IIROC responds to current market conditions

    TORONTO, Oct. 6 /CNW/ - Regulators in Canada and abroad have recently
taken regulatory action to protect investors and market integrity in light of
the current and unprecedented market turmoil. To address concerns of investors
and marketplace participants, the Investment Industry Regulatory Organization
of Canada (IIROC) has responded by increasing its regular monitoring of
trading on equity marketplaces in Canada, including heightened surveillance of
all short selling activity.
    On September 19, 2008, the Ontario Securities Commission (OSC) issued an
Order prohibiting the short sale of certain financial issuers ("Restricted
Financials") listed on the Toronto Stock Exchange that are inter-listed with
exchanges in the United States. This action was taken as a precautionary
measure to prevent regulatory arbitrage with respect to short selling in
Ontario of the "Restricted Financials" as a result of the Securities and
Exchange Commission's short sales ban. We have found high levels of compliance
by market participants with the Order.
    IIROC's surveillance of short sale activity prior to the issuance of the
OSC Order has not revealed any significant issues with naked short sales in
the Canadian marketplace. There is no evidence of manipulation using short
sales for "Restricted Financials" or for any other securities. Our
surveillance of short selling since the OSC Order was issued has revealed few
problems and settlement failure rates continue to remain low. While IIROC's
increased surveillance of equity markets has focused in particular on
securities of issuers in the financial sector that are not covered by the
Order, we have also extended our increased scrutiny to the non financial
sector and to stocks that are inter-listed with other markets.

    In addition, our analysis of surveillance data has found that:

    -  There has been a reduction in volume of trading in the "Restricted

    -  There has been no appreciable impact on the price of securities of
       either Restricted or non Restricted Financials due to the Order;

    -  There has been an increase in volatility in the Non-Restricted
       Financials and a more significant increase in the volatility of
       "Restricted Financials" in the first week following the issuance of
       the Order;

    -  There has been a decline in trade rates and volumes of trading post
       Order for both the restricted and non restricted financials with the
       decline more marked in the "Restricted Financials".

    IIROC will continue its increased surveillance of trading activity on
Canadian equity marketplaces during the terms of the Order and while current
market turmoil and uncertainty persist. We will also continue our close
monitoring of the regulatory capital position of all dealer member firms
during this period of market volatility.

    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

For further information:

For further information: Connie Craddock, Vice-President, Public
Affairs, (416) 943-5870 or ccraddock@iiroc.ca

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