Yesterday, IIROC issued its final guidance on how it plans to intervene and ensure fair trading by cancelling erroneous trades.

This follows the release of a notice requesting comments on its proposed regulatory guidance. Find a copy of the comment letter in response to the proposed guidance here.

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In the letter, appendix A presents a summary of the comments received, together with the responses of IIROC to those comments. Column 1 of the table highlights the revisions to the proposed guidance made by IIROC in response to all comments.

The changes made include:

  • It provided flexibility in the application of the pre-determined price threshold for regulatory intervention, with respect to “erroneous” trades (the “no touch zone”) in the case of certain securities having an “intrinsic value” based on other listed securities if a lesser price variance is found to impair market integrity and is “unreasonable” in the circumstances;
  • It broadened the discretion to apply a higher threshold for regulatory intervention than the “no touch zone”, in the case of an erroneous trade involving a security of limited liquidity;
  • It clarified—in the case of a trade resulting from the entry of an order that does not comply with UMIR—there is no pre-determined price threshold that must be met before:
  1. Regulatory intervention to cancel the trade may be undertaken as appropriate, or
  2. IIROC can commence regulatory enforcement proceedings in respect of the trade that was not in compliance with UMIR; and
  • Making certain editorial amendments, it included updated references to new rules and proposals of the securities regulatory authorities or IIROC related to the promotion of fair and orderly markets.

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