CANADA: IIROC proposals on Canada short selling and failed trades

Monday February 28 2011

The Investment Industry Regulatory Organization of Canada has published for comment proposed amendments to the Universal Market Integrity Rules respecting the regulation of Canada short selling and failed trades.

In particular, the proposed amendments would repeal the restrictions on the price at which a Canada short selling may be made on Canadian equity marketplaces. IIROC has also released two studies examining recent trends in trading activity, short sales and failed trades for the period May 1, 2007 to April 30, 2010. These two studies provide data and analysis that are integral to effective policy making and reflect IIROC`s ongoing commitment to monitoring trading on equity marketplaces in Canada and ensuring that our rules for market integrity are informed by relevant and timely data.

The first study confirms no unusual patterns of Canada short selling or trade failure. The second study found that there were no systemic problems in the working of the short sale regime and that the tick test was not effective as a tool to restrict significant and rapid systemic declines in prices.IIROC encourages investors, marketplace participants and other interested persons to provide comments by May 26, 2011 on the proposed amendments.

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