The Investment Industry Regulatory Organization of Canada (IIROC) has published a request for assistance for Phase III of its study on high-frequency trading activity in Canada.

IIROC published the first two phases on December 12, 2012. This release identified a study group of traders and offered a detailed, statistical analysis of their activities.

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For the third phase, the regulator is requesting assistance from interested outside parties that have demonstrated expertise in the area of market structure. These people can assess the impact of high-speed trading on Canadian market quality and integrity.

IIROC’s goal is to address issues related to this kind of trading in a fair manner. The research will also help to inform Canadian market policy direction.

Read: should regulators rein in high-speed traders?

IIROC offers the following background and details on the study:

  • Advanced monitoring under our Surveillance Technology Enhancement Program (STEP) enables us to capture trading in a single consolidated view across markets and across securities.
  • As a result, we have a rich repository of regulatory market data consisting of all orders and trades executed on all national equity markets. IIROC is using this data to help analyze trading patterns for a better understanding of the issues facing Canadian equity markets.
  • We’re requesting assistance from interested outside parties that have demonstrated expertise in the area of market structure, to assist in Phase III of the study.
  • These parties should submit proposals outlining the specific definitions, metrics and methodologies that address, at a minimum, some or all of the following items:
  1. Market quality / integrity measures;
  2. Identification and analysis of HFT entities’ and other (retail / institutional) trading behaviours;
  3. Analysis of the impact of market structure changes on HFT behaviours; and
  4. Analysis of the impact of identified behaviours on market quality and on other market participants.

IIROC will make a unique dataset available that contains all messages received by IIROC from each Canadian equity-trading venue in 2012. Broker and user attributions will be masked to protect confidentiality.

Those chosen to assist IIROC will be offered grants to help offset costs, and will be permitted to publish research resulting from their work, subject to conditions.

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