On February 14, the Investment Industry Regulatory Organization of Canada (IIROC) confirmed that it considers certain trading strategies typically associated with high frequency trading (HTF) as manipulative and deceptive in respect of the Universal Market Integrity Rules.
Specifically, IIROC outlined that it considers layering, quote stuffing, quote manipulation, spoofing and abusive liquidity detection to contravene Rule 2.2 of UMIR. That said, IIROC's notice also clarified that it was not censuring algorithmic or high frequency trading generally, as some HFT strategies, for example, contribute to the quality of price discovery in a stock. Further, while the listed practices are generally associated with automated order systems, the notice stated that the offending strategies are prohibited whether conducted electronically or manually.
IIROC released a draft version of the guidance in July 2012. A summary of comments received to the draft guidance, as well as IIROC's responses, was also released. For more information, see IIROC Notice 13-0053 and Notice 13-0054.
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