Trumid Financial, LLC
N THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, CHAPTER S.5, AS AMENDED (THE OSA) AND IN THE MATTER OF NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION (NI 21-101) AND IN THE MATTER OF NATIONAL INSTRUMENT 23-101 TRADING RULES (NI 23-101) AND IN THE MATTER OF NATIONAL INSTRUMENT 23-103 ELECTRONIC TRADING AND DIRECT ACCESS TO MARKETPLACES (NI 23-103) AND IN THE MATTER OF TRUMID FINANCIAL, LLC
ORDER (Section 15.1 of NI 21-101 and section 12.1 of NI 23-101 and section 10 of NI 23-103)
WHEREAS Trumid Financial, LLC (Trumid) has filed an application (Application) with the Ontario Securities Commission (OSC) requesting an order under Section 15.1 of National Instrument 21-101 -- Marketplace Operation ("NI 21-101"), Section 12.1 of National Instrument 23-101 -- Trading Rules ("NI 23-101") and Section 10 of National Instrument 23-103 -- Electronic Trading and Direct Access to Marketplaces ("NI 23-103" and, together with NI 21-101 and NI 23-101, the "Marketplace Rules") exempting Trumid from the application of all provisions of the Marketplace Rules that apply to a person or company carrying on business as an alternative trading system ("ATS") in Ontario (the "Requested Relief");
AND WHEREAS Trumid has represented to the OSC that:
1. Trumid is a limited liability company existing under the laws of Delaware in the United States (the "U.S."), with its head office located in New York, New York, U.S.;
2. Trumid was founded in 2014 and operates as the electronic service provider of a USD corporate debt securities trading platform for institutional clients;
3. Trumid has a technology affiliate, Trumid Technologies, LLC, which developed the trade matching platform and licenses the application for Trumid to operate. Both Trumid and Trumid Technologies, LLC, are wholly-owned subsidiaries of Trumid Holdings, LLC. All entities are under common management and control;
4. Trading of USD corporate bonds is facilitated through Trumid's Market Center (2.0) interface (the "Platform"). Trumid's technology solution is html5 based and offered over the internet. The technology provides access to an electronic application that allows clients to access available trades in USD corporate bonds;
5. It is expected that certain Ontario institutional investors wish to become clients of Trumid in order to access the liquidity afforded by the robust, existing network of clients;
6. The prospective participants in Ontario (the "Ontario Participants") will be comprised only of institutional investors that qualify as permitted clients as that term is defined in Section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103);
7. Trumid will confirm that Ontario Participants that seek to participate on the Platform are institutional investors who qualify as permitted clients, as such term is defined in section 1.1 of NI 31-103, by obtaining a representation from the Ontario Participants for access to the Platform in their onboarding documentation. The documentation will specify that this representation is deemed to be repeated by the Ontario Participant each time it enters an order for a trade on the Platform;
8. Trumid relies on the "international dealer exemption" under section 8.18 of NI 31-103 in Ontario for any trading in securities with permitted clients located in Ontario. Trumid is not registered in any capacity under the OSA;
9. Trumid is regulated and operating in the U.S. as an ATS registered with the U.S. Securities Exchange Commission ("SEC") (SEC#: 8-69500) as broker-dealer pursuant to Rule 301(b) of the Regulation ATS under 1934 Securities Exchange Act and is a member of Financial Industry Regulatory Authority (CRD#: 172129), the U.S. equivalent of Investment Industry Regulatory Organization of Canada;
10. Trumid is not in default of securities legislation in any jurisdiction;
11. Trumid seeks to provide Ontario institutional investors with direct, electronic access to trading in only USD corporate debt securities and is therefore considered to be an ATS in Ontario, as defined in subsection 1(1) of the OSA;
12. As an ATS, Trumid is prohibited from carrying on business in Ontario unless it complies with or is exempted from the Marketplace Rules;
13. In order to obtain direct access to the Platform, an Ontario Participant must agree to abide by the Trumid Rulebook;
14. Trumid will also require Ontario Participants to sign a user agreement agreeing to the terms and conditions of the use of the Platform, including clear and transparent access criteria and requirements for all market participants on the Platform, as well as minimum financial requirements for participants to maintain the financial integrity of the Platform. Trumid applies these criteria to all Platform participants in an impartial manner;
15. In addition to complying with the Trumid Rulebook and all applicable laws pertaining to the use of the Platform, prospective clients must also satisfy those requirements of Trumid's third-party intermediary. For the purpose of trading on the Platform, the intermediary acts as executing broker and will complete credit, know-your-client and anti-money laundering verifications, suitability analyses and other account supervision procedures prior to entering into clearing agreements with all users and on an ongoing basis in accordance with Ontario securities laws and Trumid requirements. The third-party intermediary has represented to Trumid that it is appropriately registered or relies on an exemption from registration under Ontario securities laws to carry on this activity;
16. Trumid will only permit trading in fixed income securities that are permitted to be traded in the United States under applicable securities laws and regulations;
17. All trades on Trumid are for securities which are TRACE-eligible. Trumid displays orders of corporate debt securities and provides accurate and timely information regarding orders. Additionally, Trumid automatically reports all transactions to TRACE in a timely manner (within fifteen (15) minutes) via FIX, and would report transactions of Ontario Participants in the same manner as it reports U.S.-based participant trades. Trade information is consistent with FINRA TRACE reporting standards and includes information regarding the type of counterparty, issuer, class or series of the security (achieved through the inclusion of the security's unique identifier), coupon, maturity, price of trade, time of trade and volume of trade, capped at $5mm+ for investment grade securities or $1mm+ for non-investment grade securities. Trumid's reporting does not absolve any participants of their own regulatory reporting requirements;
AND WHEREAS the OSC will monitor developments in international and domestic capital markets and Trumid's activities on an ongoing basis to determine whether it is appropriate for the OSC to continue to grant the Requested Relief and, if so, whether it is appropriate for the Requested Relief to continue to be granted subject to the terms and conditions set out in Schedule A to this order;
AND WHEREAS Trumid has acknowledged to the OSC that the scope of the Requested Relief and the terms and conditions imposed by the OSC set out in Schedule A to this order may change as a result of its monitoring of developments in international and domestic capital markets or Trumid's activities, or as a result of any changes to the laws in Ontario affecting trading in derivatives, commodity futures contracts, commodity futures options or securities;
AND WHEREAS based on the Application, together with the representations made by and acknowledgements of Trumid to the OSC, the OSC has determined that the granting of the Requested Relief would not be prejudicial to the public interest;
IT IS HEREBY ORDERED by the OSC that:
(a) Pursuant to Section 15.1 of NI 21-101, section 12.1 of NI 23-101 and section 10 of NI 23-103, Trumid is exempt from the requirement to comply with the Marketplace Rules;
PROVIDED THAT Trumid complies with the terms and conditions attached hereto as Schedule A.
DATED THIS 8th day of June, 2020
"Susan Greenglass"
Director, Market Regulation
Ontario Securities Commission
Schedule A
TERMS AND CONDITIONS
Regulation and Oversight
1. Trumid will continue to be subject to the regulatory oversight of the regulator in its home jurisdiction;
2. Trumid will either be registered in an appropriate category or rely on an exemption from registration under Ontario securities laws;
3. Trumid will promptly notify the OSC if its status in its home jurisdiction has been revoked, suspended, or amended, or the basis on which its status has significantly changed;
Access
4. Trumid will not provide direct access to an Ontario Participant unless the Ontario Participant is a permitted client as that term is defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;
5. Trumid will require Ontario Participants to provide prompt notification to Trumid if they no longer qualify as permitted clients;
6. Trumid must make available to Ontario Participants appropriate training for each person who has access to trade on the Platform;
Trading by Ontario Participants
7. Trading on Trumid by Ontario Participants must be cleared and settled through a clearing agency that is regulated as a clearing agency by the clearing agency's applicable regulator;
8. Trumid will permit Ontario Participants to only trade those securities which are permitted to be traded in the United States under applicable securities laws and regulations;
9. Trumid will only allow Ontario Participants to trade those fixed income securities listed in representation number 11 of this Order;
10. Trumid will automatically report all transactions of Ontario Participants to TRACE in a timely manner (within fifteen (15) minutes via FIX). This trade information is consistent with FINRA TRACE reporting standards;
Reporting
11. Trumid will promptly notify OSC Staff of any of the following:
(a) any material change to its business or operations or the information provided in its application for exemptive relief, including, but not limited to:
(i) changes to its regulatory oversight;
(ii) the access model, including eligibility criteria, for Ontario Participants;
(iii) systems and technology; and
(iv) its clearing and settlement arrangements;
(b) any change in its regulations or the laws, rules, and regulations in the home jurisdiction relevant to the products traded;
(c) any known investigations of, or regulatory action against, Trumid by the regulator in the home jurisdiction or any other regulatory authority to which it is subject;
(d) any matter known to Trumid that may affect its financial or operational viability, including, but not limited to, any significant system failure or interruption; and
(e) any default, insolvency, or bankruptcy of any participant known to Trumid or its representatives that may have a material, adverse impact upon Trumid or any Ontario Participant;
12. Trumid will maintain the following updated information and submit such information in a manner and form acceptable to OSC Staff on a bi-annual basis (within 30 days of the end of each six-month period), and at any time promptly upon the request of OSC Staff:
(a) a current list of all Ontario Participants, specifically identifying for each Ontario Participant the basis upon which it represented to Trumid that it could be provided with direct access;
(b) a list of all applicants for status as an Ontario Participant who were denied such status or access and a list of Ontario Participants who had such status or access revoked during the period;
(i) for those Ontario Participants who had their status revoked, an explanation as to why their status was revoked;
(c) for each product:
(i) the total trading volume and value originating from Ontario Participants, and
(ii) the proportion of worldwide trading volume and value on Trumid conducted by Ontario Participants, presented in the aggregate for such Ontario Participants; and
(d) a list of any system outages that occurred for any system impacting Ontario Participants' trading activity on the Platform which were reported to the regulator in Trumid's home jurisdiction;
Disclosure
13. Trumid will provide to its Ontario Participants disclosure that states that:
(a) rights and remedies against it may only be governed by the laws of the home jurisdiction, rather than the laws of Ontario, and may be required to be pursued in the home jurisdiction rather than in Ontario;
(b) the rules applicable to trading on Trumid may be governed by the laws of the home jurisdiction, rather than the laws of Ontario; and
(c) Trumid is regulated by the regulator in its home jurisdiction, rather than the OSC;
Submission to Jurisdiction and Appointment of Agent for Service
14. With respect to a proceeding brought by the OSC arising out of, related to, concerning, or in any other manner connected with the OSC's regulation and oversight of the activities of Trumid in Ontario, Trumid will submit to the non-exclusive jurisdiction of (i) the courts and administrative tribunals of Ontario, and (ii) an administrative proceeding in Ontario;
15. Trumid will submit to the OSC a valid and binding appointment of an agent for service in those jurisdictions upon which the OSC may serve a notice, pleading, subpoena, summons, or other process in any action, investigation, or administrative, criminal, quasi-criminal, penal, or other proceeding arising out of or relating to or concerning the OSC's regulation and oversight of Trumid's activities in Ontario;
Information Sharing
16. Trumid must, and must cause its affiliated entities, if any, to promptly provide to the OSC, on request, any and all data, information, and analyses in the custody or control of Trumid or any of its affiliated entities, without limitations, redactions, restrictions or conditions, including, without limiting the generality of the foregoing:
(a) data, information, and analyses relating to all of its or their businesses; and
(b) data, information, and analyses of third parties in its or their custody or control; and
17. Trumid must share information and otherwise cooperate with other recognized or exempt exchanges, recognized self-regulatory organizations, recognized or exempt clearing agencies, investor protection funds, and other appropriate regulatory bodies.