The Canadian Securities Administrators (CSA) announced in August 2023 that they are undertaking a review of exchange-traded funds (ETFs). In Canada, approximately 15% of all public investment fund assets are held within ETFs. As a popular investment, ETFs provide investors with an array of grouped assets and strategies. ETFs provide exposure to an asset class with increased liquidity and investment opportunity that might otherwise be unavailable to an individual investor. It is widely expected that the overall segment of public investment in ETFs will increase. During the remainder of 2023, the CSA announced that it will “assess whether the current regulations applicable to ETFs remain appropriate, focusing on the unique features of ETFs, i.e., secondary market trading, creation and redemption of ETF units by authorized dealers, and the arbitrage mechanism that acts to keep the market price of an ETF close to the underlying value of its portfolio.”

The CSA aims to gain insight on the ETF market in Canada and decide whether there are any further requirements needed through regulatory oversight of the ETF market. The goal of the CSA is stated as helping to “determine whether any additional requirements are needed as the industry continues to grow and innovate. A regulatory framework that is appropriately tailored to the unique ETF structure will foster competition and facilitate more investment choices for investors.”

In May 2023, the Board of the International Organization of Securities Commissions (IOSCO) published Good Practices Relating to the Implementation of the IOSCO Principles for ETFs. The CSA intends to analyze the overall market for ETFs including secondary markets, liquidity and trading patterns and assess whether the IOSCO practices are relevant and desirable for Canada’s ETF marketplace in order to determine the appropriate regulatory framework for ETFs. The CSA intends to assess whether additional consultations are necessary.

For more information, please contact one of our Securities and Corporate Finance leads: Francois Brabant, Megan Cornell, Eric Lung, Danny Wakeling, Bennett Wong or Ora Wexler.