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CIRO – Proposed Amendments Respecting the Reasonable Expectation to Settle a Short Sale
Letter Summary:
The Canadian Investment Regulatory Organization (CIRO) is proposing to support and clarify the short selling framework under UMIR by:
- adding a new positive requirement in UMIR 3.3 to have prior to order entry, a reasonable
expectation to settle on settlement date any order that upon execution would be a short
sale - adding supervisory and gatekeeper requirements pertaining to the proposed requirement
in UMIR 3.3 - consolidating other current provisions related to short selling to a common location
within UMIR (Proposed Amendments).
Overview of the Council’s Comments:
The CAC is supportive of the Consultation as the requirement to establish a reasonable expectation to settle a short sale is an appropriate and targeted response, and will not place an unnecessary burden on industry or deter short selling generally.
While reliance on easy-to-borrow lists will better ensure an adequate locate for securities and may reduce the number of failed trades, given that short selling is vital to fostering efficient markets and the promotion of price discovery and liquidity, we stress that any regulation in this area should be subject to ongoing data-based reviews.