On May 10, 2012, the
Investment Industry Regulatory Organization of Canada (IIROC)
released a request for comments on approaches to the establishment
and operation of price and volume thresholds or volatility controls
by each marketplace in Canada. IIROC has proposed the following two guiding principles: (i) that marketplace
thresholds should operate to generally preclude the execution of
orders at prices that would otherwise, on execution, require
regulatory intervention by IIROC on the triggering of a
single-stock circuit breaker or the application of IIROC's
policies and procedures for the variation and cancellation of
trades; and (ii) that the volatility control mechanism used by a
marketplace should have the least amount of impact on the
market-wide operation of the price discovery and access to tradable
The release is the first step in the public consultation process
which may lead to IIROC making a formal proposal on the
establishment of price and volume thresholds to be adopted by
marketplaces. While the release discusses existing marketplace
controls, IIROC specifically 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 currently
none of these mechanisms are triggered by the volume of an order,
but instead are based on price impact.
Comments are being accepted until August 8, 2012.
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