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Effective October 15, 2012, IIROC's price restrictions that
prohibit short sales on a "downtick" are being repealed.
The repeal of the "tick test" has been in the works for a
number of years, since similar action was taken by the U.S. Securities and
Exchange Commission to repeal short sale restrictions
in 2007. Although, unlike the U.S. rules, IIROC has not
incorporated a circuit breaker that would trigger a tick test. In
certain circumstances, however, a pre-borrow requirement for short
sales, which requires a person entering the order to have made
arrangements to borrow the securities required to settle the trade
prior to the entry of the order, is imposed.
IIROC also published a notice yesterday
to provide guidance on using "short sale" and
"short-marking exempt" order designations. Of
particular interest, the notice provides guidance with respect to
the information on which a Participant may rely in determining
whether an account may use the "short-marking exempt"
designation. The guidance further provides a list of IIROC's
answers to common questions regarding the order designations.
Meanwhile, earlier this week, IIROC published a notice
to answer specific questions regarding upcoming changes to the
rules respecting dark liquidity on Canadian markets. As we've discussed in the past, also effective October 15, UMIR is being
amended to provide that (i) visible orders will have execution
priority over dark orders on the same marketplace at the same
price; (ii) in order to trade with a dark order, smaller
orders must receive a minimum level of price improvement; and
(iii) IIROC will have the ability to designate a minimum
size for dark orders. The FAQ released by IIROC answer
questions regarding the priority of order execution, marking orders
and international crosses.
For more information, see IIROC Notices 12-0295 and 12-0300.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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