The Canadian Investment Regulatory Organization (CIRO) has issued proposed amendments to introduce mandatory close-out requirements triggered by prolonged settlement failures at a clearing agency and is seeking stakeholder comments on whether the changes would be helpful and how market participants would be affected. The proposal would require investment dealers that are members of the clearing agency to close a fail-to-deliver position by buying or borrowing shares within specified timelines, with persistent failures leading to pre-borrow requirements in the relevant security. The proposal follows feedback to a December 2022 joint CIRO and Canadian Securities Administrators (CSA) request for public input on Canada’s short selling regulatory framework, after which CIRO and the CSA formed a staff working group to assess whether additional short selling-related requirements are appropriate for Canadian markets. CIRO notes that stakeholder views on short selling remain divergent and references the Ontario Capital Markets Modernization Taskforce’s January 2021 final report, which recommended modernizing Ontario’s short selling framework including adopting mandatory close-out provisions. Comments are requested by April 10, 2025, including responses to 16 specific questions set out in the bulletin.
Canadian Investment Regulatory Organization 2025-01-09
Canadian Investment Regulatory Organization consults on mandatory close-out requirements for prolonged settlement failures
The Canadian Investment Regulatory Organization (CIRO) proposes amendments mandating close-out requirements for prolonged settlement failures at clearing agencies, seeking stakeholder feedback. Investment dealers must close fail-to-deliver positions within set timelines, with persistent failures leading to pre-borrow requirements. This follows a CIRO and Canadian Securities Administrators review of Canada's short selling framework, highlighting divergent stakeholder views and recommendations from the Ontario Capital Markets Modernization Taskforce.