For further information, please contact: Karen Archer Senior Media and Public Affairs Specialist 416-865-3046 [email protected]

Lucy Becker Vice President, Public Affairs 416-943-5870 [email protected]

Results to shed light on HFT impact on market quality and integrity

IIROC publishes academic papers on impact of HFT December 17, 2014 (Toronto, Ontario) - The Investment Industry Regulatory Organization of Canada (IIROC) today published academic papers from three of the four academic teams chosen to assess the impact of high frequency trading (HFT) and related activity on Canadian equity markets, as part of the final phase of IIROC’s comprehensive HFT Study. The academic papers are published as received and without editorial comment. IIROC will review and discuss all of the papers internally, and with other regulators and key stakeholders, before determining what, if any, regulatory response may be required in light of the findings. “Consistent with our commitment to transparency, we are publishing these highly anticipated academic papers that shed light on the impact of HFT on market integrity and quality,” said Wendy Rudd, IIROC Senior Vice President, Market Regulation and Policy. “We are releasing the papers promptly upon receipt to encourage an informed and fulsome dialogue among market participants and other stakeholders.” The first paper, “High Frequency Market Making to Large Institutional Trades”, co-authored by Robert Korajczyk and Dermot Murphy, examines the behaviour of HFT firms during times of market stress where the execution of large institutional trades, particularly those trades that comprise a high percentage of trading volume, is used as a proxy. The authors compare the behaviours of HFT firms and traditional Designated Market Makers and examine how these relate to the execution costs of large trades. The second paper, “Market Integration and High Frequency Intermediation”, co-authored by Jonathan Brogaard, Terrence Hendershott and Ryan Riordan, examines the role of HFT firms in liquidity provision, risk management and information transmission across multiple trading venues.

The third paper, “The market quality effects of the 2012 UMIR amendments to the short selling rules in Canada”, co-authored by Andriy Shkilko and Ryan Riordan, examines the effects of the relaxation of short sale restrictions on market liquidity, stability, and price discovery on Canadian securities markets. The remaining two papers from the fourth and final project team are expected to be published by the summer of 2015. The impact analysis is the third phase of IIROC’s HFT Study. It follows the publication of the first two phases of the study in December 2012, which objectively identified a study group of traders and offered a detailed, statistical analysis of their activity. IIROC’s HFT Study will complement other initiatives already adopted by IIROC to govern high frequency and algorithmic trading. In particular, in 2013 IIROC issued guidance on manipulative and deceptive trading. Surveillance alerts have been implemented and IIROC is actively monitoring to detect these rule violations. For more background information on IIROC’s three-part HFT Study, click here. *** IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada. Created in 2008 through the consolidation of the Investment Dealers Association of Canada and Market Regulation Services Inc., IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets. IIROC carries out its regulatory responsibilities by creating and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through the creation and enforcement of market integrity rules regarding trading activity on Canadian marketplaces. -30-

2