest is an index when the
                  Participant has knowledge of the unentered client order that is a program trade or
                  index option transaction; and
         (c)      a transaction in an index option when the Participant has knowledge of the
                  unentered client order that is a program trade or an index futures transaction.
Rule 10.4 extends the prohibition to cover orders entered by a related entity of the Participant or
a director, officer, partner or employee of the Participant or a related entity of the Participant.


Part 2 – Specific Knowledge Required
In order to constitute frontrunning contrary to Rule 4.1, the person must have specific
knowledge concerning the client order that, on entry, could reasonably be expected to affect the
market price of a security. A person with knowledge of such a client order must insure that the
client order has been entered on a marketplace before that person can:
     •    enter a principal order or non-client order for the security or any related security;
     •    solicit an order for the security or any related security; or
     •    inform any other person about the client order, other than in the necessary of course of
          business.
Trading based on non-specific pieces of market information, including rumours, does not
constitute frontrunning.
 Defined Terms:     NI 21-101 section 1.1 – “order”
                    NI 21-101 section 1.4 – Interpretation -- “security”
                    UMIR section 1.1 –      “arbitrage account”, “client order”, “employee”, “foreign organized regulated market”,
                                            “hedge”, “marketplace”, “non-client order”, “Participant”, ”principal order”, “Program
                                            Trade”, “related entity” and “related security”
                    UMIR section 1.2(2) – “person” and “trade”

 Regulatory History:    Effective May 16, 2008, the applicable securities commissions approved an amendment to Rule 4.1 to
                        replace the phrase “stock exchange or market” with “foreign organized regulated market or other market”.

 Disciplinary Proceedings:     Rule 4.1(1)(c) was considered In the Matter of Garett Steven Prins (“Prins”) (April 1, 2003)
                               OOS 2003-001. See disciplinary proceedings under 2.1.

 Disciplinary Proceedings:     In the Matter of Frank Patrick Greco (“Greco”) (May 28, 2003) Decision 2003-004
                               Facts – Between November 22, 2001 and April 1, 2002, Greco, a Registered Trader employed at
                               Griffiths McBurney & Partners, traded on information respecting pending undisclosed client orders
                               obtained from a trader at another Participant resulting in frontrunning and conduct inconsistent with
                               just and equitable principles of trade by Greco. Also, during this period Greco failed to properly
                               designate short sales and executed prohibited trades in a security at a time when his employer
                               was involved in a distribution of the security.
                               Held – Taking advantage of information respecting a client order that has not yet been entered in a
                               marketplace to trade ahead of the client order harms the integrity of the marketplace. Greco acted
                               contrary to just and equitable principles of trade and violated the frontrunning provisions of UMIR
                               and the Toronto Stock Exchange rules.
                               Requirements Considered – TSX Rules 4-204(1), 4-301(1) and (8) and 7-106(1)(b); Comparable
                               UMIR Provision Rules 4.1(1)(a) and 2.1(1)
                               Sanction - $65,000 fine and costs of $17,000; disgorgement of $2,105 of benefits; suspension from
                               access to the Toronto Stock Exchange for three months



Part 4 - Frontrunning                                                                                                   UMIR 4.1-2
January 1, 2013
 Disciplinary Proceedings:   In the Matter of Donald Greco (“Greco”) (July 15, 2003) Decision 2003-005
                             Facts – On November 22, 2001, Greco, a registered trader, with knowledge of an undisclosed
                             pending client order in a particular security used that information to buy shares in the security.
                             Held – With knowledge of an undisclosed client order which could reasonably be expected to affect
                             the market price of such security, Greco traded in this security, and as such, contravened TSX
                             Rule 4-204(1).
                             Requirements Considered – TSX Rule 4-204(1). Comparable UMIR Provision – Rule 4.1
                             Sanction - $15,000 fine and costs of $10,000; disgorgement of $250; one month suspension
 Disciplinary Proceedings:   Rule 4.1 was considered In the Matter of Kai Tolpinrud (“Tolpinrud”) (January 16, 2006) OOS
                             2004-001. See Disciplinary Proceedings under Rule 2.1.

 Disciplinary Proceedings:   In the Matter of Jason Fediuk (“Fediuk”) (February 15, 2005) Decision 2005-002
                             Facts – Fediuk, a trader at Salman Partners Inc. (“Salman”), had an outstanding short position in
                             TVX, a TSX listed issuer, in his personal account. On April 26, 2002, a Salman client placed a
                             significant buy order for shares of TVX with a trader that worked in close physical proximity to
                             Fediuk. Within minutes of the Salman client order being received by that trader, Fediuk placed a
                             jitney order to buy shares of TVX to cover his outstanding short position.
                             Held – While the Panel agreed that the timing of the trades and use of an undisclosed jitney order
                             to avert losses in his personal account was suspicious, it held that RS did not prove that Fediuk
                             knew of the client order when he entering trades for his personal account.
                             Requirements Considered – Rule 4.1(1)(a)
                             Disposition – charges against Fediuk dismissed




Part 4 - Frontrunning                                                                                              UMIR 4.1-3
January 1, 2013
                                                               Universal Market Integrity Rules
                                                                   Rules & Policies


PART 5 – BEST EXECUTION OBLIGATION
5.1       Best Execution of Client Orders
          A Participant shall diligently pursue the execution of each client order on the most
          advantageous execution terms reasonably available under the circumstances.


POLICY 5.1 – BEST EXECUTION OF CLIENT ORDERS
Part 1 – General Factors to be Considered
In seeking the “most advantageous execution terms reasonably available under prevailing
market conditions”, the Market Regulator would expect that the Participant would take into
account a number of general factors, including:
      •   the price at which the trade would occur;
      •   the speed of execution;
      •   the certainty of execution; and
      •   the overall cost of the transaction.
These four broad factors encompass more specific considerations, such as order size, reliability
of quotes, liquidity, market impact (the price movement that occurs when executing an order)
and opportunity cost (the missed opportunity to obtain a better price when an order is not
completed at the most advantageous time). The overall cost of the transaction is meant to
include, where appropriate, all costs associated with accessing an order and/or executing a
trade that are passed onto a client, including fees arising from trading on a particular
marketplace, jitney fees (i.e. any fees charged between dealers to provide trading access) and
settlement costs.
In considering the circumstances, Participants should take into account “prevailing market
conditions” and consider such factors as:
      •   prices and volumes of the last sale and previous trades;
      •   direction of the market for the security;
      •   posted size on the bid and offer;
      •   the size of the spread; and
      •   liquidity of the security.


Part 2 – Specific Factors to be Considered
In determining whether a Participant has diligently pursued the best execution of a client order,
the Market Regulator will consider a number of specific factors including:
      •   any specific client instructions regarding the execution of the order;
      •   whether the Participant has considered orders on a marketplace that has demonstrated
          a reasonable likelihood of liquidity for a specific security relative to the size of the client
          order, and


Part 5 – Best Execution Obligation                                                             UMIR 5.1-1
January 1, 2013
    •    whether the Participant has considered possible liquidity on marketplaces that do not
         provide transparency of orders in a consolidated market display if:
              o   the displayed volume in the consolidated market display is not adequate to fully
                  execute the client order on advantageous terms for the client, and
              o   the non-transparent marketplace has demonstrated that there is a reasonable
                  likelihood that the marketplace will have liquidity for the specific security.


Part 3 – Consideration of Foreign Organized Regulated Markets
In determining whether to consider the execution of a client order on a foreign organized
regulated market, the Participant may consider, in addition to the factors set out in Parts 1 and
2:
    •    available liquidity displayed on a marketplace relative to the size of the client order;
    •    the extent of trading in the particular security on the foreign organized regulated market
         relative to the volume of trading on marketplaces;
    •    the extent of exposure to settlement risk in a foreign jurisdiction; and
    •    the extent of exposure to fluctuations in foreign currency exchange.

Part 4 – Subject to Order Protection Rule
Notwithstanding any instruction or consent of the client, the provision of “best execution” for a
client order is subject to compliance with the “order protection rule” under Part 6 of the Trading
Rules by the marketplace on which the order is entered or by the Participant if the Participant
has marked the order as a directed action order in accordance with Rule 6.2. Similarly, if a
Participant considers a foreign organized regulated market in order to provide a client with “best
execution”, the Participant must ensure that the condition in subsection (3) of Rule 6.4, if
applicable, is satisfied prior to the execution on the foreign organized regulated market.
 Defined Terms:         NI 14-101 – section 1.1(3) – “foreign jurisdiction”
                        NI 21-101 – section 1.1 – “order”
                        NI 21-101 section 1.4 – Interpretation -- “security”
                        NI 23-101 – section 1.1 – “directed-action order”
                        UMIR section 1.1 – “better price”, “client order”, “consolidated market display”, “foreign organized
                        regulated market”, “Market Regulator”, “marketplace” and “Participant”
                        UMIR section 1.2(2) – “trade”
 Related Provisions:    UMIR sections 6.2 and 6.4; NI 23-101 – Part 6
 Regulatory History:    Effective March 9, 2007, the applicable securities commissions approved an amendment to Policy 5.1 to
                        add Part 2.
                        Effective May 16, 2008, the applicable securities commissions approved an amendment to Part 2 of
                        Policy 5.1 to replace the phrase “organized regulated markets outside of Canada” with “foreign organized
                        regulated markets”.
                        Effective September 12, 2008, the applicable securities commissions approved an amendment to
                        replace Rule 5.1. Previously, Rule 5.1 read as follows:
                             A Participant shall diligently pursue the execution of each client order on the most advantageous
                             terms for the client as expeditiously as practicable under prevailing market conditions.
                        Effective September 12, 2008, the applicable securities commissions approved an amendment to
                        replace Policy 5.1. Prior to that date, Policy 5.1 read as follows:
                             "Best execution" refers to a reasonable period of time during which the order is handled, not merely
                             the precise moment in time that it is executed. The price of the principal transaction must also be
                             justified by the condition of the market. Participants should consider such factors as:



Part 5 – Best Execution Obligation                                                                                   UMIR 5.1-2
January 1, 2013
                                •   prices and volumes of the last sale and previous trades;
                                •   direction of the market for the security;
                                •   posted size on the bid and offer;
                                •   the size of the spread; and
                                •   liquidity of the security.
                                For example, if the market is $10 bid and $10.50 asked and a client wants to sell 1000 shares, it
                                would be inappropriate for a Participant to do a principal trade at $10.05 if the security has been
                                trading heavily at $10.50 and there is strong bidding for the security at $10 compared to the number
                                of securities being offered at $10.50. The condition of the market suggests that the client should be
                                able to sell at a better price than $10.05. Accordingly, the Participant as agent for the client should
                                post an offer at $10.45 or even $10.50, depending on the circumstances. The desire of the client to
                                obtain a fill quickly is always a consideration.
                                Of course, if a client expressly consents to a principal trade a fully informed basis, following the
                                client’s instructions will be reasonable.


                                Part 2 – Factors to be Considered
                                In determining whether a Participant has diligently pursued the best execution of a client order, the
                                Market Regulator will consider a number of factors including:
                                •   any specific client instructions regarding the timeliness of the execution of the order
                                •   whether foreign organized regulated markets have been considered (particularly if the principal
                                    market for the security is outside of Canada);
                                •   whether the Participant has considered orders on a marketplace that has demonstrated a
                                    reasonable likelihood of liquidity for a specific security relative to the size of the client order; and
                                •   whether the Participant has considered possible liquidity on marketplaces that do not provide
                                    transparency of orders in a consolidated market display if:
                                    o the displayed volume in the consolidated market display is not adequate to fully execute the
                                      client order on advantageous terms for the client, and
                                    o the non-transparent marketplace has demonstrated that there is a reasonable likelihood that
                                      the marketplace will have liquidity for the specific security.
                         Effective February 1, 2011, the applicable securities commissions approved an amendment to repeal and
                         replace Part 4 of Policy 5.1. Prior to that date, Part 4 of Policy 5.1 provided:
                               Part 4 – Subject to Best Price Obligation
                               Notwithstanding any instruction or consent of the client, the provision of “best execution” for a client
                               order is subject to compliance with the “best price” obligation under Rule 5.2. Similarly, if a foreign
                               organized regulated market is considered in order to provide a client with “best execution”, the
                               Participant has an obligation to better-priced orders on marketplaces that may be required for
                               compliance with the “best price” obligation under Rule 5.2.
 Guidance:               The following is the relevant text of Market Integrity Notice 2006-017 issued on September 1, 2006 under
                         the heading “Guidance – Securities Trading on Multiple Marketplaces”. Additional text is set out under
                         Rules 3.1, 5.2, 5.3, 7.7 and 8.1:
 Rule 5.1 – Best Execution of Client Orders
 The obligation to monitor information on orders entered on and trades executed on marketplaces trading the same security falls to
 the Participant handling the client order. Neither UMIR nor the ATS Rules requires a Participant to maintain trading access to
 every Canadian marketplace on which a security may trade. However, with the publication of the CSA Notice, the CSA has
 clarified their requirement that each Participant will take into account order and trade information from all marketplaces that trade
 the same securities when discharging their best execution obligations. As set out in the CSA Notice, the CSA expects that a
 Participant will make arrangements with another dealer who is a participant of a particular marketplace or will directly route an
 order to a particular marketplace, where appropriate. In the view of IIROC, a Participant would be expected to make such
 arrangements if the particular marketplace had demonstrated that there is a reasonable likelihood that the marketplace will have
 liquidity for a specific security relative to the size of the client order.
 IIROC is also of the view that a Participant in discharging its best execution obligation should consider possible liquidity on
 marketplaces that do not provide transparency of orders in a consolidated market display, such as BlockBook and MATCH Now, if:
      •    the displayed volume in the consolidated market display is not adequate to fully execute the client order on
           advantageous terms for the client; and
      •    the non-transparent marketplace has demonstrated that there is a reasonable likelihood that the marketplace will have
           liquidity for the specific security.



Part 5 – Best Execution Obligation                                                                                             UMIR 5.1-3
January 1, 2013
    As originally set out in Market Integrity Notice 2005-015 – Guidance – Complying with “Best Price” Obligations, IIROC is of the
    opinion that a Participant may have an obligation to consider execution opportunities in special trading facilities of a marketplace if
    the price at which such trades will execute in such special facilities is a better price than available on another marketplace. For
    example, both BlockBook and Shorcan offer facilities to “discover” additional volume at the price of the last trade on their market.
    In the case of BlockBook this facility is known as the “Follow-on Auction” and on Shorcan the facility is known as the “Trade
    Expansion Protocol”. Reference should be made to Appendix “A” for a summary description of these facilities.
    If a Participant in handling various “Good Till Cancelled” orders on behalf of clients has entered the orders on a marketplace that
    has closed for trading on a particular day, IIROC would not expect that the Participant would move the orders “en masse” to a
    marketplace that continues to trade those securities. In considering best execution of the client orders, the Participant must weigh
    the possible loss of priority against the likelihood of execution opportunities. Nonetheless, IIROC would expect that the Participant
    would continue to monitor trading opportunities on those marketplaces that are open for trading and would enter appropriate
    orders if the client orders would trade with orders displayed on the marketplace that continues to trade.
    A Participant does not have to consider as part of its best execution obligation of a client order any marketplace to which dealers
    are not eligible to have trading access. If a marketplace limits access to dealers trading as principal, IIROC would permit a
    Participant to execute a trade on that marketplace as principal and then to unwind the position taken on as principal in a
    transaction with a client order on another marketplace without such transactions being considered “double printing” contrary to
    Rule 2.2 of UMIR on manipulative and deceptive activities.
    Participants are reminded that they may have other legal obligations (including applicable securities law requirements or common
    law) to their clients that may require them, in certain circumstances, to consider other marketplaces and organized regulated
    markets that may not otherwise be required by Rule 5.1 of UMIR.

    Guidance:                The following is the relevant text of Market Integrity Notice 2007-015 issued on August 10, 2007 under the
                             heading “Guidance – Specific Questions Related to Trading on Multiple Marketplaces”. Additional
                             text is set out under Rules 2.2, 3.1, 5.2 and 7.1.
    Questions and Answers
    The following is a list of questions regarding the obligations of a Participant or an Access Person with respect to trading in a
    security that trades on more than one marketplace. UMIR defines a marketplace as a recognized exchange (“Exchange”), a
    recognized quotation and trade reporting system (“QTRS”) or an alternative trading system (“ATS”) that carries on business in
    Canada.
         7.   Is a Participant required to consider organized regulated markets outside of Canada as part of “best execution”
              obligation?
              IIROC published Market Integrity Notice 2007-002 – Amendment Approval – Provisions Respecting Competitive
              Marketplaces (February 26, 2007) which contained a series of amendments to UMIR, including additional factors that
              IIROC would consider when determining whether a Participant has diligently pursued the best execution of a client
              order. One of the additional factors to be considered is whether a Participant has considered organized regulated
              markets outside of Canada (particularly if the principal market for the security is outside of Canada) in handling of a
              client order. The addition of the factor to consider organized regulated markets outside of Canada as part of best
              execution of a client order parallels a provision on best execution contained in the Companion Policy to the CSA Trading
              Rules. 1
              To the extent that a foreign market is considered in order to provide a client with “best execution” in accordance with
              Rule 5.1, the Participant would nonetheless have an obligation to better-priced orders on Canadian marketplaces under
              the “best price” obligation under Rule 5.2.
         10. What are the specific risks to a Participant in accepting an “All-or-None” client order in a multiple marketplace
             environment?
              Rule 5.1 of UMIR requires a Participant to diligently pursue the execution of each client order on the most advantageous
              terms for the client as expeditiously as practicable under prevailing market conditions. To the extent that a Participant
              accepts “All-or-None” orders from clients, IIROC expects a Participant to adopt policies and procedures with respect to
              the handling of such client orders and inform its clients of such policy, including the implications and risks (i.e. partial
              fills) associated with the use of an “All-or-None” order. If a Participant has not informed clients of the Participant’s policy
              on the handling of “All-or-None” orders, IIROC would expect that the Participant will handle an “All-or-None” order in
              conformity with client instructions.
              If a Participant, in handling an “All-or-None” order assumes the risk of a partial fill, that is, any unfilled portion of the
              client order is filled to the client out of the Participant’s error account, or the partial fill is re-allocated into the Participant’s
              error account, such orders continue to be considered a client order, and must continue to be properly marked “client”.




1
       Companion Policy 23-101CP, ss 4.1(3). The text of that subsection provides:
       For inter-listed securities, the Canadian securities regulatory authorities are of the view that in making reasonable efforts, a
       dealer should consider whether it would be appropriate in the particular circumstances to look at markets outside of Canada.



Part 5 – Best Execution Obligation                                                                                                      UMIR 5.1-4
January 1, 2013
           If an “All-or-None” order is “triggered” and trades-through a better-priced order on a marketplace, IIROC would consider
           the trade to be a violation of Rule 5.2. A violation of Rule 5.2 would occur even if the marketplace with the better-priced
           order does not display sufficient volume at a better price to fully satisfy the “All-or-None” order. In light of the risk of
           “best price” obligations posed by the use of “All-or-None” orders, IIROC expects a Participant to have a clear
           understanding of the manner in which the marketplace handles “All-or-None” orders and that the Participant will take
           appropriate steps to fulfill any “best price” obligations.

 Guidance:                The following is the relevant text of Market Integrity Notice 2007-019 issued on September 21, 2007 under
                          the heading “Guidance – Entering Client Orders on Non-Transparent Marketplaces and Facilities”.
                          Additional text is set out under Rules 5.2, 5.3, and 6.3:
 Summary
 This Market Integrity Notice provides guidance on the application of the best execution, client priority and order exposure
 requirements of the Universal Market Integrity Rules (“UMIR”) to the entry of client orders on marketplaces and facilities of
 marketplaces that do not disseminate information on orders to information vendors.
 Background
 Part 7 of National Instrument 21-101 – Marketplace Operation (the “Marketplace Operation Instrument”) provides that a
 marketplace that displays orders to any person shall provide accurate and timely information regarding orders to the information
 processor, if any, or an information vendor. A marketplace need not distribute order information to the information processor or an
 information vendor if the marketplace does not make details of orders available to persons other than those retained to assist in
 the operation of the marketplace. As at September 7, 2007, the equity marketplaces that are:
       •    “transparent” marketplaces which disclose order information are:        the Toronto Stock Exchange (“TSX”), the TSX
            Venture Exchange and CNQ, including Pure Trading; and
       •    “non-transparent” marketplaces which do not disclose order information are: BlockBook, Liquidnet, and MATCH Now.
 In the near future, the TSX intends to enable the “community matching” features of its pre-trade matching facility known as
 “Alternative Trade eXecution” (“ATX”). Under the “community matching” feature of ATX, a non-transparent “intent” entered by a
 Participant that participates in ATX may match with intents entered by other Participants or with order flow that is destined for entry
 in the central limit order book of the TSX. Any “match” in ATX must occur between the best ask price and the best bid price as
 displayed in a consolidated market display (comprised of all “transparent” marketplaces trading the particular security). The match
 is reported to the TSX and executed in the central limit order book at a price that is then at or between the best ask price and best
 bid price. One of the features of ATX allows “intents” from a particular account to be assigned to a “priority allocation group”
 (“PAG”) that will determine the order in which the intents will match.
 None of BlockBook, Liquidnet or MATCH Now provides pre-trade transparency as contemplated by Part 7 of the Marketplace
 Operation Instrument of any orders entered on their marketplace (through the provision of order information to information vendors
 for dissemination). BlockBook uses proprietary signalling to indicate to all subscribers the presence of liquidity based on certain
 parameters. In the case of Liquidnet, subscribers are informed if another subscriber has a matching “indication of liquidity”,
 following which a one-on-one negotiation of orders may take place. None of BlockBook, Liquidnet or MATCH Now provides a
 mechanism for orders to be assigned different priorities for execution outside of the priorities established by the operating model of
 the respective marketplace.
 For a summary comparison of the basic features of each marketplace, reference should be made to the chart available through the
 IIROC homepage at www.iiroc.ca under the heading “Markets We Regulate”. For more detailed guidance on the application of
 UMIR to trading on multiple marketplaces, reference should be made to:
       •    Market Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplaces (September 1, 2006);
       •    Market Integrity Notice 2006-020 – Guidance – Compliance Requirements For Trading On Multiple Marketplaces
            (October 30, 2006); and
       •    Market Integrity Notice 2007-015 – Guidance – Specific Questions Related to Trading on Multiple Marketplaces (August
            10, 2007).
 Questions and Answers
 The following are the most frequently asked questions regarding the obligations of a Participant when entering a client order on a
 non-transparent marketplace or facility and the responses of IIROC to each:
           2.   Are there circumstances when the “best execution” obligation would require a Participant to consider a
                “non-transparent” marketplace or facility?
                Rule 5.1 of UMIR requires a Participant to diligently pursue the execution of each client order on the most
                advantageous terms for the client as expeditiously as practicable under prevailing market conditions. IIROC is of
                the view that a Participant in discharging its best execution obligation should consider possible liquidity on
                marketplaces that do not provide transparency of orders in a consolidated market display, such as BlockBook and
                MATCH Now, if:
                      •    the displayed volume in the consolidated market display is not adequate to fully execute the client order
                           on advantageous terms for the client; and




Part 5 – Best Execution Obligation                                                                                          UMIR 5.1-5
January 1, 2013
                        •    the non-transparent marketplace has demonstrated that there is a reasonable likelihood that the
                             marketplace will have liquidity for the specific security.
                   As access to Liquidnet is limited to institutions other than dealers, a Participant would not have an obligation to
                   consider Liquidnet or any other marketplace to which the Participant could not otherwise, directly or indirectly,
                   obtain access to trade as agent.
              6.   Is an “intent” entered into ATX considered to be an “order” for the purpose of UMIR?
                   While the rules of the TSX refer to “active intents” and “passive intents” entered into the ATX facility (principally to
                   avoid confusion with respect to orders entered into the central limit order book of the TSX), these “intents” are a
                   firm indication of a willingness to buy or sell a security that may be executed. As such, an “intent” entered into the
                   ATX facility is considered an “order” for the purposes of Marketplace Operation Instrument and UMIR (and a client
                   order entered on ATX as an “intent” will be monitored by IIROC and subject to review as part of a trade desk review
                   undertaken by IIROC of a Participant).
                   Nonetheless, ATX is a “matching facility” rather than a marketplace. Any match of an order or active intent with a
                   passive intent in ATX does not constitute a trade. The match only becomes a trade when executed in the trading
                   engine of the TSX. As such, the critical point in time for the purposes of the application of certain UMIR provisions
                   dealing with “trades” will be at the execution of the trade in the central limit order book of the TSX.

    Guidance:                     The following is the relevant text of IIROC Notice 09-0244 issued on August 27, 2009 under the
                                  heading “Guidance Note – UMIR – "Best Execution" and "Best Price" Obligations For
                                  Securities Listed On TSX Venture Exchange”.
    Summary
    This IIROC Notice provides a reminder to Participants respecting their best execution and best price obligations under the
    Universal Market Integrity Rules (“UMIR”) as a result of securities which are listed on the TSX Venture Exchange (“TSXV”) trading
    on other marketplaces.
    “Best Execution” and “Best Price” Obligations under UMIR
    This IIROC Notice does not change the guidance that IIROC has previously issued on how a Participant would comply with their
    “best execution” 2 and “best price” 3 obligations for securities trading on multiple marketplaces. This IIROC Notice simply reminds
    Participants of their obligations given that securities listed on the TSXV now trade on other marketplaces.
    Under Rule 5.1 of UMIR, the obligation to monitor information on orders entered on and trades executed on marketplaces trading
    TSXV-listed securities falls to the Participant handling the client order. Participants are expected to take into account order and
    trade information from all marketplaces that trade the same securities when discharging their best execution obligations. Where
    appropriate, a Participant who does not have trading access to a particular marketplace would be expected to make arrangements
    with another dealer who is a Participant of the particular marketplace. In the view of IIROC, a Participant would be expected to
    make such arrangements if the particular marketplace had demonstrated that there is a reasonable likelihood that the marketplace
    will have liquidity for a specific security relative to the size of the client order.
    IIROC is also of the view that a Participant in discharging its best execution obligation should consider possible liquidity on
    marketplaces that do not provide transparency of orders in a consolidated market display if:
         •    the displayed volume in the consolidated market display is not adequate to fully execute the client order on
              advantageous terms for the client; and
         •    the non-transparent marketplace has demonstrated that there is a reasonable likelihood that the marketplace will have
              liquidity for the specific security.
    The “best price” obligation under Rule 5.2 of UMIR requires a Participant to make “reasonable efforts” to fill better-priced orders
    displayed on a “protected marketplace” 4 at the time the Participant executes at an inferior price on another marketplace or foreign


2
       See Market Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplace (September 1, 2006) under the
       sub-heading “Rule 5.1 – Best Execution of Client Orders”.
3
       See IIROC Notice 09-0107 - Rules Notice – Notice of Approval – UMIR – Provisions Respecting the “Best Price” Obligation
       (April 17, 2009), IIROC Notice 09-0108 - Rules Notice – Guidance Note – UMIR – Specific Questions Related to the “Best
       Price” Obligation (April 17, 2009) and Market Integrity Notice 2008-010 – Guidance – Complying with “Best Price” Obligations
       (May 16, 2008).
4
       Under UMIR, a “protected marketplace” means a marketplace that:
         •    disseminates order data in real-time and electronically through an information processor or one or more information
              vendors in accordance with the Marketplace Operation Instrument;
         •    permits dealers to have access to trading in the capacity as agent;
         •    provides fully-automated electronic order entry; and
         •    provides fully-automated order matching and trade execution.
       Of those marketplaces currently trading TSXV-listed securities, each of TSXV, Pure Trading, Alpha and Omega qualify as a
       “protected marketplace” while Liquidnet and MATCH Now do not qualify as a “protected marketplace”.



Part 5 – Best Execution Obligation                                                                                             UMIR 5.1-6
January 1, 2013
 organized regulated market. IIROC will accept that a Participant has made “reasonable efforts” to comply with the “best price”
 obligation if the Participant has:
      •    entered the order on a marketplace that will ensure compliance with the “best price” obligation;
      •    used an acceptable order router; or
      •    provided the order to another Participant for entry on a marketplace.
 If a Participant uses another means to enter an order on a marketplace, IIROC will determine whether a Participant has made
 “reasonable efforts” to obtain the best available prices on a “protected marketplace”. Each Participant must adopt policies and
 procedures to ensure compliance with its “best price” obligation, which will include the relevant factors upon which it is relying in
 making trading decisions. IIROC has indicated that each Participant must review its policies and procedures on an ongoing basis
 to reflect changes to the trading environment and market structure (which would include the fact that securities listed on TSXV now
 trade on multiple marketplaces).
 Trading of TSXV-Listed Securities on Multiple Marketplaces
 On March 12, 2007, Liquidnet Canada Inc. (“Liquidnet”) became the first ATS to trade securities listed on the TSXV. Trading of
 TSXV-listed securities followed on MATCH Now on September 3, 2008 and on Omega ATS Limited (“Omega”) on November 17
 2008. However, by December 31, 2008, only 223 trades in a security listed exclusively on TSXV had been made on an ATS. The
 full TSXV stock list became eligible for trading on Pure Trading on February 27, 2009 and on Alpha Trading Systems (“Alpha”) on
 March 30, 2009. During the first quarter of 2009, a total of 1,884 trades with a volume of 26,655,998 shares in TSXV-listed
 securities occurred on these markets but, during the second quarter of 2009, the number of trades expanded significantly to
 19,342 trades with a volume of 156,763,422.
 While more than 98% of trades and volume in TSXV-listed securities continued to be made through the TSXV during the first six
 months of 2009, the increase in trading activity in TSXV-listed securities on the ATSs indicates that trading opportunities in TSXV-
 listed securities are increasingly available on the ATSs. Participants must take this increased liquidity on multiple marketplaces
 into account when making determinations with respect to their “best execution” and “best price” obligations under UMIR. In
 particular, IIROC expects each Participant will monitor the changes in the liquidity available on each marketplace for securities
 listed on the TSXV and that each Participant will review their policies and procedures for both “best execution” and “best price” to
 take account of any changes in the liquidity patterns.
 The following tables set out more detailed information on trading of TSXV-listed securities during the first six months of 2009,
 including the number of trades and the associated volume.

  Number of                                                                  Marketplace
   Trades of        Total All
  TSXV-listed     Marketplaces        TSX Venture
                                                          Pure Trading      Liquidnet      Match Now          Omega        Alpha
   Securities                          Exchange

    2009 to
                       1,932,692            1,911,466            10,110               5          1,734           924          8,453
     Date
     09-Jan              258,806              258,685                  -              0            121             0               -
     09-Feb              257,096              256,737               104               2            198            55               0
     09-Mar              284,205              282,801               903               3            138           351               9
     09-Apr              330,491              325,540             1,924               0            442           200          2,385
    09-May               372,532              366,358             2,075               0            488            33          3,578
     09-Jun              429,562              421,345             5,104               0            347           285          2,481

   Volume of                                                                 Marketplace
  TSXV-listed       Total All
   Securities     Marketplaces        TSX Venture
                                                         Pure Trading       Liquidnet      Match Now          Omega        Alpha
    Traded                             Exchange

      2009 to
                  19,268,144,033      19,084,724,613         68,880,299       5,800,000      8,027,200     4,639,400      96,072,521
      Date
     09-Jan        2,705,924,102       2,705,726,102                    -              0       198,000                0            -
     09-Feb        2,632,236,154       2,627,309,854            739,900       3,500,000        319,400        367,000              0
     09-Mar        2,723,612,429       2,702,080,731         13,860,010       2,300,000      4,696,700        323,200       351,788
     09-Apr        3,150,499,202       3,100,226,639         25,099,800                0     1,077,300     3,223,000      20,872,463
    09-May         3,814,225,957       3,758,285,742         16,069,589                0       790,300         79,600     39,000,726
     09-Jun        4,241,646,189       4,191,095,545         13,111,000                0       945,500        646,600     35,847,544




Part 5 – Best Execution Obligation                                                                                         UMIR 5.1-7
January 1, 2013
    Guidance:                The following is the relevant text of IIROC Rules Notice 11-0043 issued on February 1, 2011 under the
                             heading “Guidance Note - UMIR – Guidance on ”Locked” and ”Crossed” Markets”:
    Questions and Answers
    The following are questions relating to the obligations of a Participant under UMIR in the context of a “locked” or “crossed” market
    and IIROC’s response to each question:
    5.    Is it a violation of UMIR to enter an order on a marketplace that “bids-through” or “offers-through” an order on
          another marketplace even if the order that “bids-through” or “offers-through” does not “trade”?
          Yes. Such behaviour is not in compliance with the Locked and Crossed Order Provisions. 5 In addition, IIROC is of the view
          that a Participant who intentionally “bids-through” (enters a purchase order that is booked on a marketplace at a price which
          is higher than an offer to sell that security on another protected marketplace) or “offers-through” (enters a sell order that is
          booked on a marketplace at a price which is lower than a bid to purchase that security on another protected marketplace) is
          in a breach of Rule 2.1 of UMIR governing just and equitable principles of trade since such orders will result in a “crossed
          market”. Furthermore, if the Participant is entering a client order when “bidding-through” or “offering-through”, the Participant
          may be in violation of the “best execution” requirements under Rule 5.1 to diligently pursue the execution of the client order
          on the most advantageous execution terms reasonably available under the circumstances.
    9.    May a client instruct the entry of an order that has the effect of creating or continuing a “locked” or “crossed”
          market?
          No. Although in the ordinary course, the Participant’s “best execution” obligation would require that the Participant follow its
          client’s instructions with respect to the handling of an order, compliance with the “best execution” obligation is subject to
          compliance with applicable regulatory requirements. In light of this, if the client prefers that their order be executed on a
          particular marketplace, the client may consent to the order being withheld from entry on a marketplace until such time as the
          prevailing market prices would permit the entry of the order without locking or crossing the market.

    Guidance:                The following is the relevant text of IIROC Rules Notice 11-0113 issued on March 30, 2011 under the
                             heading “Guidance Note -- UMIR – Guidance on Best Execution and Management of Orders”:
    Questions and Answers
    The following is a list of the “most frequently asked” questions regarding the use of certain order types in achieving “best
    execution” in the context of recent developments in Canadian market structure and the response of IIROC to each question:
    1.    How should a Participant ensure that order routing decisions comply with their “best execution” obligations and any
          applicable “trade-through” protection obligations? 6
          A Participant must regularly review its order routing choices to ensure that such choices continue to satisfy its “best
          execution” obligations and any applicable “trade-through” protection obligations arising as a result of the use by the
          Participant of a “Directed Action Order” or the execution of certain trades on a foreign organized regulated market 7. A
          Participant may wish to consider:
               •    maintaining a written order routing methodology or table; and
               •    the establishment of a formal process, such as a committee that regularly reviews the methodology that determines
                    order routing choices.
          The Participant is expected also to review the policies and procedures that inform their order routing decisions in conjunction




5
         See section 6.4 of Companion Policy 23-101CP.
6
         Canadian Securities Administrators Notice, Notice of Amendments to National Instrument 21-101 Marketplace Operation and
         National Instrument 23-101 Trading Rules, (2009) 32 OSCB 9401. In particular, reference should be made to Part 6 of the
         Trading Rules (“Order Protection Rule”) which became effective February 1, 2011. See also IIROC Notice 11-0036 – Rules
         Notice – Notice of Approval – UMIR – Provisions Respecting the Implementation of the Order Protection Rule (January 28,
         2011). In particular, reference should be made to Part 6 of Policy 7.1 – Specific Provision Respecting Trade-throughs which
         became effective February 1, 2011. Under that provision, a Participant must have policies and procedures in place that a
         reasonably designed to ensure compliance with the Order Protection Rule if the Participant uses a “Directed Action Order” as
         provided for under the Order Protection Rule or with the conditions in Rule 6.4 of UMIR if the Participant executes certain
         orders on a foreign organized regulated market.
7
         An Introducing Broker who is a member of an exchange, user of a quotation and trade reporting system or a subscriber to an
         alternative trading system is also a Participant for the purposes of UMIR with “best execution” obligations under Rule 5.1 of
         UMIR. An Introducing Broker who is not a Participant is subject to similar best execution requirements under applicable
         securities law, particularly Part 4 of National Instrument 23-101. The Introducing Broker is expected to adopt policies and
         procedures to ensure compliance with its “best execution” obligations. The Introducing Broker must be satisfied that the
         manner in which its orders are managed by the Executing Dealer is consistent with the policies and procedures of the
         Introducing Dealer regarding “best execution”.



Part 5 – Best Execution Obligation                                                                                             UMIR 5.1-8
January 1, 2013
          with:
                  •   the launch of a new marketplace; 8 and
                  •   a significant change to trading functionality offered by any of the existing marketplaces. 9
    2.    How should orders be managed when not all marketplaces are open and available for trading?
          In Canada, different marketplaces operate different opening mechanisms (i.e. an opening auction or a “shot-gun” open) and
          open at different times. A Participant’s policies and procedures relating to the Participant’s “best execution” obligations
          should address the handling of orders when not all marketplaces are open and available for trading (which includes prior to
          the opening and after the close of marketplaces during so-called “traditional exchange hours” of 9:30 a.m. to 4:00 p.m. or
          when certain marketplaces may be unavailable for trading for systems or technical reasons). Specifically, a Participant’s
          procedures must address the handling of “immediately tradable” orders received when not all marketplaces are open and
          available for trading.
          IIROC has previously issued guidance 10 in response to the question: “How should an ‘immediately tradable’ order from a
          client be handled if not all of the marketplaces are open at the time the order is received?” This previously issued guidance
          provided that how an immediately tradable client order received outside of traditional trading hours is handled by a Participant
          will depend on the policies adopted by the Participant as communicated to its clients. For example, the policy may provide
          that a Participant that receives a market order after 4:00 p.m. and before 9:30 a.m. the next trading day may consider trading
          opportunities on any visible marketplace that is then open for trading or the Participant may “hold” the order until all
          marketplaces or the principal or the primary market is open for trading.
    3.    What should a Participant consider when deciding where to “book” an order if multiple marketplaces open for
          trading at the same time?
          The policies and procedures adopted by the Participant should consider the “opening mechanism” adopted by each of the
          marketplaces and the impact of that mechanism on the probability of execution and the “quality” of that execution. Some
          marketplaces may offer an “opening auction market” which continually displays indicated prices prior to opening for trading.
          Other marketplaces may offer a simple “shot gun” opening. While “Opening Orders” are exempt from the Order Protection
          Rule, 11 a Participant must nonetheless comply with its “best execution” obligations with respect to its handling of “Opening
          Orders”. Each Participant must regularly monitor the quality of the executions obtained for “Opening Orders” to be able to
          determine that the marketplace chosen as the location for entering Opening Orders generally offers “best execution” for that
          particular security. Participants must recognize that different marketplaces may offer the most liquidity at the opening of
          trading for particular securities and, as such, their policies and procedures for obtaining “best execution” for Opening Orders
          must take account of this fact.
          The same considerations will apply to the handling by a Participant of a “Market-on-Close Order” when multiple marketplaces
          offer market-on-close or call market facilities to execute the closing trades at the end of the trading day.
    4.    What are the obligations of a Participant who uses a third party vendor for order routing?
          A Participant who uses a third party vendor for order routing should be familiar with the operation of the router and the
          configurability available. The configuration of the order router should support the Participant’s policies and procedures with
          respect to its “best execution” obligations as well as any “trade-through” protection obligation imposed on the Participant. On
          a regular basis, the Participant should review the operation and performance of the order router to ensure that the order
          router continues to be compatible with the policies and procedures of the Participant.
    5.    How should a Participant handle “stop loss” orders in fast moving markets?
          A stop loss order without any limit on the price of execution will, once the market has reached the pre-determined trigger
          price, be entered on a marketplace as a market order. The execution outcome is, to a large extent, dependant on the
          methods and technology used by a Participant to manage these order types. Stop loss orders may be triggered by short term
          price movements. If a Participant’s order management procedures (as they relate to triggered stop loss market orders) give
          priority to “immediacy of execution” over “price of execution”, the resulting executions may occur at unanticipated prices.
          Furthermore, the execution of stop loss orders can exacerbate a selloff trend by increasing the liquidity imbalance given that
          stop loss orders tend to cluster at or around certain trigger prices.
          Participants are reminded that they continue to have “best execution” obligations when managing stop loss orders.
          Participants who use technology solutions for the management of stop loss orders must ensure that their “best execution”
          obligations are considered in the technology design such that orders are not being entered on marketplaces that would
          execute at “clearly erroneous” prices. Participants are encouraged to require limit prices on stop loss orders. This
          recommendation is particularly applicable to those Participants who have automated the handling of stop loss orders and the


8
         It is the practice of IIROC to issue an IIROC Notice under the category of “Marketplace Notice” prior to the launch of a new
         marketplace. These notices are available on the IIROC website at www.iiroc.ca.
9
         See Summary Comparison of Current Equity Marketplaces available on the IIROC website at www.iiroc.ca.
10
         See Market Integrity Notice 2008-010 – Guidance – Complying with “Best Price” Obligations (May 16, 2008).
11
         An “Opening Order” will be considered as a “calculated-price order” for the purposes of the exception provided in section
         6.2(e)(ii) of the Order Protection Rule.



Part 5 – Best Execution Obligation                                                                                            UMIR 5.1-9
January 1, 2013
       technology has a limited ability to prevent unintended execution outcomes.
       IIROC recommends that each Participant ensure that clients who use stop loss orders are aware of:
            •    the risks inherent in the use of stop loss market orders in fast moving markets; and
            •    the general procedures of the Participant for the handling of a stop loss order that has been “triggered”.
 6.    What should a Participant tell a client with respect to the use of “market” orders?
       Many of the problems associated with the use of stop loss market orders also apply to the entry of any market order,
       particularly during periods of significant market volatility. With a market order, there is no control over what the best available
       price will be at the moment the trade is executed and the corresponding cost of the transaction. In cases of extreme market
       volatility or liquidity imbalance, the market price can quickly drop below or rise above the price that was quoted at the time the
       order was entered and a market order may trade at a price which is significantly different from the expected execution price or
       range of prices. During times of very high market activity, there may be delays in message traffic with quotes lagging behind
       actual prices that continue to change on marketplaces in real time. The size of any quote may change rapidly, affecting the
       likelihood of a quoted price being available in whole or in part.
       In contrast, a limit order provides control over the execution price but also reduces the certainty of execution. It is possible a
        limit order will not be executed, missing the opportunity to buy or sell the stock altogether in a fast moving market.
        Aggressively priced limit orders, when a buy limit order has a higher price than the prevailing market and a sell limit order has
        a lower price than the prevailing market, will trade much like a market order but the order will not “chase” the market price and
        potentially execute at a price which is outside the range which is acceptable to the investor.
       IIROC recommends that each Participant ensure that clients who use market orders are informed of the advantages and
       disadvantages of the use of such order types in various market conditions.
 7.    What obligations under UMIR does a Participant have to a “discount client” with respect to the order type selected
       for use by a client?
       While suitability obligations are generally not applicable to an Execution-Only Account, 12 Participants retain a “best execution”
       obligation with respect to orders from a client with an Execution-Only Account. A Participant should take reasonable steps to
       ensure that such clients are provided with adequate information on how certain order types, such as market orders and stop
       loss market orders, function and the associated execution risks in the current equity market structure.
       A Participant supporting electronic order entry from “Execution-Only Accounts” may wish to consider implementing a warning
       on the order entry screen when a client enters an order with a higher risk of unintended execution outcomes, such as a stop
       loss order with no limit. Participants are encouraged to require that clients with Execution-Only accounts provide limit prices
       on all stop loss orders.

 Guidance:                 The following is the relevant text of IIROC Rules Notice 11-0114 issued on March 30, 2011 under the
                           heading “Guidance Note -- UMIR – Guidance Respecting the Use of Certain Order Types”:
 Questions and Answers
 The following is a list of the “most frequently asked’ questions regarding the use of certain order types in the context of recent
 developments in Canadian market structure and the response of IIROC to each question:
 1.    Should market orders or limit orders be used in today’s more complex markets?
       The answer to this question depends on what is most important to the client. If certainty of execution is comparatively more
       important to the client than the price at which the transaction is effected, a market order may be an effective way to quickly
       buy or sell a security, as a market order will usually be executed immediately at the best available price. However, there is no
       control over what the best available price will be at the moment the trade is executed and the corresponding cost of the
       transaction. In cases of extreme market volatility or liquidity imbalance, the market price can quickly drop below or rise above
       the price that was quoted at the time the order was entered and a market order may trade at a price which is significantly
       different from the expected execution price or range of prices. During times of very high market activity, there may be delays
       in message traffic with quotes lagging behind actual prices that continue to change on marketplaces in real time. The size of
       any quote may change rapidly, affecting the likelihood of a quoted price being available in whole or in part. If a market order
       is entered before the opening of any marketplace, the execution price will reflect all other orders, including any other market
       orders, which have been entered taking into account developments since the close of the marketplaces on the previous
       trading day.
       In contrast, a limit order provides control over the execution price but also reduces the certainty of execution. It is possible a
       limit order will not be executed, missing the opportunity to buy or sell the stock altogether in a fast moving market.
       Aggressively priced limit orders, when a buy limit order has a higher price than the prevailing market and a sell limit order has
       a lower price than the prevailing market, will trade much like a market order but the order will not “chase” the market price and


12
      Participants should be aware that they also may have obligations regarding the use of order types in the handling of client
      orders under the proposed Rule 3400 – Suitability of the Dealer Member Rules of IIROC. See IIROC Notice 10-0266 – Rules
      Notice – Request for Comments – Dealer Member Rules – Plan language rule re-write project – Dealing with clients, Proposed
      Rules 3400-3900 (October 8, 2010).



Part 5 – Best Execution Obligation                                                                                          UMIR 5.1-10
January 1, 2013
       potentially execute at a price which is outside the range which is acceptable to the investor.
 2.    Does a “stop loss” order prevent losses in fast moving markets?
       Not necessarily. A stop loss order without any limit on the price of execution will, once the market has reached the pre-
       determined trigger price, be entered on a marketplace as a market order. Furthermore, the execution of stop loss orders can
       exacerbate a selloff trend by increasing the liquidity imbalance, given that stop loss orders tend to cluster at or around certain
       trigger prices.
       A stop loss limit order which, when triggered, is entered as a limit order, can be used to restrict downside risk. As with all limit
       orders, there is no guarantee that the order will be executed following entry on a marketplace. However, a stop loss limit
       order prevents executions at an unanticipated price. Once booked, the limit assigned to the order can be managed to better
       control the execution of the order. In a volatile market, a stop loss limit order may not be executed, in which case the investor
       will continue to be exposed to a declining stock price (but the investor will not receive an execution price which was otherwise
       unanticipated). While there is no guarantee of execution when using a limit order, the use of this order type may provide an
       opportunity for participation in a recovery in the event of a short term fluctuation in the price of a fast moving stock.
 3.    Can “All or None” orders be used to guarantee a fill of an order at a specific price in volatile markets?
       No. An “All or None” order is a special terms order for the purposes of UMIR and, as such, it does not participate in the
       “regular” market. Not all marketplaces or Participants support or accept “All or None” orders. 13 An “All or None” order is
       executed on a best-efforts basis and ranks lower in priority to orders without special conditions. This order type requires that
       the total number of shares specified be filled in a single transaction, at the limit price or better on a marketplace having a
       sufficient volume of the stock at the best price. Since its execution is dependent upon there being sufficient available volume
       of the security on the best market that offers this order type, the security may trade at or through the price of the “All or None”
       order without the order being executed. An “All or None” order will remain open until it is executed or cancelled.
       An alternative to an “All or None” order is a “Fill or Kill” order which also must be filled entirely at the limit price or better, but is
       cancelled if the order is not immediately executed. A “Fill or Kill” order can be used to detect liquidity quickly on any
       marketplace but does not guarantee that the order will be filled at the limit price in a volatile market.
 4.    Is there any order type that can ensure that a trade of an Exchange-traded Fund (“ETF”) occurs near its net asset
       value in volatile markets?
       No. ETFs trade like stocks and must match buyers to sellers. However, an ETF is a listed mutual fund that holds securities of
       an underlying index or other basket of securities. In order for ETF trading to reflect fair prices, the prices of the ETF’s
       underlying holdings must be stable and readily calculable. This stability may not exist during periods of heightened market
       volatility, which may hinder the process of accurately pricing ETFs. In instances when ETF quotes are subject to significant
       market volatility, a market order can result in a fill at a price which differs significantly from the price that was quoted at the
       time the trade was entered or the net asset value of the ETF at the time of the execution of the trade. Placing a “stop loss”
       order without a limit also poses the same risk of getting filled at a price which differs significantly from the “stop” price trigger.
       A limit order or stop loss limit order are alternatives that can limit losses, if the orders can be filled in a volatile market. If the
       market is missed with the limit order, this also provides an opportunity to hold the position and take advantage of any
       recovery in the value of the ETF which has an intrinsic value based on its holdings.

 Disciplinary Proceedings:          In the Matter of TD Securities Inc, (“TDSI”) (July 5, 2006) DN 2006-007
                                    Facts – Between December 2003 and January 2005, TDSI on numerous occasions failed to
                                    transmit retail client orders to Dealer A, a CNQ Market Maker, for entry onto the CNQ marketplace.
                                    TDSI held back client orders that were either not immediately tradeable or which remained outside
                                    the posted quote until expiry, including orders for less than 50 standard trading units. Such orders
                                    expired unfilled without ever being entered onto CNQ. It was also found that TDSI failed to
                                    maintain a complete audit trail relating to these orders.
                                    Disposition – TDSI failed to meet its obligations under several provisions of UMIR in relation to the
                                    handling, trading, compliance and supervision of retail client orders for CNQ listed securities. In
                                    failing to adequately consider and plan with supervisory, compliance and trading staff an
                                    appropriate method of handling and monitoring client orders for CNQ, TDSI failed to fulfill its best
                                    execution and order exposure obligations to clients in respect of some CNQ orders. In failing to
                                    adopt adequate policies and procedures to be followed by its employees TDSI failed to fulfill its
                                    supervisory obligations under UMIR.
                                    Requirements Considered – Rules 5.1, 6.3(1), 10.11(1), 10.12(1), 7.1(1) and Policy 7.1
                                    Sanctions - $350,000 fine and costs of $80,000


13
      See Summary Comparison of Current Equity Marketplaces (Table 3 – Marketplace Provisions for Order Types) available on
      the IIROC website at www.iiroc.ca. Both the Toronto Stock Exchange and TSX Venture Exchange have eliminated this order
      type effective December 15, 2008 but the order type is supported on Alpha trading Systems, Chi-X Canada ATS Limited,
      Canadian National Stock Exchange and Omega ATS Limited. [This functionality was removed from Alpha Trading Systems in
      December of 2011. All or None orders are treated as Fill or Kill orders on Omega ATS Limited.]



Part 5 – Best Execution Obligation                                                                                                 UMIR 5.1-11
January 1, 2013
                                                                               Universal Market Integrity Rules
                                                                                     Rules & Policies


5.2      Best Price Obligation – Repealed

POLICY 5.2 – BEST PRICE OBLIGATION – Repealed
 Regulatory History:   Effective April 8, 2005, the applicable securities commissions approved an amendment to clause (c) of
                       subsection (2) of Rule 5.2 to add subclause (v).
                       Effective March 9, 2007, the applicable securities commissions approved an amendment to clause (c) of
                       subsection (2) of Rule 5.2 to add subclause (vi) and to Part 1 of Policy 5.2 to change the factors that may
                       be considered. Prior to that date, Part 1 provided:
                             Part 1 – Qualification of Obligation
                             The “best price obligation” imposed by Rule 5.2 is subject to the qualification that a Participant make
                             “reasonable efforts” to ensure that a client order receives the best price. In determining whether a
                             Participant has made “reasonable efforts”, the Market Regulator will consider:
                                     •   the information available to the Participant from the information processor or information
                                         vendor;
                                     •   the transactions costs and other costs that would be associated with executing the trade
                                         on a marketplace;
                                     •   whether the Participant is a member, user or subscriber of the marketplace with the best
                                         price;
                                     •   whether market outside of Canada have been considered (particularly if the principal
                                         market for the security is outside of Canada); and
                                     •   any specific client instructions regarding the timeliness of the execution of the order.
                       Effective May 16, 2008, the applicable securities commissions approved amendments to Rule 5.2 and
                       Policy 5.2 to:
                       1.    replace subsection (1) of Rule 5.2 which, prior to the date, provided:
                                 (1)     A Participant shall make reasonable efforts prior to the execution of a client order to
                                         ensure that:
                                         (a)    in the case of an offer by the client, the order is executed at the best bid price; and
                                         (b)    in the case of a bid by the client, the order is executed at the best ask price.
                       2.    add clause (d) to subsection (2) of Rule 5.2;
                       3.    replace Part 2 of Policy 5.2 which, prior to the date, provided:
                                 Part 2 – Trade-Through of Marketplaces
                                 Subject to the qualification of the “best price obligation” as set out in Part 1, Participants may not
                                 intentionally trade through a better bid or offer on a marketplace by making a trade at an inferior
                                 price (either one-sided or a cross) on a stock exchange or other organized market. This Policy
                                 applies even if the client consents to the trade on the other stock exchange or other organized
                                 market at the inferior price. Participants may make the trade on that other exchange or
                                 organized market if the better bids or offers, as the case may be, on marketplaces are filled first
                                 or coincidentally with the trade on the other stock exchange or organized market. The time of
                                 order entry is the time that is relevant for determining whether there is a better price on a
                                 marketplace.
                                 This Policy applies to "active orders". An "active order" is an order that may cause a trade-
                                 through by executing against an existing bid or offer on another stock exchange or organized
                                 market at a price that is inferior to the bid or ask price on a marketplace at the time. This Policy
                                 applies to trades for Canadian accounts and Participants' principal (inventory) accounts. The
                                 Policy also applies to Participants' principal trades on foreign over-the-counter markets made
                                 pursuant to the outside-of-Canada exemption in clause (e) of Rule 6.4. Trades for foreign
                                 accounts are not subject to this Policy because they are exempt from Rule 6.4 pursuant to the
                                 “outside-of-Canada” exemption set out in clause (e) of Rule 6.4. For example, an order to sell
                                 from a non-Canadian account on the New York Stock Exchange at a price below the bid price
                                 on a marketplace may be executed by the Participant.




Part 5 – Best Execution Obligation                                                                                         UMIR 5.2-1
January 1, 2013
                       4.    replace Part 3 of Policy 5.2 which, prior to the date, provided:
                                   Part 3 – Foreign Currency Translation
                                   If a trade is to be executed on a foreign market, the Participant shall determine whether there is
                                   in fact a better price on a marketplace. The foreign trade price shall be converted to Canadian
                                   dollars using the mid-market spot rate or 7-day forward exchange rate in effect at the time of the
                                   trade, plus or minus 15 basis points. A better price on a marketplace must be “taken out” if there
                                   is more than a marginal difference between the price on the marketplace and the price on the
                                   other stock exchange or organized market. The Market Regulator regards a difference of one-
                                   half of a tick or less as "marginal" because the difference would be attributable to currency
                                   conversion.
                       Effective May 16, 2008, amendments were made to Rule 5.2 and Policy 5.2. These amendments were
                       approved by the applicable securities commissions on April 17, 2009 with retroactive application to May
                       16, 2008. Reference should be made to Rules Notice 09-0107 – Notice of Approval – Provisions
                       Respecting the "Best Price" Obligation (April 17, 2009) which approved amendments to:
                       1.    repeal subsection (3) of Rule 5.2 which, prior to that date, provided:
                             (3)      For the purposes of subsection (1), the Participant may take into account any transaction fees
                                     that would be payable to the marketplace in connection with the execution of the order as set
                                     out in the schedule of transaction fees disclosed in accordance with Marketplace Operation
                                     Instrument.
                       2.    replace Part 1 of Policy 5.2 which, prior to that date, provided:
                                   Part 1 – Qualification of Obligation
                                   The “best price obligation” imposed by Rule 5.2 is subject to the qualification that a Participant
                                   make “reasonable efforts” to ensure that a client order receives the best price. In determining
                                   whether a Participant has made “reasonable efforts”, the Market Regulator will consider:
                                     •         the transactions costs and other costs that would be associated with executing the trade
                                               on a marketplace; and
                                     •         whether a “better-priced” order is on another marketplace that:
                                                 o      disseminates order data in real-time and electronically through one or more
                                                        information vendors,
                                                 o      permits dealers to have access to trading in the capacity as agent,
                                                 o      provides fully-automated electronic order entry, and
                                                 o      provides fully-automated order matching and trade execution.
                       Effective February 1, 2011, the applicable securities commissions approved amendments to repeal Rule
                       5.2 and Policy 5.2. Prior to that date, Rule 5.2 and Policy 5.2 provided:
                        5.2 Best Price Obligation
                             (1)         A Participant shall make reasonable efforts at the time of the execution of an order to ensure
                                         that:
                                         (a)    in the case of an offer, the order is executed at the best bid price; and
                                         (b)    in the case of a bid, the order is executed at the best ask price.


                             (2)         Subsection (1) does not apply to the execution of an order which is:
                                         (a)    required or permitted by a Market Regulator pursuant to clause (b) of Rule 6.4 to be
                                                executed other than on a marketplace in order to maintain a fair or orderly market;
                                         (b)    a Special Terms Order unless:
                                                (i)    the security is a listed security or quoted security and the Marketplace Rules of the
                                                       Exchange or QTRS governing the trading of a Special Terms Order provide
                                                       otherwise, or
                                                (ii)   the order could be executed in whole, according to the terms of the order, on a
                                                       marketplace or with a market maker displayed in a consolidated market display;
                                         (c)    directed or consented to by the client to be entered on a marketplace as:
                                                (i)    a Call Market Order,
                                                (ii)   a Volume-Weighted Average Price Order,
                                                (iii) a Market-on-Close Order,
                                                (iv) an Opening Order,



Part 5 – Best Execution Obligation                                                                                              UMIR 5.2-2
January 1, 2013
                                                 (v)   a Basis Order, or
                                                 (vi) a Closing Price Order; or
                                         (d)     a client order on behalf of a non-Canadian account executed other than on a
                                                 marketplace pursuant to clause (d) or (e) of Rule 6.4 provided such client order does
                                                 not execute with a principal order or non-client order of the Participant.
                        POLICY 5.2 – BEST PRICE OBLIGATION
                        Part 1 – Qualification of Obligation
                        The “best price obligation” imposed by Rule 5.2 is subject to the qualification that a Participant make
                        “reasonable efforts” to ensure that an order receives the best price. “Reasonable efforts” does not
                        require that a Participant become a member, user or subscriber of each protected marketplace.
                        The Market Regulator will accept that a Participant has made “reasonable efforts” to obtain the “best
                        price” if the Participant:
                         •   enters the order on a marketplace by means of an order router developed and operated by the
                             Participant or a service provider if:
                             o the order router has demonstrated an ability to access orders on a protected marketplace, and
                             o the Participant or service provider has taken reasonable efforts to obtain order information from
                               each protected marketplace,
                        •    enters the order on a marketplace that has taken reasonable efforts to obtain order information from
                             each protected marketplace and that, in accordance with the arrangements between the Participant
                             and the marketplace, will, upon receipt of the order:
                             o route all or any part of the order required to comply with Rule 5.2 to a protected marketplace,
                             o execute the order at a price that will comply with Rule 5.2, or
                             o automatically vary the price of the order to a price that will comply with Rule 5.2; or
                        •    provides the order to another Participant for entry on a marketplace.
                        In determining whether a Participant has made “reasonable efforts” in other circumstances, the Market
                        Regulator will consider, among other factors:
                        Factors Related to Initial Consideration of a Particular Marketplace
                        •    whether the marketplace qualifies as a “protected marketplace”;
                        •    whether the protected marketplace has recently:
                                     o         commenced operations, or
                                     o         had any material malfunction or interruption of service;
                        •    whether, in the absence of an information processor, a data vendor used by the Participant has
                             made order information from the protected marketplace available in a form and format that readily
                             permits the use of such order information in the trading systems of the Participant; and
                        •    whether the Participant has followed the policies and procedures adopted by the Participant for
                             determining whether orders on a protected marketplace need to be initially considered.
                        Factors Related to On-going Compliance
                        •    whether a “better-priced” order is on a protected marketplace which the Participant has determined
                             to consider in accordance with the policies and procedures adopted by the Participant for
                             determining whether orders on a protected marketplace need to be initially considered;
                        •    whether the Participant has experienced:
                             o disruptions in trading activity as a result of any material malfunction or interruption of service of a
                               particular protected marketplace, or
                             o an inordinate proportion of immediately tradeable orders entered on a particular protected
                               marketplace being executed at an inferior price to that displayed at the time the order was
                               entered by the Participant or not being executed or being executed only in part for a volume less
                               than that displayed at the time the order was entered by the Participant; and
                        •    whether the Participant has followed the policies and procedures adopted by the Participant for
                             determining whether orders on a protected marketplace need to be considered on an on-going
                             basis.


                        Part 2 – Orders on Other Marketplaces
                        Subject to the qualification of the “best price obligation” as set out in Part 1, Participants may not
                        intentionally trade-through a better bid or offer on a protected marketplace by making a trade at an



Part 5 – Best Execution Obligation                                                                                        UMIR 5.2-3
January 1, 2013
                           inferior price (either one-sided or a cross) on another marketplace or on a foreign organized regulated
                           market. This Policy applies even if the client consents to the trade on the other marketplace or the
                           foreign organized regulated market at the inferior price.
                           A Participant will be considered to have taken reasonable efforts to obtain the best price if, at the time of
                           the execution of the order on a particular marketplace or foreign organized regulated market, the
                           Participant enters orders on behalf of the client, non-client or principal account on each protected
                           marketplace and such orders have a sufficient volume and are at a price to fill the then disclosed volume
                           on that protected marketplace.


                           Part 3 – Foreign Currency Translation
                           If a trade is to be executed on or reported to a foreign organized regulated market, the Participant shall
                           determine whether there is in fact a better price on a protected marketplace. The foreign trade price shall
                           be converted to Canadian dollars using the exchange rate the Participant would have applied in respect
                           of a trade of similar size on a foreign organized regulated market in that foreign jurisdiction. A better
                           price on a protected marketplace must be “taken out” if there is more than a marginal difference between
                           the price on the protected marketplace and the price on or reported to the foreign organized regulated
                           market. The Market Regulator regards a difference of one trading increment or less as "marginal"
                           because the difference would be attributable to currency conversion. A Participant shall maintain with
                           the record of the order the exchange rate used for the purpose of determining whether a better price
                           existed on a protected marketplace and such information shall be provided to the Market Regulator upon
                           request in such form and manner as may be reasonably required by the Market Regulator in accordance
                           with subsection (3) of Rule 10.11.

 Guidance:               The following is the relevant text of Market Integrity Notice 2005-015 issued on May 12, 2005 under the
                         heading “Guidance – Complying with “Best Price” Obligations”. Market Integrity Notice 2005-015
                         was repealed and replaced by Market Integrity Notice 2006-017 issued on September 1, 2006 under the
                         heading “Guidance – Securities Trading on Multiple Marketplaces”.
 Background
 This Market Integrity Notice provides guidance on the application of the “best price” obligations under the Universal Market
 Integrity Rules (“UMIR”) to trading activity by a Participant. In particular, this Market Integrity Notice describes how a Participant
 may comply, pending consideration and implementation of proposed amendments to UMIR, with the current obligations under
 UMIR in an environment of multiple competitive marketplaces trading the same security. Reference is made to Market Integrity
 Notice 2005-012, Provisions Respecting “Off-Marketplace” Trades, issued on April 29, 2005 which sets out a number of proposed
 amendments to UMIR that would affect certain of the obligations of a Participant. These proposed amendments are subject to
 public comment and the approval of the applicable securities regulatory authorities.
 “Best Price” Obligations of a Participant
 Rule 5.2 of UMIR requires that a Participant make reasonable efforts prior to the execution of a client order to ensure that the client
 order is filled at the best price. Presently, Part 2 of UMIR Policy 5.2 establishes that a Participant may not intentionally trade-
 through better-priced orders on a marketplace when making a trade on a marketplace in Canada or a stock exchange or other
 organized regulated market outside of Canada.
 Where there are multiple marketplaces in Canada where a trade can be executed the Participant must take appropriate steps to
 ensure that they do not trade through better-priced orders on marketplaces to which the Participant has trading access.
 Trading on Market Securities Inc.
 During May of 2005, Markets Securities Inc. (”MSI”) proposes to commence operation as an alternative trading system known as
 BlockBook™. BlockBook will allow trading in any security that is an equity security which is listed on the Toronto Stock Exchange,
 TSX Venture Exchange or Canadian Trading and Quotation System Inc. (“CNQ”).
 The trading facilities offered by BlockBook include:
      •    a continuous market (“Continuous Auction Mode”) in which orders of a minimum size (initially set at 25,000 shares for all
           securities) may be entered; and
      •    a “follow-on” auction (the “Follow-on Auction”) in which orders of a minimum size (initially set at 1,000 shares for all
           securities) may be entered for a particular security that:
                o    is triggered by an execution in Continuous Auction Mode,
                o    permits the entry of orders to trade at the price of the most recent execution in Continuous Auction Mode for a
                     period of between 60 and 90 seconds, and
                o    precludes additional executions in Continuous Auction Mode in that security until the completion of the Follow-
                     on Auction.
 A Subscriber to MSI may enter “pegged” orders in both the Continuous Auction Mode and the Follow-on Auction. A pegged order
 can be structured such that it would not be executed if the price at which the trade would occur would be higher than the best ask



Part 5 – Best Execution Obligation                                                                                         UMIR 5.2-4
January 1, 2013
 price or lower than the best bid price on the marketplace on which the security is listed. At this time, use of an appropriate pegged
 order would ensure compliance with the trade-through obligations under UMIR.
 A Subscriber to MSI who does not use a pegged order may have a “best price” obligation if an execution results in either the
 Continuous Auction Mode or the Follow-on Auction that is at a price which:
       •    in the case of a purchase, is above the ask price of orders on another marketplace indicated in a consolidated market
            display; or
       •    in the case of a sale, is below the bid price of orders on another marketplace indicated in a consolidated market display.
 In such circumstances, a Participant will be expected to undertake reasonable efforts to execute as against better-priced orders
 displayed in a consolidated market display. In determining whether a Participant has undertaken reasonable efforts, consideration
 will be given to:
      •    whether the Participant had access to the marketplace with the better-priced order or orders;
      •    the additional costs that would be incurred in accessing such order or orders; and
      •    whether the Participant has met any applicable obligation under Part 2 of Policy 2.1 to move the market.
 A Participant will be considered to have taken reasonable efforts if the Participant enters orders on a marketplace concurrent with,
 or immediately following, the trade on MSI and such orders have a sufficient volume and are at a price that will fill the volume of
 better-priced orders on that marketplace that are visible in the consolidated market display at the time of the trade on MSI. The
 obligation to fill better-priced orders is not limited by the size of the trade on MSI. The volume of the orders to be entered is
 determined solely by the visible volume of better-priced orders disclosed in the applicable consolidated market display.
 In accordance with the “Best Execution Obligation” under Rule 5.1 of UMIR, a Participant who has trading access to MSI will have
 an obligation to consider execution opportunities in the Follow-on Auction if the price at which such trades will execute is a better
 price than available on another marketplace.

 Guidance:               The following is the relevant text of Market Integrity Notice 2005-023 issued on July 29, 2005 under the
                         heading “Guidance – Securities Trading on Multiple Marketplaces”. Market Integrity Notice 2005-023
                         was repealed and replaced by Market Integrity Notice 2006-017 issued on September 1, 2006 under the
                         heading “Guidance – Securities Trading on Multiple Marketplaces”. Additional background information
                         from Market Integrity Notice 2005-023 is set out under Rule 3.1 and additional text is set out under Rules
                         5.3, 7.7 and 8.1.
 Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a marketplace to which
 they have trading access before executing a trade at an inferior price on another marketplace or a foreign market. As noted
 above, neither UMIR nor the ATS Rules requires a Participant to maintain trading access to every Canadian marketplace on which
 a security may trade. As such, the obligation currently attaches to a Participant only with reference to better-priced orders on
 marketplaces to which they have trading access.
 Example #3: Canadian security ABC trades on both Marketplace D and Marketplace E. Participant X has access to Marketplace
 D only. Participant X enters a market order for ABC on Marketplace D, even though there is a better bid or offer for ABC on
 Marketplace E at the time of the order. Participant X is in compliance with its best price obligation.
 Example #4: Canadian security ABC trades on both Marketplace D and Marketplace E. Participant X has access to Marketplace
 D and Marketplace E. Participant X enters a market order for ABC on Marketplace D, even though there is a better bid or offer for
 ABC on Marketplace E at the time of the entry of the order. Participant X takes no steps to fill the better bid or offer first or
 coincidentally. Participant X is not in compliance with its best price obligation.
 Example #5: Canadian security ABC was traded only on Marketplace D until very recently. ABC is now traded on both
 Marketplace D and Marketplace E. Participant X utilizes an order management system (“OMS”) and has access to both
 Marketplace D and Marketplace E. A client or salesperson of Participant X codes a market order with “default marketplace”
 Marketplace D into Participant X’s OMS. At the time of the order, there is a better bid or offer for ABC on Marketplace E.
 Participant X is not in compliance with its best price obligation. In order for Participant X to comply with its best price obligation,
 Participant X must take reasonable steps to ensure that its clients and salespersons do not use its OMS systems to bypass better
 bids or offers.

 Guidance:               The following is the relevant text of Market Integrity Notice 2006-017 issued on September 1, 2006 under
                         the heading “Guidance – Securities Trading on Multiple Marketplaces”. Additional text is set out under
                         Rules 3.1, 5.1, 5.3, 7.7 and 8.1: This part of the guidance was repealed effective May 16, 2008 by
                         Market Integrity Notice 2008-010 – Guidance – Complying with “Best Price” Obligations (May 16,
                         2008)
           Rule 5.2 - Best Price Obligation
 Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a marketplace before
 executing a trade at an inferior price on another marketplace or a foreign market. In accordance with the requirements of the CSA
 as set out in the CSA Notice, a Participant must take into account order information from all marketplaces trading a particular
 security (and not just marketplaces for which the Participant is a member, user or subscriber). In order to undertake “reasonable
 efforts” to effect a trade at the best price, a Participant must take appropriate steps to access orders on any marketplace. These



Part 5 – Best Execution Obligation                                                                                         UMIR 5.2-5
January 1, 2013
 steps may include the Participant making arrangements with another Participant who is a member, user or subscriber of the
 particular marketplace to handle the order as a jitney on behalf of the Participant who is not a member, user or subscriber of the
 particular marketplace.
 In the view of RS, the “best ask price” and “best bid price” can only be determined by reference to orders on marketplaces that
 provide pre-trade transparency. In order for a Participant to demonstrate that it had made “reasonable efforts” to execute a client
 order at the best price, RS expects the Participant will deal with “better-priced” orders on another marketplace if that marketplace:
      •    disseminates order data in real-time and electronically through one or more information vendors;
      •    permits dealers to have access to trading in the capacity as agent;
      •    provides fully-automated electronic order entry; and
      •    provides fully-automated order matching and trade execution.
 Of the current marketplaces, only CNQ, TSX and TSXV meet all four conditions and it is anticipated that Pure Trading will meet the
 four conditions. BlockBook, Bloomberg, Liquidnet and TriAct do not, or will not, disseminate order data. While Shorcan
 disseminates order data, Shorcan limits access to dealers trading as principal and is a “manual” marketplace. RS is of the opinion
 that “reasonable efforts” does not require a Participant to take into account orders displayed on a manual marketplace that can not
 be immediately and electronically accessed. As such, a Participant has an obligation to execute against better-priced orders on
 CNQ, Pure Trading, TSX and TSXV before executing at an inferior price on any marketplace or organized regulated market.
 Since the “better-priced” orders are determined from information in a consolidated market display, a Participant owes an obligation
 only to the “visible” portion of a “better-priced” order on another marketplace. If a marketplace permits the entry of an “iceberg”
 order for which only a portion of the volume is disclosed, no “best price obligation” is owed to the portion of the order that is not
 visible at the time the Participant is determining its obligation under the Rule 5.2. At the present time, iceberg orders are permitted
 on CNQ, TSX and TSXV and it is anticipated that iceberg orders will be permitted on Pure Trading.
 If a marketplace has visible orders but the marketplace is not open for trading at that time, a Participant does not owe a “best
 price” obligation to such orders. A Participant may trade at any time taking into account all visible orders on marketplaces then
 open for trading. This obligation will apply to special trading facilities of a marketplace which conducts trading before or after
 “regular” trading hours if orders in such special facility are visible.
 As originally set out in Market Integrity Notice 2005-015 – Guidance – Complying with “Best Price” Obligations, RS is of the opinion
 that a Participant will be considered to have taken reasonable efforts if the Participant enters orders on another marketplace
 concurrent with, or immediately following, the trade on a particular marketplace and such orders have a sufficient volume and are
 at a price that will fill the volume of better-priced orders on that other marketplace that are visible at the time of the trade on the
 particular marketplace. The obligation to fill better-priced orders is not limited by the size of the trade. The volume of the orders to
 be entered is determined solely by the visible volume of better-priced orders.
 Since TriAct will not have pre-trade transparency, UMIR would not require a Participant to determine if a “better-priced” order
 existed on TriAct prior to executing on another marketplace. However, under its proposed market model, TriAct will provide price
 improvement over the “best ask price” and the “best bid price” on the execution of a trade at the time of execution. As such, no
 order executing on TriAct would owe a “best price obligation” to an order on another marketplace

 Guidance:                The following is the relevant text of Market Integrity Notice 2007-015 issued on August 10, 2007 under the
                          heading “Guidance – Specific Questions Related to Trading on Multiple Marketplaces”. Additional
                          text is set out under Rules 2.2, 3.1, 5.1 and 7.1. Questions 5, 8, 9 and 12 in Market Integrity Notice
                          2007-015 were repealed and replaced effective May 16, 2008 by Market Integrity Notice 2008-010 –
                          Guidance – Complying with “Best Price” Obligations (May 16, 2008).
 Questions and Answers
 The following is a list of questions regarding the obligations of a Participant or an Access Person with respect to trading in a
 security that trades on more than one marketplace. UMIR defines a marketplace as a recognized exchange (“Exchange”), a
 recognized quotation and trade reporting system (“QTRS”) or an alternative trading system (“ATS”) that carries on business in
 Canada.
      5.   When entering a short sale order on a marketplace what obligation does a Participant have to “better-priced”
           orders on another marketplace?
           Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a marketplace
           before executing a trade at an inferior price on another marketplace. A Participant will be considered to have
           undertaken “reasonable efforts” if the Participant enters orders on another marketplace concurrent with, or immediately
           following, the trade on a particular marketplace and such orders have a sufficient volume and are at a price that will fill
           the volume of the better-priced orders on that other marketplace that are visible at the time of the trade on the particular
           marketplace.
           The following assumption and chart provides the basis for the two examples below:
           Assume that a particular security is listed on an Exchange that is the “principal market” and on two ATSs.




Part 5 – Best Execution Obligation                                                                                          UMIR 5.2-6
January 1, 2013
                                  Undisclosed       Disclosed        Bid        Ask        Disclosed      Last        Time of
               Marketplace
                                    Bid Size         Bid Size       Price       Price      Ask Price      Sale       Last Sale

             Principal Market        10,000            1,000        $10.00     $10.10        3,000       $10.10     11:15 a.m.

             ATS 1                                     5,000        $9.90      $10.20        4,000        $9.90     11:20 a.m.

             ATS 2                                     1,000        $9.89      $10.05        4,000       $10.05     10:15 a.m.

           Example 3:           A Participant wishes to enter a market order to sell 7,000 shares “short”.
                                A Participant or Access Person would be able to enter the short sale on:
                                     •     the Principal Market at $10.10 (being the “last sale price” on that marketplace);
                                     •     ATS 1 at $9.90 (as the last sale on ATS 1 was established subsequent to the last sale on
                                           the Principal Market); and
                                     •     ATS 2 at $10.10 (as the $10.05 last sale on ATS 2 was prior to the $10.10 last sale on the
                                           Principal Market).
           However, if a Participant executed the short sale on ATS 1, the Participant would owe an obligation to the “better-priced”
           orders disclosed in the consolidated market display. Rule 5.2 of UMIR would require a Participant to immediately enter
           an order on the Principal Market to execute against the better-priced visible order ($10.00 for 1,000 shares).
           Since the order entered on the Principal Market by the Participant to satisfy its displacement obligation would be a “short
           sale”, the Participant may have to enter the order as “short exempt” in order to ensure that it trades (as the trading
           system of the Principal Market may be programmed not to permit a short sale below the last sale price on that market).
           Since the short sale was properly executed on ATS 1, orders entered by the Participant on the Principal Market to meet
           “best price” obligations under Rule 5.2 will not be considered to be a violation of price restrictions on short sales for the
           purposes of Rule 3.1. While there was another 10,000 shares at a better price on the Principal Market, that volume was
           not “visible” in the consolidated market display and, as such, the Participant would not have a “best price” obligation to
           such undisclosed volume.
           Example 4:           Same scenario as above, however the better-priced bid on the Principal Market is fully disclosed
                                ($10.00 for 10,000 shares).
                                A Participant would be able to enter the short sale on:
                                     •     the Principal Market at $10.10 (being the “last sale price” on that marketplace);
                                     •     ATS 1 at $10.00 (to avoid trading-through the better-priced order on the Principal Market);
                                           and
                                     •     ATS 2 at $10.10 (as the $10.05 last sale on ATS 2 was prior to the $10.10 last sale on the
                                           Principal Market).
           As set out in example 3 above, a Participant will be considered to have made “reasonable efforts” to comply with its
           best price obligations if a Participant enters orders on another marketplace concurrent with, or immediately following,
           the trade on a particular marketplace and such order(s) have a sufficient volume and are at price that will fill the volume
           of better-priced orders in the consolidated market display at the time of the trade. In this example, while the last sale of
           the security on ATS 1 was subsequent to the last sale on the principal market, because the volume of the proposed
           short sale (7,000 shares) if executed, is not of sufficient volume to fill the volume of better-priced orders in the
           consolidated market display (10,000 shares) a Participant may not enter a short sale on ATS 1.
      8.   Is a Participant required to consider orders in a special terms book of a marketplace as part of its “best price”
           obligation?
           Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a marketplace
           before executing a trade at an inferior price on another marketplace or a foreign market. Under UMIR, the determination
           of the “best ask price” and “best bid price” excludes the price of any order that is a Special Terms Order and a number of
           “specialty” orders such as Basis Order, Call Market Order, Closing Price Order, Market-on-Close Order, Opening Order
           and Volume-Weighted Average Price Order. While a Participant is not required to consider Special Terms Orders in
           determining best price, a Participant may be required to consider execution opportunities in the special terms book of a
           marketplace in accordance with its best execution obligation under Rule 5.1 of UMIR.
      9.   If a Participant executes a trade on a marketplace at an inferior price, and immediately thereafter attempts to
           displace a specific better-priced order on another marketplace that is cancelled before the Participant is able to
           enter the order, is a Participant obligated to displace other orders at that same price and volume?
           Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a marketplace
           before executing a trade at an inferior price on another marketplace. As originally set out in Market Integrity Notice
           2005-015 – Guidance – Complying with “Best Price” Obligations (May 12, 2005), RS is of the opinion that a Participant
           will be considered to have undertaken reasonable efforts if the Participant enters orders on another marketplace
           concurrent with, or immediately following, the trade on a particular marketplace and such orders have a sufficient volume
           and are at a price that will fill the volume of the better-priced orders on that other marketplace that are visible at the time



Part 5 – Best Execution Obligation                                                                                           UMIR 5.2-7
January 1, 2013
           of the trade on the particular marketplace. To the extent that the better-priced orders visible at the time of the of the
           trade are “immediately” replaced with another order or orders the Participant has an obligation to trade with such other
           order(s) even though it will trade with a different order(s) than intended. The volume of the order to be entered is
           determined solely by the visible volume of the better-priced order(s) at the time of the trade on the particular
           marketplace.
           In the view of RS, an order entered by a Participant on a marketplace to satisfy its displacement obligation must be
           entered concurrently with, or immediately following the trade on another marketplace, regardless of whether the order(s)
           that gave rise to the displacement obligation continue to be “available”. As such, a Participant may wish to enter an
           order to satisfy its displacement obligation in a manner that ensures that the order trades only with the volume of better-
           priced orders that are then “available”, and that any unfilled portion of the order may be “killed” to prevent the unfilled
           portion of the order from being “booked” on the other marketplace.
      12. Can a Participant factor in connectivity costs or other fees related to accessing a marketplace in determining
          “best price”?
           Rule 5.2 of UMIR requires that a Participant make reasonable efforts prior to the execution of a client order to ensure
           that the client order is executed at the best available price. Transaction costs and other costs (including access fees
           and settlement charges) associated with executing a trade on a marketplace may be considered in determining whether
           a Participant has made “reasonable efforts”. In order to undertake “reasonable efforts” to effect a trade at the best price,
           a Participant must take appropriate steps to access orders on any marketplace trading a particular security (and not just
           marketplaces for which the Participant is a member, user or subscriber).
           If a Participant has a specific arrangement with a client or generally charges clients (either as a separate fee or
           increased commission) transaction costs related to accessing a particular marketplace, a Participant may consider such
           transaction costs in determining the marketplace with the “best price”. For example, if fees charged directly to a client to
           access a marketplace with the “best price” result in a client receiving a net price for the trade (trade price less costs
           related to accessing the particular marketplace) that is inferior to the price that the client would have received had the
           Participant executed the trade on another marketplace, a Participant may trade with orders on such other marketplace.
           To the extent that a Participant does not directly charge “access” costs to a client (i.e. the Participant does not charge a
           separate fee or increased commission to execute a trade on a particular marketplace), a Participant must direct a client
           order to the marketplace with the best available price as determined from information in a consolidated market display.
           Presently, a marketplace is allowed to establish fees to access its marketplace without limitation. While differences in
           access fees charged by marketplaces is allowed, the regulation of access fees is currently the subject of a proposal by
           the Canadian Securities Administrators (“CSA”), which among other things, proposes to establish a maximum amount
           that a visible marketplace can charge for access to a quote.     Reference should be made to Market Integrity Notice
           2007-007 – Request for Comments - Joint Canadian Securities Administrators / Market Regulation Services Inc. Notice
           on Trade-Through Protection, Best Execution and Access to Marketplaces (April 20, 2007) for a discussion of CSA
           “trade-through” proposal. The provisions of UMIR and their interpretation and application would be modified to conform
           to the position adopted by the CSA.

 Guidance:               The following is the relevant text of Market Integrity Notice 2007-019 issued on September 21, 2007 under
                         the heading “Guidance – Entering Client Orders on Non-Transparent Marketplaces and Facilities”.
                         Additional text is set out under Rules 5.1, 5.3, and 6.3.
 Questions and Answers
 The following are the most frequently asked questions regarding the obligations of a Participant when entering a client order on a
 non-transparent marketplace or facility and the responses of IIROC to each:
           3.   What “best price” obligation is owed if a client order executes on a non-transparent marketplace at a price
                that is inferior to an order displayed on a transparent marketplace?
                Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a
                marketplace before executing a trade at an inferior price on another marketplace or a foreign market. In the view of
                IIROC, the “best ask price” and “best bid price” can only be determined by reference to orders on marketplaces that
                provide pre-trade transparency. In order for a Participant to demonstrate that it had made “reasonable efforts” to
                execute a client order at the best price, IIROC expects the Participant will deal with “better-priced” orders on
                another marketplace if that marketplace:
                     •    disseminates order data in real-time and electronically through one or more information vendors;
                     •    permits dealers to have access to trading in the capacity as agent;
                     •    provides fully-automated electronic order entry; and
                     •    provides fully-automated order matching and trade execution.
                Of the current marketplaces, only CNSX (including Pure Trading), TSX and TSXV meet all four conditions.
                BlockBook, Liquidnet and MATCH Now are “non-transparent” marketplaces that do not disseminate order data.
                Since the “better-priced” orders are determined from information in a consolidated market display, a Participant
                owes an obligation only to the “visible” portion of a “better-priced” order on another marketplace. If a marketplace



Part 5 – Best Execution Obligation                                                                                         UMIR 5.2-8
January 1, 2013
                has visible orders but the marketplace is not open for trading at that time, a Participant does not owe a “best price”
                obligation to such orders. A Participant may trade at any time taking into account all visible orders on marketplaces
                then open for trading. This obligation will apply to special trading facilities of a marketplace which conducts trading
                before or after “regular” trading hours if orders in such special facility are visible.
                Since neither ATX nor MATCH Now will provide pre-trade transparency, UMIR would not require a Participant to
                determine if a “better-priced” order existed on ATX or MATCH Now prior to executing on another marketplace.
                However, both ATX and MATCH Now have been structured to provide price improvement over the “best ask price”
                and the “best bid price” at the time of execution on MATCH Now and at the time of “match” on ATX. (When a
                “match” on ATX is executed as a trade on the TSX, the price must be at or between the “best ask price” and the
                “best bid price”.) As such, no order executing on MATCH Now or matching on ATX would owe a “best price
                obligation” to an order on another marketplace.

 Guidance:                The following is the relevant text of Market Integrity Notice 2007-021 issued on October 24, 2007 under
                          the heading “Guidance – Expectations Regarding “Best Price” Obligations””. Market Integrity
                          Notice 2007-021 was repealed and replaced effective May 16, 2008 by Market Integrity Notice 2008-
                          010 – Guidance – Complying with “Best Price” Obligations (May 16, 2008).
 Summary
 This Market Integrity Notice provides guidance on the expectations of Market Regulation Services Inc. (“RS”) regarding
 compliance with the “best price” obligations of the Universal Market Integrity Rules (“UMIR”) in an environment of multiple
 transparent marketplaces. In particular, this notice focuses on the expectations of RS as a result of the launch of continuous
 auction market trading on Pure Trading (“Pure”) of securities listed on the Toronto Stock Exchange (“TSX”).
 Background
           Summary Description of the Best Price Obligation
 RS issued Market Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplaces (September 1, 2006) which
 provides general guidance on the obligations of a Participant or Access Person under UMIR with respect to trading activity in a
 security that trades on more than one marketplace including the best price obligation of a Participant under Rule 5.2 of UMIR.
 Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a marketplace before
 executing a trade at an inferior price on another marketplace or a foreign market. A Participant must take into account order
 information from all marketplaces trading a particular security (and not just marketplaces for which the Participant is a member,
 user or subscriber). In order to undertake “reasonable efforts” to effect a trade at the best price, a Participant must take
 appropriate steps to access orders on any marketplace. These steps may include the Participant making arrangements with
 another Participant who is a member, user or subscriber of the particular marketplace to handle the order as a jitney on behalf of
 the Participant who is not a member, user or subscriber of the particular marketplace.
 In the view of RS, the “best ask price” and “best bid price” can only be determined by reference to orders on marketplaces that
 provide pre-trade transparency. In order for a Participant to demonstrate that it had made “reasonable efforts” to execute a client
 order at the best price, RS expects the Participant will deal with “better-priced” orders on another marketplace if that marketplace:
      •    disseminates order data in real-time and electronically through one or more information vendors;
      •    permits dealers to have access to trading in the capacity as agent;
      •    provides fully-automated electronic order entry; and
      •    provides fully-automated order matching and trade execution.
 Of the current marketplaces, only CNQ (including Pure), TSX and TSX Venture Exchange (“TSXV”) meet all four conditions.
 BlockBook, Bloomberg, Liquidnet and MATCH Now do not disseminate order data. As such, a Participant has an obligation to
 execute against better-priced orders on CNQ, Pure, TSX and TSXV before executing at an inferior price on any marketplace or
 foreign organized regulated market.
 Since the “better-priced” orders are determined from information in a consolidated market display, a Participant owes an obligation
 only to the “visible” portion of a “better-priced” order on another marketplace. If a marketplace permits the entry of an “iceberg”
 order for which only a portion of the volume is disclosed, no “best price obligation” is owed to the portion of the order that is not
 visible at the time the Participant is determining its obligation under the Rule 5.2. At the present time, iceberg orders are permitted
 on CNQ, Pure, TSX and TSXV.
 If a marketplace has visible orders but the marketplace is not open for trading at that time, a Participant does not owe a “best
 price” obligation to such orders. A Participant may trade at any time taking into account all visible orders on marketplaces then
 open for trading. This obligation applies to special trading facilities of a marketplace which conducts trading before or after
 “regular” trading hours if orders in such special facility are visible.
 RS is of the opinion that a Participant will be considered to have taken reasonable efforts if the Participant enters orders on
 another marketplace concurrent with, or immediately following, the trade on a particular marketplace and such orders have a
 sufficient volume and are at a price that will fill the volume of better-priced orders on that other marketplace that are visible at the
 time of the trade on the particular marketplace. The obligation to fill better-priced orders is not limited by the size of the trade. The
 volume of the orders to be entered is determined solely by the visible volume of better-priced orders.




Part 5 – Best Execution Obligation                                                                                           UMIR 5.2-9
January 1, 2013
 Since MATCH Now does not provide pre-trade transparency, UMIR does not require a Participant to determine if a “better-priced”
 order existed on MATCH Now prior to executing on another marketplace. However, MATCH Now provides price improvement
 over the “best ask price” and the “best bid price” on the execution of a trade. As such, no order executing on MATCH Now owes a
 “best price” obligation to an order on another marketplace.
 For additional guidance on trading on multiple marketplaces, reference should be made to:
      •    Market Integrity Notice 2006-020 – Guidance – Compliance Requirements For Trading On Multiple Marketplaces
           (October 30, 2006); and
      •    Market Integrity Notice 2007-015 – Guidance – Specific Questions Related to Trading on Multiple Marketplaces (August
           10, 2007).
           Launch of Continuous Auction Trading on Pure
 On September 14, 2007, the “Pure Trading” facility of CNQ launched continuous auction trading for three TSX-listed securities.
 Pure has expanded its trading list to include a total of 15 TSX-listed securities as of October 12, 2007. The schedule for the
 inclusion of additional TSX-listed securities in the Pure stock list is available on the Pure website at www.puretrading.ca under the
 heading “Stock List”.
 With the commencement of continuous auction trading, the cross printing facility of Pure is limited to those securities which are
 supported in the continuous auction market.
 Questions and Answers
 The following is a list of questions dealing with the expectations of RS regarding the compliance by a Participant with the “best
 price” obligations under Rule 5.2 of UMIR as a result of the launch of continuous auction market trading of TSX-listed securities on
 Pure.
           1.   With the launch of continuous auction market on Pure, will RS provide Participants with a “grace period” in
                order to adjust to compliance with “best price” obligations?
                RS will not provide a “grace period”. RS recognizes that the launch of continuous auction trading on Pure of TSX-
                listed securities represented the first time since the introduction of UMIR in 2002 that two transparent marketplaces
                with orders displayed in a consolidated display have conducted trading in relatively-liquid securities. RS is aware
                that not all Participants and/or service providers have been able to fully implement systems changes (including the
                introduction of “smart order router” capacity) or procedures that are necessary to ensure compliance with the “best
                price” obligation to visible orders on both Pure and the TSX. Each Participant is expected to implement interim
                measures in a “reasonable effort” to comply with its best price obligations. The interim measures adopted by a
                Participant are to be adequate taking into account the size and type of order flow of the Participant. The interim
                measures may involve routing orders for securities which trade on more than one transparent marketplace for
                “special handling” and entry on the appropriate marketplace or directing order flow to another Participant that has
                fully implemented a systems solution for entry on a jitney basis on the appropriate marketplace.
                RS acknowledges that the interim measures adopted by a Participant may nonetheless result in an isolated number
                of trade-throughs. Provided the Participant has followed its interim measures during this transition period, RS will
                not consider an isolated trade-through to be a violation of UMIR requirements.
           2.   Will a Participant have satisfied its “best price” obligation if the trading decision is based on information
                available to the Participant?
                A Participant must take into account order information from all transparent marketplaces trading a particular
                security (and not just marketplaces for which the Participant is a member, user or subscriber). Provided the
                Participant has taken such information into account when entering an order, RS will be satisfied that the Participant
                has made “reasonable efforts” to comply with the best price. RS recognizes that there will be different latencies in
                the delivery of information between the various data vendors, service providers and the internal systems of the
                Participant. The standard of conduct for compliance with the best price obligation is “particular” for each
                Participant.
           3.   Does RS consider a “trade-through” to have occurred if the displayed market changes after the entry of an
                order by a Participant?
                No. The “best price” obligation under Rule 5.2 is based on a Participant taking “reasonable efforts”. In “race
                conditions”, a Participant that enters an order based on the available information at the time of the entry of the order
                will be in compliance with Rule 5.2.
           4.   Why is RS distributing Potential Violation Alert Notices (“PVANS”) regarding possible “trade-throughs” of
                better-priced orders?
                On a regular basis since the launch of continuous auction trading on Pure, RS has been distributing PVANS or
                notifications of possible trade-throughs to each of the Participants that may have executed a trade-through of a
                better-priced order between Pure and the TSX. RS recognizes that each Participant is in a period of transition to
                trading in a multiple marketplace environment and the purpose of the distribution of the PVANS is to bring to the
                attention of each Participant the possibility that their systems or procedures may need to be adjusted to ensure
                compliance with the best price obligation. The production of these notices is based on information available to RS.



Part 5 – Best Execution Obligation                                                                                        UMIR 5.2-10
January 1, 2013
               RS expects that each Participant will investigate these potential violations to determine if any adjustment is
               necessary to the systems or procedures used by the Participant to ensure compliance with the best price
               obligation.
          5.   What is RS’s expectation with respect to the monitoring and testing to be undertaken by a Participant for
               compliance with the “best price” obligation?
               With the launch of continuous auction market trading in same securities on multiple transparent marketplaces, each
               Participant must review and update the policies and procedures adopted pursuant to Rule 7.1 of UMIR to ensure
               compliance with the “best price” obligation. RS also expects that the compliance procedures adopted by a
               Participant will be reviewed to ensure that there is adequate testing for compliance with “best price” obligations,
               particularly with respect to any portion of the order flow of the Participant that has not been handled by a smart
               order router or other automated solution.
               RS expects that each Participant will periodically test any automated solution to verify that the “solution” remains
               effective for the type of businesses being conducted by the Participant. RS expects that such tests will be
               conducted whether the automated solution has been developed by the Participant or provided by a third party
               service provider. The results of these tests must be retained by the Participant and RS expects to be in a position
               to review the results of these tests during regularly scheduled trade desk reviews conducted by RS.
          6.   What are the obligations of a Participant that “bids through” or “offers through” an order contained in a
               consolidated market display?
               If a Participant actively “bids through” or “offers through” on a particular marketplace the prices indicated in a
               consolidated market display on another marketplace, this action will result in “crossed markets” where the bid on
               one marketplace is higher than the offer on another marketplace. A “bid through” occurs when an order to
               purchase is booked on a marketplace at a price which is higher than an offer to sell that security displayed on
               another transparent marketplace. A “offer through” occurs when an order to sell is booked on a marketplace at a
               price which is lower than a bid to purchase that security displayed on another transparent marketplace.
               At the time the Participant enters the order that “bids through” or “offers through”, this order will be considered the
               “active order” since there is an existing order booked on a transparent marketplace against which the order that
               “bids through” or “offers through” could have executed at least in part. The fact that the order that “bids through” or
               “offers through” is “booked” on marketplace does not change its status as the “active order” for the purposes of the
               best price obligation under UMIR.
               In the view of RS, a Participant that intentionally “bids through” or “offers through” orders on another marketplace is
               in breach of the requirements of UMIR, including under Rule 2.1 to transact business openly and fairly and in
               accordance with just and equitable principles of trade. In addition, if the Participant is entering a client order when
               “bidding through” or “offering through”, the Participant may be in violation of the “best execution” requirements
               under Rule 5.1 to diligently pursue the execution of the client order on the most advantageous terms for the client
               as expeditiously as practicable.
          7.   Can a Participant that executes a “trade-through” when handling a client order rectify the problem by
               improving the price payable to or by the client?
               No. The “best price” obligation is an obligation which each Participant owes to the market generally rather than to
               the client. While a Participant that executes a trade-through in the handling of a client order may not have obtained
               “best execution” for that client order and may therefore need to adjust the price of the trade for the benefit of the
               client, the “best price” obligation requires that the Participant, concurrent with, or immediately following, the
               execution of the trade-through, enter orders on another marketplace of sufficient volume and at a price that will fill
               the volume of better-priced orders on that other marketplace that are visible at the time of the execution of the
               trade-through.
          8.   How will a Participant know if a particular security is traded on more than one marketplace?
               It is the obligation of each Participant to monitor the marketplaces to determine which securities are eligible to trade
               on each marketplace. RS has noted that many of the potential trade-throughs have been executed on the day that
               the security is initially eligible for trading on more than one transparent marketplace. In the case of Pure, the
               Participant or its service provider should monitor the schedule of TSX-listed securities eligible to trade on the
               continuous auction market of Pure that is available on the Pure website at www.puretrading.ca under the heading
               “Stock List”.
                  Participants should also be aware that a limited number of securities may be inter-listed from time to time between
                  CNQ and TSXV and that these securities may trade on each marketplace under different symbols. Presently, there
                  are two such inter-listed securities: United Reef Limited, which is listed on CNQ under the symbol “URPL”, is also
                  listed on the TSXV under the symbol “URP”; and Roxmark Mines Limited, which is listed on CNQ under the symbol
                  “RMKL” and is also listed on TSXV under the symbol “RMK”.

 Guidance:            The following is the relevant text of Market Integrity Notice 2008-010 issued on May 16, 2008 under the
                      heading “Guidance – Complying with “Best Price” Obligations”.




Part 5 – Best Execution Obligation                                                                                       UMIR 5.2-11
January 1, 2013
    Summary
    This Market Integrity Notice provides guidance on the expectations of the Investment Industry Regulatory Organization of Canada
    (“IIROC”) regarding compliance with the “best price” obligations of the Universal Market Integrity Rules (“UMIR”) in an
    environment of multiple protected marketplaces. This guidance reflects the adoption of amendments to UMIR as set out in:
        •    Market Integrity Notice 2008-008 – Amendment Approval – Provisions Respecting “Off-Marketplace” Trades (May 16,
             2008); and
        •    Market Integrity Notice 2008-009 – Request for Comments – Provisions Respecting the “Best Price” Obligation (May 16,
             2008).
    This Market Integrity Notice repeals and replaces, effective May 16, 2008, the guidance related to Rule 5.2 from the
    following notices:
        •    Market Integrity Notice 2007-021 – Guidance – Expectations Regarding “Best Price” Obligations (October 24,
             2007).
        •    Market Integrity Notice 2007-015 – Guidance – Specific Questions Related to Trading on Multiple Marketplaces
             (August 10, 2007);
        •    Market Integrity Notice 2006-020 – Guidance – Compliance Requirements For Trading On Multiple Marketplaces
             (October 30, 2006); and
        •    Market Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplaces (September 1, 2006).
    Revised Guidance
    Amendments to the “Best Price” Obligation
    Concurrent with this Market Integrity Notice, IIROC has published notice of certain amendments to UMIR that are effective as of
    May 16, 2008 that change the “best price” obligation. Reference should be made to the following Market Integrity Notices which
    contain details of the amendments, together with certain guidance on the interpretation and application of the amendments:
        •     Market Integrity Notice 2008-008 – Amendment Approval – Provisions Respecting “Off-Marketplace” Trades (May 16,
             2008) (the ‘“Off-Marketplace” Amendments’); and
        •    Market Integrity Notice 2008-009 – Request for Comments – Provisions Respecting the “Best Price” Obligation (May 16,
             2008) (the “Interim Amendments”).
              IIROC considers these to be “interim” amendments because the Canadian Securities Administrators (“CSA”) are
              developing a trade-through proposal. 1 Depending upon the final form of this trade-through regime, conforming changes
              may be required to UMIR, in particular the “best price” obligation under Rule 5.2 as modified by the Interim
              Amendments. IIROC expects that the Interim Amendments will be in effect from May 16, 2008 until changes
              implementing the final form of the CSA’s trade-through regime become effective.
    All of Market Integrity Notice 2007-021 – Guidance – Expectations Regarding “Best Price” Obligations (October 24, 2007)
    is repealed and replaced with the following:
             Questions and Answers
             The following is a list of questions dealing with the expectations of IIROC regarding the compliance by a Participant with
             the “best price” obligations under Rule 5.2 of UMIR as a result of the launch of new protected marketplaces:
             1.   Will a Participant have satisfied its “best price” obligation if the trading decision is based on information as
                  seen by the Participant?
                  IIROC recognizes that there will be different latencies in the delivery of information between the various data
                  vendors, service providers and the internal systems of the Participant. The standard of conduct for compliance with
                  the best price obligation is “particular” for each Participant.
                  For a discussion of the obligation of a Participant to consider information from a particular protected marketplace,
                  reference should be made to Market Integrity Notice 2008-009 – Request for Comments – Provisions Respecting
                  the “Best Price” Obligation (May 16, 2008)
             2.   Does IIROC consider a “trade-through” to have occurred if the displayed market changes after the entry of
                  an order by a Participant?
                  No. The “best price” obligation under Rule 5.2 is based on a Participant taking “reasonable efforts”. In “race
                  conditions”, a Participant that enters an order based on the available information at the time of the entry of the order
                  will be in compliance with Rule 5.2.
             3.   What communications will I receive from IIROC regarding trade-through alerts after May 16, 2008?
                  On a regular basis since the launch of continuous auction trading on Pure Trading in September of 2007, IIROC
                  has been distributing “Notifications of Trade-Through Alerts” to Participants to assist firms in their efforts to ensure


1
       See Market Integrity Notice 2007-007 – Request for Comments – Joint Canadian Securities Administrators/Market Regulation
       Services Inc. Notice on Trade-Through Protection, Best Execution and Access to Marketplaces (April 20, 2007).



Part 5 – Best Execution Obligation                                                                                          UMIR 5.2-12
January 1, 2013
               compliance with the “best price” obligation. As of May 16, 2008, IIROC will no longer be providing the Notifications
               of Trade-Through Alerts. However, IIROC will continue to monitor for trade-throughs and may issue a Potential
               Violation Alert Notifications ("PVAN") if the facts of the "trade-through" of better-priced orders warrant.
          4.   What is IIROC’s expectation with respect to the monitoring and testing to be undertaken by a Participant
               for compliance with the “best price” obligation?
               With the launch of continuous auction market trading in same securities on multiple protected marketplaces, each
               Participant must review and update the policies and procedures adopted pursuant to Rule 7.1 of UMIR to ensure
               compliance with the “best price” obligation. IIROC also expects that the compliance procedures adopted by a
               Participant will be reviewed to ensure that there is adequate testing for compliance with “best price” obligations,
               particularly with respect to any portion of the order flow of the Participant that has not been handled by a smart
               order router or other automated solution.
               IIROC expects that each Participant will periodically test any automated solution to verify that the “solution” remains
               effective for the type of businesses being conducted by the Participant. IIROC expects that such tests will be
               conducted whether the automated solution has been developed by the Participant or provided by a third party
               service provider. The results of these tests must be retained by the Participant and IIROC expects to be in a
               position to review the results of these tests during regularly scheduled trade desk reviews conducted by IIROC.
          5.   What are the obligations of a Participant that “bids through” or “offers through” an order contained in a
               consolidated market display?
               If a Participant actively “bids through” or “offers through” on a particular marketplace the prices indicated in a
               consolidated market display on another marketplace, this action will result in “crossed markets” where the bid on
               one marketplace is higher than the offer on another marketplace. A “bid through” occurs when an order to
               purchase is booked on a marketplace at a price which is higher than an offer to sell that security displayed on
               another protected marketplace. A “offer through” occurs when an order to sell is booked on a marketplace at a
               price which is lower than a bid to purchase that security displayed on another protected marketplace.
               In the view of IIROC, a Participant that intentionally “bids through” or “offers through” orders on another
               marketplace is in breach of the requirements of UMIR, including under Rule 2.1 to transact business openly and
               fairly and in accordance with just and equitable principles of trade. In addition, if the Participant is entering a client
               order when “bidding through” or “offering through”, the Participant may be in violation of the “best execution”
               requirements under Rule 5.1 to diligently pursue the execution of the client order on the most advantageous terms
               for the client as expeditiously as practicable.
          6.   Can a Participant that executes a “trade-through” when handling a client order rectify the problem by
               improving the price payable to or by the client?
               No. The “best price” obligation is an obligation which each Participant owes to the market generally rather than to
               the client. While a Participant that executes a trade-through in the handling of a client order may not have obtained
               “best execution” for that client order and may therefore need to adjust the price of the trade for the benefit of the
               client, the “best price” obligation requires that the Participant concurrent with, or immediately following, the
               execution of the trade-through to enter orders on another marketplace of sufficient volume and at a price that will fill
               the volume of better-priced orders on that other marketplace that are visible at the time of the execution of the
               trade-through.
          7.   How will a Participant know if a particular security is traded on more than one marketplace?
               It is the obligation of each Participant to monitor the marketplaces to determine which securities are eligible to trade
               on each marketplace. IIROC has noted that many of the potential trade-throughs have been executed during the
               period immediately following the security becoming eligible for trading on an additional protected marketplace.

 Questions 5, 8, 9 and 12 in Market Integrity Notice 2007-015 – Guidance – Specific Questions Related to Trading on
 Multiple Marketplaces are repealed and replaced with the following:
          5.      When entering a short sale order on a marketplace what obligation does a Participant have to “better-
                  priced” orders on another marketplace?
                  Under Rule 5.2, a Participant has an obligation to make reasonable efforts to fill better-priced orders on a protected
                  marketplace at the time the Participant executes at an inferior price on another marketplace or foreign organized
                  regulated market. A Participant will be considered to have undertaken “reasonable efforts” if the Participant enters
                  orders on a protected marketplace concurrent with, or immediately following, the trade on a particular marketplace
                  and such orders have a sufficient volume and are at a price that will fill the volume of the better-priced orders on
                  that other protected marketplace that are visible at the time of the trade on the particular marketplace.
               The following assumption and chart provides the basis for the two examples below:




Part 5 – Best Execution Obligation                                                                                         UMIR 5.2-13
January 1, 2013
                Assume that a particular security is listed on an Exchange that is the “principal market” and on two ATSs and that
                each of the marketplaces qualify as a “protected marketplace”. 2

                                  Undisclosed       Disclosed                     Ask           Disclosed       Last    Time of Last
                Marketplace                                        Bid Price
                                    Bid Size         Bid Size                     Price         Ask Price       Sale       Sale
               Principal              10,000           1,000        $10.00       $10.10           3,000     $10.10       11:15 a.m.
               Market

               ATS 1                                   5,000         $9.90       $10.20           4,000         $9.90    11:20 a.m.

               ATS 2                                   1,000         $9.89       $10.05           4,000     $10.05       10:15 a.m.

                Example 3:         A Participant wishes to enter a market order to sell 7,000 shares “short”.
                                   A Participant or Access Person would be able to enter the short sale on:
                                      •    the Principal Market at $10.10 (being the “last sale price” on that marketplace);
                                      •    ATS 1 at $9.90 (as the last sale on ATS 1 was established subsequent to the last sale on
                                           the Principal Market); and
                                      •    ATS 2 at $10.10 (as the $10.05 last sale on ATS 2 was prior to the $10.10 last sale on the
                                           Principal Market).
                However, if a Participant executed the short sale on ATS 1, the Participant would owe an obligation to the “better-
                priced” orders disclosed in the consolidated market display. Rule 5.2 of UMIR would require a Participant to
                immediately enter an order on the Principal Market to execute against the better-priced visible order ($10.00 for
                1,000 shares).
                Since the order entered on the Principal Market by the Participant to satisfy its displacement obligation would be a
                “short sale”, the Participant may have to enter the order as “short exempt” in order to ensure that it trades (as the
                trading system of the Principal Market may be programmed not to permit a short sale below the last sale price on
                that market). Since the short sale was properly executed on ATS 1, orders entered by the Participant on the
                Principal Market to meet “best price” obligations under Rule 5.2 will not be considered to be a violation of price
                restrictions on short sales for the purposes of Rule 3.1. While there was another 10,000 shares at a better price on
                the Principal Market, that volume was not “visible” in the consolidated market display and, as such, the Participant
                would not have a “best price” obligation to such undisclosed volume.
                Example 4:            Same scenario as above, however the better-priced bid on the Principal Market is fully
                                      disclosed ($10.00 for 10,000 shares).
                                      A Participant would be able to enter the short sale on:
                                           •    the Principal Market at $10.10 (being the “last sale price” on that marketplace);
                                           •    ATS 1 at $10.00 (to avoid trading-through the better-priced order on the Principal
                                                Market); and
                                           •    ATS 2 at $10.10 (as the $10.05 last sale on ATS 2 was prior to the $10.10 last sale
                                                on the Principal Market).
                As set out in example 3 above, a Participant will be considered to have made “reasonable efforts” to comply with its
                best price obligations if a Participant enters orders on a protected marketplace concurrent with, or immediately
                following, the trade on a particular marketplace and such order(s) have a sufficient volume and are at price that will
                fill the volume of better-priced orders in the consolidated market display at the time of the trade. In this example,
                while the last sale of the security on ATS 1 was subsequent to the last sale on the principal market, because the
                volume of the proposed short sale (7,000 shares) if executed, is not of sufficient volume to fill the volume of better-
                priced orders in the consolidated market display (10,000 shares) a Participant may not enter a short sale on ATS 1.
          8.      Is a Participant required to consider orders in a special terms book of a marketplace as part of its “best
                  price” obligation?
                  Under UMIR, the determination of the “best ask price” and “best bid price” excludes the price of any order that is a
                  Special Terms Order and a number of “specialty” orders such as Basis Order, Call Market Order, Closing Price
                  Order, Market-on-Close Order, Opening Order and Volume-Weighted Average Price Order. While a Participant is
                  not required to consider Special Terms Orders in determining best price, a Participant may be required to consider
                  execution opportunities in the special terms book of a marketplace in accordance with its best execution obligation
                  under Rule 5.1 of UMIR




2
    For a discussion of the definition of a “protected marketplace”, see “Definition of Protected Marketplace” on pages 9 and 10 of
    Market Integrity Notice 2008-008 - Amendment Approval – Provisions Respecting “Off-Marketplace” Trades (May 16, 2009).



Part 5 – Best Execution Obligation                                                                                        UMIR 5.2-14
January 1, 2013
             9.   If a Participant executes a trade on a marketplace at an inferior price, and immediately thereafter attempts
                  to displace a specific better-priced order on another marketplace that is cancelled before the Participant is
                  able to enter the order, is a Participant obligated to displace other orders at that same price and volume?
                  IIROC is of the opinion that a Participant will be considered to have undertaken reasonable efforts if the Participant
                  enters orders on another protected marketplace concurrent with, or immediately following, the trade on a particular
                  marketplace and such orders have a sufficient volume and are at a price that will fill the volume of the better-priced
                  orders on that other protected marketplace that are visible at the time of the trade on the particular marketplace. To
                  the extent that the better-priced orders visible at the time of the of the trade are “immediately” replaced with another
                  order or orders, the Participant has an obligation to enter an order even though it may trade with a different order(s)
                  than intended or not trade at all. The volume of the order to be entered is determined solely by the visible volume
                  of the better-priced order(s) at the time of the trade on the particular marketplace.
                  In the view of IIROC, an order entered by a Participant on a protected marketplace to satisfy its displacement
                  obligation must be entered concurrently with, or immediately following the trade on another marketplace, regardless
                  of whether the order(s) that gave rise to the displacement obligation continue to be “available”. As such, a
                  Participant may wish to enter an order to satisfy its displacement obligation in a manner that ensures that the order
                  trades only with the volume of better-priced orders that are then “available”, and that any unfilled portion of the
                  order may be “killed” to prevent the unfilled portion of the order from being “booked” on the other marketplace.
                  The “Off-Marketplace” Amendments introduced a requirement for a “bypass order” marker to facilitate compliance
                  with obligations owed to order comprising part of the disclosed volume. This marker will be implemented on a
                  future date to be determined by the Board of Directors of IIROC. When implemented, the “bypass order” marker
                  will allow orders entered on a protected marketplace for the purpose of meeting “best price” obligations to “bypass”
                  certain types of orders including undisclosed volume of iceberg order, Special Terms Orders and other specialty
                  types of orders. 3
             12. Can a Participant factor in connectivity costs or other fees related to accessing a marketplace in
                 determining “best price”?
                  Rule 5.2 of UMIR requires that a Participant make reasonable efforts at the time of the execution of an order to
                  ensure that the order is executed at the best available price. As a result of the Interim Amendments, transaction
                  costs and other costs (including access fees, trade processing fees and settlement charges) associated with
                  executing a trade on a marketplace was repealed as one of the factors to be considered in complying with the “best
                  price” obligation. Transaction costs may no longer be considered in determining whether a Participant has made
                  “reasonable efforts”.
                  Presently, a marketplace is allowed to establish fees to access its marketplace without limitation. While differences
                  in access fees charged by marketplaces is allowed, the regulation of access fees is currently the subject of a
                  proposal by the Canadian Securities Administrators (“CSA”), which among other things, proposes to establish a
                  maximum amount that a visible marketplace can charge for access to a quote. Reference should be made to
                  Market Integrity Notice 2007-007 – Request for Comments - Joint Canadian Securities Administrators / Market
                  Regulation Services Inc. Notice on Trade-Through Protection, Best Execution and Access to Marketplaces (April
                  20, 2007) for a discussion of CSA “trade-through” proposal. The provisions of UMIR and their interpretation and
                  application would be modified to conform to the position adopted by the CSA. Under the proposals with respect to
                  “best execution”, the overall cost of the transaction will be one of the factors that a Participant will be able to take
                  into account in complying with the “best execution” obligation.

    Questions 5, 7 and 9 in Market Integrity Notice 2006-020 – Guidance – Compliance Requirements For Trading On Multiple
    Marketplaces (October 30, 2006) are repealed and replaced with the following:
             5.   How should an “immediately tradeable” order from a client be handled if not all of the marketplaces are
                  open at the time the order is received?
                  The traditional continuous auction trading hours of exchanges in Canada have been between 9:30 a.m. and 4:00
                  p.m. Certain of the marketplaces open earlier or close later than these traditional trading hours. IIROC expects
                  that a Participant will adopt policies and procedures with respect to the handling of “market” and other “immediately
                  tradeable” orders that are received outside of historic trading hours. IIROC also expects that a Participant will
                  inform its clients of such policy and its implications. It is the view of IIROC that the adoption of such a policy will
                  reduce the likelihood of confusion on the part of clients with respect to when and where a “market” or other
                  immediately tradeable orders may trade. Any policy adopted by a Participant must be consistent with the “best
                  execution” obligations owed to the client under Rule 5.1.
                  How an immediately tradeable client order received outside of traditional trading hours is handled by a Participant
                  will depend on the policy adopted by the Participant as communicated to its clients. For example, the policy may
                  provide that a Participant that receives a market order after 4:00 p.m. and before 9:30 a.m. the next trading day


3
       See “Definition of Disclosed Volume” on pages 7 and 8 of Market Integrity Notice 2008-008 - Amendment Approval –
       Provisions Respecting “Off-Marketplace” Trades (May 16, 2008).



Part 5 – Best Execution Obligation                                                                                          UMIR 5.2-15
January 1, 2013
                   may consider trading opportunities on any visible marketplace that is then open for trading or the Participant may
                   “hold” the order until all marketplaces or the principal market is open for trading.
                   Notwithstanding any policy adopted by a Participant, Rule 6.3 dealing with the exposure of client orders provides
                   that a Participant is able to withhold entry of a client order to purchase or sell 50 standard trading units or less if the
                   Participant “determines based on market conditions that entering the order would not be in the best interests of the
                   client”. If the Participant withholds the orders in these circumstances, the Participant guarantees that the client will
                   receive a price at least as good as the price the client would have received if the client order had been executed on
                   receipt by the Participant or a better price if the client order executes against a principal or non-client order.
              7.   Is a Participant required to consider visible orders on a protected marketplace that is not then open for
                   trading in order to meet its “best price” obligation in the handling of a client order?
                   Under Rule 5.2, a Participant must make reasonable efforts to ensure that an order is executed at the “best price”.
                   If a marketplace displays orders in a consolidated market display but that marketplace is not open for trading at that
                   particular time, a Participant does not need to consider such orders in evaluating its “best price” obligation. A
                   Participant need only consider visible orders on protected marketplaces that are then open for trading. A
                   Participant will have to consider as part of its “best price” obligation visible orders entered on special trading
                   facilities of a protected marketplace which conducts trading before or after its “regular” trading hours.
                   Reference should be made to Market Integrity Notice 2008-009 – Request for Comments – Provisions Respecting
                   the “Best Price” Obligation (May 16, 2008) for a discussion of other circumstances when a Participant is not
                   required to take account of visible orders on a protected marketplace.
              9.   What “best price” obligation does a Participant have with respect to orders entered on a particular
                   marketplace by a client with “direct market access”?
                   If a Participant has provided direct market access to a client with respect to the entry of orders on a particular
                   marketplace, the Participant has the obligation to fill any better-priced orders on a protected marketplace in respect
                   of which an obligation under Rule 5.2 is owed. For a discussion of the orders of marketplaces for which an
                   obligation is owed under Rule 5.2, reference should be made to Market Integrity Notice 2008-009 – Request for
                   Comments – Provisions Respecting the “Best Price” Obligation (May 16, 2008).
                   If the Participant routes orders from a client with direct market access through a “smart order router”, the Participant
                   must ensure that the client is entitled to have direct market access to any marketplace to which the smart order
                   router may direct the order.
    That part of Market Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplaces (September 1,
    2006) under the heading “Rule 5.2 – Best Price Obligation” is repealed. For a discussion of the application of the “best price”
    obligation for securities trading on multiple marketplaces, reference should be made to the “Background to the Interim
    Amendments” and “Description of the Interim Amendments” in Market Integrity Notice 2008-009 - Request for Comments –
    Provisions Respecting the “Best Price” Obligation (May 16, 2008).

    Guidance:           The following is the relevant text of IIROC Notice 08-0028 issued on July 14, 2008 under the heading “Rules
                        Notice - Guidance Note – Entering Orders on a Protected Marketplace that supports Hidden Order
                        Types”.
    Summary
    This Rules Notice provides guidance on the expectations of the Investment Industry Regulatory Organization of Canada (“IIROC”)
    regarding compliance with the “best price” obligations under the Universal Market Integrity Rules (“UMIR”) when entering an order
    on a protected marketplace that supports hidden order types.
    Effective June 1, 2008, Market Regulation Services Inc. (“RS”) merged with the Investment Dealers Association of Canada to form
    IIROC. IIROC adopted the Universal Market Integrity Rules (“UMIR”) as the rules of IIROC governing trading on marketplaces for
    which IIROC acts as the regulation services provider and IIROC adopted the guidance on the interpretation of UMIR previously
    published by RS. As a result of the merger, references to “RS” in the Market Integrity Notices mentioned in this Rules Notice
    should also include IIROC.
    Background
    Market Integrity Notice 2008-008 – Request for Comments – Provisions Respecting the “Best Price” Obligation (May 16, 2008)
    (“Best Price Notice”) set out that the “best price” obligation of a Participant under Rule 5.2 of UMIR requires a Participant to make
    reasonable efforts to fill better-priced orders displayed on a protected marketplace at the time the Participant executes at an
    inferior price on another marketplace or foreign organized regulated market. 4 Concurrent with the publication of the Best Price


4
       The Amendments to the “best price” obligation contained in the Best Price Notice were effective as of May 16, 2008, subject to
       approval by the applicable securities commissions following public comment. Reference should be made to the Best Price
       Notice for additional guidance on the principal components of other amendments to “best price”, which include:
          • examples of order handling methods that IIROC will automatically consider to be “reasonable efforts”;
          • factors that IIROC will take into account in determining whether “reasonable efforts” have been made if a Participant is
            using an order handling method other than one which is automatically considered “reasonable efforts”;



Part 5 – Best Execution Obligation                                                                                              UMIR 5.2-16
January 1, 2013
    Notice, Market Integrity Notice – Amendment Approval – Provisions Respecting “Off-Marketplace” Trades (May 16, 2008) (“Off-
    Marketplace Notice”) provided notice of the approval of amendments to UMIR which included the definition of a “protected
    marketplace” as a marketplace that:
          •      disseminates order data in real-time and electronically to the information processor or one or more information vendors
                 in accordance with National Instrument 21-101 (“Marketplace Operation Instrument”);
          •      permits dealers to have access to trading in the capacity as agent;
          •      provides fully-automated electronic order entry; and
          •      provides fully-automated order matching and trade execution.
    As of the date of this Rules Notice, the marketplaces which are regulated by IIROC that qualify as a protected marketplace are:
    the Toronto Stock Exchange (“TSX”); TSX Venture Exchange (“TSXV”); Canadian Quotation and Trading System (“CNQ”),
    including the Pure Trading Facility of CNQ; Omega ATS (“Omega”) and Chi-X Canada ATS Limited (“Chi-X”). Alpha Trading
    Systems LP (“Alpha”) is expected to commence operations as an ATS in the fall of 2008 and to qualify as a protected marketplace.
    “Fully-Hidden” Orders on a Protected Marketplace
    Under Rule 5.2 of UMIR, a Participant only owes a “best price” obligation to the “disclosed volume” of better-priced orders on a
    protected marketplace. 5 In other words, UMIR does not require a Participant to determine if a “better-priced” order exists on a
    “non-transparent” marketplace prior to executing an order on another marketplace. The ability of a Participant to effectively “by-
    pass” orders on a dark marketplace in complying with the “best price” obligation reflects the policy rationale that provides priority at
    the same price level to visible orders over hidden orders or hidden portions of visible orders (i.e. iceberg orders). However, a
    Participant may be required to consider execution opportunities on a “non-transparent” marketplace in accordance with its best
    execution obligation under Rule 5.1 of UMIR.
    IIROC expects that, in the near-term, one or more protected marketplaces may propose to support the entry of a “fully-hidden”
    order type that will be eligible to interact with “regular” orders on its marketplace.
    IIROC will consider a Participant to have undertaken “reasonable efforts” to comply with its “best price” obligation if, concurrently
    with, or immediately following a trade on a marketplace at an inferior price, the Participant enters orders on each protected
    marketplace and that such orders have a sufficient volume and are at a price that will fill the volume of the better-priced orders on
    those protected marketplaces that were visible at the time of the trade at the inferior price. The introduction of fully-hidden orders
    on a protected marketplace would distort the ability of a Participant to effectively “displace” better-priced orders if “fully-hidden”
    orders participate in the trade executions ahead of orders that had been included as part of the “disclosed volume”.
    The amendments to UMIR contained in the Off-Marketplace Notice address this issue with the introduction of the concept of a
    “bypass order” which will ensure that an order entered on a marketplace by a Participant to satisfy the “best price” obligation under
    Rule 5.2 of UMIR trades only with orders that are included in the “disclosed volume”. The requirement for a “bypass order” will
    come into effect on a date determined by the IIROC board on or after August 14, 2008. IIROC will issue IIROC Rules Notice
    announcing the date this provision will be implemented at least 30 days in advance of the implementation date determined by the
    IIROC board.
    Until the implementation of the “bypass order” type on a date established by the IIROC board, IIROC is of the view that the
    introduction by a protected marketplace of a fully-hidden order type is subject to the following conditions:
    1.           No Priority “At the Market” – For disclosed orders and fully-hidden orders at the same price, the protected
                 marketplace must give priority to the disclosed orders regardless of the time of entry of the fully-hidden order.



           • the requirement for each Participant to adopt policies and procedures to ensure compliance with the “best price”
             obligation;
           • clarification that “reasonable efforts” does not require a Participant to maintain a connection to each protected
             marketplace; and
           • removal of “transaction costs” as a factor to be taken into consideration in determining compliance with the “best price”
             obligation.
         Reference should also be made to Market Integrity Notice 2008-010 – Guidance – Complying with “Best Price” Obligations
         (May 16, 2008) which repeals and replaces aspects of previous guidance related to Rule 5.2 under UMIR.
5
         The term “disclosed volume” includes the volume of orders on a protected marketplace at a price better than the price of the
         intended trade but excludes:
              • the undisclosed portion of any iceberg order;
              • a Basis Order;
              • a Call Market Order;
              • a Market-on-Close Order;
              • an Opening Order;
              • a Special Terms Order; or
              • a Volume-Weighted Average Price Order.



Part 5 – Best Execution Obligation                                                                                            UMIR 5.2-17
January 1, 2013
    2.            Adequate Notice to Market Participants – The protected marketplace must provide at least three months notice of the
                  introduction of a fully-hidden order type to those persons who have access to the marketplace.
    3.            Exclusion from Consideration by a Marketplace Smart Order Router – If the protected marketplace offers a smart
                  order router to those persons who have access to the marketplace, the order router should only take account of those
                  orders on the protected marketplace which are included in the “disclosed volume”. In the view of IIROC, if an order
                  router offered by a marketplace could take advantage of undisclosed volume on that marketplace when making a routing
                  determination, such a router would have an unfair advantage over other routers that would not have access to
                  information regarding the “hidden” orders.
    4.            Introduction of “Bypass” Functionality – A protected marketplace that proposes to introduce a fully-hidden order type
                  must at the time of the introduction of the fully-hidden order type support an order marker which allows incoming orders
                  to fulfill displacement obligations to “bypass” hidden volume on the protected marketplace and execute only with the
                  disclosed volume.
    5.            Order Exposure Requirements – Rule 6.3 of UMIR requires that client orders for 50 standard trading units or less be
                  immediately entered on a marketplace which displays orders in accordance with Part 7 of the Marketplace Operation
                  Instrument. The intent of this provision is to ensure transparency of retail-sized orders. An exception to the “order
                  exposure” requirements is provided if the client specifically instructs the Participant to deal otherwise with the particular
                  order. In the view of IIROC, a client entering an order for 50 standard trading units or less must specifically consent to
                  the entry of their order as “fully-hidden”. A protected marketplace that intends to introduce a fully-hidden order type
                  should consider including a reminder to its subscribers of the “order exposure” requirements under Rule 6.3 of UMIR as
                  part of the notice provided to Participants (as set out in paragraph 2 above).

    Guidance:                   The following is the relevant text of IIROC Notice 2009-0108 issued on April 17, 2009 under the heading
                                “Guidance Note – Specific Questions Related To The ‘Best Price’ Obligation”.
    Summary
    This Rules Notice provides guidance on specific questions regarding compliance with the “best price” obligations of the Universal
    Market Integrity Rules (“UMIR”) in an environment of multiple protected marketplaces. This guidance:
             •     reflects the approval of amendments to UMIR regarding the “best price” obligation that were effective as of May 16,
                   2008; 6 and
             •     supplements and reaffirms the guidance provided in Market Integrity Notice 2008-010 – Guidance – Complying with
                   “Best Price” Obligations (May 16, 2008). 7
    Reference should also be made to IIROC Notice 09-0105 - Rules Notice – Guidance – UMIR – Guidance on Aspects of “Locked”
    and “Crossed” Markets (April 9, 2009), which provides guidance on specific questions regarding the “best price” and “best
    execution” obligations of a Participant under UMIR as they relate to “locked” and “crossed” markets.
    Current “Best Price” Provisions
    Under the “best price” obligation of Rule 5.2, a Participant is required to make “reasonable efforts” to fill better-priced orders
    displayed on a “protected marketplace” 8 at the time the Participant executes at an inferior price on another marketplace or foreign
    organized regulated market. A Participant’s “best price” obligation is owed to the “visible” portion of a “better-priced” order on a
    protected marketplace. If a marketplace permits the entry of an “iceberg” order for which only a portion of the volume is disclosed,


6
         See IIROC Notice 09-107 - Rules Notice – Notice of Approval – UMIR – Provisions Respecting the “Best Price” Obligation
         (April 17, 2009) which sets out the approval of the applicable securities regulatory authorities of various amendments to UMIR
         that were effective on May 16, 2008 on the publication of Market Integrity Notice 2008-009 – Request for Comments –
         Provisions Respecting the “Best Price” Obligation (May 16, 2008).
7
         Market Integrity Notice 2008-010 repealed and replaced, effective May 18, 2008, the guidance related to Rule 5.2 from the
         following notices:
         •       Market Integrity Notice 2007-021 – Guidance – Expectations Regarding “Best Price” Obligations (October 24, 2007);
         •       Market Integrity Notice 2007-015 – Guidance – Specific Questions Related to Trading on Multiple Marketplaces (August
                 10, 2007);
         •       Market Integrity Notice 2006-020 – Guidance – Compliance Requirements for Trading on Multiple Marketplaces (October
                 30, 2006); and
         •       Market Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplaces (September 1, 2006).
8
         UMIR defines a “protected marketplace” as a marketplace that:
         •       disseminates order data in real-time and electronically through one or more information vendors in accordance with the
                 Marketplace Operation Instrument;
         •       permits dealers to have access to trading in the capacity as agent;
         •       provides fully-automated electronic order entry; and
         •       provides fully-automated order matching and trade execution.



Part 5 – Best Execution Obligation                                                                                               UMIR 5.2-18
January 1, 2013
 no “best price” obligation is owed to the portion of the order that is not visible at the time the Participant is determining its obligation
 under Rule 5.2.
 The policies under Rule 5.2 provide that a Participant will be considered to have made “reasonable efforts” to comply with the “best
 price” obligation if the Participant has:
      •    entered the order on a marketplace that will ensure compliance with the “best price” obligation;
      •    used an acceptable order router; or
      •    provided the order to another Participant for entry on a marketplace.
 If a Participant uses another means to enter an order on a marketplace, a number of factors will be taken into account in
 determining whether a Participant has made “reasonable efforts” to obtain the best available prices on a marketplace. Among the
 specific factors is whether:
      •    the protected marketplace recently launched operations;
      •    order information from the protected marketplace is available through a data vendor used by the Participant;
      •    the protected marketplace recently had a material malfunction or interruption of services; and
      •    the protected marketplace demonstrated an inordinate proportion of “inferior fills” with respect to tradeable orders routed
           to it.
 Each Participant must adopt policies and procedures to ensure compliance with its “best price” obligation, which will include the
 relevant factors upon which it is relying on in making trading decisions. Each Participant must review its policies and procedures
 on an ongoing basis to reflect changes to the trading environment and market structure.
 Questions and Answers
 The following are some of the most frequently asked questions regarding the “best price” obligation of a Participant and the
 response of IIROC to each question:
      1.   What is a Participant expected to do with an “on-stop” order entered on a marketplace that, once triggered,
           trades through a better-priced order on another marketplace?
           An “on-stop” order entered by a Participant on a marketplace can only be “triggered” once the security that is the subject
           of the “on-stop” order trades at a specified price on a marketplace. One way for an “on-stop” to be triggered and
           immediately trade-through another marketplace is if the trade that triggered the “on-stop” was itself a trade-through
           (others include rapidly moving quotations, commonly know as “flickering quotes”, and instances of a marketplace
           experiencing technical difficulties). Insofar as reasonable efforts were made to execute a trade at the best available
           price, IIROC would not consider the resulting trade to be a contravention of the “best price” obligation.
           Historically, marketplaces that operated an “on-stop” facility provided that an “on-stop” order, once triggered, would
           convert to a “limit” order at the trigger price. This handling ensures compliance with the “best price” obligation. A
           marketplace might employ an allocation methodology that provides the option of having a triggered “on-stop” order
           converted to a “market” order. One of the implications of this allocation methodology is that once the “on-stop” is
           triggered, the “market” order will trade exclusively with orders on that marketplace and would not take account of better-
           priced visible orders on other protected marketplaces. In light of this risk, IIROC expects that a Participant will have a
           clear understanding of the manner in which “on-stop” orders are handled on a particular marketplace and that the
           Participant will take appropriate steps to fulfill any “best price” obligations resulting from the use of an “on-stop” facility.
      2.   Does the “best price” obligation preclude the use of “All-or-None” Orders?
           No. The execution of an “All-or-None” Order is not exempt from the “best price” obligation, but this does not preclude a
           Participant or a marketplace from handling an “All-or-None” Order. An “All-or-None” Order is a Special Terms Orders for
           the purposes of UMIR. If a marketplace supports “All-or-None” Orders, the functionality of the marketplace may provide
           that the “All-or-None” Order will migrate from the Terms Book if there is the sufficient volume on that marketplace at an
           appropriate price to completely fill the “All-or-None” Order. In this case, IIROC expects that the Participant will take
           appropriate steps to fulfill any “best price” obligations if the “All-or-None” Order has executed at an inferior price to
           better-priced orders on a protected marketplace. On the other hand, the marketplace may only execute the “All-or-
           None” Order if the volume on that marketplace is sufficient and there are no “better-priced” orders on other protected
           marketplaces.
           If marketplaces do not offer the functionality to handle “All-or-None” Orders, a Participant would still be able to accept
           orders with such conditions and to handle the orders manually through a trader or through an order management system
           that would enter the order as a “fill or kill” order on a particular marketplace only when that marketplace had sufficient
           displayed volume to execute the order without avoiding “better-priced” orders on other protected marketplaces. The
           Participant will have to decide whether to accept “All-or-None” Orders in these circumstances.
      3.   In the case of a “bid-through” or “offer-through” which order is the “active” order?
           With the amendments to the “best price” obligation that became effective May 16, 2008, the relevant time to determine
           compliance with the “best price” obligation was changed from the time of order entry to the time of order execution. As a
           result of this change, the concept of “active” and “passive” orders is no longer relevant to the determining compliance
           with the “best price” obligation.



Part 5 – Best Execution Obligation                                                                                             UMIR 5.2-19
January 1, 2013
         4.    Is a Participant required to consider organized regulated markets outside of Canada as part of its “best price”
               obligation?
               No. The “best price” obligation applies to orders entered on a marketplace. Under UMIR, a “marketplace” includes an
               exchange, quotation and trade reporting system or alternative trading system that operates in Canada.
               However, a Participant handling a client order may have an obligation to consider orders on a foreign organized
               regulated market as part of its “best execution” obligation. If a foreign market is considered in order to provide a client
               with “best execution”, the Participant would have an obligation to better-priced orders on protected marketplaces in
               Canada under the “best price” obligation.

    Guidance:                The following is the relevant text of IIROC Notice 09-0224 issued on July 30, 2009 under the heading
                             “Procedures For Handling Certain Designated Trades As Principal”:
    Summary
    This Rules Notice provides guidance on the procedures for the execution by a Participant as principal of certain pre-arranged
    trades or intentional crosses that qualify as a “designated trade” 9 under the Universal Market Integrity Rules (“UMIR”) and which
    involve a distribution to clients of a significant block of stock of a listed security.
    Background
    Effective May 16, 2008, UMIR was amended to provide a mechanism to cap the obligation of a Participant, when acting as
    principal or agent, to fill better-priced orders in the case of designated trades 10 to those orders included in the “disclosed
    volume”. 11 To ensure that the better-priced orders included in the disclosed value were protected, the amendments provided for
    the introduction of a “bypass order” 12 marker that would be attached to orders entered to meet best price obligations. The use of
    the bypass order marker would ensure that the order would not interact with hidden orders, undisclosed portions of iceberg orders
    or Special Terms Order or other specialty orders. 13 In order to provide marketplaces, Participants and service providers with time
    to amend their systems to accommodate the bypass order, implementation of this portion of the amendments was deferred until
    June 1, 2009. 14


9
       A “designated trade” is defined as an intentional cross or pre-arranged trade of a security made at a price that:
         •    would not be less than the lesser of:
                   o    95% of the best bid price, and
                   o    10 trading increments less than the best bid price; and
         •    would not be more than the greater of:
                   o    105% of the best ask price, and
                   o    10 trading increments more than the best ask price.
       The definition does not impose any minimum volume or value requirements in order for an intentional cross of pre-arranged
       trade to qualify as a “designated trade”.
10
       For details of the various amendments to UMIR, see Market Integrity Notice 2008-008 – Amendment Approval – Provisions
       Respecting “Off-Marketplace” Trades (May 16, 2008).
11
       The term “disclosed volume” is defined as including the volume of orders on a protected marketplace at a price better than the
       price of the intended trade but excludes:
          •     the undisclosed portion of any iceberg order;
          •     a Basis Order;
          •     a Call Market Order;
          •     a Market-on-Close Order;
          •     an Opening Order;
          •     a Special Terms Order; or
          •     a Volume-Weighted Average Price Order.
12
       Bypass Order means an order that is:
          •     part of a designated trade; or
          •     to satisfy an obligation to fill an order imposed on a Participant or Access Person by any Rule or Policy
       and that is entered on a protected marketplace to execute as against the disclosed volume on that marketplace prior to the
       execution or cancellation of the balance of the order.
13
       UMIR defines a number of “specialty” types of orders such as: a Basis Order; a Call Market Order; a Market-on-Close Order;
       an Opening Order; a Special Terms Order; or a Volume-Weight Average Price Order.
14
       IIROC Notice 09-0034, Rules Notice – Guidance Note – UMIR – Implementation Date for the Marking of Bypass Orders
       (February 3, 2009).



Part 5 – Best Execution Obligation                                                                                          UMIR 5.2-20
January 1, 2013
 These amendments to UMIR eliminated the “uncertainties” surrounding the ability of a Participant to “move the market” amidst the
 presence of orders with partial or fully undisclosed volume. On July 18, 2008, the Toronto Stock Exchange (“TSX”) repealed its
 wide distribution rules 15 that permitted a dealer to “take-on” a principal trade “off-marketplace” in connection with “unwinding”
 trades to at least 25 separate client accounts. The wide distribution rules capped the amount of “interference” that the execution of
 the unwinding trades might encounter from “iceberg orders” and possibly certain Special Terms Orders and other “specialty”
 orders. The TSX noted that “…the wide distribution rules are no longer necessary as a result of the UMIR Amendments because
 the combination of bypass orders and designated trades essentially duplicates the functionality currently provided through the TSX
 wide distribution mechanism.” 16
 Under the wide distribution rules of the TSX, a dealer could make, subject to specific conditions, a pre-arranged trade 17 of a
 significant block of stock whereby the Participant would execute the “take-on” principal trade “off-marketplace” with the
 understanding that the Participant would immediately “distribute” the block of stock to its clients by means of an “on-marketplace”
 principal-client trade (with specific client allocations conducted by journal entry). While the amendments to UMIR made various
 aspects of the wide distribution rules of the TSX redundant (particularly those provisions that capped “interference” from certain
 types of orders) other aspects, namely the provisions that provided for the principal take-on trade to occur “off-marketplace” and
 the mechanism for the facilitation of “distribution” of large blocks of stock, were not addressed. As such, the following guidance
 sets out the expectations of IIROC with respect to the procedures for the execution of certain designated trades that involve a
 Participant acting as principal. It is important to note that while the wide distribution rules were applicable to the TSX, the
 procedures described in this Guidance Note are applicable for the conduct of an unwinding trade on any Canadian marketplace.
 Questions and Answers
 The following are specific questions respecting the procedures for the execution of certain designated trades by a Participant and
 the response of IIROC to each question:
      1.      With the elimination of the wide distribution rules of the TSX, is a Participant still able to undertake, as principal,
              the “distribution” to its clients of a significant block of a listed security?
              Yes. In certain circumstances, a Participant may agree to take on a significant block of stock from a shareholder of a
              listed issuer at a discount to the prevailing market price with the intention of immediately attempting to sell the stock to its
              clients.
              The wide distribution procedures of the TSX were designed to facilitate the sale of a large block of stock by a Participant
              to its clients in an efficient manner. 18 IIROC is of the view that the efficient distribution of large blocks of stock continues
              to be a laudable goal. As such, IIROC may provide an exemption from Rule 6.4 of UMIR to allow a Participant to
              complete a principal take-on trade “off-marketplace” if the trade is made in furtherance of a “distribution” to clients.
              Unlike the wide distribution rules of the TSX, IIROC does not require a minimum volume or value for a transaction to
              qualify for an “off-marketplace” exemption in accordance with Rule 6.4 of UMIR. In the view of IIROC, an “off-
              marketplace” exemption is warranted if the Participant, acting as principal, assumes the “economic risk” of the
              transaction with the “intent to distribute” the stock to its clients.
              Under the wide distribution rules of the TSX, the practice developed that wide distributions were generally undertaken at
              the close or the opening of trading. The introduction of the amendments to UMIR regarding “designated trades” permits
              these types of distributions to be undertaken at any time during the trading day on any marketplace.
      2.      What steps must a Participant take to facilitate an “off-marketplace” take-on trade in a listed security in
              furtherance of a “distribution” to clients?
              Before a Participant agrees to the “take-on” trade, the Participant must apply to IIROC in writing for an exemption under
              Rule 6.4(b) of UMIR. 19 In the normal course, IIROC will provide an exemption to allow the principal “take-on” leg of the
              “distribution” to be executed “off-marketplace” if:


15
     TSX Rule Book, Rule 4-103 – Wide Distributions.
16
     TMX Group Notice to Participating Organizations and Members 2008-030 (July 18, 2008).
17
     A “pre-arranged trade” is defined as a trade for which the terms of the trade were agreed upon prior to the entry of either the
     order to purchase or to sell on a marketplace by the persons entering the orders or by the persons on whose behalf the orders
     are entered.
18
     Prior to their repeal, the wide distribution rules of the TSX required that a transaction meet several additional conditions,
     including:
          •    timely public announcement of the wide distribution;
          •    a minimum transaction value of at least $25,000,000;
          •    distribution to 25 or more clients, with no one client’s allocation being more than 50% of the total allocation; and
          •    completion of the wide distribution by the end of the fourth trading session following the announcement of the wide
               distribution.
     19
         For a general description of the procedures to be followed and the information to be provided in order to obtain an
     exemption pursuant to Rule 6.4(b), see Market Integrity Notice 2005-020 – Guidance – Obtaining a Trading Exemption or Rule



Part 5 – Best Execution Obligation                                                                                               UMIR 5.2-21
January 1, 2013
                    •    the size of the “take-on” trade is such that the trade could not be completed on a marketplace without being
                         disruptive of the market;
                    •    the price of the “take-on” trade varies from the intended price of the “distribution” (or the highest price in a
                         range of possible distribution prices if the price of the distribution has not been finally determined) by an
                         amount that is not more than the usual agency commission that would be charged by that Participant to that
                         client for an order of the same size; 20
                    •    the Participant intends to “distribute” the block of shares to its clients and does not already hold client orders
                         for a significant proportion of the block; and
                    •    the Participant agrees that to the extent that the distribution price is more than the greater of 5% or 10 trading
                         increments lower than the prevailing market price at the time the distribution trades are to be executed, the
                         Participant will move the market in accordance with the requirements set out in Part 2 of Policy 2.1 of UMIR to
                         within 5% or 10 trading increments of the distribution price before executing the designated trade.
               Any exemption granted by IIROC applies only to the transaction described in the application for exemption.
      3.       Are there any circumstances under which IIROC would not provide an “off-marketplace” to facilitate a
               “distribution” of a block of securities?
               Yes. IIROC generally will not grant an “off-marketplace” exemption if, at the time of the proposed take-on trade, the
               Participant already holds client orders for a significant proportion 21 of the block. In these circumstances, IIROC believes
               that it is more appropriate for the transaction to be completed “on-marketplace” with the Participant acting as agent for
               both vendor and purchasers. However, it is acceptable for a Participant to have received “indications of interest” from
               clients to participate in the distribution.
      4.       How is a Participant expected to execute the “unwinding” trade?
               After the negotiation of the take-on trade, the Participant would market the “distribution” of the block to its clients. The
               unwinding trade may be executed concurrent with or following the completion of the take-on trade. Unless IIROC
               otherwise agrees, IIROC expects the unwinding trade to be executed on a marketplace later that trading day. IIROC will
               permit the unwinding trades to be recorded on a marketplace in a single principal-client trade for the entire block of stock
               at the distribution price. The single trade will be permitted even in circumstances where the Participant has not received
               client orders for the full amount of the block. After the unwinding trade has been “printed”, the Participant may allocate
               the securities to clients by means of journal entry for the balance of that trading day. 22




     Interpretation (June 13, 2005). In addition to the information set out in Market Integrity Notice 2005-020, a Participant seeking
     an exemption for an “off-marketplace” trade related to a “distribution”, should submit to IIROC the following information:
           •      the price at which the “take-on” trade will be executed (or the price range if the take-on price has not been
                  determined);
           •      the intended price of the “distribution” (or the highest price in a range of possible distribution prices if the price of the
                  distribution has not been determined);
           •      a description of the “marketing efforts” that the Participant has undertaken;
           •      the number of client accounts that have been solicited or which the Participant intends to solicit to purchase the
                  securities;
           •      the number and volume of solicited client orders the Participant holds at the time of the proposed “take-on” trade;
                  and
           •      the name of the counterparty to the “take-on” trade.
     Staff in Market Regulation Policy may be contacted by telephone or in writing as follows:
           •      Deanna Dobrowsky – 416-646-7266 or by email at ddobrowsky@iiroc.ca;
           •      Kevin McCoy – 416-943-4659 or by email at kmccoy@iiroc.ca; or
           •      Naomi Solomon – 416-646-7280 or by email at nsolomon@iiroc.ca.
20
     In essence, this condition ensures that the request for an exemption to execute the trade on a marketplace is not an attempt to
     avoid the application of Rule 7.5 of UMIR dealing with recorded prices.
21
     The determination of what constitutes a “significant proportion” is a fact specific analysis that takes into account various factors,
     including, but not limited to, the liquidity profile of the security and recent trading patterns in the security. While IIROC retains
     sole discretion in determining what constitutes a “significant proportion” for the purposes of Rule 6.4(b), IIROC will generally
     consider client orders that account for more than 25% of the volume of the distribution to be a “significant proportion”.
22
     For this purpose, IIROC considers the end of the “trading day” to be the close of trading on the last of the marketplaces on
     which the security trades and which provides pre-trade transparency. In the context of designated trade distribution to clients,
     IIROC will also take into account the liquidity and volatility profile of the particular securities when determining whether the
     “take-on” price satisfies this requirement.



Part 5 – Best Execution Obligation                                                                                               UMIR 5.2-22
January 1, 2013
      5.   What is a Participant expected to do if not all of the unwinding trade is allocated to clients by the end of the
           trading day?
           If a Participant has not allocated all the securities that were subject of the unwinding trade to clients by the end of the
           trading day, IIROC expects that the Participant will take the unallocated securities into its inventory account and file with
           IIROC a “Regulatory Marker Correction Form” setting out, among other things, the number of securities marked as a
           trade to a client which have been taken into inventory. 23 To the extent that a Participant has taken unallocated securities
           into inventory, any future sales of the securities must be completed “on-marketplace” as a principal trade that is subject
           to all of the provisions of UMIR, including Rule 5.2 (best price).
      6.   Is the unwinding trade subject to the “best price” obligation under Rule 5.2 of UMIR?
           Yes. The execution of the unwinding trade is subject to the Participant making reasonable efforts to trade with better-
           priced orders disclosed in a consolidated market display. In order to limit interference from better-priced orders not
           included in the “disclosed volume” on the marketplace on which the unwinding trade is to be executed, the Participant
           would mark the unwinding trade with the “bypass order” marker. However, if the Participant had not “fully allocated” the
           unwinding trade at the time of its execution, the Participant may wish to interact with the undisclosed volume and Special
           Terms Orders in order to reduce the amount of stock that the Participant might potentially have to take into inventory
           and, in these circumstances, the Participant may decide not to mark the unwinding trade as a “bypass order”.
      7.   Is a Participant required to mark any orders entered on other marketplaces for “displacement” purposes as
           “bypass”?
           No, but IIROC recommends the use of the bypass marker on orders sent to displace better-priced orders on other
           protected marketplaces to avoid interference from “undisclosed” liquidity. For example, if a Participant sends an order to
           a protected marketplace 24 to trade with the “disclosed volume” on that marketplace in compliance with the “best price”
           obligation under Rule 5.2 of UMIR and does not mark the order “bypass”, the Participant takes on the risk that the order
           will interact with the undisclosed volume, including hidden orders and the undisclosed portion of iceberg orders and
           Special Terms Orders. To the extent that not all of the orders included in the “disclosed volume” are filled, the
           Participant continues to have a displacement obligation. For greater certainty, notwithstanding that a Participant enters
           an order on a particular protected marketplace that is of a sufficient volume and is at price that will fill the disclosed
           volume, to the extent that the order is not marked “bypass” and the order encounters “interference” from undisclosed
           orders on the marketplace, the Participant will not have met its obligations under Rule 5.2.

 Guidance:               The following is the relevant text of IIRO. Notice 09-0244 issued on August 27, 2009 under the heading
                         “Guidance Note – UMIR – "Best Execution" and "Best Price" Obligations For Securities Listed On
                         TSX Venture Exchange”:
 Summary
 This IIROC Notice provides a reminder to Participants respecting their best execution and best price obligations under the
 Universal Market Integrity Rules (“UMIR”) as a result of securities which are listed on the TSX Venture Exchange (“TSXV”) trading
 on other marketplaces.
 “Best Execution” and “Best Price” Obligations under UMIR
 This IIROC Notice does not change the guidance that IIROC has previously issued on how a Participant would comply with their
 “best execution” 25 and “best price” 26 obligations for securities trading on multiple marketplaces. This IIROC Notice simply reminds
 Participants of their obligations given that securities listed on the TSXV now trade on other marketplaces.
 Under Rule 5.1 of UMIR, the obligation to monitor information on orders entered on and trades executed on marketplaces trading
 TSXV-listed securities falls to the Participant handling the client order. Participants are expected to take into account order and
 trade information from all marketplaces that trade the same securities when discharging their best execution obligations. Where
 appropriate, a Participant who does not have trading access to a particular marketplace would be expected to make arrangements


23
     Reference should be made to IIROC Rules Notice 08-0033 – Guidance Note – New Procedures For Order Marker Corrections
     (July 30, 2008) for guidance on the procedures for reporting order marker corrections and the use of the web-based
     “Regulatory Marker Correction Form” that is available on the IIROC website at www.iiroc.ca. Permitting the unwinding trade to
     be marked “principal-client” combined with the submission of a Regulatory Marker Correction Form via a secure web-based
     system to the extent that the unwinding trade has not been fully-allocated to clients, prevents information leakage on how much
     of the block of securities was taken into inventory by the Participant.
24
     Presently, the TSX, TSX Venture Exchange, CNSX, Pure, Alpha, Chi-X and Omega are considered to be a “protected
     marketplace”. Reference is made to the definition of a “protected marketplace” in Rule 1.1 of UMIR.
25
     See Market Integrity Notice 2006-017 – Guidance – Securities Trading on Multiple Marketplace (September 1, 2006) under the
     sub-heading “Rule 5.1 – Best Execution of Client Orders”.
26
     See IIROC Notice 09-0107 - Rules Notice – Notice of Approval – UMIR – Provisions Respecting the “Best Price” Obligation
     (April 17, 2009), IIROC Notice 09-0108 - Rules Notice – Guidance Note – UMIR – Specific Questions Related to the “Best
     Price” Obligation (April 17, 2009) and Market Integrity Notice 2008-010 – Guidance –Complying with “Best Price” Obligations
     (May 16, 2008).



Part 5 – Best Execution Obligation                                                                                        UMIR 5.2-23
January 1, 2013
 with another dealer who is a Participant of the particular marketplace. In the view of IIROC, a Participant would be expected to
 make such arrangements if the particular marketplace had demonstrated that there is a reasonable likelihood that the marketplace
 will have liquidity for a specific security relative to the size of the client order.
 IIROC is also of the view that a Participant in discharging its best execution obligation should consider possible liquidity on
 marketplaces that do not provide transparency of orders in a consolidated market display if:
      •       the displayed volume in the consolidated market display is not adequate to fully execute the client order on
              advantageous terms for the client; and
      •       the non-transparent marketplace has demonstrated that there is a reasonable likelihood that the marketplace will have
              liquidity for the specific security.
 The “best price” obligation under Rule 5.2 of UMIR requires a Participant to make “reasonable efforts” to fill better-priced orders
 displayed on a “protected marketplace” 27 at the time the Participant executes at an inferior price on another marketplace or foreign
 organized regulated market. IIROC will accept that a Participant has made “reasonable efforts” to comply with the “best price”
 obligation if the Participant has:
      •       entered the order on a marketplace that will ensure compliance with the “best price” obligation;
      •       used an acceptable order router; or
      •       provided the order to another Participant for entry on a marketplace.
 If a Participant uses another means to enter an order on a marketplace, IIROC will determine whether a Participant has made
 “reasonable efforts” to obtain the best available prices on a “protected marketplace”. Each Participant must adopt policies and
 procedures to ensure compliance with its “best price” obligation, which will include the relevant factors upon which it is relying in
 making trading decisions. IIROC has indicated that each Participant must review its policies and procedures on an ongoing basis
 to reflect changes to the trading environment and market structure (which would include the fact that securities listed on TSXV now
 trade on multiple marketplaces).
 Trading of TSXV-Listed Securities on Multiple Marketplaces
 On March 12, 2007, Liquidnet Canada Inc. (“Liquidnet”) became the first ATS to trade securities listed on the TSXV. Trading of
 TSXV-listed securities followed on MATCH Now on September 3, 2008 and on Omega ATS Limited (“Omega”) on November 17
 2008. However, by December 31, 2008, only 223 trades in a security listed exclusively on TSXV had been made on an ATS. The
 full TSXV stock list became eligible for trading on Pure Trading on February 27, 2009 and on Alpha Trading Systems (“Alpha”) on
 March 30, 2009. During the first quarter of 2009, a total of 1,884 trades with a volume of 26,655,998 shares in TSXV-listed
 securities occurred on these markets but, during the second quarter of 2009, the number of trades expanded significantly to
 19,342 trades with a volume of 156,763,422.
 While more than 98% of trades and volume in TSXV-listed securities continued to be made through the TSXV during the first six
 months of 2009, the increase in trading activity in TSXV-listed securities on the ATSs indicates that trading opportunities in TSXV-
 listed securities are increasingly available on the ATSs. Participants must take this increased liquidity on multiple marketplaces
 into account when making determinations with respect to their “best execution” and “best price” obligations under UMIR. In
 particular, IIROC expects each Participant will monitor the changes in the liquidity available on each marketplace for securities
 listed on the TSXV and that each Participant will review their policies and procedures for both “best execution” and “best price” to
 take account of any changes in the liquidity patterns.
 The following tables set out more detailed information on trading of TSXV-listed securities during the first six months of 2009,
 including the number of trades and the associated volume.




27
     Under UMIR, a “protected marketplace” means a marketplace that:
          •      disseminates order data in real-time and electronically through an information processor or one or more information
                 vendors in accordance with the Marketplace Operation Instrument;
          •      permits dealers to have access to trading in the capacity as agent;
          •      provides fully-automated electronic order entry; and
          •      provides fully-automated order matching and trade execution.
     Of those marketplaces currently trading TSXV-listed securities, each of TSXV, Pure Trading, Alpha and Omega qualify as a
     “protected marketplace” while Liquidnet and MATCH Now do not qualify as a “protected marketplace”.



Part 5 – Best Execution Obligation                                                                                      UMIR 5.2-24
January 1, 2013
                                                                                       Marketplace
         Number of
                              Total All
     Trades of TSXV-                            TSX Venture           Pure
                            Marketplaces                                             Liquidnet          Match Now    Omega         Alpha
     listed Securities                           Exchange            Trading

       2009 to Date              1,932,692           1,911,466          10,110                     5         1,734       924         8,453
          09-Jan                   258,806             258,685                 -                   0           121         0               -
         09-Feb                    257,096             256,737             104                     2           198        55               0
         09-Mar                    284,205             282,801             903                     3           138       351               9
          09-Apr                   330,491             325,540           1,924                     0           442       200         2,385
         09-May                    372,532             366,358           2,075                     0           488        33         3,578
         09-Jun                    429,562             421,345           5,104                     0           347       285         2,481


      Volume of                                                                      Marketplace
     TSXV-listed        Total All
      Securities      Marketplaces         TSX Venture
                                                             Pure Trading          Liquidnet           Match Now     Omega         Alpha
       Traded                               Exchange

       2009 to
                         19,268,144,033    19,084,724,613        68,880,299         5,800,000            8,027,200   4,639,400 96,072,521
        Date
       09-Jan            2,705,924,102      2,705,726,102                  -                   0          198,000            0             -
       09-Feb            2,632,236,154      2,627,309,854           739,900         3,500,000             319,400     367,000              0
       09-Mar            2,723,612,429      2,702,080,731        13,860,010         2,300,000            4,696,700    323,200      351,788
       09-Apr            3,150,499,202      3,100,226,639        25,099,800                    0         1,077,300   3,223,000 20,872,463
       09-May            3,814,225,957      3,758,285,742        16,069,589                    0          790,300      79,600 39,000,726
       09-Jun            4,241,646,189      4,191,095,545        13,111,000                    0          945,500     646,600 35,847,544


 Guidance:               The following is the relevant text of IIROC Rules Notice 11-0043 issued on February 1, 2011 under the
                         heading “Guidance Note -- UMIR – Guidance on ”Locked” and ”Crossed” Markets”:
 Questions and Answers
 The following are questions relating to the obligations of a Participant under UMIR in the context of a “locked” or “crossed” market
 and IIROC’s response to each question:
         2.   Is a Participant required to move a properly “booked” order on one marketplace to another marketplace to trade
              with an order that was subsequently entered on that other marketplace where the latter order caused a “locked
              market”?
              No. A Participant is not required to “migrate” a resting order on a marketplace to another marketplace to trade with an
              order that resulted in a “locked market”. Insofar as a Participant has not “bid-through” or “offered-through” an order on
              another marketplace when entering an order on the “resting” marketplace, a Participant is under no obligation to move
              its resting order to another marketplace to trade with an order entered after the “booked” order was entered. For greater
              certainty, if an order is entered on a marketplace at a price which at the time of entry would not be executable against
              better-priced orders visible on a protected marketplace, the Participant is in compliance with “best execution” obligations.
              Nonetheless, a Participant may decide to “migrate” a client order to the other marketplace to increase the probability of
              execution. In making such a decision under the “best execution” obligation of the Participant, the Participant would have
              to give due consideration to the possible loss of priority if the existing order is moved and the likelihood of full execution
              should the order be moved to that other marketplace. The circumstances under which a Participant would move an
              order to another marketplace are based on the “best execution” policies and procedures adopted by the Participant.
              IIROC expects that the policies and procedures adopted by a Participant to achieve “best execution” will set out the
              circumstances under which properly “booked” client orders will “migrate” and that the Participant will inform its clients of
              such policy and its implications. In the view of IIROC, the adoption of such policy and its communication to clients will
              reduce the likelihood of client confusion with respect to the question of “when and where” client orders will trade. 28
        6.    During a “crossed” market, may a Participant or Access Person execute against the order that has caused a
              “crossed” market or the order that was “bid-through” or “offered-through”?

28
       In many ways, the expectations of IIROC are comparable to what IIROC expects in the handling of a client “Good-Till -
       Cancelled Order” that has been booked on a marketplace that either opens later or closes earlier than other marketplaces
       trading the same security.



Part 5 – Best Execution Obligation                                                                                               UMIR 5.2-25
January 1, 2013
           Yes. The entry of an order that is a “bid-through” or “offer-through” will result in a “crossed” market. If the Participant or
           Access Person has not taken reasonable efforts to avoid the “bid-through” or “offer-through”, the Participant or Access
           Person will have violated UMIR. However, IIROC also recognizes that, with the significant increases in order message
           traffic, the incidence of “crossed” markets will also increase without any breach of UMIR having occurred. Once markets
           are “crossed”, IIROC is of the view that the entry of a subsequent order that has the effect of “uncrossing”, or
           contributing to the uncrossing of, the markets is permitted for the purposes of UMIR and the entry of an order that
           contributes to the “uncrossing” of markets is allowed under the Order Protection Rule. 29 For example, if a security is
           offered on a protected marketplace at $10 and a bid at $11 is entered on another protected marketplace, the entry of the
           bid at $11 is a “bid-through” and has violated the requirements of UMIR. A Participant or Access Person that
           subsequently trades with the offer at $10 or the bid at $11 has not violated its obligations under UMIR or the Locked and
           Crossed Order Provisions provided there are no offers below $10 or bids above $11 on any other protected
           marketplace. Trading to take advantage of opportunities presented by “crossed” markets fits the UMIR definition of
           activities permitted by an arbitrage account.
 Disciplinary Proceedings:      Rule 5.2 was considered In the Matter of Gerald Douglas Phillips (“Phillips”) (February 26,
                                2004) SA 2004-002. See Disciplinary Proceedings under 2.1.

 Disciplinary Proceedings:      In the Matter of Magna Partners Ltd. (“Magna”) (November 16, 2010) DN 10-0295
                                Facts – Between October 2008 and May 2010, Magna failed to make reasonable efforts to meet its
                                best price obligations as it did not make reasonable efforts to have access to all protected
                                marketplaces, in particular Alpha, CNSX, Omega and Chi X. After determining that the costs of
                                becoming a member of each protected marketplace were too great, Magna did not make inquiries
                                into any of the other methods of accessing the various marketplaces, such as by way of jitney or
                                Smart Order Router, until following the commencement of an IIROC investigation in July, 2009.
                                Magna further failed to maintain adequate policies and procedures, including to test for “trade
                                throughs” and to monitor and document the levels of trading on each marketplace, in order to
                                ensure reasonable efforts were made to execute orders at the best price.
                                Disposition – Magna admitted that it breached UMIR when it failed to make reasonable efforts to
                                meet its best price obligations by connecting to all available “protected marketplaces” and in failing
                                to have adequate policies and procedures in place to address best price obligations. The best price
                                obligation set out in UMIR 5.2 is a general duty owed to the market as a whole to ensure fairness to
                                all market participants and to promote competition, efficiency, and transparency while maintaining
                                investor confidence in the market. UMIR Policy 5.2 requires IIROC regulated member firms to adopt
                                policies and procedures that will ensure compliance with their ongoing best price obligations and
                                reflect changes in the trading environment and market structure.
                                Requirements Considered – Rule 5.2, 7.1 and Policy 5.2
                                Sanction - A Hearing Panel imposed a fine of $100,000 and costs in the amount of $10,000 against
                                Magna.
                                Review – Further to review by the Ontario Securities Commission, the Commission substituted its
                                own penalty decision for that of the IIROC Hearing Panel and reduced the fine to $30,000.

 Disciplinary Proceedings:       In the Matter of BMO Nesbitt Burns (“BMONB”) (August 25, 2010) DN 10-0228
                                 Facts – In November 2008, BMONB was advised by IIROC of “a larger than average” number of
                                 “trade through” alerts which identify possible “best price” violations. At that time, BMONB had not
                                 yet connected to two protected marketplaces, namely Chi-X or Omega ATS (“Omega”). In late
                                 February 2009, IIROC Staff again raised this issue, noting that there had not been any significant
                                 improvement. While having thereafter connected to Chi-X, BMONB did not sign a subscription
                                 agreement with Omega until October 14, 2009. Despite the requirement of Rule 5.2, BMONB
                                 relied on three factors which are not considerations under Policy 5.2 in determining when it would
                                 connect to Omega: (i) Omega’s launch process; (ii) technological challenges in connecting to
                                 Omega; and (iii) Omega’s liquidity levels. BMONB also relied on availability of Omega’s market
                                 data as a consideration relevant to connection.
                                 Disposition – A Participant has an obligation to execute against better-priced orders on protected
                                 marketplaces before executing at an inferior price on any marketplace or foreign organized
                                 regulatory market. Under the terms of a Settlement Agreement, BMONB admitted that between
                                 October 2008 and October 2009, it breached UMIR when it failed to make reasonable efforts to
                                 meet its best price obligations by connecting to all available “protected marketplaces” and, in
                                 particular, Omega ATS, an alternative trading system for Canadian exchange listed equities.
                                 Requirements Considered – Rule 5.2 and Policy 5.2.



29
     See section 6.5 of the Trading Rules and section 6.4 of Companion Policy 23-101CP.



Part 5 – Best Execution Obligation                                                                                         UMIR 5.2-26
January 1, 2013
                              Sanction - BMONB agreed to a $250,000 fine and $15,000 in costs.

 Disciplinary Proceedings:    In the Matter of Beacon Securities Limited. (“Beacon”) (April 8, 2011) DN 11-0120
                              Facts – From December 2008 to November 2010, Beacon traded on the TSX through a third party
                              trading platform and jitneyed all TSX-Venture trades. Beacon did not, however, directly connect to
                              the remaining protected marketplaces although Beacon always had access to all protected
                              marketplaces via its ongoing jitney relationship, but this had never been used in practice prior to
                              April, 2010 for institutional clients. Following a trade desk review in August 2009, IIROC noted that
                              Beacon was connected to the TSX and TSX-Venture, but was not directly connected to the other
                              protected markets and deficiencies were found in Beacon’s written policies and procedures to
                              ensure “trade throughs” did not occur. In March 2010, Beacon updated its policies and procedures
                              regarding trading supervision. In October 2010, IIROC advised Beacon that between November,
                              2008 to April 2010, Beacon generated 899 trade through alerts which could indicate violations and
                              that random sampling showed certain trade through violations. In November, 2010, Beacon
                              upgraded its trading platform to include the Smart Order Router to become directly connected to
                              the remaining protected marketplaces for its institutional transactional activity.
                              Disposition – Pursuant to a Settlement Agreement, Beacon admitted that between December 2008
                              until November 2010, the firm failed to make reasonable efforts to ensure that orders were
                              executed at the best price, contrary to UMIR 5.2 and UMIR Policy 5.2; and from December 2008
                              until March 2010, the firm failed to have adequate policies and procedures in place in order to
                              ensure reasonable efforts were made to execute orders at the best price, contrary to UMIR 7.1.
                              Requirements Considered – Rule 5.2, 7.1 and Policy 5.2, and 7.1
                              Sanction – Beacon agreed to pay a fine of $70,000 costs in the amount of $5,000.
 Disciplinary Proceedings:   In the Matter of Maison Placements Canada Inc. (“MPCI”) (April 13, 2011) DN 11-0124
                             Facts – Between December 2008 and January 2011 (the “relevant period”), MPCI was not
                             connected to all of the six protected marketplaces, but only to the TSX and TSXV. MPCI did not use
                             an acceptable order router nor did it did not provide the order to another Participant for entry on a
                             marketplace. As a result, MPCI did not consider orders on any of the protected marketplaces other
                             than the TSX or TSXV. During the period October 2007 to March 2008, MPCI informed its clients
                             that it would execute trades on the TSX or TSXV only. During the period between December 2008
                             to October 2010, MPCI generated trade through alerts; however the percentage of trade through
                             alerts generated was small relative to MPCI’s overall trading volume. During the relevant period,
                             MPCI did not monitor or review its order flow for compliance with the “best price” obligation and did
                             not set out the steps or process to be followed to make “reasonable efforts” to ensure that orders
                             receive the “best price” when executed on a marketplace.
                             Disposition – Pursuant to a Settlement Agreement, MPCI admitted that it breached UMIR 5.2 and
                             UMIR Policy 5.2 as it did not make reasonable efforts during the relevant period to ensure orders
                             were executed at the “best price.” UMIR Requirements make it clear that despite client consent or
                             instruction a Participant cannot trade-through a better bid or offer on a protected marketplace by
                             making a trade at an inferior price. In addition, MPCI failed to have adequate policies and
                             procedures in place to ensure compliance with its “best price” obligation, contrary to UMIR 7.1 and
                             UMIR Policy 7.1.
                             Requirements Considered – Rule 5.2, 7.1 and Policy 5.2, and 7.1
                             Sanction – MPCI agreed to pay a fine of $95,000 and costs in the amount of $5,000.
 Disciplinary Proceedings:   In the Matter of Pope & Company Limited (“Pope”) (March 14, 2012) DN 12-0095
                             Facts – Between December 2008 and January, 2011, (the “Relevant Period”) Pope, an institutional
                             investment firm, was not connected to all protected marketplaces, only to the Toronto Stock
                             Exchange (TSX) and TSX Venture Exchange (TSXV). In addition, Pope did not use an acceptable
                             order router or provide the order to another Participant for entry on a marketplace. As a result,
                             Pope did not consider orders on any of the protected marketplaces other than the TSX or TSXV in
                             respect of the “best price” obligation. Pope judged that the costs of subscribing to all protected
                             marketplaces was too high and that it was not feasible to provide its orders to another Participant for
                             entry on a marketplace as this would result in a transaction costs it believed its clients would find
                             unacceptable. Pope ultimately subscribed to the TSX Smart Order Router and entered a jitney
                             service agreement to route orders to the firm’s jitney provider if the best price was available on a
                             marketplace where the firm was not subscribed. During the Relevant Period, “trade-through” alerts
                             were generated by Pope but they were a small percentage relative to its overall trading volume.
                             Disposition – Pursuant to a Settlement Agreement, Pope admitted that in the Relevant Period it
                             failed to make reasonable efforts to ensure that orders were executed at the best price, contrary to
                             UMIR 5.2 and UMIR Policy 5.2 and failed to have adequate policies and procedures in place to



Part 5 – Best Execution Obligation                                                                                    UMIR 5.2-27
January 1, 2013
                             ensure reasonable efforts were made to execute orders at the best price, contrary to UMIR 7.1 and
                             Policy 7.1.
                             Requirements Considered – Rule 5.2, 7.1 and Policy 5.2, 7.1
                             Sanction – Pope agreed to pay a fine of $30,000 and to pay costs in the amount of $5,000.




Part 5 – Best Execution Obligation                                                                                UMIR 5.2-28
January 1, 2013
                                                                 Universal Market Integrity Rules
                                                                      Rules & Policies


5.3      Client Priority
         (1)      A Participant shall not enter on a marketplace or an organized regulated market a
                  principal order or a non-client order of the Participant that, based on the
                  information known or reasonably available to the person or persons originating or
                  entering the principal order or non-client order, the Participant knows or should
                  have known will execute or have a reasonable likelihood of executing in priority to
                  a client order received by the Participant prior to the entry of the principal order or
                  non-client order for the same security that is:
                  (a)   at the same price or a lower price than the client order in the case of a
                        purchase or the same or a higher price than the client order in the case of a
                        sale; and
                  (b)   on the same side of the market.


         (2)      Despite subsection (1) but subject to Rule 4.1, a Participant is not required to give
                  priority to a client order if:
                  (a)   the client specifically has consented to the Participant entering principal
                        orders and non-client orders for the same security at the same price on the
                        same side of the market on the same settlement terms;
                  (b)   the principal order or non-client order is:
                        (i)     automatically generated by the trading system of a marketplace in
                                respect of the Marketplace Trading Obligations of that marketplace,
                        (ii)    automatically generated by a system operated by the Participant or on
                                behalf of the Participant based on pre-determined order and trading
                                parameters established, programmed and enabled for trading prior to
                                the receipt of the client order,
                        (iii)   for a managed account and the client order is for a managed account
                                under the direction of the same person and in respect of which
                                executions are allocated between the various managed accounts on an
                                equitable basis in accordance with the established practices of the
                                Participant, or
                        (iv)    a Basis Order;
                  (c)   the client order has been entered directly by the client of the Participant on a
                        marketplace;
                  (d)   the principal order or non-client order is executed pursuant to an allocation by
                        the trading system of a marketplace and:
                        (i)     either:
                                (A)   the security which is the subject of the order trades on no
                                      marketplace other than that marketplace,




Part 5 – Best Execution Obligation                                                              UMIR 5.3-1
January 1, 2013
                                (B)   the principal order or non-client order is a Call Market Order, an
                                      Opening Order, a Market-on-Close Order or a Volume-Weighted
                                      Average Price Order,
                                (C)   each of the client order and the principal order or non-client order
                                      was entered on the same marketplace,
                                (D)   the client has instructed the Participant to enter the client order on
                                      a particular marketplace, or
                                (E)   the client has instructed the Participant to enter the client order in
                                      a manner that does not disclose the identifier of the Participant in
                                      a consolidated market display,
                        (ii)    the client order was entered by the Participant on that marketplace
                                immediately upon receipt by the Participant, and
                        (iii)   if the client order was varied or changed by the Participant at any time
                                after entry, the variation or change was on the specific instructions of
                                the client;
                  (e)   either the client order or the principal order or non-client order is a Special
                        Terms Order and the client order would not have executed in the transaction
                        or transactions involving the principal order or non-client order due to the
                        terms and conditions of at least one Special Terms Order; or
                  (f)   a Market Integrity Official requires or permits the principal order or non-client
                        order to be executed in priority to a client order.


         (3)      For the purposes of clause (2)(a), a client shall be deemed to have consented to
                  the Participant entering principal orders and non-client orders for the same security
                  at the same price on the same side of the market on the same conditions and
                  settlement terms if the client order, in accordance with the specific instructions of
                  the client, is to be executed in part at various times during the trading day or at
                  various prices during the trading day.


POLICY 5.3 – CLIENT PRIORITY
Part 1 – Background
Rule 5.3 restricts a Participant and its employees from trading in the same securities as a client
of the Participant. The restriction is designed to minimize the conflict of interest that occurs
when a Participant or its employee compete with the firm’s clients for execution of orders. The
Rule governs:
          •    trading ahead of a client order, which is taking out a bid or offering that the client
               could have obtained had the client order been entered first. By trading ahead, the
               pro order obtains a better price at the expense of the client order.
          •    trading along with a client, or competing for fills at the same price.
The application of the rule can be quite complex given the diversity of professional trading
operations in many firms, which can include such activities as block facilitation, market making,
derivative and arbitrage trading. In addition, firms may withhold particular client orders in order


Part 5 – Best Execution Obligation                                                                 UMIR 5.3-2
January 1, 2013
to obtain for the client a better execution than the client would have received if the order had
been entered directly on a marketplace. Each firm must analyze its own operations, identify risk
areas and adopt compliance procedures tailored to its particular situation.
A Participant has overriding agency responsibilities to its clients and cannot use
technical compliance with the rule to establish fulfillment of its obligations if the
Participant has not otherwise acted reasonably and diligently to obtain best execution of
its client orders.


Part 2 – Prohibition on Intentional Trading Ahead
A Participant can never intentionally trade ahead of a client order that is either a market order or
tradeable limit order received prior to the entry of the principal order or non-client order except in
accordance with an exemption from the requirements of Rule 5.3(1), which exemptions include
obtaining the specific consent of the client. Examples of "intentional trades” include, but are not
limited to:
          •   withholding a client order from entry on a marketplace (or removing an order already
              entered on a marketplace) to permit the entry of a competing principal or non-client
              order ahead of the client order;
          •   entering a client order on a relatively illiquid market (other than on the instructions of
              the client) and entering a principal or non-client order on a more liquid marketplace
              where the principal or non-client order is likely to obtain faster execution;
          •   adding terms or conditions to a client order (other than on the instructions of the
              client) so that the client order ranks behind principal or non-client orders at that
              price;
          •   putting terms or conditions on a principal or non-client order for the purpose of
              differentiating the principal or non-client order from a client order that would
              otherwise have priority at that price; and
          •   entering a principal order or non-client order as an “anonymous order” (without the
              identifier of the Participant) which results in an execution in priority to a previously
              entered client order that discloses the identifier of the Participant.


Part 3 – No Knowledge of Client Order
The Participant must have reasonable procedures in place to ensure that information
concerning client orders is not used improperly within the firm. These procedures will vary from
firm to firm and no one procedure will work for all firms. If a firm does not have reasonable
procedures in place, it cannot rely on the exceptions. Reference should be made to Policy 7.1 –
Policy on Trading Supervision Obligations, and in particular Part 4 – Specific Procedures
Respecting Client Priority and Best Execution.
If a client has instructed a Participant to withhold an order or has granted a Participant discretion
with respect to the entry of an order, details of the instruction or grant of discretion must be
retained for a period of seven years from the date of the instruction or grant of discretion and,
for the first two years, the consent must be kept in a readily accessible location.




Part 5 – Best Execution Obligation                                                             UMIR 5.3-3
January 1, 2013
Part 4 – Client Consent
A Participant does not have to provide priority to a client order if the client specifically consents
to the Participant trading alongside or ahead of the client. The consent of the client must be
specific to a particular order and details of the agreement with the client must be noted on the
order ticket. A client cannot give a blanket form of consent to permit the Participant to trade
alongside or ahead of any future orders the client may give the Participant.
If the client order is part of a pre-arranged trade that is to be completed at a price below the best
bid price or above the best ask price as indicated on a consolidated market display, the
Participant will be under an obligation to ensure that “better-priced” orders on a marketplace are
filled prior to the execution of the client order. Prior to executing the client order, the Participant
must ensure that the client is aware of the better-priced orders and has consented to the
Participant executing as against them in priority to the client order. The consent of the client
must be noted on the order ticket.
If the client has given the Participant an order that is to be executed at various times during a
trading day (e.g. an “over-the-day” order) or at various prices (e.g. at various prices in order to
approximate a volume-weighted average price), the client is deemed to have consented to the
entry of principal and non-client orders that may trade ahead of the balance of the client order.
Unless the client has provided standing written instructions that all orders are to be executed at
various times during the trading day or a various prices during the trading day, the client
instructions should be treated as specific to a particular order and the details of the instructions
by the client must be noted on the order ticket. However, if the un-entered portion of the client
order would reasonably be expected to affect the market price of the security, the Participant
may be precluded from entering principal or non-client orders as a result of the application of the
frontrunning rule.
In certain circumstances, a client may provide a conditional consent for the Participant to trade
alongside or ahead of the client order. For example, a client may consent to a principal order of
Participant sharing fills with the client order provided the client order is fully executed by the end
of the trading day. If the client's order is not fully executed, the client may expect that the
Participant "give up" its fills to the extent necessary to complete the client order. In this situation,
the Participant should mark its orders as "principal" throughout the day. Any part of the
execution which is given up to the client should not be re-crossed on a marketplace but should
simply be journalled to the client (since the condition of the consent has not been met, the fills in
question could be viewed as properly belonging to the client rather than the principal order). To
the extent that a Participant "gives up" part of a fill of a principal order to a client based on the
conditional consent, the Participant shall report the particulars of the "give up" to the Market
Regulator not later than the opening of trading on marketplaces on the next trading day. The
conditional consent of the client must be specific to a particular order. The details of the
agreement with the client must be noted on the order ticket.
 Defined Terms:    NI 21-101 section 1.1 – “order”
                   NI 21-101 section 1.4 – Interpretation -- “security”
                   UMIR section 1.1 –       “best ask price”, “best bid price”, “Basis Order”, “Call Market Order”, “client order”,
                                            “consolidated market display”, “employee”, “Exchange”, “limit order”, “Market Integrity
                                            Official”, “Market-on-Close Order”, “market order”, “Market Regulator”, “marketplace”,
                                            “Marketplace Rules”, “Marketplace Trading Obligations”, “non-client order”, “Opening
                                            Order”, “Participant”, “pre-arranged trade”, “principal order”, “QTRS”, “Special Terms
                                            Order”, “trading day” and “Volume-Weighted Average Price Order”




Part 5 – Best Execution Obligation                                                                                     UMIR 5.3-4
January 1, 2013
                   UMIR section 1.2(2) – “trade”
 Related Provisions:   UMIR section 4.1 and Policy 7.1
 Regulatory History:   Effective May 26, 2006, the applicable securities commissions approved amendments to repeal and
                       replace Rule 5.3 and Policy 5.3, Prior to that date, Rule 5.3 and Policy provided:
                       5.3   Client Priority
                             (1)     A Participant shall give priority to its client orders over all of its non-client or principal orders in
                                     the same security and on the same side of the market, unless the non-client or principal order
                                     is executed at a price above the client’s limit price (for a buy order) or below the client’s limit
                                     price (for a sell order).
                             (2)     A Participant shall give priority to its client market orders over its non-client or principal orders
                                     in the same security and on the same side of the market.
                             (3)     Subsections (1) and (2) shall not apply to allocations made by a trading system of a
                                     marketplace, provided that any client orders of the Participant were entered immediately upon
                                     receipt by the Participant and were not subsequently changed or removed from the system
                                     (other than changes or removals made on the instruction of the client).
                             (4)     Subsections (1) and (2) shall not apply to client orders where the client has specifically given
                                     the Participant discretion with respect to execution of an order or where the Participant is
                                     making a bona fide attempt to obtain best execution for a client order, provided that no
                                     director, officer, partner, employee or agent of the Participant with knowledge of open client
                                     orders for a security that have not been fully executed enters a non-client or principal order on
                                     the same side of the market in such security.
                             (5)     Subsections (1) and (2) shall not apply with respect to a particular client order where the client
                                     has specifically consented to the Participant trading ahead or alongside that order.
                             (6)     The Participant shall record the specific consent referred to in subsection (5) on the order
                                     ticket.
                             (7)     The exemptions in subsections (3), (4) and (5) shall not apply unless the Participant has
                                     implemented a reasonable system of internal policies and procedures to ensure compliance
                                     with this Rule and to prevent misuse of information about client orders.
                             (8)     Subsections (1) and (2) shall not apply to a client order that has been entered directly by the
                                     client of the Participant on a marketplace that does not require the disclosure of the identifier
                                     of the Participant in a consolidated market display and the director, officer, partner, employee
                                     or agent of the Participant who enters a principal order or a non-client order does not have
                                     knowledge that the client order is from a client of the Participant until the execution of the client
                                     order.
                             POLICY 5.3 – CLIENT PRIORITY
                             Part 1 – Background
                             Rule 5.3 restricts Participants and their employees from trading in the same securities as their
                             clients in order to minimize the conflict of interest that occurs when a firm or a pro trader competes
                             with the firm’s clients for executions.
                             The Rule governs two types of activities. The first is trading ahead of a client order, which is taking
                             out a bid or offering that the client could have obtained had the client order been entered first. By
                             trading ahead, the pro order obtains a better price at the expense of the client order.
                             The second activity governed by the rule is trading along with a client, or competing for fills at the
                             same price.
                             The application of the rule can be quite complex given the diversity of professional trading
                             operations in many firms, which can include such activities as block facilitation, market making,
                             derivative and arbitrage trading. In addition, firms may withhold particular client orders in order to
                             obtain for the client a better execution than the client would have received if the order had been
                             entered directly on a marketplace. Each firm must analyze its own operations, identify risk areas
                             and adopt compliance procedures tailored to its particular situation.
                             Part 2 – Broker’s Legal Obligations
                             Agency law imposes certain obligations on those who act on behalf of others. Among those
                             obligations is a prohibition on an agent appropriating for itself an opportunity that could go to the
                             principal (client) unless the principal specifically consents.
                             At common law, the client can consent to the Participant trading ahead or alongside. Such consent
                             must be specific to an order, and not contained in a general consent in a client account agreement.
                             For example, an institutional client may consent to splitting fills with the Participant or may consent
                             to the Participant trading ahead in order to move the market to the agreed-upon price for a block



Part 5 – Best Execution Obligation                                                                                              UMIR 5.3-5
January 1, 2013
                             trade (e.g. permitting the Participant as pro to move the market down to the price at which it will buy
                             a block from the client).
                             Participants have overriding agency responsibilities to their clients and cannot use technical
                             compliance with the rule to establish fulfilment of their obligations if they have not otherwise acted
                             reasonably and diligently to obtain best execution of their client orders. Firms should obtain legal
                             advice that their own order handling procedures comply with their obligations to their clients.
                             Part 3 – Prohibition on Intentional Trading Ahead
                             Rule 5.3 provides that a Participant must give priority of the execution to client orders, subject to
                             certain exceptions necessary to ensure overall efficiency of order handling. The Rule contains an
                             exception for allocations in a trading system provided that the firm enters client orders immediately
                             and does not interfere with the system allocation in any way. The rationale is that a pro who has
                             committed to the marketplace ahead of a client is not taking a trading opportunity from the client as
                             the client’s trading opportunity does not arise until he or she gives an order.
                             The Rule also contains an exception where a client order has been withheld in a bona fide attempt
                             to get better execution for the client, provided that any pro who is trading ahead of the client order
                             does not have knowledge of that order and that the firm has reasonable procedures in place to
                             ensure that information concerning client orders is not used improperly within the firm. These
                             procedures will vary from firm to firm and no one procedure will work for all firms.
                             A Participant cannot intentionally obtain execution of a pro order ahead of a client order without the
                             specific consent of the client, unless the trade is at a better price than the client's limit. A Participant
                             can never intentionally trade ahead of a client market or tradeable limit order without the specific
                             consent of the client. Such consent must be specific to a particular order, and details of the
                             agreement with the client must be noted on the order ticket.
                             Examples of "intentional trades” include, but are not limited to:
                             •       withholding a client order from entry on a marketplace (or removing an order already entered
                                     on a marketplace) to permit the entry of a competing pro order ahead of the client order;
                             •       entering a client order in a relatively illiquid market and entering a pro order in a more liquid
                                     marketplace where the pro order is likely to obtain faster execution; and
                             •       adding terms to an order (other than on the instructions of the client) so that the order ranks
                                     behind pro orders in the regular market at that price.
                             Part 4 – No Knowledge of Client Order
                             Rule 5.3 also contains two exceptions that requires that the director, officer, partner, employee or
                                  agent of the Participant who enters the principal order or the non-client order be unaware that
                                  the client order has not been entered. The two exceptions are:
                             •       if the client specifically grants discretion to the Participant with respect to the entry of the order;
                                     and
                             •       if the Participant withholds the client order from entry in a bona fide attempt to get better
                                     execution for the client.
                             In these circumstances, the Participant must have reasonable procedures in place to ensure that
                             information concerning client orders is not used improperly within the firm. These procedures will
                             vary from firm to firm and no one procedure will work for all firms. If a firm does not have reasonable
                             procedures in place, it cannot rely on the exceptions in subsections (3), (4) and (5) of Rule 5.3.
                             Reference should be made to Policy 7.1 – Policy on Trading Supervision Obligations.
                             The procedures must address the handling of client orders and must be followed up by after-the-
                             fact monitoring. At a minimum, these procedures, which must be documented, must include:
                             •       Education of all traders in their responsibilities in handling client orders. In particular, traders
                                     must be informed that intentionally trading ahead of a client order is prohibited and will result in
                                     disciplinary action against the trader.
                             •       Identification of particular areas within the firm where there is a risk of non-compliance. For
                                     many firms this would include:
                                     -    the point at which the order is taken (e.g. a branch or institutional desk);
                                     -    the points at which orders are managed (e.g. an OMS trader or retail special handling
                                          desk); and
                                     -    areas of the firm that are in proximity to areas where orders are handled.
                             •       After-the-fact reviews of trading must also be conducted. Client complaints must be
                                     documented and followed-up. On a monthly basis (at a minimum) the firm must compare
                                     execution of a reasonable sample of non-client orders with contemporaneous client orders in



Part 5 – Best Execution Obligation                                                                                             UMIR 5.3-6
January 1, 2013
                                     the same security on the same side of the market. A Participant will be expected to investigate
                                     instances where it appears that a pro may have traded with knowledge of a client order prior to
                                     its entry on a marketplace.
                             Periodically the firm must review its procedures to ensure that they are appropriate to ensure that
                             the firm is meeting both the requirements of Rule 5.3 and its agency obligation to clients.
                             Part 5 –Client Consent
                             A Participant does not have to provide priority to a client order if the client specifically consents to
                             the Participant trading along side or ahead of the client. Any request must be specific to that order.
                             A client cannot give a blanket consent to permit the Participant to trade along side or ahead of any
                             future orders the client may give the Participant.
                             A Participant must keep a record of the client’s consent to withhold orders for seven years from the
                             date of the instruction and, for the first two years, the consent must be kept in a readily accessible
                             location.
                             If the client has given the Participant that is to be executed at various times during a trading day
                             (e.g. an “over-the-day” order) or at various prices (e.g. at various prices in order to approximate a
                             volume-weighted average price), the client is deemed to have consented to the entry of entry of
                             principal and non-client orders that may trade ahead of the balance of the client order. However, if
                             the unentered portion of the client order would reasonably be expected to affect the market price of
                             the security, the Participant may be precluded from entering principal or non-client orders as a
                             result of the application of the frontrunning rule.
                       Effective October 31, 2003, the applicable securities commissions approved the amendment to add
                       subsection (8) of Rule 5.3 as it read prior to May 26, 2006.
                       Effective March 9, 2007, the applicable securities commissions approved an amendment to repeal and
                       replace Rule 5.3 and to repeal and replace Parts 2 and 3 of Policy 5.3. Prior to that date, Rule 5.3 and
                       Parts 2 and 3 of Policy 5.3 provided:
                             5.3      Client Priority
                                       (1)     A Participant shall give priority to a client order of the Participant over all principal
                                               orders and non-client orders of the Participant that are entered on a marketplace or
                                               an organized regulated market after the receipt of the client order for the same
                                               security that is:
                                               (a)   the same price or a higher price in the case of a purchase or the same or a
                                                     lower price in the case of a sale; and
                                               (b) the same side of the market.
                                       (2)     Despite subsection (1) but subject to Rule 4.1, a Participant is not required to give
                                               priority to a client order if:
                                               (a)   the client specifically has consented to the Participant entering principal orders
                                                     and non-client orders for the same security at the same price on the same side
                                                     of the market on the same settlement terms;
                                               (b)   the client order has not been entered on a marketplace as a result of:
                                                     (i)    the client specifically instructing the Participant to deal otherwise with the
                                                            particular order,
                                                     (ii)   the client specifically granting discretion to the Participant with respect to
                                                            entry of the order, or
                                                     (iii) the Participant determining in accordance with Rule 6.3(1)(e) that, based
                                                           on market conditions, entering the order would not be in the best interests
                                                           of the client,
                                                     and no director, officer, partner, employee or agent of the Participant with
                                                     knowledge that the client order has not been entered on a marketplace enters
                                                     a principal order or a non-client order for the same security on the same side of
                                                     the market on the same conditions and settlement terms;
                                               (c)   the principal order or non-client order is:
                                                     (i)    automatically generated by the trading system of an Exchange or QTRS in
                                                            accordance with the Marketplace Rules in respect of the applicable Market
                                                            Maker Obligations, or
                                                     (ii)   a Basis Order;
                                               (d)   the client order has been entered directly by the client of the Participant on a
                                                     marketplace that does not require the disclosure of the identifier of the



Part 5 – Best Execution Obligation                                                                                            UMIR 5.3-7
January 1, 2013
                                                      Participant in a consolidated market display and the director, officer, partner,
                                                      employee or agent of the Participant who enters a principal order or a non-
                                                      client order does not have knowledge that the client order is from a client of the
                                                      Participant until the execution of the client order;
                                               (e) the principal order or non-client order is executed pursuant to an allocation by
                                                   the trading system of a marketplace and:
                                                      (i)      either:
                                                               (A) the security which is the subject of the order trades on no
                                                                   marketplace other than that marketplace,
                                                               (B) the principal order or non-client order is a Call Market Order, an
                                                                   Opening Order, a Market-on-Close Order or a Volume-Weighted
                                                                   Average Price Order, or
                                                               (C) each of the client order and the principal order or non-client order
                                                                   was entered on the same marketplace,
                                                      (ii)     the client order was entered by the Participant on that marketplace
                                                               immediately upon receipt by the Participant, and
                                                      (iii) if the client order was varied or changed by the Participant at any time
                                                            after entry, the variation or change was on the specific instructions of the
                                                            client;
                                               (f)           either the client order or the principal order or non-client order is a Special
                                                             Terms Order and the client order would not have executed in the transaction
                                                             or transactions involving the principal order or non-client order due to the
                                                             terms and conditions of at least one Special Terms Order; or
                                               (g)           a Market Integrity Official requires or permits the principal order or non-client
                                                             order to be executed in priority to a client order.
                                     (3)       For the purposes of clause (2)(a), a client shall be deemed to have consented to the
                                               Participant entering principal orders and non-client orders for the same security at
                                               the same price on the same side of the market on the same conditions and
                                               settlement terms if the client order, in accordance with the specific instructions of the
                                               client, is to be executed in part at various times during the trading day or at various
                                               prices during the trading day.
                                     Part 2 – Prohibition on Intentional Trading Ahead
                                     Rule 5.3 provides that a Participant must give priority of the execution to client orders over
                                     all principal orders and non-client orders of the Participant that are entered on a
                                     marketplace or an organized regulated market after the receipt of the client order for the
                                     same security at the same price on the same side of the market on the same conditions
                                     and settlement terms. The requirement is subject to certain exceptions necessary to
                                     ensure overall efficiency of order handling.
                                     In particular, exceptions to the client priority rule are provided if the principal order or non-
                                     client order that is entered after the receipt of the client order is:
                                           •         automatically generated by the trading system of an Exchange or QTRS in
                                                     accordance with the Market Maker Obligations of that marketplace;
                                           •         a Basis Order; or
                                           •         required or permitted to be executed by a Market Integrity Official in priority to
                                                     the client order.
                                     A principal order which is automatically generated by the trading system of an Exchange
                                     or QTRS in accordance with that marketplace’s rules on market-making activities is not an
                                     intentional attempt by a Participant to trade ahead of or along with a client order. An
                                     exemption from the client priority rule is therefore provided in order to ensure overall
                                     market liquidity in accordance with established Market Making Obligations.
                                     A Basis Order is undertaken at a price that is determined by prices achieved in related
                                     trades made in the derivatives markets. As such, the execution of a Basis Order is not an
                                     intentional attempt by a Participant to trade ahead of or along with a client order.
                                     An exception to the client priority rule is also provided where the trading system of a
                                     marketplace allocates the fill to a principal order or non-client order. In order to be able to
                                     rely on this exception the following three conditions must be met:
                                           •         either:




Part 5 – Best Execution Obligation                                                                                                UMIR 5.3-8
January 1, 2013
                                               o    the security does not trade on any marketplace other than the one on which
                                                    the client order and the principal order or non-client order is entered,
                                               o    the principal order or non-client order is a Call Market Order, an Opening
                                                    Order, a Market-on-Close Order or a Volume-Weighted Average Price
                                                    Order, or
                                               o    each of the client order and the principal order or non-client order was
                                                    entered on the same marketplace;
                                          •    the client order was entered immediately upon receipt by the Participant; and
                                          •    after entry, the client is not varied or changed except on the specific instructions
                                               of the client.
                                     The exception that is provided for a principal or non-client order which is a Call Market
                                     Order, Opening Order, Market-on Close Order or a Volume-Weighted Average Price Order
                                     recognizes that the price at which such an order may execute will not generally be known
                                     at the time the principal or non-client order is entered on a marketplace. Provided the client
                                     order has been entered on receipt and not varied without the consent of the client, any
                                     allocation by the trading system of the marketplace for these particular types of orders is
                                     not an attempt to bypass client orders.
                                     A Participant can never intentionally trade ahead of a client market or tradeable limit order
                                     received prior to the entry of the principal order or non-client order without the specific
                                     consent of the client. Examples of "intentional trades” include, but are not limited to:
                                          •    withholding a client order from entry on a marketplace (or removing an order
                                               already entered on a marketplace) to permit the entry of a competing principal or
                                               non-client order ahead of the client order;
                                          •    entering a client order in a relatively illiquid market and entering a principal or
                                               non-client order in a more liquid marketplace where the principal or non-client
                                               order is likely to obtain faster execution;
                                          •    adding terms or conditions to a client order (other than on the instructions of the
                                               client) so that the client order ranks behind principal or non-client orders at that
                                               price;
                                          •    adding terms or conditions to a client order (other than on the instructions of the
                                               client) so that the client order ranks behind principal or non-client orders at that
                                               price;
                                          •    putting terms or conditions on a principal or non-client order for the purpose of
                                               differentiating the principal or non-client order from a client order that would
                                               otherwise have priority at that price; and
                                          •    entering a principal order or non-client order as an “anonymous order” (without
                                               the identifier of the Participant) which results in an execution in priority to a
                                               previously entered client order where the identifier of the Participant has been
                                               disclosed on the entry of the client order.
                                     Part 3 – No Knowledge of Client Order
                                     Rule 5.3 also contains four exceptions to client priority that require the director, officer,
                                     partner, employee or agent of the Participant who enters the principal order or the non-
                                     client order to be unaware that the client order has not been entered. The exceptions are:
                                          •    the client specifically instructs the Participant to withhold entry of the order;
                                          •    the client specifically grants discretion to the Participant with respect to the entry
                                               of the order;
                                          •    the Participant withholds the client order from entry in accordance with Rule 6.3
                                               in a bona fide attempt to get better execution for the client; and
                                          •    the client enters the order directly on a marketplace that does not require the
                                               disclosure of the identifier of the Participant in a consolidated market display.
                                      In these circumstances, the Participant must have reasonable procedures in place to
                                      ensure that information concerning client orders is not used improperly within the firm.
                                      These procedures will vary from firm to firm and no one procedure will work for all firms. If
                                      a firm does not have reasonable procedures in place, it cannot rely on the exceptions.
                                      Reference should be made to Policy 7.1 – Policy on Trading Supervision Obligations, and
                                      in particular Part 4 – Specific Procedures Respecting Client Priority and Best Execution.




Part 5 – Best Execution Obligation                                                                                        UMIR 5.3-9
January 1, 2013
                                            If a client has instructed a Participant to withhold an order or has granted a Participant
                                            discretion with respect to the entry of an order, details of the instruction or grant of
                                            discretion must be retained for a period of seven years from the date of the instruction or
                                            grant of discretion and, for the first two years, the consent must be kept in a readily
                                            accessible location.
                          Effective August 26, 2011, the applicable securities commissions approved an amendment to repeal and
                          replace subclause (i) of clause (b) of subsection (2) of Rule 5.3. Prior to that date, subclause (i) of clause
                          (b) of subsection (2) of Rule 5.3 provided:
                                   (i)    automatically generated by the trading system of an Exchange or QTRS in accordance with
                                          the Marketplace Rules in respect of the applicable Market Maker Obligations,

 Guidance:                 The following is the relevant text of Market Integrity Notice 2005-023 issued on July 29, 2005 under the
                           heading “Guidance – Securities Trading on Multiple Marketplaces”. Market Integrity Notice 2005-023
                           was repealed and replaced by Market Integrity Notice 2006-017 issued on September 1, 2006 under the
                           heading “Guidance – Securities Trading on Multiple Marketplaces”. Additional background information
                           from Market Integrity Notice 2005-023 is set out under Rule 3.1 and additional text is set out under Rules
                           5.2, 7.7 and 8.1.
 A Participant that enters client orders and principal or non-client orders for the same security on more than one marketplace must
 be aware of the requirements regarding client priority set out in Rule 5.3. A Participant can never intentionally trade ahead of a
 client market or tradeable limit order received prior to the entry of the principal order or non-client order without the specific
 consent of the client. One example of an intentional trade includes simultaneously entering a client order in a relatively illiquid
 market and entering a principal or non-client order in a more liquid marketplace where the principal or non-client order is likely to
 obtain faster execution.
 In Market Integrity Notice 2005-017 (June 10, 2005), RS has proposed amendments to the rules related to client priority. One of
 the proposed changes would remove the ability to rely on the allocation made by the trading system of a marketplace as an
 exemption from the requirements of the client priority rule in circumstances where trades occur on more than one marketplace.

 Guidance:                 The following is the relevant text of Market Integrity Notice 2006-017 issued on September 1, 2006 under
                           the heading “Guidance – Securities Trading on Multiple Marketplaces”. Additional text is set out under
                           Rules 3.1, 5.1, 5.3, 7.7 and 8.1.
           Rule 5.3 – Client Priority
 A Participant that enters client orders and principal or non-client orders for the same security on more than one marketplace must
 be aware of the requirements regarding client priority set out in Rule 5.3. As a general requirement, a Participant is required to
 provide priority for a client order over a principal order or non-client order only if the client order is received prior to the entry of the
 principal order or non-client order and the client order is at the same or “better” price and is subject to the same conditions and
 settlement terms as the principal order or non-client order. In particular, a Participant can never intentionally trade ahead of a client
 order that is either a market order or a tradeable limit order that was received prior to the entry of the principal order or non-client
 order unless the Participant receives the specific consent of the client. One example of an intentional trade includes
 simultaneously entering a client order in a relatively illiquid market and entering a principal or non-client order in a more liquid
 marketplace where the principal or non-client order is likely to obtain faster execution at the same or better price than the client
 order. In this circumstance, the Participant is not able to rely on the exemption from client priority provided for allocations made by
 the trading system of a marketplace since the client order and the principal or non-client order were entered on different
 marketplaces. Reference should be made to Market Integrity Notice 2006-012 – Amendment Approval – Provisions Respecting
 Client Priority (May 26, 2006) for further guidance on the application of Rule 5.3 as amended effective May 26, 2006.
 Shorcan limits access to its marketplace to dealers trading as principal. If a Participant receives a client order for a particular
 security which is entered on another marketplace and the Participant subsequently enters a principal order on Shorcan, the
 Participant may be under an obligation to reallocate any fill received on the execution of the principal order on Shorcan to the
 client. The reallocation would be required if the client’s order has not executed but would have executed on Shorcan ahead of the
 Participant’s order if the client’s order had been eligible for entry on Shorcan and had been entered on Shorcan on receipt of the
 client’s order by the Participant.

 Guidance:                 The following is the relevant text of Market Integrity Notice 2007-019 issued on September 21, 2007 under
                           the heading “Guidance – Entering Client Orders on Non-Transparent Marketplaces and Facilities”.
                           Additional text is set out under Rules 5.1, 5.2, and 6.3.
 Questions and Answers
 The following are the most frequently asked questions regarding the obligations of a Participant when entering a client order on a
 non-transparent marketplace or facility and the responses of IIROC to each:
           4.    What are the “client priority” obligations if a marketplace or facility permits orders to be assigned different
                 priorities for execution?
                 For Participants who participate in the ATX facility of the TSX, each particular account which is eligible to enter an
                 “intent” will be assigned to a PAG that will be “hard-coded” into ATX and which will not be subject to trade-by-trade



Part 5 – Best Execution Obligation                                                                                              UMIR 5.3-10
January 1, 2013
               allocations or changes by traders. Under Rule 5.3, a Participant may have to provide priority to a client order
               received prior to the entry of a principal order or non-client orders at the same or an inferior price to that of the
               client order. “Client priority” would be required if the Participant, based on the information known or reasonably
               available