The Investment Industry Regulatory
Organization of Canada (IIROC) recently proposed
a set of principles
intended to guide it as it considers formal proposals to establish
marketplace price and volume thresholds. Specifically, two guiding
principles are proposed, namely (i) that marketplace thresholds
should generally preclude the execution of orders that would
otherwise require regulatory intervention by IIROC due to the
trigger of a single-stock circuit breaker or the application of
policies regarding the variation and cancellation of trades; and
(ii) that the application of marketplace thresholds should have the
least amount of impact on price discovery and access to tradable
The release considers existing mechanisms to control volatility
and notes that IIROC has issued guidance or request for comments
with respect to single-stock circuit breakers, regulatory intervention for the cancellation or
variation of trades and market-wide circuit breakers. IIROC
notes, however, that these mechanisms are based on price impact and
are not directly affected by the volume of an order. Ultimately,
IIROC requests comments on all aspects of controlling price
volatility in the Canadian marketplace and specifically on a number
of questions, including: (i) whether marketplaces should be
required to adopt a form of marketplace thresholds; (ii) whether
the proposed guiding principles are appropriate and whether there
are additional ones that should be considered; and (iii) whether
marketplace thresholds should be more flexible during periods of
natural volatility. Comments are being accepted until August 8,
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