TMX warns Canadian regulators against following US short selling rule

TMX Group, the owner of the Toronto Stock Exchange, has written to the Canadian Securities Administrators, warning the regulator not to introduce short selling rules similar to those being introduced in the US.

Earlier in the year, the US Securities and Exchange Commission (SEC) announced a “circuit breaker” system which would see short selling restricted in instances where a stock fell by 10% in a single day.

TMX warned that, instead of helping the market, the new rule could actually cause problems if introduced in Canada.

“TMX Group believes that additional regulation of short sales in Canada is not warranted,” said Tom Kloet, TMX Group CEO. “In our view, adopting the recently-amended US rules around short sales would add unnecessary costs to the industry without resulting in a corresponding benefit to investors.”

In its letter, the firm pointed to analysis which suggested that Canada had not been victim to the levels of “abusive” short selling seen elsewhere. Additionally, TMX said that recent Investment Industry Regulatory Organization of Canada amendments to short selling regulations in the Universal Market Integrity Rules provided sufficient controls.

“We are confident that the UMIR short sale rules combined with vigilant surveillance and enforcement by IIROC provide protection to our market,” Kloet concluded.

GSL Canadian Securities Lending Summit