Effective October 15, 2012, IIROC's price restrictions that prohibit short sales on a “downtick” are being repealed. The repeal of the "tick test" has been in the works for a number of years, since similar action was taken by the U.S. Securities and Exchange Commission to repeal short sale restrictions in 2007. Although, unlike the U.S. rules, IIROC has not incorporated a circuit breaker that would trigger a tick test. In certain circumstances, however, a pre-borrow requirement for short sales, which requires a person entering the order to have made arrangements to borrow the securities required to settle the trade prior to the entry of the order, is imposed.
IIROC also published a notice yesterday to provide guidance on using "short sale" and "short-marking exempt" order designations. Of particular interest, the notice provides guidance with respect to the information on which a Participant may rely in determining whether an account may use the "short-marking exempt" designation. The guidance further provides a list of IIROC's answers to common questions regarding the order designations.
Meanwhile, earlier this week, IIROC published a notice to answer specific questions regarding upcoming changes to the rules respecting dark liquidity on Canadian markets. As we've discussed in the past, also effective October 15, UMIR is being amended to provide that (i) visible orders will have execution priority over dark orders on the same marketplace at the same price; (ii) in order to trade with a dark order, smaller orders must receive a minimum level of price improvement; and (iii) IIROC will have the ability to designate a minimum size for dark orders. The FAQ released by IIROC answer questions regarding the priority of order execution, marking orders and international crosses.