Canada – IIROC Short Selling Expectations

Canada – IIROC Short Selling Expectations

On 17 August 2022, C-IIROC issued guidance on short selling and sufficient securities collateral.

  • C-IIROC issued short selling guidance note 22-0130 re participant obligations to settle short sales.

Reasonable Expectation Test

  • The notice advises that a member participant must have a reasonable expectation of holding sufficient securities to settle short sales, prior to the order entry, execution.
  • Confirms that short sale orders entered without such reasonable expectation would be deemed in violation, prohibited under UMIR 2.2 manipulative and deceptive activities.
  • A participant must be able to access sufficient securities within two days of the trade.
  • Note, reasonable expectation precludes obtaining securities after the settlement date.

Frequently Asked Questions

  • Guidance note also provides FAQs, reinforcing that securities subject to a statutory hold/resale restrictions would not be deemed as available under the IIROC standards.
  • Also, a client's commitment to buy shares of a secondary financing yet to close would also not be deemed appropriate under the reasonable expectation test and definition.
  • In both cases, shares are not available on the settlement date, which precludes them.