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.