- The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC/CIRO) published Staff Notice 23-329, requesting public feedback on short selling regulations.
- They received 23 comments from various stakeholders. The comments showed no consensus on the ideal regulatory regime for short selling, ranging from minor amendments to substantial changes, with one suggesting a ban.
- Key areas for further study and potential regulatory changes include:
- Pre-Borrow Requirements: Opinions varied on whether short sellers should arrange to borrow securities before short selling, with some suggesting a less stringent “locate” rule and others cautioning against increased costs.
- Different Treatment for Junior Issuers: Limited support and calls for more research before any specific rules are proposed.
- Shortening Timeline for Reporting Failed Trades: Mixed views, with some suggesting it should be reconsidered after adjusting to the T+1 settlement cycle.
- Transparency: Suggestions varied from EU-style public reporting to restrictions on anonymous broker numbers, balanced against concerns over excessive transparency affecting liquidity and price discovery.
- Mandatory Close-Outs/Buy-Ins of Short Positions: Support for introducing rules similar to those in the U.S. and EU.
- The CSA and CIRO plan to form a staff working group in early 2024 to examine short selling issues, including potential mandatory close-out or buy-in requirements, with any proposed rule changes subject to public comment. CIRO also plans to clarify expectations for settling short sale trades, with proposals expected in early 2024.
- The CSA and IIROC/CIRO published a notice seeking feedback on short selling regulations in Canada, receiving 23 comments with no clear consensus on the ideal regulatory approach.
- Key areas under review include pre-borrow requirements for short sellers, different regulations for junior issuers, shortening the timeline for reporting failed trades, and varying levels of transparency.
- There is support for mandatory close-outs or buy-ins of short positions, akin to U.S. and EU rules.
- The CSA and CIRO are forming a working group in early 2024 to further analyze short selling issues, including mandatory close-out/buy-in requirements, with CIRO also planning to propose clarifications on short sale trade settlements.