Reaching our Destination and Beyond

While TestLab 2022 is complete, our support for RegTech innovation and adoption in Ontario’s capital markets does not stop here.

During TestLab 2022, several key learnings emerged that will guide the OSC Innovation Office’s future support and involvement in the RegTech space. But we are not alone on this journey – market participants also have a significant role to play in ensuring that Ontario can reap the benefits of RegTech innovation.

Having gained valuable insights, our next step is to turn these learnings into action. By promoting greater collaboration among innovators, regulators, and market participants, we believe we can chart a path forward toward more efficient, responsive, and innovative capital markets in Ontario.

Next steps

Supporting the RegTech Ecosystem

During TestLab 2022, we held numerous meetings with test participants, where we were able to share insights, build a continuous dialogue, and develop strong relationships.

We organized the first OSC TestLab Talks event, which brought together regulatory experts, solution providers, and Innovation Office stakeholders for a half day at the MaRS Discovery District to discuss the current regulatory environment and opportunities for RegTech innovation.

We also arranged monthly informal coffee chats between test participants so they could connect to share perspectives, learnings, and advice.

All seven test participants expressed gratitude for these unique opportunities to meet and discuss their solutions with other ecosystem stakeholders and connect directly with OSC team members. We aim to continue community building beyond TestLab 2022. To this end, in the near term we will plan and host periodic RegTech information sessions where multiple stakeholders in the innovation community can come together, meet the Innovation Office team, learn about our program offerings and ongoing work, and get pointers to helpful regulatory resources.

Making Regulation More Accessible

We have heard from stakeholders that locating and navigating regulation such as National Instruments and Companion Policies, currently published in PDF format, can be difficult.

This sentiment was expanded on by one test participant who stated that we should make our securities regulation machine-readable to make them more accessible and easier for computers to decipher. RegTech firms would be one of the many beneficiaries of machine-readable regulation, as we understand that this format will support automation in developing and updating solutions when necessitated by regulatory change.

We are closely following the machine-readable rulebook initiative

of the US-based Financial Industry Regulatory Authority (FINRA), which has focused on implementing machine readable rules for its 40 most frequently viewed rules.

As an investment industry self-regulatory organization, FINRA’s initiative is designed to enhance firms’ compliance efforts, reduce costs, and aid in risk management. It is a leading example for machine-readability of securities regulation that we can learn from and consider for future OSC efforts to implement machine-readable rules.

Visit OSC IdeaHub Beta to join the conversation. Share your ideas and let us know:

Would machine-readable securities regulation (including securities laws, rules, regulations, and guidance) help support you or your business? How?

If the OSC developed machine-readable securities regulation, what technical specifications (taxonomy, file format, download or API options, etc.) would you like to see implemented?

Is there anything else you'd like the OSC to take into account when considering machine-readable securities regulation?

Building Support for Capital Markets Testing Among Market Participants

During TestLab 2022, we witnessed firsthand how vital registrant feedback is to RegTech solution providers and saw multiple examples of real improvements made to test participants’ solutions based on direct feedback from their test partners. All stakeholders benefit from better solutions when both RegTech solution providers and registrants invest the time to work together.

To that end, we will be reaching out to registrants and other capital markets participants to better understand their pain points and challenges, why some may be reluctant to test new solutions, and what we can do to increase their participation in future TestLab tests.

While each TestLab cohort will be different, we will aim to do our part and address any upfront questions and work to build a broad community of potential test partners to foster collaboration and enhance networks to help support future testing.

Visit OSC IdeaHub Beta to join the conversation. Share your ideas and let us know:

Do you see any benefits to you or your firm from participating in regulatory testing?

What would prevent you or your firm from participating in regulatory testing?

What are the key factors you would take into account when considering whether to participate in regulatory testing?

Is there something the OSC could do to make it more likely that you'd participate in a future TestLab test?

Shaping and Sharing RegTech Standards

Our test participants shared that industry standards for RegTech solutions would make development easier, help clarify roles and responsibilities and reduce friction that arises during procurements or as the result of conflicting interpretations of regulations.

As one example, standards can help facilitate leading practices for RegTech solution providers to make their solutions explainable and interpretable which can enable the adoption of new and beneficial technologies.

Domestic and international standard setting is one process that can help support RegTech innovation and adoption. For this reason, the OSC Innovation Office is an active participant in the Global Financial Innovation Network (GFIN)

, which consists of more than 70 international organizations committed to supporting financial innovation. We actively contribute to the RegTech Ecosystem Working Group where discussions and information sharing on standard setting continue to happen.

Moving forward, we will continue to be an active participant in this and similar initiatives to contribute perspectives that can help support Ontario’s RegTech innovators and registrants. We will also share key developments and invite input from our stakeholders on the approaches that work for Ontario’s capital markets. We recently shared

the GFIN RegTech Ecosystem Special Unit report on our social media channels. We invite you to review the report and share your comments with us.

Where we go From Here: OSC TestLab Continues

What an adventure! From developing the program to launching and running TestLab 2022, it was a true team effort from start to finish. Ultimately, we accomplished exactly what we set out to do:

We’ve laid a strong foundation for OSC TestLab – but there’s still more to build. Our journey is far from over as we continue to explore uncharted territories and blaze trails for responsive regulation.

Eager to see where TestLab takes us next?

Stay in touch and get involved. Together, we can help make Ontario’s capital markets work better for everyone.

About this report + acknowledgements

This report was created by staff of the OSC Innovation Office to share our learnings from OSC TestLab’s inaugural test with regulatory partners and innovation and financial ecosystem participants.

Innovation is a team sport, and we are tremendously thankful to our OSC TestLab participants for their collaboration, time, and dedication to the program, as well as the registrants, advisors, and investors who contributed to innovation in such a meaningful way.

Special thanks to our OSC colleagues from the Compliance and Registrant Regulation Branch, Investment Funds and Structured Products Branch, Digital Solutions Branch, Communications Branch, General Counsel’s Office, and the Investor Office. Your partnership made all the difference, and we appreciate your efforts in bringing TestLab 2022 to life.