Sistema de relatórios de comércio do mercado iiroc

Sistema de relatórios de comércio de mercado da Iiroc
A Organização Reguladora do Setor de Investimentos do Canadá publicou uma nova regra de relatório de transação de dívida que entrará em vigor em novembro de 2015.
De acordo com a nova estrutura, os membros do revendedor deverão relatar, após o comércio, todas as transações de títulos de dívida feitas por eles e / ou suas afiliadas que sejam consideradas distribuidores de títulos públicos.
A estrutura foi aprovada pelos Administradores de Valores Mobiliários do Canadá, então, até novembro de 2015, espera-se que mais de 90% da atividade de negociação de dívida dos membros do dealer estejam sujeitos à supervisão do IIROC.
A regra é crucial, uma vez que a participação no mercado de dívida por investidores institucionais e de varejo aumentou significativamente nos últimos anos, com o valor do comércio de títulos no Canadá em 2013 estimado em US $ 11,9 trilhões, comparado com US $ 1,95 trilhão em mercados de ações.
"Nós reconhecemos que a renda fixa desempenha um papel importante em ajudar os investidores a atingir suas metas financeiras", diz Susan Wolburgh Jenah, presidente e CEO da IIROC.
Além disso, um Sistema de Relatórios de Comércio do Mercado facilitará a coleta e análise de relatórios detalhados do comércio da dívida.
O IIROC trabalhou cooperativamente com o Banco do Canadá para desenvolver o novo sistema, que será executado em paralelo ao programa MTRS existente por um curto período de tempo para garantir a integridade dos dados.
Consistente com a prática atual, o IIROC continuará a publicar apenas estatísticas agregadas de negociação de dívida. Além disso, com a assistência de um grupo de trabalho da indústria, o IIROC está desenvolvendo um modelo de taxa de recuperação de custos que será publicado pelo IIROC para comentários até o final deste ano.

Preps industriais para relatórios canadenses pós-negociação.
A partir de 1º de novembro, os revendedores da dívida canadense no mercado de balcão serão obrigados a relatar tais transações à Organização Reguladora da Indústria de Investimento do Canadá (IIROC). A Bloomberg está entre as plataformas de dados de mercado e de negociação preparadas para o novo conjunto de regras.
"Quando os reguladores canadenses começaram a introduzir requisitos de relatórios de transação com o objetivo de vigilância comercial, nossos clientes no Canadá nos procuraram procurando recursos de relatórios de transações para ajudá-los a criar uma solução de processamento direto que não afetaria seu dia-a-dia." para operações diárias e os ajudaria a serem compatíveis ”, disse Sunil Biswas, chefe global de produtos da Bloomberg.
De acordo com a nova Regra 2800c do IIROC, os distribuidores de títulos governamentais (GSDs) e suas afiliadas que participam do Sistema de Relatórios de Mercado devem reportar todas as transações de dívida denominadas em dólar canadense.
Ao contrário do regulador norte-americano Finra, que exige transações de renda fixa qualificadas informadas a plataforma Trace dentro de 15 minutos da transação, o IIROC exige que os GSDs relatem suas transações no máximo um dia após a data de negociação (T + 1).
O regulador também planeja prorrogar o mandato para participantes que não participem do GSD até 1º de novembro de 2016, segundo os oficiais do IIROC.
A Bloomberg iniciou seu projeto de desenvolvimento do IIROC no início do ano, alavancando as capacidades que já tinha no apoio a outras classes de ativos e outros regimes de relatórios regulatórios, de acordo com Biswas.
"Levamos cerca de seis meses para desenvolver a oferta e colocá-la em nosso ambiente de teste", disse Biswas, da Bloomberg. “Então, fizemos parte do teste de toda a indústria montado pelo IIROC. Agora é só uma questão de esperar pela data de ir ao vivo.
A Bloomberg TOMs é a primeira ferramenta de relatórios comerciais do cliente certificada pelo IIROC para atender aos requisitos de relatórios da Regra 2800c, acrescentaram funcionários da Bloomberg.
Este artigo é da Markets Media e é legalmente licenciado pela Bloomberg.
Suporte ao cliente.
Acesso para Cliente.
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Arquivos de tag: IIROC.
Uma 'Vitória' para o IIAC & # 8211; Avaliação de adequação de CRM (Blog do IIAC)
Uma 'Vitória' para o IIAC & # 8211; Avaliação de adequação de CRM (Blog do IIAC)
Por insistência do Grupo de Trabalho do Venture Market do IIAC, o IIROC emitiu um Modelo de Relacionamento com o Cliente (CRM) - Notificação de Perguntas Freqüentes (FAQ) esclarecendo as obrigações de avaliação de adequação dos distribuidores para certos clientes com tolerância de alto risco. A FAQ abordou especificamente o investimento especulativo ou a negociação, como nos títulos cotados da TSX Venture Exchange (TSXV). O FAQ articula claramente a abordagem da adequação do portfólio e não proíbe ações de risco em contas / carteiras que não sejam de alto risco. O FAQ também esclarece a abordagem que os revendedores devem adotar para avaliar a adequação quando um cliente deseja participar de negociações especulativas e tem tolerância & hellip; Continue lendo & rarr;
Comentários desativados em A 'Win' para o IIAC & # 8211; Avaliação de adequação de CRM (Blog do IIAC)
Reforçar a transparência das obrigações das empresas (IIAC Blog)
Reforçar a transparência das obrigações das empresas (IIAC Blog)
Em setembro de 2015, a Canadian Securities Administrators (CSA) divulgou suas propostas há muito aguardadas para melhorar a transparência dos títulos corporativos. Em minha carta do presidente em dezembro de 2015, discuto o sistema de transparência existente da CanPX e as falhas no sistema de relatórios de comércio do mercado IIROC, introduzido em 1º de novembro de 2015, antes de compartilhar minha opinião sobre a abordagem de transparência ótima.
* Ao encontrar uma nova direção para a transparência dos vínculos corporativos, a CSA precisa garantir que ela compreenda todas as implicações de seu modelo proposto e estar convencida de que a nova abordagem atinge um objetivo de interesse público melhor.
Comments Off on Melhorar a transparência das obrigações das empresas (IIAC Blog)
IIAC lança boletim informativo do mercado de títulos (Blog do IIAC)
IIAC lança boletim informativo do mercado de títulos (Blog do IIAC)
O IIAC lançou uma nova publicação intitulada “Atualização Regulatória do Mercado de Renda Fixa do IIAC”. Você pode ler nosso número inaugural clicando aqui.
Este boletim informativo mensal trará informações atualizadas sobre os desenvolvimentos regulatórios do mercado de títulos no Canadá, nos EUA, na Europa e na Ásia. Também inclui links relevantes e comentários do IIAC.
Se você ou outras pessoas em sua organização forem impactadas por mudanças regulatórias nos mercados de renda fixa, esta publicação é para você.
A edição de novembro de 2015 aborda tópicos como:
& # 8211; Próximos passos da CSA na regulamentação e transparência do mercado de renda fixa do Canadá.
Comentários desativados em IIAC lança boletim informativo do mercado de títulos (Blog do IIAC)
O IIAC Responde às Propostas de Alterações do IIROC: Mercados Transparentes Não Protegidos e Regra de Proteção de Ordens (Blog do IIAC)
O IIAC Responde às Propostas de Alterações do IIROC: Mercados Transparentes Não Protegidos e Regra de Proteção de Ordens (Blog do IIAC)
Em abril de 2015, a Ontario Securities Commission (OSC) aprovou alterações no modelo de negociação do TSX Alpha Exchange. A partir de setembro de 2015, a Alpha aplicará um pequeno atraso no processamento (um aumento de velocidade) em pedidos para combater negociações de alta frequência e limitar a liquidez fugaz. Além disso, os pedidos exibidos na carteira de pedidos da Alpha deixarão de ser protegidos da negociação (ou seja, a execução de um pedido a um preço inferior ao preço de oferta exibido ou superior ao preço de oferta exibido) sob a Regra de proteção de pedidos ( OPR).
Em resposta, a Organização Reguladora da Indústria do Investimento do Canadá (IIROC) anunciou & hellip; Continue lendo & rarr;
Comments Off on O IIAC Responde às Propostas de Alterações do IIROC: Mercados Transparentes Não Protegidos e Regra de Proteção de Ordens (Blog do IIAC)

Indústria.
20 de fevereiro de 2013.
Requisitos propostos para o relatório de transações de títulos da dívida.
Sumário executivo.
Em 30 de janeiro de 2013, o Conselho de Administração do IIROC aprovou a publicação para comentar a Proposta de Regra 2800C - Transaction Reporting for Debt Securities (a Proposta de Regra).
A Regra Proposta exigirá que cada Membro Revendedor da IIROC relate, após a negociação, todas as transações do mercado de dívida executadas pelo Membro Revendedor, incluindo aquelas executadas em um Sistema de Comércio Alternativo (ATS) ou através de um Corretor Intermediário (IDBB). A Proposta de Regra facilitará a criação de um banco de dados de informações de transação que permitirá à IIROC cumprir suas responsabilidades com relação à vigilância e supervisão do mercado de negociação de balcão (OTC).
Esta proposta não contempla a disponibilização de dados sobre transações individuais ao público no momento; no entanto, o IIROC continuaria publicando estatísticas agregadas de negociação de dívidas consistentes com nossa prática atual.
O Plano de Projeto de Vigilância do Mercado de Dívida proposto pelo IIROC (o Plano do Projeto) detalha o cronograma, o formato e o conteúdo propostos para todos os relatórios de execução exigidos sob a Regra Proposta.
Os principais objetivos da Proposta de Regra e Plano de Projeto são:
• Assegurar relatórios consistentes e padronizados das transações do mercado de dívida OTC,
• criar uma base de dados de transacções para todos os títulos de dívida OTC especificados,
• desenvolver relatórios regulares de vigilância para o IIROC para monitorar a atividade comercial,
• fornecer ferramentas para o IIROC consultar e analisar os dados da transação,
• Assegurar que os relatórios do Sistema de Relatório de Comércio do Mercado (MTRS) compilados pelo IIROC com base nos dados de transação coletados dos participantes do mercado e arquivados no Banco do Canadá sejam completos, confiáveis ​​e precisos, e.
• permitir a análise de tendências e desenvolvimentos nos mercados de dívida e monetário.
Comentários são solicitados na Proposta de Regra e no Plano do Projeto até 22 de maio de 2013.
1. História Relevante
O mandato do IIROC é "definir e aplicar padrões regulatórios e de investimento de alta qualidade, proteger os investidores e fortalecer a integridade do mercado enquanto mantém mercados de capital eficientes e competitivos". Este mandato aplica-se a todas as atividades de negociação nos mercados de dívida e ações no Canadá.
Historicamente, os padrões de relatórios regulatórios para instrumentos de dívida têm sido bastante diferentes daqueles para ações, em parte porque títulos de dívida têm sido negociados no mercado de balcão, com muito pouca informação disponível ao público. Os mercados acionários, por outro lado, têm negociado em bolsas e Sistemas Alternativos de Negociação (ATSs) com alto grau de transparência, incluindo dados de pedidos e de comércio em tempo real, bem como informações completas (históricas) pós-negociação.
A atividade do mercado de dívida representa uma parcela significativa do valor total da negociação no mercado de valores mobiliários no Canadá. Em 2012, o valor do mercado de títulos domésticos secundários foi de aproximadamente US $ 10 trilhões; enquanto o mercado monetário representou um adicional de US $ 6,7 trilhões. Em comparação, os mercados acionários representaram cerca de US $ 1,9 trilhão em valor negociado em 2012.
A renda fixa tornou-se cada vez mais importante para os investidores nos últimos anos. Após a crise financeira de 2008, os investidores recorreram a instrumentos de dívida como um "refúgio seguro" da incerteza e volatilidade dos mercados acionários. Os títulos de dívida são parte integrante das estratégias de portfólio equilibradas para investidores institucionais e investidores de varejo. Embora os investidores de varejo representem uma porcentagem relativamente pequena do valor dos instrumentos de dívida negociados, eles representam quase metade do número de transações executadas anualmente.
Como a negociação em todos os mercados e instrumentos continua a evoluir e a estrutura de muitos produtos negociados no mercado de balcão se torna cada vez mais complexa, é importante que os reguladores adaptem suas atividades de supervisão para refletir essas mudanças. Ao continuar a fortalecer seu programa de supervisão de Títulos de Dívida, o IIROC introduziu nos últimos anos a Regra de Precificação Justa de Títulos de OTC e aprimorou seus exames de conformidade da mesa de operações.
Houve um debate significativo no Canadá em relação à negociação no mercado de dívida e à falta de relatórios regulatórios sistemáticos ou transparência para os investidores. Muitos participantes do mercado argumentaram que as características únicas da negociação no mercado de dívida exigem que ela seja conduzida em mercados OTC com transparência limitada. Outros, incluindo reguladores, expressaram preocupações relacionadas à justiça, transparência e integridade do mercado.
O debate em torno da negociação no mercado de dívida não é exclusivo do Canadá. O IIROC acompanhou de perto a evolução dos relatórios do mercado de dívida e transparência em outras jurisdições, por meio de consultas com outros reguladores nos Estados Unidos e no Reino Unido, após debate público sobre as questões e monitoramento de artigos de mídia e trabalhos acadêmicos.
Em abril de 2009, o IIROC propôs aprimoramentos aos seus atuais requisitos de precificação justos baseados em princípios, conhecidos como "Regra de Precificação Justa", que exigiriam que os Membros do Dealer fornecessem ou comprassem preços justos e razoáveis ​​para transações de títulos OTC (dívida e capital). clientes de varejo e institucionais. Em sua proposta, o IIROC expressou preocupações de que, devido à estrutura e operação diferentes dos mercados de balcão, os investidores, particularmente os investidores de varejo, tenham muito menos acesso a informações sobre preços do que para os mercados listados. Devido à falta de informação oportuna sobre preços, sentimos que é importante que a supervisão regulatória contínua da negociação de títulos de varejo seja necessária para proteger os investidores.
Após o período de comentários e subsequentes mudanças na regra preliminar, a Regra de Precificação Justa (Regra 3300 do Membro Revendedor IIROC) foi implementada em outubro de 2011. Em sua Notificação de Aprovação / Implementação, o IIROC delineou os principais objetivos da norma e suas emendas para:
1. assegurar que os clientes, em particular os clientes de retalho, recebam ofertas e preços de oferta de valores mobiliários OTC que sejam justos e razoáveis ​​em relação às condições de mercado prevalecentes;
2. assegurar que os clientes recebam uma divulgação suficiente sobre a garantia em questão que lhes permita, assim como o Representante Registrado dos clientes, confirmar, por meio de outras fontes do mercado, que o preço oferecido é razoável em relação às condições vigentes no mercado;
3. sublinham o princípio de que as actividades de conformidade são tão importantes para as transacções de títulos de mercado de balcão como para as transacções de valores mobiliários cotadas;
4. assegurar que os Membros do Dealer focalizem políticas, procedimentos, esforços de supervisão e conformidade em relação aos mercados OTC, além do foco atual em valores mobiliários negociados em mercados organizados, e forneça aos departamentos de conformidade dos Membros do Dealer o suporte regulamentar para suas atividades de conformidade em relação a Negócio de balcão; e.
5. Reconhecer e realçar que os mercados OTC diferem em termos de forma e estrutura da natureza mais formalizada dos mercados de valores mobiliários cotados, e de regulamentar os mercados OTC, tendo em conta estas idiossincrasias.
Para garantir a conformidade com a Regra de Precificação Justa, também propusemos que fosse desenvolvido um sistema que permitisse ao pessoal da IIROC monitorar a negociação no mercado de dívida OTC dos Membros do Dealer e fornecer os dados que permitiriam à IIROC identificar circunstâncias em que os preços de comércio não se alinham com o mercado. mercado prevalecente. Em consulta com a indústria e consultores especializados, o IIROC começou a trabalhar no Projeto de Vigilância do Mercado da Dívida.
2. Normas Internacionais para Relatórios Regulatórios do Mercado da Dívida.
Em muitas jurisdições em todo o mundo, os reguladores têm historicamente acesso limitado ou nenhum acesso a informações para negociação no mercado de dívida não listado. Normalmente, as informações só estão disponíveis após o fato, geralmente por meio de pedidos de informações por parte dos reguladores dos participantes.
Na última década, no entanto, à medida que a estrutura de mercado continuou a evoluir, mudanças significativas aumentaram a quantidade de informações disponíveis em tempo real ou pós-negociação para os títulos de dívida OTC. Em muitos países, a negociação de instrumentos de dívida ocorre agora em bolsas e ATSs. A ascensão do comércio eletrônico aumentou a transparência nos mercados de dívida secundária, assim como no comércio de ações. Muitos reguladores também começaram a implementar requisitos mais rigorosos para relatórios comerciais. Especificamente, relatórios obrigatórios pós-negociação foram estabelecidos em várias jurisdições, incluindo EUA, Reino Unido, Malásia e México. Vários países avançaram em direção a uma maior transparência pública, e muitos organismos acadêmicos e industriais, como o CFA, sugeriram que a transparência nos mercados de dívida leva a mercados mais eficientes e melhora a descoberta de preços.
Pode-se esperar que os relatórios regulatórios das transações de títulos de dívida OTC se tornem ainda mais comuns à medida que os reguladores de valores mobiliários enfrentam a globalização e crescentes interdependências dos mercados financeiros.
Em 2011, o CFA Institute publicou um artigo intitulado "Um exame da transparência nos mercados de bônus europeus", no qual sugeria que os investidores se beneficiariam de ter acesso a informações mais oportunas sobre a negociação no mercado de dívida. Reconhecendo que a questão da transparência é complexa e que muitos participantes têm fortes pontos de vista contra a transparência, a CFA declarou ainda que acreditava que "as preocupações dos revendedores no mercado podem ser acomodadas e, ao mesmo tempo, promover a transparência".
A Itália, que possui o maior mercado europeu de títulos, ampliou os requisitos de transparência pré-negociação e pós-negociação além das ações para incluir a negociação no mercado de dívida.
Os Estados Unidos e o Reino Unido fornecem exemplos de mercados de títulos de dívida que estão sujeitos a relatórios regulatórios similares àqueles propostos pelo IIROC.
Nos EUA, as regras da Autoridade Reguladora da Indústria Financeira (FINRA, Financial Industry Regulatory Authority) exigem a apresentação de transações de dívida OTC em quase todos os títulos de renda fixa não governamentais à FINRA. O Conselho Municipal de Regulamentação de Valores Mobiliários (MSRB), que tem jurisdição normativa no mercado de títulos municipais dos EUA, também opera um sistema de relatórios de transações. As regras do MSRB exigem que os distribuidores relatem essencialmente todas as suas transações de títulos municipais para esse sistema.
Os programas de relatórios de transações da FINRA e MSRB estão operacionais de uma forma ou de outra desde meados da década de 1990. Ambas as organizações mudaram para um prazo de 15 minutos, aproximadamente 10 anos depois. A FINRA monitora os relatórios de transação usando o sistema TRACE (Trade Reporting and Compliance Engine) e gera alertas e relatórios de exceção a serem investigados pela equipe na condução de suas atividades de vigilância de mercado. Além de fornecer dados pós-negociação aos reguladores, a maioria dos dados do TRACE também é divulgada publicamente, fornecendo transparência pós-negociação.
A FINRA e a MSRB começaram com um escopo relativamente limitado para suas regras de relatório de transação e, com o tempo, expandiram o escopo. Atualmente, os títulos do Tesouro dos EUA representam a única categoria principal de títulos de dívida nos Estados Unidos não cobertos por um requisito de relatório de transação.
O MSRB compartilha seus dados de transação de títulos municipais com a FINRA, que tem responsabilidades de inspeção e execução com relação às regras do MSRB. A equipe de operações de vigilância da FINRA conduz consultas de vigilância regulares e ad hoc contra os bancos de dados de transações.
Reino Unido e MiFID I.
O Reino Unido é outro exemplo de um país desenvolvido com mercados consideráveis ​​para os instrumentos de dívida interna e internacional e uma quantidade substancial de comércio transfronteiriço e não cambial. A Financial Services Authority (FSA) é o único regulador de valores mobiliários do Reino Unido.
Como o Reino Unido é membro do Espaço Econômico Europeu (EEE), os regulamentos da FSA estão em conformidade com as diretivas da União Européia. Com relação aos relatórios de transação, a Diretiva relevante da UE é a Diretiva de Mercados de Instrumentos Financeiros (DMIF), que entrou em vigor em novembro de 2007.
Os requisitos de relatório de transações da FSA na Seção 17 de seu Manual de Supervisão do Manual (SUP 17) não distinguem entre títulos de dívida e ações. Exigem que todas as transacções, incluindo OTC, em qualquer instrumento financeiro sejam reportadas à FSA até ao fecho das operações em T + 1 se a transacção envolver um instrumento financeiro "admitido à negociação" em qualquer "Mercado Regulamentado" no EEE ou numa "Mercado Prescrito" no Reino Unido. (O termo "Mercado Regulamentado" significa essencialmente uma bolsa de valores, enquanto os mercados AIM e PLUS (ambos afiliados à LSE) são os únicos dois Mercados Prescritos relevantes para as regras da FSA.)
As regras da FSA também exigem o relato de qualquer transação em um derivativo OTC se o valor do instrumento for derivado de, ou for dependente de, "um instrumento financeiro relacionado a ações ou dívida admitido à negociação em um Mercado Regulado ou Prescrito". .
A FSA mantém um sistema, conhecido como Zen, que aceita os relatórios de transação e fornece à equipe da FSA uma plataforma para realizar a fiscalização do mercado. Embora essas informações não estejam disponíveis publicamente, há alguma transparência pós-negociação oferecida para instrumentos de dívida por meio de iniciativas lideradas pelo setor.
A maioria dos títulos de dívida negociados no Reino Unido não estão listados em um Mercado Regulamentado ou Prescrito. Consequentemente, as atuais regras da FSA têm um alcance um pouco limitado nos mercados de títulos de balcão do Reino Unido. A MiFID II, sucessora proposta da MiFID I, acrescentaria o requisito de reportar transacções, incluindo transacções OTC, se o instrumento financeiro for "admitido à negociação" ou "negociado" numa "Linha de Negociação Multilateral" ou numa "Instalação de Negociação Organizada". ". A definição de "Sistema de Negociação Organizada" é suficientemente ampla para incluir redes de cruzamento de corretoras e sistemas de corretoras entre corretoras. A implementação futura da MiFID II provavelmente estenderia a cobertura da exigência de relatório para uma porcentagem muito maior do mercado de títulos do Reino Unido.
A tabela abaixo compara as regras existentes e propostas para relatórios regulamentares nos EUA, no Reino Unido e no Canadá.
Regras atuais em outras jurisdições selecionadas.
Países do EEE (Reino Unido)
Países do EEE (Reino Unido)
As regras do Reino Unido estão em conformidade com as políticas da EEA, declaradas na MiFID I.
MiFID II - proposto para o EEE (incluindo o Reino Unido) para 2015.
Implementação total direcionada para 2015.
Seção 17 do FSA Supervisor Handbook.
Seção 17 do FSA Supervisory Handbook.
Parte 2800C das regras do membro do negociante.
Corporativo, Agência Governamental, Garantido por Hipoteca e Outros Títulos de Dívida com Garantia de Ativos; Produtos Estruturados.
Títulos Municipais, incluindo Planos de Poupança Universitária ("529" contas)
Qualquer Instrumento listado no "Mercado Regulamentado" da EEA (bolsa) ou em um "Mercado Prescrito" (mercados com cotação PLUS e AIM no Reino Unido), mesmo se negociado em OTC; Derivativos OTC, se o valor for baseado em instrumento coberto.
Adição: Qualquer Instrumento (mesmo se negociado em OTC) se for "admitido à negociação ou negociação em um Instrumento de Negociação Multilateral" ou um instrumento "Instrumento de Negociação Organizado" AND (por exemplo, derivativo) que estejam correlacionados e influenciem o preço dos instrumentos admitidos para negociação em um MTF ou OTF.
Todos os títulos de dívida; Repo / Reverse Repo Transactions; Transferências internas entre unidades de negócios.
15 min. após o comércio.
15 min. após o comércio.
Fim dos negócios em T + 1.
Fim dos negócios em T + 1.
Início dos negócios em T + 1.
Tesouro dos EUA; Repos; Trocas de Câmbio.
Reposição Colateral Geral
"Operações de Financiamento" (Repos); Transações do Mercado Primário.
"Operações de Financiamento" (Repos); Transações do Mercado Primário.
Não CUSIP ou ISIN; Trocas de Câmbio.
Regras atuais no Canadá.
O Instrumento Nacional 21-101 especifica os Requisitos de Transparência de Informações de Pré-Negociação e Pós-Negociação para Títulos Públicos e de Dívida Corporativa. O National Instrument exige que um mercado, um corretor de títulos entre negociantes e um revendedor forneçam informações precisas e oportunas sobre os detalhes das negociações em títulos de dívida corporativa designados para um processador de informações (atualmente CanPX). Existe uma isenção em vigor até 1 de janeiro de 2015 para os títulos da dívida pública.
3. Banco do Canadá e Relatório MTRS.
Atualmente, o relatório padronizado mais abrangente das transações do mercado de dívida no Canadá são os relatórios estatísticos semanais fornecidos pelo Government Securities Distributors ("GSDs") ao Banco do Canadá. Este é um requisito para participação em leilões de títulos do Governo do Canadá. As estatísticas semanais são submetidas através do Sistema de Relatórios de Mercado (MTRS), do qual são produzidos relatórios trimestrais. O Banco do Canadá usa esses dados para diversos fins relacionados à sua administração de leilões de títulos públicos, incluindo o cálculo de limites de licitação para GSDs e para análise de tendências e desenvolvimentos nos mercados de dívida e monetário.
Ao longo dos anos, o IIROC teve discussões em andamento com o Banco do Canadá sobre o funcionamento eficiente dos mercados de dívida canadenses e a importância dos relatórios do MTRS. O Banco do Canadá, o IIROC e a comunidade de revendedores mantiveram discussões sobre formas de melhorar a eficiência da coleta de dados do MTRS e a qualidade, comparabilidade e confiabilidade dos dados coletados. Houve algumas preocupações com possíveis inconsistências nas metodologias de relato do MTRS entre os distribuidores.
Atualmente, está previsto que o IIROC produza os relatórios MTRS a partir dos dados de transação coletados e que o relato dos dados de transação continuará a ser uma condição de participação nos leilões de títulos do Governo do Canadá para GSDs. O sistema eletrônico do IIROC para relatar transações de títulos de dívida servirá como sucessor do MTRS. A Proposta de Regra exigirá que todos os GSDs comecem a relatar transações de títulos de dívida ao sistema de relatórios de transação do IIROC e o IIROC compartilhará esses dados com o Banco do Canadá, evitando que os revendedores enviem relatórios agregados semanais cobrindo as mesmas transações. Refletindo esse papel como o sistema sucessor do MTRS, o IIROC propõe nomear seu sistema como o MTRS 2.0.
4. Requisitos propostos para o relatório do mercado de dívida IIROC.
4.1 O Projeto de Vigilância do Mercado de Dívida.
Ao estabelecer o Projeto de Vigilância do Mercado da Dívida (o Projeto), o objetivo principal foi examinar várias opções para a criação de um banco de dados de transações, e ferramentas analíticas e de relatórios, para permitir que a IIROC cumprisse suas responsabilidades com relação à vigilância e supervisão de custos. Negociação do mercado de dívida OTC e para substituir o quadro de MTRS existente.
O projeto foi iniciado em outubro de 2011, após a implementação da Norma 3300 do Membro Revendedor da IIROC - Preço Justo de Títulos Over-The-Counter. A equipe do projeto reuniu-se com uma variedade de revendedores e partes interessadas do setor para considerar todas as visões, analisar alternativas e desenvolver o plano do projeto.
O feedback recebido dos participantes da indústria, do Banco do Canadá e de outras partes interessadas demonstrou apoio geral aos objetivos do Projeto e aos benefícios potenciais para a indústria de melhoria da qualidade e integridade dos dados. As seguintes diretrizes, representando as visões comuns da maioria das partes interessadas, foram aplicadas no desenvolvimento do Plano detalhado do Projeto:
• Requisitos de relatórios mais detalhados são críticos para a efetiva supervisão do IIROC no mercado de títulos de balcão;
• O IIROC deve especificar o conteúdo e o formato dos dados a serem fornecidos e permitir diferentes opções de entrega de dados;
• O relatório deve ser exigido apenas após a negociação (T + 1);
• Novos requisitos devem ser implementados em fases, quando apropriado;
• Os Membros do Dealer devem fornecer relatórios padrão, que podem ser complementados por informações ad hoc quando solicitadas;
• O pessoal do IIROC poderia refinar os requisitos para relatórios após a implementação da Proposta de Regra, com base em sua análise dos dados recebidos durante a fase inicial do relatório; e.
• Os Membros do Dealer devem receber um período de implementação razoável após a aprovação final da Proposta de Regra.
4.2 Objetivos Regulatórios.
As prioridades do IIROC na condução da supervisão do mercado de dívida são fortalecer a imparcialidade e integridade dos mercados de dívida e assegurar a conformidade e prevenir e / ou abordar os abusos identificados em áreas como:
• melhor execução e preço justo;
• execução antecipada (uso de informações materiais não públicas para negociar antes da negociação ou emissão de títulos de clientes);
• manipulação do preço de um instrumento de mercado de dívida ou classe de instrumentos; e.
• adequação (especialmente com relação a certos tipos de instrumentos específicos).
Essas prioridades foram as principais considerações na determinação dos elementos de dados que o IIROC espera que sejam relatados sob a regra proposta.
4.3 Requisitos de Relatórios Propostos.
Os Distribuidores serão obrigados a relatar transações para o IIROC em T + 1 para todas as transações em títulos de dívida (conforme definido na seção 1.1 da Proposta de Regra, anexada no Apêndice A) incluindo aquelas executadas em um ATS ou através de um Corretor Intermediário (IDBB).
Os membros do revendedor serão obrigados a relatar as informações da transação de forma imediata, precisa e completa. Para transações que envolvam um Membro do Dealer e um Membro que não seja do Dealer (incluindo um cliente), o Membro do Dealer deverá enviar um relatório comercial ao IIROC. Para transações entre dois Membros do Dealer, ambos os Membros do Dealer deverão enviar um relatório comercial.
Prevê-se que os Membros terão várias opções sobre como entregar relatórios comerciais ao IIROC, com base no volume de sua atividade. Os relatórios de transação serão necessários para incluir elementos de dados específicos, conforme descrito no Plano do Projeto e atualizados periodicamente.
Os Membros do Dealer terão permissão para usar agentes de terceiros com a finalidade de enviar informações sobre transações; no entanto, a principal responsabilidade por relatórios oportunos, precisos e completos permanecerá como dever do Membro Revendedor.
Detalhes completos relativos a elementos de dados, especificações do sistema, prazos de entrega, relatórios de exceção (em dias não úteis ou fora do horário comercial normal), etc. serão abordados no Guia do Usuário do MTRS 2.0, a ser publicado em uma data posterior.
4.4 Implementação de requisitos de relatórios.
Espera-se que as exigências de relatórios sejam implementadas em fases, que dependerão do tipo de instrumento negociado e se o Membro Revendedor participa do MTRS do Banco do Canadá. Os detalhes dos cronogramas de implementação propostos estão definidos na Seção 4 do Plano de Projeto, anexado como Apêndice B.
A regra proposta fornece à IIROC o poder específico para alterar os requisitos de relatórios. Caso o IIROC proponha, em algum momento futuro, fazer uma alteração significativa, o IIROC emitirá um aviso solicitando comentários do público durante um período de comentários de pelo menos 30 dias. Após o período de comentários e após a aprovação da alteração pelas autoridades reguladoras de valores mobiliários aplicáveis, o IIROC emitirá um Guia do Usuário do MTRS 2.0 atualizado e confirmará a data efetiva da mudança. Independentemente da materialidade, os Membros do Dealer receberão um período de aviso adequado para permitir o desenvolvimento e a implementação de uma mudança nos requisitos de relatório.
5. Processo de elaboração de regras.
Como parte do processo de desenvolvimento de regras, a equipe do IIROC consultou representantes de vários representantes, tanto individual como coletivamente, que representam a maior parte da atividade de negociação do mercado de dívida no Canadá. O Comitê de Renda Fixa do IIROC também revisou e comentou a Proposta de Regra e o Plano do Projeto. O objetivo dessas consultas era garantir que a Proposta de Regra e o Plano de Projeto fossem razoáveis ​​em termos de alcance e operacionalmente alcançáveis.
Em geral, a maioria das empresas apoiava os objetivos do projeto e também via benefícios para o setor. Todos os principais distribuidores indicaram que não previam grandes problemas na coleta e divulgação dos dados comerciais necessários.
A Proposta de Regra e o Plano do Projeto foram aprovados para publicação pelo Conselho de Diretores do IIROC em 30 de janeiro de 2013.
O texto da Proposta de Regra é apresentado no Apêndice A. O Plano do Projeto é apresentado no Apêndice B.
5.1 Issues and Alternatives Considered.
IIROC believes that the policy rationale for the introduction of transaction reporting requirements in other jurisdictions applies equally in the Canadian context, and that the Proposed Rule is necessary to ensure that IIROC is able to provide effective oversight of trading in the debt markets in Canada.
Discussions (spanning a number of years) have been held with the Canadian Depository for Securities (CDS) to determine if the required data could be collected from a single source, eliminating the need for each dealer to report to IIROC. It was determined, however, that CDS is not a viable, comprehensive and exclusive source of the required data as it does not collect or receive any information regarding retail transactions, and existing CDS records are missing a number of the data elements that are critical to our overall objectives. One such element is the time at which each transaction occurred. We were unable to identify any other existing sources for the required transaction data.
5.2 Proposed Rule Classification.
Statements have been made elsewhere as to the nature and effects of the Proposed Rule. The purposes of the Proposed Rule are to:
• promote just and equitable principles of trade and the duty to act fairly, honestly and in good faith, and.
• foster cooperation and coordination with entities engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in, securities.
The Board has determined that the Proposed Rule is not contrary to the public interest.
Due to the substantive nature of the Proposed Rule, it has been classified as a Public Comment Rule proposal.
6. Effects of Proposed Rule on Market Structure, Dealer Members, Non-Members, Competition and Costs of Compliance.
The Proposed Rule does not impose any burden or constraint on competition or innovation that is not necessary or appropriate in furtherance of IIROC's regulatory objectives. IIROC has consulted with Dealer Members who have confirmed that existing trade capture systems can be leveraged to create transaction files suitable for transmission to IIROC. Therefore, the Proposed Rule does not impose costs or restrictions on the activities of market participants (including Dealer Members and non-Dealer Members) that are disproportionate to the goals of the regulatory objectives sought to be realized.
The costs associated with the ongoing operation and maintenance of MTRS 2.0, including technology, staff and other direct costs, will be allocated to IIROC Dealer Members on a cost-recovery basis. A cost-recovery model, which may be based on transactions, will be developed separately and published for comment prior to implementation.
Dealer Members will incur their own technology start-up costs as well. We have not been provided with any estimates of these costs but we do not anticipate that they will be disproportionate to the benefit associated with the elimination of MTRS reporting that is currently done.
7. Technological Implications and Implementation Plan.
Dealer Members that participated in industry consultations under the Debt Market Surveillance Project indicated that the data elements to be reported under the Proposed Rule could be collected from existing data sources using client order management systems or the Dealer Members' mid-office systems, where client information is held along with trade execution information. All of the Dealer Members consulted indicated that they did not anticipate significant issues with collecting and reporting the required trade data.
The Proposed Rule will be implemented following approval by the recognizing regulators and in accordance with the Project Plan and MTRS 2.0 User Guide, which is to be developed and finalized in consultation with Dealer Members.
8. Request for Public Comment.
Comments are sought on the Proposed Rule and Project Plan. Comments should be made in writing. Two copies of each comment letter should be delivered within 90 days of the publication of this notice.
One copy should be addressed to the attention of:
A second copy should be addressed to the attention of:
Those submitting comment letters should be aware that a copy of their comment letter will be made publicly available on the IIROC website (iiroc. ca under the heading "IIROC Rulebook -- Dealer Member Rules -- Policy Proposals and Comment Letters Received").
Questions may be referred to:
9. Attachments.
Appendix A -- Proposed Rule 2800C -- Transaction Reporting for Debt Securities.
Appendix B -- Debt Market Surveillance Project Plan.
Source IIROC website: iiroc. ca/industry/marketmonitoringanalysis/Documents/BondMarketSecondaryTrading_en. pdf.
Source IIROC website: iiroc. ca/industry/marketmonitoringanalysis/Documents/MoneyMarketSecondaryTrading_en. pdf.
Source IIROC website: iiroc. ca/news/Documents/MarketplaceStatisticsReportCurrent_en. pdf.
IIROC Notice of Approval/Implementation, Sept. 1, 2011.
Transparency of Corporate Bond Markets, Report of the Technical Committee of the International Organization of Securities Commissions (IOSCO), May 2004.
Corporate Bond Market Transparency and Transaction Costs by Edwards, Amy K., Harris, Lawrence and Piwowar, Michael S; September 21, 2004.
An Examination of Transparency in European Bond Markets, CFA Institute, October 2011, Volume 2011, No. 5.
FINRA requires all trades in eligible Corporate, Equity Linked Notes and Convertible Debt and MSRB requires all trades in Municipal Debt.
MiFID II has not yet been approved and may be subject to further amendments. Final approval is expected sometime in 2015.
See Appendix B, Section 4.1.
Appendix A -- Proposed Rule 2800C -- Transaction Reporting for Debt Securities.
This Rule 2800C requires Dealer Members to report information about each of their transactions (and their related affiliates' transactions) in Debt Securities to the Corporation through an electronic system maintained by the Corporation.
Rule 2800C requires Dealer Members to report information about each of their transactions (and their affiliates' transactions) in Debt Securities to the Corporation through the electronic system operated by the Corporation for this purpose. The reported transaction data is used in the Corporation's surveillance of the debt market to identify potential market abuses such as violations of the fair pricing requirements of Dealer Member Rule 3300, insider trading and market manipulation. It also supports the Corporation's general inspection and enforcement activities, rulemaking, and other regulatory functions. The trade data received pursuant to this rule enables appropriate oversight to ensure the integrity of OTC debt market trading and strengthen standards of investor protection. Reported transaction data may be shared on a confidential basis with other securities market regulators as well as the Bank of Canada and may be aggregated for statistical reports and other market research that is made public.
For purposes of Rule 2800C, the terms below have the meanings noted.
1.1 "Debt Securities" means any securities that provide the holder with a legal right, in specified circumstances, to demand payment of the amount owing and includes a debtor-creditor relationship. The fact that a security was issued in another country or denominated in a foreign currency does not disqualify it from being a Debt Security. The term includes securities with short-term maturities or mandatory tender periods such as commercial paper and floating rate notes as well as traditional notes and bonds. Derivative products that are not securities (e. g., futures contracts, interest-rate swaps) are not Debt Securities.
1.2 "MTRS 2.0" means the Debt Securities transaction reporting system operated by the Corporation. As used in this term, "MTRS" is an abbreviation of "Market Trade Reporting System". MTRS 2.0 replaces the Bank of Canada's MTRS.
1.3 "Bank of Canada's MTRS" means the transaction reporting system for Debt Securities currently operated by the Bank of Canada. As used in this term, "MTRS" is an abbreviation of "Market Trade Reporting System".
1.4 "MTRS 2.0 User Manual" means the electronic document containing technical specifications, business rules, reporting procedures and other official instructions on transaction reporting under Rule 2800C. The MTRS 2.0 User Manual is available on the Corporation's web site and is updated as necessary.
1.5 "MTRS 2.0 Enrollment Form" means the electronic form filed by a Dealer Member with the Corporation to supply contact and other information that may be needed by the Corporation in connection with the Dealer Member's reporting of Debt Securities transactions. An MTRS 2.0 Enrollment Form must also be filed by any party seeking to act as an agent for a Dealer Member in reporting transaction data to MTRS 2.0.
1.6 "MTRS 2.0 Submitter Identifier" means a code assigned by the Corporation to a Dealer Member or an agent of a Dealer Member that has successfully enrolled in MTRS 2.0 for transaction reporting.
1.7 "Special Condition Indicator" means a code used on a transaction report to indicate that the transaction has certain attributes described as Special Conditions in the MTRS 2.0 User Manual. Among other uses, the Special Condition Indicator helps to identify transactions that may be priced differently than other transactions in the same issue (e. g., a primary market transaction subject to a fixed price offering agreement). Special Condition Indicators are also used to identify sale and repurchase and reverse sale and repurchase transactions, transactions that involve parties related to the Dealer Member executing the transaction, and certain other conditions that may apply to a transaction and that are relevant to the regulatory and market surveillance purposes of Rule 2800C.
1.8 "Riskless Principal Trade" means a trade in a Debt Security that involves two offsetting orders (buy and sell) that are filled through transactions executed against a Dealer Member's trading or other proprietary account, with the execution of one of the orders dependent upon the receipt or execution of the other. A riskless principal trade results in two offsetting principal transactions on the Dealer Member's books, rather than one agency transaction. A Dealer Member typically performs a riskless principal trade to fill a client order with an offsetting transaction in the market or with another client.
2. Reporting Requirements.
2.1 (a) General Transaction Reporting Requirement.
Every Dealer Member must report each of its transactions in Debt Securities to the Corporation within the timeframes and in the manner specified in this Rule 2800C, as supplemented and explained in the MTRS 2.0 User Manual as may change from time to time, subject to the exceptions stated below:
(i) Debt Securities Without Assigned ISIN or CUSIP Numbers.
A transaction in a Debt Security that has no ISIN or CUSIP number assigned on the Date of Trade Execution is exempt from the transaction reporting requirement in this Section 2.1 of Rule 2800C; provided, however, that a transaction in a new issue of a Debt Security shall be reported within the timeframe stated in Section 2.5 of this Rule 2800C if an ISIN or CUSIP number is assigned to the Debt Security by 6:00 p. m. Eastern Time on the Business Day following the date of sale of the new issue.
(ii) Transactions Executed on an Exchange.
A transaction in a Debt Security executed on a domestic securities exchange is exempt from the transaction reporting requirement in this Section 2.1 of Rule 2800C.
2.2 Reporting Responsibilities of Dealer Members in Specific Situations.
The responsibilities of Dealer Members for transaction reporting in specific trading situations are described in detail in the MTRS 2.0 User Manual. Reporting responsibilities in the most common situations are as follows:
(a) In a transaction between a Dealer Member and a client (or another dealer that is not a Dealer Member), the Dealer Member reports.
(b) In a transaction between two Dealer Members, each Dealer Member is responsible to report the transaction from its perspective (buy-side or sell-side). This responsibility includes the requirement for a Dealer Member to make a buy-side or sell-side transaction report, as appropriate, when it is a party to a transaction that results in the movement of securities between the accounts of an introducing broker and its clearing broker. Similarly, a report is required when a Dealer Member is one of the parties in a transaction between two dealer clients of the same clearing broker.
(c) A Dealer Member that executes a transaction in the market to fill an order it has received from a source external to the trading desk executing the order must report both a market-side transaction and a client-side transaction, regardless of whether the trade is effected as a Riskless Principal Trade or is executed in an agency capacity.
2.3 A Dealer Member may use an agent to submit transactions to MTRS 2.0 by ensuring that the conditions stated in the MTRS 2.0 User Manual for use of an agent are met. These conditions include enrollment in MTRS 2.0 by both the Dealer Member and the agent. A Dealer Member utilizing an agent for transaction reporting remains responsible for compliance with Rule 2800C and is responsible for the agent's actions on its behalf as well as any failure by the agent to act as required under the Rule.
2.4 Information Required on Transaction Reports.
Each transaction report must contain accurate and complete information about the reported transaction as specified in the Transaction Record Specifications and other instructions contained in the MTRS 2.0 User Manual. Required information includes, but is not limited to, price and quantity information, identifiers for the securities and parties involved in the transaction, the time and date that the transaction was executed, and any Special Condition Indicators applicable to the transaction.
2.5 Reporting Timeframes.
(a) File Receipts.
The MTRS 2.0 User Manual provides detailed specifications on how to transmit electronic files containing transaction records to the Corporation. Upon a successful submission and receipt by the Corporation, MTRS 2.0 provides the submitter with an electronic receipt including a control number, the time and date that the transmission was received, and certain other information for each successful file transmission. A Dealer Member should not consider a file containing transaction records to have been received unless the Corporation generates such a file receipt.
File receipts must be retained by the Dealer Member for seven years and be retrievable within a reasonable period of time. File receipts must be retained in a central, readily accessible place for a period of two years from the date of each file receipt.
(b) Reporting Deadlines.
A Dealer Member must ensure that a transaction report for which the Dealer Member is responsible is received by the Corporation in proper form and with complete and accurate information within the following timeframes:
(i) For transactions in Debt Securities with ISIN or CUSIP Numbers assigned on the Date of Transaction Execution:
(A) if the date of transaction execution is a Business Day and the time of transaction execution is no later than 6:00 p. m. Eastern Time, the report must be made no later than 2:00 a. m. Eastern Time on the Business Day following the date of transaction execution;
(B) if the date of transaction execution is a Business Day and the time of transaction execution is after 6:00 p. m. Eastern Time, the report must be made no later than 2:00 a. m. Eastern Time on the second Business Day following the date of transaction execution; e.
(C) for all other transactions, including those executed on a Saturday, Sunday, or any officially recognized Federal or Provincial statutory holiday on which the system is closed, the report must be made no later than 2:00 a. m. Eastern Time on the second Business Day following the Date of Transaction Execution;
provided, however, that:
(ii) for transactions in new issue debt securities with no ISIN or CUSIP number assigned a transaction report required under Paragraph 2.1(b) of this Rule must be made no later than 6:00 p. m. Eastern Time on the Business Day following the day that the ISIN or CUSIP number is assigned.
3. Enrollment Requirements.
(a) Initial Enrollment.
Prior to submitting Debt Securities transaction reports to MTRS 2.0, a Dealer Member (and its agent if an agent is used for submitting transaction reports) must enroll in MTRS 2.0 and receive an MTRS 2.0 Submitter Identifier from the Corporation. The Corporation will accept transaction reports only from Dealer Members and agents of Dealer Members that are enrolled in MTRS 2.0 and that have an assigned Submitter Identifier. Enrollment is accomplished by completing the MTRS 2.0 Enrollment Form with all required information, including technical and business contact points.
(b) Requirements for Continued Enrollment.
Once enrolled, Dealer Members remain responsible to keep all information on the MTRS 2.0 Enrollment Form up-to-date and to follow procedures stated in Rule 2800C and the MTRS 2.0 User Manual. The Corporation may revoke a Dealer Member's enrollment and/or the enrollment of a Dealer Member's agent, thereby removing access to MTRS 2.0, in the case of continued behavior that threatens the accuracy of transaction data collected by the Corporation or the reliable operation of any of the Corporation's electronic systems including MTRS 2.0 (e. g., continued submission of files with erroneous data; incorrectly formatted files or records; or files containing computer viruses).
4. Testing Requirements.
Prior to submitting Debt Securities transaction reports to MTRS 2.0, a Dealer Member or prospective agent for a Dealer Member must successfully test its capability to submit transaction files and records. Procedures for testing are included in the MTRS 2.0 User Manual as may change from time to time.
Appendix B -- Debt Market Surveillance Project Plan.
At this time, IIROC is addressing the issue of improved regulatory reporting only for debt market transactions in Canada with the Debt Market Surveillance Project to establish and maintain MTRS 2.0. This Project Plan outlines the scope and objectives of the Project and the steps that will be taken toward its implementation. The Project Plan includes a high-level summary of dealer reporting requirements, the instruments to be covered and the data elements for each transaction to be reported. Unless otherwise defined, capitalized terms are as defined in the Proposed Rule 2800C -- Transaction Reporting for Debt Securities or in existing Dealer Member Rules.
2. Project Overview.
The Debt Market Surveillance Project was initiated by IIROC in October 2011 following approval of Rule 3300, the Fair Pricing Rule, to implement a debt market regulatory reporting and compliance program. This Project will enable IIROC to address regulatory issues and to conduct appropriate oversight in order to ensure the integrity of OTC debt market trading and thus strengthen standards of investor protection and promote investor confidence. In addition, this Project will result in the development of IIROC's trade repository for debt security transactions and is likely to serve as the successor to MTRS. The key stakeholders for this project are:
• IIROC, who will use the information to monitor trading in various Debt Securities in fulfilling its oversight mandate;
• Dealer Members (and their related affiliates) who execute transactions in Debt Securities and will be required to report on activities carried out by their organizations as well as their affiliated entities; e.
• Bank of Canada, who will use this data to assess trends in debt market activities and as part of their requirements for participation in primary distributions.
Specifically, the Project aims to:
• ensure consistent and standardized reporting of all OTC debt market transactions on a post-trade basis;
• create a complete transaction database;
• develop regular surveillance reports and query tools for IIROC staff to monitor and analyze trade activity; e.
• ensure reliable and accurate MTRS reports are produced.
2.2 Project Approach.
With the initiation of the Project in October 2011, a Project team was formed and an outside consultant hired to develop the detailed Project Plan.
An introductory meeting was held with representatives of all key dealer participants in November 2011 to provide information regarding the objectives of the project, outline the intended scope and timeline for the project, and answer preliminary questions. Subsequent, individual meetings were held with a number of firms from November 2011 to February 2012, to solicit dealers' comments and feedback on the project. Each dealer was asked to outline their organizational structure for debt market trading, their trade process and what systems were used to capture and store data throughout the process. Meetings were also held with key industry participants including CanDeal, CBID, CDS and two data vendors.
In general, most firms were supportive of the objectives of the Project and also saw benefits to be derived for the industry in relation to improving the quality and integrity of MTRS data. Dealers suggested that the best source of the data for regulatory reporting would be either the client order management systems or the mid-office system where client information is held along with trade execution information, including details such as client ID and time of the trade. All of the major dealers indicated that they did not anticipate major issues with collecting and reporting the trade data required.
Discussions were held with CDS to determine if the required data could be collected from a single source and thus alleviate the need for each dealer to report to IIROC. However, it was determined that the current absence of retail trade information and transaction time stamps precludes this approach through CDS. IIROC and the Bank of Canada have been collaborating on improvements to the MTRS reporting framework.
During July and August 2012, the project team began development of the Project Plan and draft rule. In September 2012, a follow-up meeting was held with the Dealer representatives to provide an update on the project and to discuss the key elements of the proposed regulatory reporting requirements.
Dealer Members will be required to report transactions to IIROC, on T+1, for all transactions in Debt Securities (as defined in section 1.1 of the Proposed Rule) including those executed on an ATS or through an Inter-Dealer Bond Broker (IDBB).
The following risks to successful implementation of the project have been identified:
• delays in approval of the Proposed Rule; e.
• reduced availability of internal resources committed to the Project due to unforeseen shifts in business priorities (e. g., industry-driven issues that necessitate near-term regulatory changes).
3. IIROC Surveillance Requirements.
3.1 Surveillance Oversight.
Transaction data from IIROC Dealer Members will be collected and the Surveillance team will be provided with a set of alerts and reports for their review and investigation.
In the initial phases of the project, basic reports and queries will be developed. It is expected that, over time, as IIROC Surveillance staff become familiar with the trading patterns and trends in debt market trading, additional reports and more sophisticated query tools will be developed.
Basic reports will include information regarding:
• transactions identified with trade prices outside an acceptable range from the average trade price for that instrument on the trade date;
• instruments which have traded outside of their normal trade price or volume ranges;
• insider trading that has occurred in equities for examination of related debt instruments;
• distribution of primary debt issuances, including on the date of the distribution as well as trading prior to and after the distribution; e.
• distribution of primary BA issuances in relation to the corresponding CDOR rate.
Basic queries will include the ability to select and analyze:
• all transactions by date for a specific instrument by ISIN/CUSIP;
• all transactions for an instrument over a specified period of time; e.
• all transactions for an instrument in relation to the associated benchmark bond.
Reporting of data by Dealer Members to IIROC is a regulatory obligation as defined in Proposed Rule 2800C -- Transaction Reporting for Debt Securities. All data collected by IIROC will be received for regulatory purposes in order to conduct appropriate surveillance and oversight of debt market trading.
This proposal does not contemplate making data regarding individual transactions available to the public at this time; however, IIROC would continue to publish aggregate debt trading statistics consistent with current reporting . Changes to this position, if any, would be subject to comprehensive industry consultation and public comment.
4. Reporting Requirements for Dealers.
Proposed Rule 2800C establishes the requirements for reporting of OTC Debt Securities.
4.1 Phasing In of Reporting.
To facilitate the initial implementation of transaction reporting for Debt Securities, Dealer Member responsibilities under Proposed Rule 2800C are to be phased in based on: (i) the Dealer Member's participation in Bank of Canada's MTRS system, (ii) the types of Debt Securities traded, and (iii) the type of transaction, as follows:
All Dealer Members that, as of September 1, 2013, were GSDs and participants in Bank of Canada's MTRS must comply with the full Rule. For those Dealer Members, the Rule is effective with respect to all of their transactions in Debt Securities issued in Canada and denominated in Canadian dollars, including all sale and repurchase and reverse sale and repurchase transactions in Canadian dollars involving Debt Securities issued in Canada.
(a) Dealer Members that, as of September 1, 2013, were GSDs and participants in the Bank of Canada's MTRS must comply with the full Rule with respect to all transactions in Debt Securities, including transactions that involve foreign currency or Debt Securities not denominated in Canadian dollars.
(b) Dealer Members that, as of September 1, 2013, were not GSDs and participants in the Bank of Canada's MTRS must comply with the full Rule for all transactions, including transactions that involve foreign currency or Debt Securities not denominated in Canadian dollars.
The following table summarizes the proposed phases and projected timeline:
Proposed Rule Comment Period.
Q1/Q2 2013 (90 days)
System Requirements to be finalized and published.
Q1 2013 -- Q3 2013.
Publish Final Rule.
Phase 1 Implementation.
6-12 months after final rule published.
12-24 months after final rule published.
4.2 Reporting Obligation.
Trade data input obligations will be as follows:
• In transactions between two Dealer Members, both Dealer Members shall submit a trade report to IIROC; e.
• In transactions involving a Dealer Member and a non-Dealer Member (including a customer) the Dealer Member shall be required to submit a trade report to IIROC.
Dealer Members have an ongoing obligation to report transaction information promptly, accurately, and completely. The Dealer Member may employ an agent for the purpose of submitting transaction information; however, the primary responsibility for the timely, accurate and complete reporting of transaction information remains the duty of the Dealer Member.
4.3 Timing of Transaction Reporting.
Dealer Members will be required to submit transaction information to IIROC on the day following the trade (i. e. T+1). Complete details regarding timing of transaction reporting will be covered in the MTRS 2.0 User Guide. This specification will cover delivery times for reports to be delivered to IIROC and reporting of trade exceptions such as trades executed on non-business days or outside normal business hours.
4.4 Data Elements.
Each transaction report must contain the following information about the transaction:
• Coupon of Securities (using "variable" designation stated in User Manual if the coupon is variable)
• Quantity of Securities.
• Price of Transaction.
• Commission or Mark-Up Stated on Confirmation (if any)
• Yield Stated on Confirmation (if any)
• Date of Transaction Execution.
• Time of Transaction Execution.
• Reporting Dealer MTRS Identifier -- Primary (the dealer that executed the transaction)
• Reporting Dealer MTRS Identifier -- Secondary (populated for example if a second Dealer Member, acting as a fully disclosed introducing broker, is the source of the order executed on the reporting side of a trade and no movement of securities occurs between an account of the Dealer Member acting introducing broker and an account of the executing dealer).
• Capacity -- Principal or Agent ("Riskless Principal Trades" reported as Principal Capacity)
• Customer Account Identifier.
• Benchmark Security Identifier (ISIN or CUSIP of any Canada Bond used as pricing benchmark)
• Trading Venue Code.
• Any Applicable Special Condition Indicators, including:
• Fee-Based Account Indicator.
• Primary Market Indicator.
• Internal Transaction Indicator.
• Related Party Indicator.
• For trades where the Repo Indicator is reported:
• Repo Maturity Date (if fixed)
• Open Repo Indictor (opening or closing )
• Repo Collateral Security Identifier.
5. Technology Infrastructure.
Currently, there is no database of debt market transactions and there are no fixed-income alerts or reports available. IIROC will build a database for debt market transactions and implement a debt surveillance module which will produce a suite of alerts and reports. Staff will also obtain, from external sources, certain reference data to create a security master file, which will include details of each debt instrument.
It is anticipated that Dealer Members will have several options for delivery of trade reports to IIROC, based on the volume of their activity. These options will include:
• File transfer (CSV file) via a direct dedicated line between the Dealer and IIROC;
• File transfer (CSV file) over secure internet connection from Dealer to IIROC; e.
• Web Interface for Dealers with small transaction volumes -- screen entry of all trades.
Note that some Dealer Members may choose to have a third party provide their transaction data to IIROC. This is acceptable to IIROC but the Dealer must ensure that their provider meets all IIROC specifications and requirements.
Detailed system specifications will be prepared by IIROC staff and published as part of the MTRS 2.0 User Guide prior to the final Rule being published.
All dealers were offered the opportunity to meet with the project team representatives. Meetings were held with appropriate representatives from Bank of America/Merrill, BMO, Canaccord, Casgrain, CIBC, Deutsche Bank, GMP, HSBC, NBF, RBC, Scotia, TD Securities as well as CanDeal, CBID, CDS, Bloomberg and GMarkets.

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Iiroc market trade reporting system.
This IIROC Notice provides notice that, on January 27,the Board of Directors "Board" of the Investment Industry Regulatory Organization of Canada "IIROC" approved the publication for comment of proposed amendments "Proposed Amendments" to the Universal Market Integrity Rules "UMIR" respecting the regulation of short sales and failed trades. In particular, the Proposed Amendments would:. In addition, the Board authorized the withdrawal from further consideration an earlier proposal to repeal the requirements related to the preparation and filing of semi-monthly short position reports. IIROC has been recognized as a self-regulatory organization by each of the Canadian provincial securities regulatory authorities the market Regulators" and, as such, is authorized to be a regulation services provider for the purposes of National Instrument "Marketplace Operation Instrument" and National Instrument As a regulation services provider, IIROC administers and enforces trading rules for the marketplaces that retain the services of IIROC. The Market Rules Advisory Committee of IIROC "MRAC" reviewed the Proposed Amendments prior to their consideration by the Board. MRAC is an advisory committee comprised of representatives of each of: The text of the Proposed Amendments is set out in Appendix "A". The Proposed Amendments are part of an overall strategy to monitor and regulate short sales and failed trades in the Canadian equity marketplaces which the Board has determined to be in the public interest. Comments should be in writing and delivered by May 26, to:. Commentators shoul d be aware that a copy of their reporting letter will be made publicly available on the IIROC website A summary of the comments contained in each submission will also be included in a future IIROC Notice. After considering the comments on the Proposed Amendments received in response to this Request for Comments together with any comments of the Recognizing Regulators, staff of IIROC may recommend that revisions be made to the Proposed Amendments. If the revisions are not of a material nature, the Board has authorized the President to approve the revisions on behalf of IIROC and the Proposed Amendments as revised will be subject to approval by the Recognizing Regulators. If the revisions are material, the Proposed Amendments as revised will be submitted to the Board for ratification and, if ratified, will be republished for further public comment. IIROC has undertaken a process of evaluating additional steps which might be taken in Canada to deal with issues related to short sales and failed trades. These possible steps include additional amendments to UMIR, changes in the procedures and monitoring systems of IIROC and co-operation in data collection and sharing with the Ontario Securities Commission "OSC" and the CDS Clearing and Depository Services Inc. In developing the proposals for the further regulation of short sales, IIROC sought to ensure that any rules, guidance and monitoring regime:. Given the required price decline, coupled with the relatively short period of time during which price restrictions on short sales apply after imposition, the majority of US market activity is not subject to a tick test. Studies by IIROC support the premise that the tick test has no appreciable impact on pricing and, in light of that, IIROC believes that there are better mechanisms to detect and address abusive short selling. Under the Proposed Amendments, IIROC would proceed with the outstanding proposal to repeal the tick test but will also continue to work with other Canadian regulators to enhance measures intended to identify and address incidents of "abusive" short selling. While the SEC adopted Rule ostensibly to enhance "investor confidence" in short selling activity, its adoption may have also served to reinforce the preconception that rapid price declines are generally the result of abusive short selling. While single-stock circuit breakers have been in effect in the United States trade June 11,short selling activity has not been system by the market centers market a factor in any of the incidents in which a single-stock circuit breaker was triggered. The adoption of Rule may have the unintended effect of encouraging retail investors to sell at the first opportunity following the triggering of a circuit breaker in order to avoid further downward price pressure, which in turn would inadvertently put more downward price pressure on the security. In the view of IIROC, investor confidence is best bolstered by:. In an effort to enhance the transparency of short selling activity in the Canadian market, the following steps will be taken:. A separate CSPR is produced by CNSX for securities listed on that exchange. In addition to the Proposed Amendments and other IIROC initiatives described in this IIROC Notice, the Canadian Securities Administrators "CSA" and IIROC are proposing to publish a joint notice to solicit feedback on whether additional proposals to enhance disclosure of short sales and failed trades are required "Joint Notice". In a limited number of cases, securities which are inter-listed between an Exchange in Canada and an exchange in the United States may become subject to the U. When Rule is implemented in the United States, regulatory arbitrage can be avoided even if Canada does not adopt the same circuit breaker system and alternative uptick rules. In part, this requires Market being able to demonstrate that its regime effectively addresses "abusive" short selling through other mechanisms, including real-time alerts based on trading activity across all Canadian marketplaces. IIROC is currently in the process of developing an alert for its surveillance system that will monitor for unusual levels of short selling activity, coupled with significant price movements. If unusual levels of short selling are detected which are disruptive to the market, IIROC also has the ability to intervene to vary or cancel the prices of any trade that is "unreasonable" or, in particularly egregious circumstances, to impose a halt on trading of a particular security across all marketplaces. In addition, IIROC has the ability to designate a security as a "Short Sale Ineligible Security" for a period of time. Currently, IIROC's policies and procedures for undertaking a regulatory intervention to halt trading in a security or to vary or cancel trades are not publicly disclosed. In a separate initiative, IIROC has published for public comment draft guidance that would provide greater transparency of IIROC's existing policies and procedures relating to the variation or cancellation of "unreasonable" trades and trades which are not in compliance with the requirements of UMIR. As part of any response, IIROC should enhance its monitoring of short sales and failed trades. This reporting system will identify "problem" fails and allow IIROC to assess the reasons for the failure and monitor the steps being taken to resolve the problem. This will also allow IIROC to determine if short selling is becoming concentrated within particular dealers or clients. Access to this database would allow IIROC to determine, from time to time, variations in trade failures from historic patterns for particular securities and Participants. The use of this order designation would permit the data on "short sales" to better reflect the activities of persons who may have adopted a "directional" trading strategy. The entering of an order for the sale of a security without, at the time of entering the order, having the reasonable expectation of settling any trade that would result from the execution of the order constitutes a violation of iiroc prohibition on manipulative and deceptive activities. As such, "naked short selling", as that term is sometimes understood, is not permitted under UMIR. However, once a Participant or Access Person is aware of difficulties in obtaining particular securities to make settlement of any short sale the Participant or Access Person would no longer have a "reasonable expectation" of being able to settle a resulting trade and therefore would not be able to enter further short sale orders. For trading in a particular security, certain Participants or Access Persons who do not have the ability to borrow that security may be precluded from entering short sales while other Participants or Access Persons with the ability to borrow that security may continue to undertake additional short sales. Even when the person entering an order has "reasonable expectations" of being able to settle any resulting trade, there may be circumstances in which the person should be required to have made arrangements to "pre-borrow" the securities which are the subject of a short sale. These types of circumstances may include when:. IIROC set out an administrative interpretation that would also allow a Participant or Access Person, as applicable, when determining the "last sale price" of a particular security to rely on trade information from:. The Proposed Amendments would repeal all restrictions on the price at which a short sale may be made. The Proposed Amendments would parallel action taken by the SEC to repeal price restrictions on short sales in the United States effective July 7, While the restrictions on the price at which a short sale may be executed would be repealed under the Proposed Amendments, the requirement to mark an order as "short" would continue. Under the Proposed Amendments, a Participant or Access Person would be given specific direction as to the need, subject to certain exceptions, to have made arrangements to borrow securities when entering an order that on execution would be a short sale of:. An Extended Failed Trade is one in respect of which notice of the failed trade was required to be provided to IIROC in accordance with Rule 7. If an Extended Failed Trade report has been filed previously at any time by a Participant with IIROC with respect to an Extended Failed Trade in the account of a client or non-client, that client or non-client would not be able to enter an order that on execution would be a short sale without having made arrangements to borrow the securities necessary to settle any resulting trade until:. If a Participant or Access Person has filed previously at any time a report of an Extended Failed Trade in respect of a principal trade by that Participant or Access Person in a particular security, the Participant or Access Person would not be able to enter an order that on execution would be a short sale without having made arrangements to borrow the securities necessary to settle any resulting trade until IIROC has consented to the entry of the principal order that is a short sale of that particular security. In providing the consent, IIROC will be able to review with the Participant or Access Person the circumstances surrounding the previous Extended Failed Trade and the reasons why the Participant or Access Person believes that system short sales of that particular security are unlikely to fail to settle. The restriction on future sales by clients and non-clients is broader than for Participants or Access Persons in that it covers short sales of any security and not just the security which was the subject of the Extended Failed Trade. While the Participant is ultimately system for the settlement of any failed trade, the Participant may not fully know the reason for the earlier trade failure or the current circumstances of the particular client or non-client. However, the Proposed Amendments provide the Participant with the ability to waive the pre-borrow requirement if the Participant is satisfied, after reasonable inquiry, that the reason for any prior failed trade by the client trade non-client was solely as a result of administrative error. Until the Participant is able to complete such an inquiry or IIROC otherwise consentsthe client or non-client would be subject to the pre-borrow requirements on any intended short sale. Under the Proposed Amendments, a Participant or Access Person who enters an order that would, on execution, be a short sale of a security that IIROC has designated as a "Pre-Borrow Security" would be iiroc to have made arrangements to borrow the securities necessary for reporting of any trade prior to the entry of the order on a marketplace. Presently, the "short exempt" order designation is used to identify an order for the short sale of a security which is not subject to the tick test. If the tick test is repealed as contemplated in the Proposed Amendments, the use of the "short exempt" order designation will no longer be required for this purpose. Under the Proposed Amendments, the existing field on the order entry would be used to indicate an order that is exempt from being marked as "short" i. Under this proposal, orders from particular accounts for the purchase or sale of a security would be designated as "short-marking exempt" upon entry on a marketplace. More specifically, orders would be marked as "short-marking exempt" if the order is from an account that is:. IIROC expects that the institutional accounts which would be required to mark orders as "short-marking exempt" would include "high-frequency traders" whose trading strategy does not involve the holding of positions in particular securities. Use of the "short-marking exempt" designation would relieve the account from having to mark the order as "short". Given the high volume and speed of orders generated by arbitrageurs, market makers and high-frequency traders coupled with the fact that these types of accounts may have orders on both sides of the market on various marketplaces at the same time, determining whether such orders are made from a "long" or "short" position at the time of the entry of additional sell orders is problematic. Use of the "short-marking exempt" designation in the manner proposed would allow IIROC to monitor separately the trading activities of those accounts which are actively buying and selling the same security without taking a directional position in that security and which have a finite time horizon of a trading day or less to effectively balance purchases and sales of the particular security. Further, this revised order marking requirement is intended to permit IIROC to focus monitoring of short sale activity on accounts that have adopted a "directional" position with respect to particular securities. Additionally, IIROC is in the process of introducing an alert in its surveillance system that will be triggered when there is an increase in the level of short selling of an individual security based on historic levels of short selling activity for that particular security combined with a significant price decline in the market price of the security. Removing much of the "noise" in the short sale data flowing from trades by persons who are not taking a directional position, regarding the security should permit the alert to operate more effectively. Concurrent with the issuance of this Rules Notice, IIROC has issued for public comment draft guidance on the use of the "short sale" and "short-marking exempt" order designations that IIROC would intend to issue upon the Proposed Amendments becoming approved and effective. With the proposed repeal of the tick test, one of the main reasons for using aggregate holdings is removed as there will no longer be a restriction on the price at which the trade may be executed. Changing the basis for determining whether an order is "short" to take into consideration only the holdings in the account entering the sell order at the time the order is entered may simplify the process of determining the appropriate marking while at the same time slightly increasing the proportion of trades which are marked "short". As an alternative, IIROC had considered the introduction of a separate, new account identifier that would be required for the three types of accounts described above. However, IIROC was of the view that it would be more efficient to reuse the existing "short exempt" designation as marketplaces, service providers, Participants and Access Persons would have to modify their systems to remove functionality and provision for the "short exempt" designation. IIROC specifically seeks comment on the relative merits from an operational perspective for the two approaches. The Proposed Amendments would require a Participant or Access Person to have made arrangements to borrow securities prior to the entry of an order that would, on execution, be a short sale of a security that IIROC has designated as a "Pre-Borrow Security". The Proposed Amendments add a definition of "Pre-Borrow Security" to Rule 1. In determining whether to make such a designation, IIROC would have to consider whether:. With the repeal of the price restrictions on the price at which a short sale may be made, clause d of Part 1 of Policy 2. The following is a summary of the most significant impacts of the adoption of the Proposed Amendments:. The technological implications of the Proposed Amendments on Participants, marketplaces or service providers are as follows:. IIROC would expect that if the Proposed Amendments are approved by the Recognizing Regulators, the amendments would become effective one hundred and eighty days following the date IIROC publishes notice of the approval. Early inthe Technical Committee of IOSCO published a report entitled Regulation of Short Selling which contains principles designed to help develop a more consistent international approach to the regulation of short selling. The objective of the report was to help eliminate gaps between the different regulatory approaches to naked short selling while minimising any adverse impact on legitimate activities, such as securities lending and hedging, which IOSCO indicated are critical to capital formation and reducing market volatility. The report recommends that effective regulation of short selling should be based on the following four principles and the report outlines the minimum actions that regulators should undertake in order to support each of the four principles. A number of "high level" observations on the application of each principle in the Canadian context follow the discussion of each principle. A more market analysis of the IOSCO recommendations and their reconciliation to the provisions of UMIR and various procedures and proposals of IIROC are set out in Appendix "C":. Short selling activities should be subject to appropriate controls to reduce or minimise the potential risks that could affect the orderly and efficient functioning and stability of financial markets. In order to reduce or minimise the potential risks from short selling, regulators should have an effective discipline for the settlement of short selling transactions. As a minimum requirement this should impose strict settlement such as compulsory buy-in of failed trades. IIROC Commentary on the Canadian Context: Under UMIR, a Participant or Access Person is engaging in "manipulative and deceptive" activities if on the entry of an order they do not have the reasonable expectation of being able to settle the resulting trade. As such, "naked short selling", as that term is sometimes understood, is not permitted in Canada. Studies by IIROC have demonstrated that, in Canada, a short sale has a lower probability of settlement failure than trades generally and that the primary reason for trade failure is simple "administrative error". Broad mandatory provisions such as compulsory buy-in do not exist in Canada. Short selling should be subject to a reporting regime that provides timely information to the market or to market authorities. In order to achieve this enhanced level of transparency regarding short selling activity, jurisdictions should consider some form of reporting of short selling information to the market or to market authorities. IIROC recognizes the problems associated with current short position reporting. Short selling should be subject to an effective compliance and enforcement system. As an effective compliance and enforcement system is essential for an effective short selling regulatory regime, the regulators should: Canada has a "flagging" regime that requires all short sales to be marked as such at the time of entry. IIROC is pursuing, in connection with the introduction reporting a new surveillance and monitoring system, the development of alerts that will be generated by the surveillance system when there is:. This alert will allow IIROC to detect "abusive short selling" activity on a timely basis and to take appropriate remedial or investigative actions including designating the security as being ineligible for further short selling activity. To enhance the effectiveness and operation of this alert, IIROC is also proposing to introduce a "short-marking exempt" designation that will ensure that the "short sale" marker is used only by persons who are taking a directional position in a security when their order is entered. The "extended failed trade" report will also allow IIROC to monitor the extent to which short selling is involved in failed trades of particular securities. IIROC monitors trade failure rates generally based on information provided by CDS. IIROC is also co-operating with the OSC in receiving daily CNS trade failure reports from CDS on a daily basis. Access to this database will permit IIROC to determine, from time to time, patterns of failure among Participants and securities. While IIROC is party to a number of information sharing agreements with foreign self-regulatory organizations and regulators, the securities regulatory authorities have authority in respect of cross-border and domestic investigations involving persons who are outside the jurisdiction of IIROC. Short selling regulation should allow appropriate exceptions for certain types of transactions for efficient market functioning and development. It is necessary that there is flexibility in short selling regulation in order to allow market transactions that are desirable for efficient market functioning and development. Therefore regulatory authorities should at a minimum clearly define the exempted activities and the manner in which these exemptions should be reported. UMIR presently permits a series of exemptions from price restrictions on short sales for market making and arbitrage activities and for securities, such as inter-listed securities and Exchange-traded Funds, which have a relatively low possibility of abusive short selling due to their relatively high liquidity or relationship with underlying securities. While the Proposed Amendments would repeal price restrictions on short sales, the Proposed Amendments would also separate out, through the use of the "short-marking exempt" order designation, the trading activities of arbitragers, market makers and certain institutional accounts that pursue "directionally neutral" strategies in the trading of securities. The primary purpose of adopting the proposed "short-marking exempt" order designation is to allow IIROC to focus more directly on "directional" short selling activity. A byproduct of the adoption of this new order designation will be an increase in IIROC's ability to monitor the effects, if any, of "non-directional" trading strategies, including high frequency trading. In July ofthe SEC repealed all price restrictions on short sales and precluded self-regulatory organizations from introducing any rules that restricted the price at which a short sale could be made. This action had followed a multi-year "pilot project" which had concluded that price restrictions on short sales had no effect on market prices. At the time of the Emergency Order, only one of the 19 securities was on the "fails" list maintained in accordance with Regulation SHO by the market centre on which the securities were listed. Notwithstanding this fact, the Emergency Order required that a short seller must have entered into an arrangement to borrow the securities required for settlement prior to the execution of the short sale. The Division of Trading and Markets of the SEC provided guidance that "an arrangement to borrow requires more than a [sic] reasonable grounds to believe that the security can be borrowed. An arrangement to borrow means a bona fide agreement to borrow the security such that the security being borrowed is set aside at the time of the arrangement solely for the person requesting the security. The stated rationale for the Emergency Order was set out in the preamble to the Emergency Order which stated:. False rumors can lead to a loss of confidence in our markets. Such loss of confidence can lead to panic selling, which may be further exacerbated by "naked" short selling. As a result, the prices of securities may artificially and unnecessarily decline well below the price level that would have resulted from the normal price discovery process. If significant financial institutions are involved, this chain of events can threaten disruption of our markets. The events preceding the sale of The Bear Stearns Companies Inc. During the week of March 10,rumors spread about liquidity problems at Bear Sterns, which eroded investor confidence in the firm. As Bear Stearns' stock price fell, its counterparties became concerned, and a crisis of confidence occurred late in the week. In particular, counterparties to Bear Stearns were unwilling to make secured funding available to Bear Stearns on customary terms. In light of the potentially systemic consequences of a failure of Bear Sterns, the Federal Reserve took emergency action. The Emergency Order was scheduled to terminate on July 29, but was extended until August 12, Since September ofthe SEC instituted a number of other temporary or permanent initiatives directed at short sales and failed trades, including measures which, among other things:. On April 8,the SEC unanimously voted to seek public comment on whether short sale price restrictions or circuit breaker restrictions should be imposed and whether such measures would help promote market stability and restore investor confidence. The SEC voted to propose two approaches to restrictions on short sales - one being a price test that would apply on a market-wide and permanent basis "short sale price test" and one that would apply only to a particular security during severe market declines in that security "circuit breaker". The rule requires trading centers to establish, maintain and enforce written policies and procedures that are reasonably designed to prevent the execution or display of a prohibited short sale. Generally, equity securities that are listed on a national securities exchange would be covered by the rule. The rule would apply whether the security is traded on an exchange or in the over-the-counter market such as internally by a dealer and reported on the "tape" using a trade reporting system. Observers have noted certain market regarding the approach adopted by Rule In particular, Rule Inthe Australian Securities and Investments Commission "ASIC" announced a package of interim measures relating to short sales. The ASIC subsequently prohibited, subject to limited exceptions, all short sales including "covered" short sales that had been permitted under the interim amendments. The ban on covered short selling for non-financial securities was ultimately lifted, effective November 19, Following the consultation process, the ASIC provided some limited exemptions to the outright ban on naked short selling. The current regulatory framework in Australia includes: On September 18,the Financial Services Authority "FSA" introduced new provisions which prohibit the creation of, or increase in, a net short position giving rise to an economic exposure to shares in specified financial institutions and insurers including naked and covered short sales. These provisions expired on January 16, The FSA introduced new short reporting requirements that became effective on September 23, The FSA moved to remove the ban on short sales of financial institutions effective January 19, At the same time, the FSA also agreed to extend, with minor modifications, the Disclosure Obligation until June 30, In Februarythe FSA published a discussion paper in which it set out its views with respect to the regulation of short sales, including the trade of various constraints on short sales, including, "tick tests" and "circuit breakers". Inthe European Commission published a proposal on the regulation of short selling. It is anticipated that the regulation would be adopted in mid In the interim, several European Union Members have adopted, or are in the process of adopting, amendments to their respective short sale regimes both on an interim and permanent basis. For example, Austria, Greece and Spain have each adopted requirements that require a person to disclose a net short position that exceeds 0. In Julythe Hong Kong Stock Exchange "HKSE" proposed the suspension of price restrictions on short sales. In Julythe Hong Kong Securities and Futures Commission "SFC" approved the proposal to "relax" the uptick rule. However, later inthe SFC, together with the HKSE, announced that in light of recent market developments overseas they had agreed not to implement the July proposal, and instead, retained the existing regime which limits short sales to "covered" short sales in certain designated securities, at or above the current ask price. Proposed legislation, based on the conclusions derived from the consultation process, is expected to include a position reporting requirement where a short position report will be required on a weekly basis once a short position is the lesser of:. In Julythe Taiwan Stock Exchange removed price restrictions on short sales for a number of securities and the market regulators in both Malaysia and India have iiroc to ease restrictions on short sales. In September ofMarket Regulation Services Inc. In May ofin conjunction with the merger of RS with the Investment Dealers Association, the Board ratified and adopted these amendment proposals as IIROC proposals. In October ofat the height of the market turmoil, the Board agreed to defer consideration of the repeal of the tick test and the repeal of the requirement to file Short Position Reports, pending evaluation of further developments in the market and regulatory initiatives instituted in other jurisdictions. The balance of the proposals listed above was approved by the applicable securities regulatory authorities effective October 15, "Prior Amendments". Implementation of the requirement to provide to IIROC a report of an Extended Failed Trade or notice of certain variations or cancellation of trades was deferred and will become effective on June 1, In light of the SEC's decision in July of to remove price restrictions on short sales, IIROC granted, effective July 6,an exemption from the price restrictions on a short sale under Rule 3. Securities which trade on an ECN in the United States but are not otherwise listed on an exchange in the United States do not qualify for the exemption. The Inter-listed Exemption will reporting in force until those aspects of the Proposed Amendments dealing with the repeal of price restrictions on short sales of all securities and the change in use of the "short exempt" order designation have been approved by the Recognizing Regulators or withdrawn by IIROC. Securities regulators generally have a concern regarding the relationship between failed trades and preserving market integrity. In order to ensure that the audit trail for any trade is accurate and that IIROC has sufficient information to evaluate whether trading activity has been conducted in compliance with UMIR and other regulatory requirements, the Prior Amendments introduced a requirement that each Participant or Access Person is required to report to IIROC if a trade that has failed to settle on the settlement date remains unresolved 10 trading days following the settlement date. The requirement to file an "Extended Failed Trade" report will become effective on June 1, with respect to trades other than those using the "Trade-for-Trade" settlement facility of CDS. These reports of Extended Failed Trades will allow IIROC to determine if the trade has failed to settle for an "improper" reason for example, if a sale had been executed as an undeclared short sale. Once an initial report of an Extended Failed Trade had been filed with IIROC, the Participant or Access Person will be required to file a second report once the account has cured the default. This reporting regime will put IIROC in a position to monitor trends in Extended Failed Trades, including the steps which a Participant or Access Person may be taking to rectify the default. Information from the reports will be used by IIROC in making a determination whether a particular security should be designated as a "Short Sale Ineligible Security". The initial Extended Failed Trade report will indicate the steps that have been taken to resolve the "failure" in the preceding 10 business days and which are proposed to be taken to resolve the failure. A "close-out" report is also required to be filed which will indicate the steps which were ultimately taken to resolve the failure. During the period between the initial report and the close-out report, IIROC would be in a position to inquire of a Participant or Access Person as to whether additional steps had been taken since the filing of the initial report. In making such requests, IIROC would rely on its general investigative power under Rule The Prior Amendments introduced a requirement that a trade cannot be cancelled or varied, with respect to price, volume or settlement date, unless the cancellation or variation was made by:. The requirement to file a "Trade Variation or Cancellation" report will become effective on June 1,concurrent with the introduction of the first phase of filing requirements for the Extended Failed Trade reports. Prior to the settlement of the trade, each Participant or Access Person who is a party to a trade may not agree to a cancellation or variation of the trade with respect to: The use of the procedures and facilities provided by the marketplace or the clearing agency will ensure that information regarding the cancellation or variation can be publicly disseminated. Marketplaces are able to cancel trades in limited circumstances principally related to systems malfunctions or technical problems at the marketplace. The addition of the notice requirement should not impose, in the ordinary course, a greater administrative burden upon a Participant or Access Person. The current practice to add, vary or cancel trades is for a Participant or Access Person to contact the marketplace on trade date prior to the trade being reported by the marketplace to CDS or to contact CDS prior to settlement. If the request has been made to a marketplace, the marketplace will notify IIROC prior to effecting any variation or cancellation. If the request has been made to CDS, CDS reports these variations or cancellations to the marketplace for review and, in turn, the marketplace forwards the report to IIROC. If IIROC concludes that there are no market integrity concerns and agrees with the change, the marketplace amends the official record of the trade. However, if the trade cancellation or variation is made after the settlement of the trade by the clearing agency, system of the trade cancellation or variation will now be required to be provided to IIROC by each Participant and Access Person that is a party to the trade. The purpose of the report directly from a Participant or Access Person is to ensure that a trade variation or cancellation is not effected outside the normal reporting of the marketplaces and CDS unless IIROC is notified of the variation or cancellation and has the opportunity to review the change for possible market integrity concerns. Notice of a trade cancellation or variation will allow IIROC to ensure that the cancellation or variation of the trade is for a bona fide reason and not as part of a manipulative or deceptive manner of trading including the establishment of a price that would trade other trading activity to then be conducted in nominal compliance with UMIR or other securities regulatory requirements. The Prior Amendments allow IIROC to designate a particular security or a class of securities as being ineligible to be sold "short". The purpose of this provision is to provide additional flexibility to IIROC, as the Market Regulator, to respond to developments in trading of a particular security or class of securities if, in IIROC's opinion as concurred in by the applicable securities regulatory authorities, rates of failed trades become excessive. The criteria which IIROC would use in pursuing a designation of a security have been specifically set out in Part 4 of Policy 1. If, based on reports of failed trades submitted to IIROC in accordance with the requirements of Rule 7. Since studies by IIROC indicated that short selling was not the primary reason for the existence of failed trades, IIROC is of the view that a statistical threshold would not, by itself, be appropriate. IIROC must determine that short selling is exacerbating the situation before deciding whether to seek approval to designate the security as being ineligible for further short selling. IIROC is of the view that there are greater risks to market integrity if a series of dealers experience prolonged trade failures for a relatively minor number of shares of a security that is illiquid than from the failure of a single block trade due possibly to administrative problems or delays at a custodian in a highly-liquid security. In the view of IIROC, the need to make a designation will be a relatively rare occurrence. Since the introduction of UMIR, there has been no instance when either RS or IIROC would have sought approval for such a designation. However, IIROC acknowledges that the repeal of price restrictions on short sales will likely result in increased volatility trade less liquid securities. In addition, IIROC acknowledges that junior issuers are concerned with the possibility of "bear raids". IIROC is of the view that the activity which is part of a "bear raid" will be detected with existing monitoring standards employed by IIROC and that such activity may be contrary to existing prohibitions against manipulative and market behaviour. IIROC does not believe that a designation will have to be made in "real time" as the circumstances which will lead to the need to designate a security will build over a period time e. No one factor would necessarily lead to IIROC determining to seek a designation. Also, it is not possible to provide quantitative "thresholds" for each of the factors that would be taken into account by IIROC. IIROC would consider the circumstances of the particular issuer e. IIROC will only designate a security as a "Short Sale Ineligible Security" with the concurrence of the applicable securities regulatory authorities. IIROC will seek that concurrence in a designation from:. While IIROC does not believe that a designation will have to be made in "real time", IIROC nonetheless believes that any designation will have to be "timely" in order to address situations arising in the marketplace. If IIROC detects unusual circumstances and concludes that an issue is developing that appears to be rooted in short selling, IIROC's first step would normally be to issue an IIROC Notice indicating that, with respect to the particular security, market participants should ensure their ability to borrow or obtain securities for settlement in advance of any sale. In the meantime, IIROC would continue to monitor trading in the particular security to determine if further regulatory action was warranted. Under the Prior Amendments, a short sale of a security that is designated as a "Short Sale Ineligible Security" may not be made. The Prior Amendments contained a number of exemptions from this prohibition, including if the order is entered on a marketplace:. In October ofIIROC deferred the proposed repeal of the requirement system Participants and Access Persons to prepare and file a short position report on a semi-monthly basis. To replace the aggregation of the information in the short position reports filed by Participants and Access Persons into the CSPR, IIROC envisioned the dissemination, by third parties, of periodic summary reports of short sales executed on marketplaces in particular securities. IIROC continues to encourage marketplaces to make this information publicly available. Nonetheless, IIROC will pursue the introduction of short sale trade summaries on a semi-monthly basis that will correspond to the reporting cycle for short position reports. IIROC expects to begin issuing these semi-monthly summary reports at the same time as the changes to the marking of "short sales" and "short exempt" orders are implemented. IIROC recognizes that the CSPR has a number of problems and limitations. Despite its flaws and in the absence of the ability to readily produce other short sale report at the present time, the CSPR is a "known" report that is comparable to short position reports in other jurisdictions. Furthermore, the continued production and publication of the CSPR supports IIROC's objective of encouraging greater public awareness of short selling in trading activity in Canada. Trade availability of both trading summaries and the CSPR will allow the current users of the CSPR an opportunity to evaluate the information provided by reporting summaries and would provide IIROC with an opportunity to track the relationship between information provided in the CSPR and the marketplace trading summaries. Concurrent with the issuance of this Rules Notice, IIROC has published a statistical study of trends on Canadian marketplaces in the three-year period from May 1, to April 30, the "Study Period" with respect to overall trading activity, short selling and failed trades the "Trends Study". During the Study Period, there was no "negative" change in the pattern of short selling or trade failures from the findings of the Prior Study. In particular, during the Study Period:. That study found that while there were "unusual" levels of activity in "financial sector" issuers in the period leading up to the temporary imposition of a prohibition on short selling, the proportion of short selling of financial sector issuers was generally consistent with historic patterns and the levels of short selling for inter-listed securities. The study concluded that the ban had a significant impact on market quality by reducing liquidity and increasing "spreads" while not having any effect on price volatility. Concurrent with the issuance of this Rule Notice, IIROC has also published a statistical study that looks at the price movement of securities listed on the TSXV during the Reporting Period that indicates that the significant price declines observed in the second half of were not caused by or exacerbated by short selling activity. InRS undertook a study of failed trades in the Canadian marketplace the "Failed Trade Study". Any proposed changes to UMIR must be approved by the Recognizing Regulators of the CSA. IIROC staff have been participating and prior to June 1, staff of both RS and the Investment Dealers Association of Canada participated in an informal working group with CSA staff the "Working Group" that has been examining various issues related to failed trades and short sales, including the role that short sales play in the occurrence of failed trades. The Working Group has been monitoring developments related to short sales and failed trades in other jurisdictions, particularly SEC initiatives to amend Regulation SHO. IIROC has provided the Working Group with periodic updates to the Recent Trends in Trading Activity, Short Selling and Failed Trades and other research and studies undertaken by IIROC. The Proposed Amendments by IIROC have been discussed with the Working Group. Following the publication of this IIROC Notice, the CSA and IIROC are proposing to publish the Joint Notice to solicit feedback on whether additional proposals to enhance disclosure of short sales and failed trades in Canada are required. For example, the Joint Notice may seek comment on whether disclosure of short positions by institutional investors may be necessary, similar to "buy-side" reporting requirements that have been or are being widely implemented in other jurisdictions. The Joint Notice may also seek input on the type, level and frequency of public disclosure of system trades in equity securities traded on all Canadian marketplaces and cleared through CDS that would be appropriate for the Canadian market. If significant problems emerge after the implementation of the Proposed Amendments as well as the implementation of any other elements of the IIROC proposal relating to the execution or settlement of short sales, IIROC would be in a position to consider appropriate additional regulatory responses. Similarly, if settlement rates deteriorate after the implementation of the Market Amendments, either generally or in specific classes of securities, additional initiatives may be considered by IIROC. As indicated in the Trends Study, the number of trades executed on marketplaces has increased dramatically over the three-year Study Period from approximately 10, trades per month to almost 30, trades while the number of initial buy-in notices received by CDS in connection with iiroc failures has remained relatively constant, in the range of 30, to 40, notices per month. Studies by IIROC indicated that the majority of trade failures arose out of "administrative error" and were readily resolved. For this reason, a "hard" close-out requirement would have the effect of transferring the cost to dealers that have failed to settle for "innocent" reasons. One proposal considered by IIROC was the introduction of a "capital charge" on the dealer that failed to receive the security which would act as an incentive for that dealer to exercise its buy-in rights. Another option considered was the introduction of an administrative penalty to be imposed on the dealer that failed to deliver. Neither option was pursued, as it was unclear that the adoption of either initiative would have materially reduced the incidence of administrative error, the primary cause of settlement failure. IIROC was of the opinion that, if the underlying patterns for trade failure in Canada showed signs of increasing, a simplified "penalty" would be the preferred option, but that consideration might also be given to a "capital charge" on one or both sides of the failed trade. One initiative that IIROC noted in a number of jurisdictions was the introduction of a requirement for the reporting of short positions by "holders" of the short position rather than on an aggregate basis by intermediaries, such as dealers and subscribers to an ATS. The CSPR, which is an aggregation of reports filed by Participants and Access Persons, has not proven to be a useful tool to IIROC for monitoring or investigative purposes. Introducing additional account level requirements would not provide information that would be as timely or as meaningful as the enhanced information available through the monitoring of "marked" trades both in real-time time and on post-trade analysis. IIROC has had outstanding since April of a proposal that would require the unique identifier of each Direct Market Access "DMA" client to be included with each order, including short sales. This proposal would formalize the practice adopted by marketplaces that require the DMA account identified on the order. The inclusion of DMA account information allows real-time monitoring of account level activity of institutional accounts for all system and not just short sales. IIROC's surveillance system provides a comprehensive database for post-trade analysis of all orders and trades on all marketplaces. In the view of IIROC, the monitoring of short sales should be integrated into surveillance systems which already monitor for anomalous price or volume movements in a particular security in real-time. In particular, IIROC is developing an alert which will consider increases in the rate of short selling in conjunction with declines in market price. This alert will help to identify, in real-time, situations that may require regulatory intervention including the possible designation of the security as a "Pre-Borrow Security" or "Short Sale Ineligible Security". A position report only provides a snapshot of the situation at a particular point in time and provides no information on the trading activity during the period, which is what impacts market prices. IIROC also noted that the threshold for making a position report in a number of the jurisdictions that have introduced this requirement is 0. By comparison, in March ofthe average short position in a security listed on TSXV was 0. While comment is requested on all aspects of the Proposed Amendments, comment is specifically requested on the following questions:. Are there any policy reasons, other than those identified in this Request for Comments, that IIROC should consider in pursuing the proposed repeal of the existing "tick test" short sales must be made at a price not less than the last sale price? If you disagree with the proposal to repeal the tick test, please indicate why it should be retained. If restrictions on the price of a short sale are to be retained, should UMIR adopt a "bid reporting at the time of order entry e. If restrictions on the price of a short sale are to be retained, whether in the short-term or on a long-term basis, should there be an exemption provided to securities inter-listed on an exchange in the United States? If restrictions on the price of a short sale are repealed, what regulatory arbitrage opportunities may exist in the case of an inter-listed security, where a circuit breaker has been triggered in the United States giving rise to short sale price restrictions? What measures could be taken, if any, to limit this potential regulatory arbitrage? The Proposed Amendments would "reuse" the existing "short exempt" designation to indicate accounts that qualify for the "short-marking exempt" designation. Are there any specific operational considerations for marketplaces or Participants from this change in use? Would there be any benefits to introducing a separate, new designation if marketplaces, service providers and Participants still have to modify their system to remove functionality and provision for the existing "short exempt" designation? Are there any other operational considerations for marketplaces or Participants that would arise as a result of the adoption of the Proposed Amendments, beyond those identified in this Request for Comments? If the Proposed Amendments are approved, IIROC is proposing to delay the implementation for a period of one hundred and eighty days in order to provide Participants, marketplaces and service providers the time to make necessary changes to their systems, policies and procedures. Should the implementation period be longer and, if so, why? The requirement to mark a sell order as a "short sale" is determined based on the aggregate holdings of the "seller" across multiple accounts which may in fact be held at multiple Participants or dealers while the requirement of a Participant to file a short position report is based on the position of each individual account. If the tick test is repealed, should the basis for determining the marking orders and filing short position reports be harmonized? Would it be preferable for the marking of orders to be determined based on the holdings in the account entering the sell order at the time the order is entered? In addition to these questions posed by IIROC, the CSA and IIROC are proposing to publish the Joint Notice to solicit feedback on whether additional proposals to enhance disclosure of short sales and failed trades in Canada are required. See IIROC Notice -- Rules Notice -- Request for Comments -- UMIR -- Provisions Respecting Market Maker, Odd Lot and Other Marketplace Trading Obligations April 23, CNSX presently operates an "alternative market" known as "Pure Trading" that is entitled to trade securities that are listed on other Exchanges and that presently trades securities listed on the TSX and TSXV. There are reports that short selling actually declined during this period -- a finding which would be consistent with the studies undertaken by IIROC. The most common usage is in connection with a short sale when the seller has not made arrangements to borrow any securities that may be required to settle the resulting trade. Some commentators use a more restrictive interpretation that describes any short sale when the seller has not pre-borrowed the securities necessary for settlement. A report for failures of trades settling through the Trade-for-Trade settlement facility of CDS will become effective at a later date once IIROC has completed the development and testing of trade that would permit IIROC to receive the information directly from CDS. In connection with these requirements, IIROC publishes annually a non-exhaustive list of entities which are "acceptable counterparties" and "acceptable institutions". For a link to the most recent listing, see IIROC Notice -- Rules Notice -- Technical -- Dealer Member Rules -- Acceptable Institutions and Acceptable Counterparties Database August 25, See also IIROC Notice -- Rules Notice -- Technical -- Dealer Member Rules -- List of Basle Accord Countries November 19, which identified the 20 countries that then qualified as "Basle Accord Countries" and IIROC Notice -- Rules Notice -- Technical -- Dealer Member Rules -- List of Recognized Exchanges and Associations Regulated Entities Purposes November 19, which identified 31 exchanges and associations the members of which would qualify as "regulated entities". The rules of CDS provide a procedure for the "buy-in" of failed trades. The party that has not received the security purchased may initiate this procedure and, if the failure persists, CDS will, on the instruction of the party that has failed to receive the security, enter orders on a marketplace to close out the position with the additional costs being borne by the defaulting party. The orders prohibited short sales in financial firms during the period September 18, to October 8, Effective October 17,the SEC adopted an antifraud rule, Rule 10b under the Securities Exchange Act ofaimed at short sellers including broker-dealers acting as principal who deceive specified persons about their intention or ability to deliver securities in time for settlement and that fail to deliver securities by settlement date. The ASIC indicated that concurrent with the anticipated removal of the short sale ban on non-financial securities, the ASIC together with the ASX would be putting in place disclosure and reporting arrangements respecting short sales. See ASIC Release -- ASIC Extends Ban on Covered Short Selling of Financial Securities January 21, The ban was further extended to May 31, See ASIC Release -- ASIC Extends Ban on Covered Short Selling of Financial Securities March 5, However, a legally binding commitment from a lender is considered "unconditional". This means that both the new requirements of the Regulation and disparate national short selling restrictions may remain operative in parallel in various parts of the EU for up to a year. Full harmonisation trade not be achieved until July 1, Short Selling Crackdown", Forbes. A comparable provision was not incorporated into UMIR on the grounds that the general provisions curtailing abusive short selling made the provision unnecessary. The provision does not require that the dealer make a "positive affirmation" that it has the ability to settle the trade but merely have a "reasonable expectation" at the time of the entry of the order. Essentially, a Participant may enter a short sale of a security until such time as the Participant knows, or should reasonably have known, that it can no longer borrow the securities to effect settlement. Among the activities precluded by Policy 2. Historically, a "death spiral" had occurred when an issuer was undergoing certain types of arrangements or capital reorganizations including voluntary or involuntary conversion of debt to a class of listed equity that tied the conversion or reorganization ratios to the market price of the securit y to be issued. As the market price of the listed security fell the number of securities to be issued rose. In anticipation of receiving additional listed securities on the completion of the transaction, investors would sell the additional listed security short into the market resulting in further downward pressure on the market price of the listed security. Since the securities that would be issuable on the arrangement or reorganization would not be available to settle the sales in the ordinary course, the sales would be considered "short sales" for the purposes of UMIR. See "Pre-Borrow Requirements" on pages 9 to 11 [in the IIROC published version of this Notice]. In particular, that Market Integrity Notice indicated that: Increasingly, there is concern whether the CSPR provides a complete or meaningful picture of the short position in any security. In particular, the CSPR report does not reflect system short position in securities held by:. Each of the 7 months between October of and April of had a number of trades in excess of the Study Period average indicating that the trend towards increased trading activity is continuing notwithstanding the turmoil in the markets generally. For the month period ended September 30, covered by the Prior Study there were an average oftrades per day. With respect to average daily volume, the Study Period average was , with a high of , in April of and a low of , in August of when volume on the TSXV was at a low of , With the exception of October ofthe months between October of and April of had average daily trade value below the Study Period average notwithstanding above average number of trades and volume which reflects the general decline in price levels. The number of trades in ETFs increased from 3, per day in May of to a high of 39, in November of for an overall average of 13, for the Study Period. The number of trades in inter-listed securities increased fromper day in May of to a high ofin March of for an overall average offor the Study Period. CNSX averaged 94 trades per day during the Study Period with the number of trades market from in May of to 28 trades per day in April of Both TSXV and CNSX had below the Study Period average number of trades in each of the 7 months between October of and April of For the purposes of this Study, the months October of to April of were included. For the purposes of this Study, five months September of to January of experienced elevated level of market stress across both indexes. This increase in the proportion of short sales was anticipated on the granting of the exemption. On CNSX, short sales accounted for 7. However, the averages for the other four months were significantly lower such that the average for a Market Stress Period was only 2. For MATCH Now, which operates as a non-transparent marketplace, short selling accounted for only On average over the Study Period, the short position on the TSX turned over every 0. The Case of the TSX Venture Exchange February 25, The rate of trade failure on CNQ is comparable to the 2. Clause a of subsection 1 does not apply to an order that has been designated as a "short-marking exempt order" in accordance with subclause 6. Under the definition of a "Pre-Borrow Security", the Market Regulator may designate a security in respect of which an order that on execution would be a short sale may not be entered on a marketplace unless the Participant or Access Person entering the order has made arrangements to borrow the securities that would be required to settle the trade prior to the entry of the order. In determining whether to make such a designation, the Market Regulator shall consider whether:. Text of Current Provisions Marked to Reflect Adoption of the Proposed Amendments. Except as otherwise provided, a Participant or Access Person shall not make a short sale of a security on a marketplace unless the price is at or above the last sale price. A short sale of a security may be made on a marketplace at a price below the last sale price if the sale is: A Participant or Access Person shall not enter an order to sell a security on a marketplace that on execution market be a short sale:. Clause a of subsection 1 does not apply to an order automatically generated by the trading system of an Exchange or QTRS in accordance with the Marketplace Rules in respect of the applicable Market Maker Obligations that has been designated as a "short-marking exempt order" in accordance with subclause 6. A Participant acting as agent shall not enter a client order or a non-client order on a marketplace that would, if executed, be a short sale if the client or non-client has previously executed a sale of any listed security that became a failed trade in respect of which notice to the Market Regulator was required pursuant to Rule 7. A Participant acting as principal or an Access Person shall not enter an order on a marketplace for a particular security that would, if executed, be a short sale if the Participant or Access Person has previously executed a sale in that security that became a failed trade in respect of which notice to the Market Regulator was required pursuant to Rule 7. A Participant or an Access Person shall not enter an order on a marketplace for a Pre-Borrow Security that would, trade executed, be a short sale unless the Participant or Access Person has made arrangements for the borrowing of the securities necessary to settle any resulting trade prior to the entry of the order. In determining whet her to make such a designation, the Market Regulator shall consider whether: There are a number of activities which, by their very nature, will be considered to be a manipulative or deceptive method, act or practice. For the purpose of subsection iiroc of Rule 2. If persons know or ought reasonably to know that they are engaging or participating in these or similar types of activities those persons will be in breach of subsection 1 of Rule 2. Prior to the opening of a marketplace on a trading day, a short sale may not be entered on that marketplace as a market order and must be entered as a limit order and have a limit price at or above the last sale price of that security as indicated in a consolidated market display or at or above the previous day's close reduced by the amount of a dividend or distribution if the security will commence ex-trading on the opening. When reducing the price of a previous trade by the amount of a distribution, it is possible that the price of the security will be between the trading increments. Where such a situation occurs, the price of the short sale order should be set no lower than the next highest price. In the case of a distribution of securities other than a stock split the value of the distribution is not determined until the security that is distributed has traded. For example, if shareholders of ABC Co. Once a security has traded on an ex-distribution basis, the regular short sale rule applies and the relevant price is the previous trade. The Report recognizes that not all jurisdictions consider the same activities to be "short selling". The Report considers "short selling" to be the sale of stock that the seller does not own at the point of sale. The provisions under UMIR differ in the following areas: The UMIR provisions contain a more expansive definition of "short sale" than most jurisdictions, including the United States. As a result, the number of short sales will be higher in Canada than would be the case if the definition in the United States applied. In Canada, this means the person making the sale generally must have a "reasonable expectation" of settlement at the time of the sale. In the United States, the sales are treated as "long" even in circumstances when a failure of settlement is contemplated at the time of the sale. Ownership of securities subject to a resale restriction imposed by securities legislation or a marketplace. Sale of any security subject to a resale restriction is a short sale and the seller must have a "reasonable expectation" of being able to settle at time of the sale. In the US, the sale of certain "restricted" securities is considered a sale from a long position. Even under Rule of Regulation SHO, a dealer is given an additional 36 days following failure to close out the position arising from the sale of certain "restricted" securities. The holder of an option, right or warrant must have taken all steps to "exercise" the system, right or warrant including the payment of money before the person is considered "long". Similar provisions apply when a person is to acquire securities as a result of "tendering" or "converting". In the United States, the practice is that securities which are the subject of an option can be sold in the market from a "long" position and the proceeds of sale used to pay for the securities. If securities would, in the ordinary course, not be available until after the scheduled settlement date, the trade is a short sale and the seller must have a "reasonable expectation" of being able to settle at the time of the sale. The additional restrictions in Canada that apply before a person is considered "long" increase the proportion of short sales and require the Participant to take steps to have a "reasonable expectation" of being in a position to settle. Even under Rulea dealer in the US is given an additional 3 days following failure to close out the position arising from the sale of "unavailable" securities. If a short sale is made without a "reasonable expectation" of settlement, UMIR provides that the trade constitutes manipulative and deceptive activity contrary to Rule 2. Studies by IIROC found that, in Canada, a short sale was significantly less likely to fail than trades from long positions, generally. In part, this result is due to the fact that short selling is concentrated in those classes of securities with the lowest trade failure iiroc senior listed equity securities. Historically, failure rates in Canada have been less than those in the United States. The implementation of Rule significantly reduced US trade failure rates to the extent that US rates may now be less than the prevailing failure rates in Canada. However, studies by IIROC found that failure rates varied significantly amongst securities. Increases in the proportion of trading accounted for by junior securities since early have resulted in slightly higher overall failure rates in Canada, without changing the underlying patterns. In some jurisdictions, settlement of failed trades achieved by compulsory buy-in or close-out provisions. In some markets, the process is initiated by either the securities settlement system or the buyer who has not received the securities. Some markets impose a monetary penalty. CDS has "buy-in" provisions which, if initiated by the purchaser who has failed to receive, are mandatory on the defaulting dealer. As indicated in the studies undertaken by IIROC, the number of trades executed on marketplaces has increased dramatically over the three-year period - May of to April - from approximately 10, trades per month to almost 30, trades while the number of initial buy-in notices received by CDS in connection with trade failures has remained relatively constant in the range of 30, to iiroc, notices per month. Studies by IIROC also indicated that the majority of trade failures arose out of "administrative error" and were readily resolved. For this reason, a "hard" close-out requirement has the effect of transferring the cost to dealers that have failed to settle for "innocent" reasons. Neither option was pursued given the reasons for settlement failure and the rates of failure. IIROC was of the opinion that, if the underlying patterns for trade failure in Canada showed signs of increasing, a simplified "penalty" would be the preferred option but that consideration might also be given to a "capital charge" on one or both sides of the failed trade. Studies by IIROC have indicated that trades which are subject to "special terms", including those related to settlement, have a higher likelihood of settlement failure than "ordinary" trades. To support "strict settlement", regulators could adopt eligibility criteria for stocks eligible for short selling, pre-borrowing or 'locate' requirements, price restrictions or "flagging" as appropriate for individual iiroc. Under UMIR, all short sales must be "marked" either as a "short" sale subject to price restrictions or as "short exempt". UMIR presently provides that a security may be designated as a "Short Sale Ineligible Security" which precludes any short sale of the particular security subject to certain enumerated exceptions. Unless designated as a "Short Sale Ineligible Security", the security may be sold short. Given the historic rates of trade failure, studies by IIROC supported the conclusion that general requirements related to "pre-borrowing" or "locate" of securities were not warranted in the Canadian setting. Under the Proposed Amendments, IIROC is proposing to require a pre-borrowing requirement for short sales but its application would be restricted to persons who had executed an "extended failed trade" in any security i. While IIROC is proposing to proceed with the repeal of price restrictions on short sales, IIROC is proposing that the existing "short exempt" marker be used to identify the purchase or sale of a security by reporting account that is active in the security reporting essentially, in the trade course, aims to be "flat" holdings of a particular security at the end of each trading day such as arbitrage account, market makers, odd lot dealers and high frequency traders. This would simplify the marking of orders for certain accounts and remove the "chaff" from IIROC's monitoring of short sale activity. IIROC would also be in a position to monitor the relative buying and selling activity of "short-marking exempt" accounts in a particular security throughout a trading day. To achieve "enhanced and meaningful" reporting, should consider reporting short selling information to the market or at a minimum, to market authorities. UMIR currently requires the marking of all short sales and this marker is displayed to IIROC but not included in the public display. IIROC has been pursing the introduction of trading summaries of short sales for particular securities aggregated by trading activity across all marketplaces trading the security. One of the objectives of providing this information is to demonstrate to the investing public that there are established patterns for different classes of securities e. These patterns reflect hedging, arbitrage and market making activities, together with the liquidity profile of the particular security. IIROC hopes to be system a position by the implementation date of the Proposed Amendments, to publicly provide such reports on a semi-monthly basis. IIROC continues to encourage the marketplaces to publicly provide information on a more frequent basis and ideally in a consolidated report. Recognize that information on short selling may mislead the market and expose the seller to a "short squeeze". Attempting to "corner" the market to affect a short squeeze is presently recognized as a manipulative and deceptive activity that is prohibited under UMIR. IIROC believes that the important element in short sale data is the underlying pattern or trend. Daily information for a particular security can be distorted by the effects of a small number of trades, particularly with securities of limited liquidity or high volatility. IIROC continues to believe that the "short sale" and "short-marking exempt" flags should not be included in the public order display but must continue to be available to IIROC in real-time. Reporting system could be based on "flagging" or "short position" or acomprehensive regime could adopt both models. IIROC continues to pursue the introduction of trading summaries based on "marked" short sales. UMIR requires that Participants and Access Persons file short position reports on a bi-monthly basis. InIIROC had proposed to repeal the requirement for short position reports to be effective following the introduction of an "adequate replacement" such as the short sale trading summary reports. IIROC is withdrawing the proposed repeal. While the Consolidated Short Position Report is "flawed", relatively costly and cumbersome to compile, IIROC recognizes that the reports are a source of information with an established history. For this reason, the proposed trading summaries of "short sales" for each listed security would be provided semi-monthly to correspond with the reporting period for the Consolidated Short Position Report. Reporting which excludes derivatives may not provide full picture and "induce a migration of trading activities to the derivatives market". UMIR does not require information on derivative positions to be included in the short position report. Information on the outstanding interest in listed derivatives is already publicly available. IIROC acknowledges that there is no source of information on positions subject to over-the-counter derivatives. Including derivatives would increase complexity and have practical issues associated with collection of derivative data. Recommends assessment of the balance of difficulties and benefits. UMIR presently exempts from execution on a marketplace transactions related to the exercise of an option or other derivative transaction. IIROC has indicated that such an initiative, if IIROC were to act as administrator, could be dovetailed with a more comprehensive reporting of trades of listed securities which have been executed off-marketplace including on the exercise of OTC derivatives or execution outside of Canada that has not been reported in that foreign jurisdiction. IIROC does not expect that this initiative will be actively pursued in the foreseeable future. Recommends consideration of objective and usage of data collected in determining whether reporting of short position on gross or net basis is more appropriate. Trigger level for reporting and frequency of reporting must balance costs of compliance with provision of useful information to "reduce the risk of manipulative and other unfair trading practices". UMIR does not require "holder" level reporting. When appropriate, this information is obtained from the dealer providing the short position report. The Consolidated Short Position Report has not proven to be a useful tool for monitoring or investigative purposes. Introducing additional account level requirements would not provide information that was more timely or meaningful than the enhancement of the information available through the monitoring of "marked" trades both in real-time time and on post-trade analysis. IIROC has had outstanding, since April ofa proposal that would require the unique identifier of each Direct Market Access "DMA" client to be included with each order, including short sales. There is also a comprehensive database for post-trade analysis. The alert will help identify in real-time situations that may require further regulatory action including possible designation of the security as "Pre-Borrow Security" or "Short Sale Ineligible Security". For example, the most common proposed threshold is if the short position of a person exceeds 0. By comparison, in March ofthe average short position in a security listed on the TSX Venture Exchange was 0. Studies by IIROC indicated that short selling is not a significant contributing factor in the decline of prices in the Canadian market, even during periods of rapid price decline, such as during the second half of In fact, short selling and short positions declined dramatically during this period particularly in respect of the "junior" securities which were perceived to be the most vulnerable to short reporting abuse. Reporting should be by the "holder" of the short position as brokers may not have complete information but recognize that authorities may not have jurisdiction over the "ultimate" holder. The jurisdiction of IIROC is limited to Participants and Access Person and does not extend to investors. However, IIROC continues to believe that the most effective tool to avoid abusive short selling is to system trading activity in real-time, so that abusive activity can be detected quickly and regulatory action taken, when appropriate, in a timely manner. As brokers are responsible for "flagging", may be easier to monitor compliance with flagging of short sales as compared to short position reporting. Trade Desk reviews and audits of Participants monitor "marking" and "short position reporting" compliance. If such an impact is observed, account level information can be requested from the Participant. UMIR trade requires each dealer to prepare a short position report which is aggregated with other reports in the Consolidated Short Position Report. IIROC's ability to identify institutional DMA clients on orders is an important factor in creating real-time monitoring and the ability to determine trading patterns. IIROC is proposing to withdraw their proposal to repeal the short position report. As such, IIROC will be able to monitor changes in the short positions of individual securities and to then supplement that data with information from the trading summaries. View that instituting a market settlement of failed trades "is one of the pillars of a short selling regulatory regime". Regular monitoring and inspections of settlement failures is important, especially for those iiroc which frequently fail to deliver. UMIR makes Participant responsible for settlement of each trade and provides that they must have a "reasonable expectation" of settlement at the time of order entry. UMIR will require Participants to report with respect to positions that have not been rectified within 10 days of the intended settlement date. IIROC monitors trade failure rates generally, based on information provided by CDS. CDS and iiroc OSC are developing a database of daily initial trade failure reports involving the continuous net settlement facilities of CDS. Access to this database would permit IIROC to determine, from time to time, patterns of failure among Participants and securities. IIROC will also be able to establish patterns with respect to "extended failed trades" based on reports filed with IIROC regarding these positions and their resolution. IIROC has set June 1, as the implementation date of the "extended failed trade reporting" system other than for trades using the "Trade for Trade" settlement system at CDS which will be implemented at a later date. Where there is a "flagging" regime appropriate parties should be required to maintain books and records of short sales for a sufficient period of time. UMIR requires that order information be retained for a period of seven years and during the first two years the retention must be in a "readily accessible location". The UMIR requirements complement National Instrument requirements which deal with the maintenance of order and trade information not otherwise covered by UMIR e. Encourages establishment of a mechanism to analyse the information obtained from flagging or short position reporting to identify potential market abuses and systemic risk. Historically, IIROC has analysed the data with respect to short sales to establish trends and patterns and has periodically provided the results of this analysis to the securities regulatory authorities and published relevant portions of the data in reports. IIROC will be introducing a new alert to monitor for a combination of price movement and changes in patterns of short selling. A Surveillance Officer will then be able to determine, in real-time, if abusive short selling is contributing to a significant price decline for a particular security. IIROC has an "unreasonable" price policy under which IIROC may undertake a "regulatory intervention" if there is unreasonable trading or trading which is not in compliance with UMIR. IIROC is proposing to make the policy for regulatory intervention more publicly transparent through the issuance of guidance. The regulatory intervention policy is both general and comprehensive and is triggered by any "unexplained" price movement and not just price declines resulting from short selling activity. Based on the studies and monitoring undertaken by IIROC, it would appear that the perceived abuses that manifested themselves in other jurisdictions were not evident in the Canadian market. IIROC is therefore reluctant to propose additional administrative and regulatory burdens to address problems which do not presently exist. Should be appropriate exceptions for hedging, market making and arbitrage. Suggest consideration of whether failed trades arising from market making activities should be allowed more time to settle or be exempt from price restrictions. UMIR provides exceptions from price restrictions on short sales for hedging, market making and arbitrage. Additional iiroc are provided for various specialty type orders, Exchange-traded Funds and to satisfy displacement obligations imposed under the "best price" rules of UMIR. Comparable exceptions other than for specialty orders apply to the ability to make a short sale of a Short Sale Ineligible Security. While exempted activities may need to be covered by reporting to regulators consideration should be given to exemptions from "public disclosure" to protect interests of parties engaged in the activity. Under UMIR, the short sale "markings" are not to be included in the public display. However, all "markings" are visible to IIROC for its monitoring activities. Under the Proposed Amendments, IIROC is proposing a separate "flagging" marker for the purchase or sale by an account that in the ordinary course does not "carry a position" such as market makers, arbitrageurs and certain institutional accounts that adopt a "directionally neutral" strategy in the trading of securities. This separate category will allow IIROC to monitor the trading activities of this group of persons separate from traditional short selling activity. This separate marking for "short-marking exempt orders" would not be available to the public. Exemptions should be clearly defined particularly in respect of "market making" and "hedging" activities. UMIR defines "Market Maker Obligations" by reference to Exchange rules. UMIR does not provide exceptions for "informal" market makers. Hedging activities are limited to recognized "derivatives market maker" and "Program Trades" as defined by Exchange rules. IIROC is presently proposing to replace the definition of "Market Maker Obligations" with a new defined term "Marketplace Trading Obligations" which has been expanded to take into account odd lot and other trading obligations imposed pursuant to a contact between marketplaces and their members or users. Twitter LinkedIn Youtube Email Alertas RSS Feeds. Take-Over Bids, Issuer Bids, Special Transactions and Early Warning. Information for Small and Medium Enterprises. Dealers, Advisers and Investment Fund Managers. Who Needs to Register. Applicants for Designation as Trade Repositories. Legal Entity Identifiers LEIs. JavaScript is disabled or not supported by this browser. This website works best with JavaScript enabled. Text of Provisions Following Adoption of the Proposed Amendments. Restrictions on Short Selling - repealed. Restrições à venda a descoberto. A Participant or Access Person shall not enter an order to sell a security on a marketplace that on execution would be a short sale: Entry of Orders to a Marketplace. Each order entered on a marketplace shall contain: In determining whether to make such a designation, the Market Regulator shall consider whether: Part 1 -- Manipulative or Deceptive Method, Act or Practice. Part 1 -- Entry of Short Sales Prior to the Opening. Part 1 - Entry of Short Sales Prior to the Opening. Part 2 -- Short Sale Price When Trading Ex-Distribution. Part 2 - Short Sale Price When Trading Ex-Distribution. Description of UMIR Provisions. Additional Commentary and Suggested Proposals. UMIR requires the reporting of short positions on a gross basis. Triggers and threshold levels may need to be fine-tuned as more experience is gained. Flagging may not help in assessing outstanding short positions or large individual positions. Short selling regulation regime should "not stifle legitimate short selling activities".
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4 thoughts on “Iiroc market trade reporting system”
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Tag Archives: IIROC.
A ‘Win’ for the IIAC – CRM Suitability Assessment (IIAC Blog)
A ‘Win’ for the IIAC – CRM Suitability Assessment (IIAC Blog)
At the urging of the IIAC’s Venture Market Working Group, IIROC issued a Client Relationship Model (CRM)—Frequently Asked Questions (FAQ) Notice clarifying dealers’ suitability assessment obligations for certain clients with a high-risk tolerance. The FAQ specifically addressed speculative investing or trading, such as in TSX Venture Exchange (TSXV) listed securities. The FAQ clearly articulates the portfolio approach to suitability, and does not prohibit venture stocks in accounts/portfolios that are not high risk. The FAQ also clarifies the approach dealers must adopt to assess suitability when a client wishes to engage in speculative trading and has tolerance … Continue lendo & rarr;
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Enhancing Corporate Bond Transparency (IIAC Blog)
Enhancing Corporate Bond Transparency (IIAC Blog)
In September 2015, the Canadian Securities Administrators (CSA) released its long-awaited proposals to enhance corporate bond transparency. In my December 2015 Letter from the President , I discuss the existing CanPX transparency system and the flaws in the IIROC Market Trade Reporting System which was introduced on November 1, 2015, before sharing my thoughts on the optimal transparency approach.
*In striking a new direction for corporate bond transparency, the CSA needs to ensure it understands the full implications of its proposed model, and be convinced that the new approach reaches a better public interest objective.
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IIAC Launches Bond Market Newsletter (IIAC Blog)
IIAC Launches Bond Market Newsletter (IIAC Blog)
The IIAC has launched a new publication titled “IIAC Fixed Income Market Regulatory Update.” You can read our inaugural issue by clicking here.
This monthly newsletter will bring you up-to-date on bond market regulatory developments in Canada, the U. S., Europe and Asia. It also includes relevant links and IIAC commentary.
If you or others in your organization are impacted by regulatory changes in the fixed income markets, then this publication is for you.
The November 2015 issue covers topics such as:
& # 8211; CSA next steps in regulation and transparency of Canada’s fixed income market.
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The IIAC Responds to IIROC’s Proposed Amendments Re: Unprotected Transparent Marketplaces and the Order Protection Rule (IIAC Blog)
The IIAC Responds to IIROC’s Proposed Amendments Re: Unprotected Transparent Marketplaces and the Order Protection Rule (IIAC Blog)
In April 2015, the Ontario Securities Commission (OSC) approved changes to the TSX Alpha Exchange trading model. Effective September 2015, Alpha will apply a short processing delay (a speed bump) on orders to counter high-frequency trading and limit fleeting liquidity. Additionally, orders displayed in the Alpha order book will no longer be protected from trade-through (i. e. the execution of an order at a price that is inferior to a displayed bid price or higher than a displayed offer price) under the Order Protection Rule (OPR).
In response, the Investment Industry Regulatory Organization of Canada (IIROC) announced … Continue lendo & rarr;
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