Implementation Date for the Reporting of Trade Variations and Cancellations

11-0079
Type: Rules Notice> Guidance Note
Rule connection:
UMIR
7.11 Variation and Cancellation and Correction of Trades
Distribute internally to:
Legal and Compliance
Trading

Contact:

James E. Twiss
Vice President, Market Regulation Policy
Telephone:
Email:

Executive Summary

This Rules Notice provides notice that the requirement to provide a report of a Trade Variation or Cancellation (“TVCR”) to the Investment Industry Regulatory Organization of Canada (“IIROC”) will implemented on June 1, 2011.

Background

Amendments to Universal Market Integrity Rules (“UMIR”) approved on October 15, 2008 introduced a requirement as Rule 7.11 that a trade cannot be cancelled or varied (with respect to price, volume or settlement date), unless the cancellation or variation was made:

  • by IIROC in accordance with UMIR; or
  • with notice to IIROC immediately following the variation or cancellation of the trade in such form and manner as may be required by IIROC.

The implementation of the requirement to file a TVCR was deferred and will become effective on June 1, 2011, concurrent with the introduction of the first phase of filing requirements for the reports of an “Extended Failed Trade”.1

Questions and Answer

The following are questions relating to the obligation of a Participant or Access Person to file a TVCR and IIROC’s response to each question:

  1. Is a Participant or Access Person required to file a TVCR for every variation or cancellation of a trade?

No.  Prior to the settlement of a trade of a listed security executed on a marketplace, the variation (with respect to: the price of the trade; the volume of the trade; or the date for settlement of the trade) or the cancellation of the trade may only be undertaken using the procedures and facilities offered by the marketplace on which the trade was executed or by the clearing agency through which the trade is or was to be cleared and settled.  Marketplaces are able to cancel trades in limited circumstances principally related to systems malfunctions or technical problems at the marketplace or at the direction of IIROC.

A TVCR is required ONLY from a Participant or Access Person who was party to a trade and the variation or cancellation is made after the initial settlement date of the trade.  The purpose of the report directly from a Participant or Access Person is to ensure 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 permit other trading activity to then be conducted in nominal compliance with UMIR or other securities regulatory requirements). 

  1. If a Participant or Access Person has an obligation to file a TVCR, how and when should be TVCR be filed with IIROC?

A TVCR must be filed with IIROC immediately following the variation or cancellation of a trade.  The TVCR must be filed with the Trading Review and Analysis Department of IIROC.  A TVCR is considered a “regulatory communication”, and unless otherwise permitted by IIROC, the TVCR will take the form of an e-mail submitted through EMX.

EMX is a web portal based application allowing users to exchange secure and encrypted messages that is used by Trading Review and Analysis for various regulatory communications including: Requests for Information, Potential Violation Alert Notifications and Gatekeeper Reports.

If you have any questions regarding the procedure for filing a TVCR, please contact [email protected].

  • 1IIROC Notice 11-0080 - Rules Notice – Guidance Note – UMIR – Implementation Date for the Reporting of Extended Failed Trades (February 25, 2011).