Under Rule 10.9 of UMIR,
IIROC may vary or cancel a trade that is "unreasonable"
or not in compliance with UMIR or any policy. IIROC's
regulatory intervention powers are currently exercised under its
broad discretion. The proposed guidance is intended to elaborate
upon and set out more transparent standards in regard to the
exercise of these powers, particularly with respect to its power
under 10.9(1)(d) respecting "unreasonable" trades.
In addition to the factors provided by Rule 10.9(2) for
determining whether a trade is unreasonable, the proposed guidance
also sets out a number of additional factors IIROC will consider,
such as whether the volume or number of trades is unusual in the
context of the market and whether the trade was made in error or as
the result of a deliberate trade. The notice also includes
information regarding halts with respect to situations where there
has been "asymmetric" dissemination of material
information. In this regard, IIROC acknowledges that intervention
in trading related to asymmetric dissemination of material
information is fairly unique to Canada, but maintains it has
intrinsic value in protecting market integrity and providing a
clear and transparent remedy to parties harmed by such activity.
The relative certainty and immediacy of this remedy being
distinguished from the remedy under the statutory regime for civil
liability in secondary markets.
With respect to trades that are not in compliance with UMIR,
IIROC stated that it may intervene in cases of rule violations that
are self-evident at the time of execution, including violations of
the client-principal trading requirement under Rule 8.1 of UMIR, the
market stabilization price restrictions under Rule 7.7, the
requirement not to "abuse" a person with Market Maker
Obligations under Part 1 of Policy 2.1
or the requirement to move the market in an orderly manner over a
period of time when executing a pre-arranged trade or intentional
cross under Part 2 of Policy
IIROC is accepting comments on the proposed guidance until
February 14, 2011. For more information, see IIROC Notice
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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