CSA & IIROC – Joint CSA and IIROC Staff Notice 23-329 Short Selling in Canada

Download PDF:

CSA & IIROC – Joint CSA and IIROC Staff Notice 23-329 Short Selling in Canada

Letter Summary:

The consultation reviews the current securities regulations and IIROC rules governing short selling in Canada and summarizes responses from the prior consultation on activist short selling.  Based on a further review, the CSA and IIROC have determined that the current regulatory regime is consistent with the principles for the effective regulation of short selling by IOSCO and they did not receive any specific evidence of issues from activist short selling campaigns.  A number of specific questions are asked with respect to whether the market has changed to support the introduction of new requirements, such as the requirement for a dealer to confirm the ability to borrow securities prior to accepting a short sale order and whether additional public transparency requirements should be considered.

Overview of the Council’s Comments:

The Council supports initiatives to review existing regulation to ensure effectiveness, but this exercise should be driven by data and an awareness of potential unintended consequences of regulatory changes. Short selling makes critical contributions to market liquidity and price formation, supporting robust capital markets. In the absence of evidence of specific harm(s), we should not proceed with rule changes that could serve as a general deterrent to short selling and potentially significantly impair the quality of Canadian capital markets.