EquiLend Canada Inc. -- s. 15.1 of NI 21-101 Marketplace Operation

Headnote

National Instrument 21-101 Marketplace Operation -- relief granted from the transparency requirements in ss. 7.2 and 7.4 and ss. 8.1(3) and 8.2(3) and from the permitted securities requirements in s. 6.3 -- applicant registered as an investment dealer and IIROC member so as to operate an ATS facilitating securities lending transactions in equities and fixed income securities.

Applicable Legislative Provisions

National Instrument 21-101 Marketplace Operation, ss. 6.3, 7.2, 7.4, 8.1(3), 8.2(3).

September 25, 2009

IN THE MATTER OF

NATIONAL INSTRUMENT 21-101

MARKETPLACE OPERATION (N1 21-101)

AND

IN THE MATTER OF

EQUILEND CANADA INC.

DECISION

(Section 15.1 of National Instrument 21-101)

WHEREAS on March 19, 2009, EquiLend Canada Inc. ("ECI") applied (the "Application") to the Director for a decision under section 15.1 of NI 21-101 granting:

(a) an exemption from section 6.3 of NI 21-101 to permit to be traded over the ECI platform (the "Platform") the debt securities described in Schedule 1 which do not qualify as "corporate debt securities" or "government debt securities" for purposes of section 6.3 of NI 21-101;

(b) an exemption from sections 7.2 and 7.4 of NI 21-101 to relieve ECI from the transparency requirements in respect of trades in exchange-traded securities and foreign exchange-traded securities executed on the Platform resulting from securities lending transactions; and

(c) an exemption from subsections 8.1(3) and 8.2(3) of NI 21-101 to relieve ECI from the transparency requirements in respect of trades in corporate debt and government debt securities executed on the Platform resulting from securities lending transactions;

AND WHEREAS ECI has represented to the Director that:

1. ECI is a Nova Scotia limited company organized on April 17, 2008 and is a wholly-owned subsidiary of EquiLend Holdings LLC ("EquiLend Holdings");

2. ECI is registered as an investment dealer in the Province of Ontario and is also a member of the Investment Industry Regulatory Organization of Canada (Ontario District) ("IIROC") for the purposes of operating as an alternative trading system ("ATS");

3. EquiLend LLC is a limited liability company incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of EquiLend Holdings;

4. EquiLend LLC is registered with the United States Securities and Exchange Commission as a broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA") and the Securities Investor Protection Corporation;

5. EquiLend LLC operates an electronic trading platform (the "Platform") in the U.S. and is the sole provider of the Platform in the U.S.;

6. EquiLend Europe Limited ("EquiLend Europe") is a limited company organized under the laws of England and a wholly-owned subsidiary of EquiLend Holdings;

7. EquiLend Europe is registered in the U.K. and European Economic Area ("EEA") as a multilateral trading facility ("MTF") and is regulated by the Financial Services Authority ("FSA");

8. EquiLend Europe operates the Platform in the U.K. and the EEA and is the sole provider of the Platform in the U.K. and the EEA;

9. The Platform facilitates securities lending and borrowing transactions in equities and fixed income securities by providing secure access and connectivity between potential borrowers and lenders through a private network or the internet;

10. ECI will offer access to the Platform for the purpose of securities lending and borrowing transactions in equities and fixed income securities to Authorized Users (as defined in Schedule 2), in the Province of Ontario that have represented to ECI through ECI's user agreement ("User Agreement") or by way of a separate formal representation that their conduct of securities lending is subject to a level of regulation and oversight (under applicable securities, banking or other appropriate law) that imposes upon the participant a combination of requirements such as audits, public disclosure of financial information, capital rules, collateral requirements, record keeping requirements or other similar safeguards ("Ontario Participants");

11. ECI will be the sole party furnishing access to the Platform in Ontario to Ontario Participants;

12. Ontario Participants, through ECI, will be able to engage in securities borrowing and lending transactions with non-Ontario Participants who have been granted access to the Platform through EquiLend LLC or EquiLend Europe, as the case may be, on substantially similar terms as the Ontario Participants;

13. Securities traded over the Platform once ECI has commenced operations will include "foreign exchange traded securities" and "exchange-traded securities" ("Permitted Equity Securities") within the meaning of NI 21-101 and those debt securities described in Schedule 1;

14. Section 6.3 of NI 21-101 provides that an ATS can only execute trades in exchange-traded securities, corporate debt securities, government debt securities, or foreign exchange-traded securities, as defined in section 1.1 of NI 21-101;

15. Sections 7.2 and 7.4 of NI 21-101 impose post-trade transparency requirements for exchange-traded securities and foreign exchange-traded securities and subsections 8.1(3) and 8.2(3) of NI 21-101 impose post-trade transparency requirements for government debt securities and corporate debt securities;

16. Pre-trade transparency requirements are not applicable to EquiLend pursuant to sections 7.1 and 8.1 of NI 21-101 because orders capable of acceptance in foreign exchange-traded securities and exchange-traded securities and debt securities will not be displayed on the Platform;

17. The relief from Section 6.3 is needed to accommodate the full range of securities lending and borrowing activity in international securities that can occur currently under the Platform and the relief from sections 7.2, 7.4, 8.1 and 8.2 is required to be consistent with the limited transparency that exists in and is required in the securities lending environments in both Canada and internationally;

AND WHEREAS the Director has received certain other representations from ECI in connection with the Application;

AND WHEREAS based on the Application and the representations and undertakings made to the Director, the Director is satisfied that granting exemptions from section 6.3, section 7.4, and subsection 8.2(3) of NI 21-101 would not be prejudicial to the public interest;

IT IS THE DECISION of the Director that pursuant to section 15.1 of NI 21-101 that ECI is:

(a) exempt from section 6.3 of NI 21-101 so that users of its Platform can borrow and lend debt securities described in Schedule 1 (as Schedule 1 may be amended from time to time through an amendment to Form 21-101F2);

(b) exempt from sections 7.2 and 7.4 of NI 21-101 to relieve ECI from the transparency requirements in respect of trades in exchange-traded securities and foreign exchange-traded securities executed on the Platform resulting from securities lending transactions; and

(c) exempt from subsections 8.1(3) and 8.2(3) of NI 21-101 to relieve ECI from the transparency requirements in respect of trades in corporate debt securities and government debt securities executed on the Platform resulting from securities lending transactions;

PROVIDED THAT:

(d) ECI provides access to the Platform only to Ontario Participants;

(e) the Platform only executes trades with respect to Permitted Equity Securities and the securities listed in Schedule 1 (as Schedule 1 may be amended from time to time through an amendment to Form 21-101F2); and

(f) ECI is exempt from the requirements in sections 7.2 and 7.4 and subsections 8.1(3) and 8.2(3) of NI 21-101 until the earlier of December 31, 2014, or the implementation by the Commission of a rule, policy, or notice relating to the transparency of securities lending transactions.

SCHEDULE 1

The following non-Canadian debt securities are offered through the Platform:

(a) high-grade and high-yield U.S. corporate bonds;

(b) U.S. Government sponsored agency bonds (e.g. Ginnie Mae, issued by the Government National Mortgage Association; Fannie Mae, issued by the Federal National Mortgage Association; and Freddie Mac, issued by the Federal Home Loan Mortgage Corporation);

(c) U.S. Government Treasury Bonds;

(d) emerging market bonds, which are defined as U.S. dollar or Euro-denominated bonds issued by sovereign entities or corporations domiciled in a developing country, including both high grade and non-investment grade debt;

(e) European high-grade corporate bonds, which are defined as corporate bonds issued by entities domiciled in Europe; and

(f) non U.S. sovereign bonds (e.g. UK gilts or German bundesbonds).

SCHEDULE 2

In this Decision Document, "Authorized Users" means:

(a) a bank listed in Schedule I or II of the Bank Act (Canada), or an authorized foreign bank listed in Schedule III of that Act;

(b) the Business Development Bank incorporated under the Business Development Bank Act (Canada);

(c) a loan corporation, trust company, trust corporation, savings company or loan and investment society registered under the Trust and Loan Companies Act (Canada) or under comparable legislation in any province or territory of Canada;

(d) a co-operative credit society, credit union central, federation of caisses populaires, credit union or league, or regional caisse populaire, or an association under the Cooperative Credit Associations Act (Canada), in each case, located in Canada;

(e) a company licensed to do business as an insurance company in a province or territory of Canada;

(f) a subsidiary of any company referred to in paragraph (a), (b), (c), (d) or (e), where the company owns all of the voting shares of the subsidiary;

(g) a financial services cooperative within the meaning of the Act respecting Financial Services Cooperatives (Quebec);

(h) the Caisse centrale Desjardins du Québec established under the Act respecting the Mouvement des Caisses Desjardins (Quebec);

(i) a person or company registered under the securities legislation of the applicable province or territory of Canada as an adviser or dealer, other than a limited market dealer;

(j) the government of Canada or of any jurisdiction, or any crown corporation, instrumentality or agency of a Canadian federal, provincial or territorial government;

(k) any Canadian municipality or any Canadian provincial or territorial capital city;

(l) any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any instrumentality or agency thereof;

(m) a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a provincial pension commission or similar regulatory authority;

(n) a registered charity under the Income Tax Act (Canada);

(o) a company, limited partnership, limited liability partnership, trust or estate, other than a mutual fund or non-redeemable investment fund, that had net assets of at least C$5,000,000 as reflected in its most recently prepared financial statements;

(p) a person or company, other than an individual, that is recognized or designated by a Canadian securities regulatory authority as an "accredited investor" or by the Autorité des marchés financiers as a "sophisticated purchaser";

(q) a mutual fund or non-redeemable investment fund that, in the applicable province of Canada, distributes its securities only to persons or companies that are accredited investors;

(r) a mutual fund or non-redeemable investment fund that, in the applicable province of Canada, distributes its securities under a prospectus for which a receipt has been granted;

(s) an account that is fully managed by a registered portfolio manager or an entity listed in paragraphs (a), (c), (d) or (e);

(t) an entity organized outside of Canada that is analogous to any of the entities referred to in paragraphs (a) through (f) and paragraph (m) in form and function; and

(u) a person or company in respect of which all of the owners of interests, direct or indirect, legal or beneficial, are persons or companies that are Institutional Investors; provided that:

(i) two or more persons who are the joint registered holders of one or more securities of the issuer shall be counted as one beneficial owner of those securities; and

(ii) a corporation, partnership, trust or other entity shall be counted as one beneficial owner of securities of the issuer unless the entity has been created or is being used primarily for the purpose of acquiring or holding securities of the issuer, in which event each beneficial owner of an equity interest in the entity or each beneficiary of the entity, as the case may be, shall be counted as a separate beneficial owner of those securities of the issuer.