IIROC Publishes and Seeks Comment on Proposed Amendments regarding regulation of short sales and failed trades

TORONTO, Feb. 25 /CNW/ - The Investment Industry Regulatory Organization of Canada (IIROC) today published for comment proposed amendments to the Universal Market Integrity Rules respecting the regulation of short sales and failed trades. In particular, the proposed amendments would repeal the restrictions on the price at which a short sale may be made on Canadian equity marketplaces.

IIROC 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, "Trends in Trading Activity, Short Sales and Failed Trades for the period May 2007 to April 30, 2010", looks at the relation between short sales and failed trades during a time frame which includes the period of the greatest market turmoil in generations, from October 1, 2008 to April 30, 2009. The study confirms the findings of an earlier IIROC study ("Recent Trends in Trading Activity, Short Sales and Failed Trades") which found no unusual patterns of short selling or trade failure.

The second study "Price Movement and Short Sales Activity, the Case of the TSX Venture Exchange for the period May 1, 2007 to April 30, 2010" looks at the relationship between price movement and short sale activity during a period when all of the securities traded on the TSX Venture were subject to price restrictions on short sales. These restrictions (the "tick test") require that a short sale can only be made a price which is not less than the last sale price of that security on a marketplace. The 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.

Both the studies and the proposed amendments are available on the IIROC web site at www.iiroc.ca.

IIROC encourages investors, marketplace participants and other interested persons to provide comments by May 26, 2011 on the proposed amendments.  As part of the request for comments on the proposed amendments, IIROC has also asked for responses on a number of specific questions related to the regulation of short sales and failed trades. The procedure for providing comments and responses is set out in the IIROC Notice.

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IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.  Created in 2008 through the consolidation of the Investment Dealers Association of Canada and Market Regulation Services Inc., IIROC sets high quality regulatory and investment industry standards, protects investors and strengthens market integrity while maintaining efficient and competitive capital markets.

IIROC carries out its regulatory responsibilities through setting and enforcing rules regarding the proficiency, business and financial conduct of dealer firms and their registered employees and through setting and enforcing market integrity rules regarding trading activity on Canadian equity marketplaces.

SOURCE Investment Industry Regulatory Organization of Canada (IIROC) - General News

For further information:

Connie Craddock
Vice President, Public Affairs


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