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CNQ Comments on Nasdaq request to BC Securities Commission

September 18, 2003

Ms. Denise Duifhuis
Senior Legal Counsel
Legal and Market Initiatives
British Columbia Securities Commission
P.O. Box 10142, Pacific Centre
701 West Georgia Street
Vancouver, BC V7Y 1L2

RE: BC Notice 2003/20 � Proposal to Exempt NASD Affiliates of BC Dealers from Registration Requirements

Canadian Trading and Quotation System Inc. (�CNQ�) appreciates this opportunity to comment on the above-noted proposal published by the British Columbia Securities Commission (�BCSC�). We understand that the deadline for comments has passed, but we hope that the Commission will consider these comments in its review.

CNQ is a recognized quotation and trade reporting system in Ontario. We are the first new marketplace recognized since the adoption of National Instrument 21-101.

CNQ believes that competition among marketplaces benefits market participants and that the regulatory framework should foster competition. However, this cannot be achieved at the expense of market integrity and even-handed treatment. We agree with concerns expressed by other commenters about the regulatory gap that would be created if NASD affiliates of Canadian dealers were exempt from registration. But our concerns are larger than that one issue.

The proposal raises significant issues concerning a securities commission�s jurisdiction, in particular, the need to define what activities a marketplace or registrant can undertake in a province without recognition or registration. To put the issue another way, it is defining what type and level of activity a commission is prepared to tolerate in its jurisdiction without having the authority to regulate the activity.

We support the BCSC�s call for a passport approach to regulation not only as an attainable outcome, but also as a natural progression beyond the CSA�s various
harmonization initiatives. We also agree that identical rules should not be a prerequisite to adopting that system and that regulatory innovation should be welcomed. However, the jurisdictional issues raised by the NASDAQ proposal are fundamental, and we believe that they should be addressed by the Canadian Securities Administrators (�CSA�) before the proposal is considered.

We believe that approving the proposal without examining the larger context risks setting a precedent that could have unintended consequences including creating another hurdle in the way of a passport system for dealers and issuers. There is a very high risk that different commissions will have different views as they will be wary of allowing activity over which no Canadian commission has full regulatory authority. This will exacerbate the Canadian patchwork of regulation and make the goal of a comprehensive passport system more elusive. It will also create uncertainty and costs for market participants, with a greater risk that they will inadvertently be offside local rules, as activities not requiring recognition or registration in one jurisdiction would trigger the requirements in another.

We would hope that an examination of these issues by the CSA would be a catalyst to streamline and harmonize the regulatory regime and make it easier for firms and markets to operate nationwide. This cannot be achieved by one commission acting alone. If the proposal is adopted, one unfortunate result would be to make it much easier for US-registered brokers to operate in British Columbia while little progress has been made to remove the administrative barriers faced by Canadian-registered brokers who wish to conduct business in another province.

We thank you for this opportunity to comment. Please direct any questions to myself at 416.572.2000 x2470 ([email protected]) or to Timothy Baikie, General Counsel & Corporate Secretary at 416.572.2000 x2282 ([email protected]).

Yours truly,

Robert G. Cook
President & CEO

cc: D. Hyndman
L. Evans