Bypassing investment dealers

Clearing and settlement of equity, debt, and money market transactions in Canada are handled by CDS Clearing and Depository Services Inc., which is owned by the TMX Group. TMX also owns the Toronto Stock Exchange, CSE’s main and much larger competitor.

CDS’s clearing and settlement operations are tightly regulated by the Bank of Canada, as well as by securities regulators across the country.

The CSE says its proposed platform would provide “substantial” cost savings over existing options, in part by eliminating the need for investment dealers to post initial and marketto-market capital with a clearing house pending the settlement of trades.

In addition, since trades would clear and settle immediately using blockchain technology, risks would be reduced, the exchange said.

Under the plan, token issuers would be required to adhere to the same listing requirements as the more than 300 conventional, nontokenized issues on the CSE, and the platform would have a formalized “disclosure environment” for investors purchasing tokens initially and in the secondary market.

“By harnessing this technology, the potential exists to extend corporate finance beyond the limits of traditional equity and debt offerings,” Carleton said. “We look forward to working with regulators and with corporations seeking to raise capital through STOs (securities token offerings) to fully realize the benefits of the new platform.”

As part of its push to enter the clearing and settlement business, the CSE signed a memorandum of understanding with Kabuni Technologies Inc., a private Vancouver-based company that intends to file a prospectus with the B.C. Securities Commission for approval to issue tokens to investors through an STO on the Canadian Securities Exchange.

The CSE was recognized as an exchange in 2004 by the Ontario Securities Commission.