CIRO Proposes Amendments Respecting Mandatory Close-Out Requirements

Seeks comment from stakeholders on 16 key questions to better understand impacts 

TORONTO, Jan. 9, 2025 /CNW/ - The Canadian Investment Regulatory Organization (CIRO) has issued Proposed Amendments Respecting Mandatory Close-Out Requirements and is seeking comments to better understand whether these changes would be helpful and how stakeholders would be impacted. 

In December 2022, CIRO and the Canadian Securities Administrators published Short Selling in Canada to request public feedback on Canada's short selling regulatory framework. In response to comments received, CIRO and the CSA formed a staff working group to examine whether additional requirements relating to short selling would be appropriate in the context of the Canadian markets. 

Mandatory close-outs would be triggered when there is a prolonged settlement failure at a clearing agency by an investment dealer. If persistent, settlement failures could pose significant risk to investors and erode confidence in the capital markets. The proposed requirements would mean that investment dealers, that are members of the clearing agency, would be required to "close" the fail-to-deliver position by buying or borrowing shares within specific timelines, or else they would become subject to pre-borrow requirements in the particular security.

"Stakeholder feedback on short selling in Canada shows divergent viewpoints and no consensus on the best approach," said Kevin McCoy, Senior Vice-President, Market Regulation, CIRO. "The intent of publishing these Proposed Amendments for comment is to bring clarity to stakeholders on what the rules might look like, how they may apply to their businesses, and to allow stakeholders to comment on those proposed changes specifically." 

CIRO has heard from some stakeholders that the regulator should explore implementing mandatory close-outs. The Final Report (published in January 2021) of the Ontario Capital Markets Modernization Taskforce recommended the modernization of Ontario's short selling framework which includes the adoption of mandatory close-out provisions.

"A significant part of our mission to protect investors involves preserving the integrity of Canadian capital markets," said McCoy. "With this proposal, we aim to strengthen our regulatory framework and harmonize our approach to potentially match those practices adopted in other jurisdictions where appropriate." 

CIRO is requesting comments by April 10, 2025, on all aspects of the Proposed Amendments. CIRO also seeks responses and feedback on 16 specific topics, presented as questions in the Bulletin.

About CIRO.

The Canadian Investment Regulatory Organization (CIRO) is the national self-regulatory organization that oversees all investment dealers, mutual fund dealers and trading activity on Canada's debt and equity marketplaces. CIRO is committed to the protection of investors, providing efficient and consistent regulation, and building Canadians' trust in financial regulation and the people managing their investments. For more information, visit www.ciro.ca. 

SOURCE Canadian Investment Regulatory Organization (CIRO)

Kate Morris, Senior Corporate Communications and Public Affairs Specialist, [email protected], Phone: [phone]