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Notice 2005-002 Amendments to Order Entry Rule

February 1, 2005

Amendments to Order Entry Rule 4-107

On January 28, 2005, the Ontario Securities Commission approved the amendments to CNQ Rules relating to the entry of orders outside the market by non-market making CNQ dealers. The amendments are attached Appendix "A" and the text of the Rule as Appendix "B".

The proposed amendments were published for comment on December 3, 2004 in CNQ Notice 2004-009. No formal comments were received during the 30 day comment period. The only topic raised informally was that of odd-lot orders, and whether non-market making dealers could enter these directly as well. It was intended that the amended rule would also apply to the odd lot and terms markets.

The amendments allow approved traders at all CNQ Dealers to enter:
(i) Buy orders at prices equal to or less than the existing bid price, and
(ii) Sell orders at prices equal to or higher than the existing offer price

of a Market Maker security, including odd-lot orders, and orders for client and non-client accounts.

Currently, CNQ Dealers that are not a market maker in a market maker security are restricted to entering client orders to trade with the bid or offer (�client matching orders�) and crosses between the bid and offer. All other orders must be given to a market maker for entry.

Given the increase in order flow through CNQ Market Makers, the rule change will allow Non-Market Maker CNQ Dealers to enter additional order types on Market Maker securities. The purpose of the rule change is to improve the efficiency of the trading model by reducing the obligation of the Market Makers and increasing the ability of CNQ Dealers to manage their own order flow.


The amended rule will be in effect as of Wednesday, February 2, 2005. Please direct any questions to Mark Faulkner, Director, Listings & Regulation at 416.572.2000 x2305 email: Mark.Faulkner@cnq.ca



APPENDIX �A�

BE IT RESOLVED THAT:

1. Rule 4-107(2) is hereby amended by deleting the word �or� after �Client Matching Order� and by deleting the phrase �after the opening of trading.�

2. Rule 4-107(2) is further amended by adding the following clauses:

�(c) a client or non-client buy order with a limit price equal to or lower than the bid at the time of order entry; and
(d) a client or non-client sell order with a limit price equal to or higher than the ask at the time of order entry.�

PASSED this 9th day of November, 2004, to be effective upon Ontario Securities Commission approval following public notice and comment.

�Ian Bandeen�
Chairman

�Timothy Baikie�
Secretary


APPENDIX B
Rule 4-107 Entry of Orders for Market Maker Securities, blacklined against Current Rule

(1) Subject to Rule 4-107(2), only a Designated Market Maker may enter

(a) orders and
(b) crosses at any price between the bid and offer

into the CNQ System for a Market Maker security.

(2) A CNQ Dealer other than a Designated Market Maker may enter into the CNQ System

(a) a Client Matching Order; or
(b) a cross at any price between the bid and ask;
(c) a client or non-client buy order with a limit price equal to or lower than the bid at the time of order entry; and
(d) a client or non-client sell order with a limit price equal to or higher than the ask at the time of order entry

for such securities after the opening of trading.

(3) & (4) - (relate to partially disclosed orders)

(5) CNQ Dealers other than a Designated Market Maker shall, subject to Rules 4-107(2) and (6), direct orders to one or more Designated Market Makers.

(6) A CNQ Dealer may direct part or all of a Client Matching Order to a Market Maker for execution or entry into the CNQ System, including any unfilled portion of the order previously directly entered into the CNQ System by the CNQ Dealer pursuant to Rule 4-107(2).

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