On May 10, 2012, the Investment Industry Regulatory Organization of Canada (IIROC) released a request for comments on approaches to the establishment and operation of price and volume thresholds or volatility controls by each marketplace in Canada. IIROC has proposed the following two guiding principles: (i) that marketplace thresholds should operate to generally preclude the execution of orders at prices that would otherwise, on execution, require regulatory intervention by IIROC on the triggering of a single-stock circuit breaker or the application of IIROC’s policies and procedures for the variation and cancellation of trades; and (ii) that the volatility control mechanism used by a marketplace should have the least amount of impact on the market-wide operation of the price discovery and access to tradable liquidity.
The release is the first step in the public consultation process which may lead to IIROC making a formal proposal on the establishment of price and volume thresholds to be adopted by marketplaces. While the release discusses existing marketplace controls, IIROC specifically issued guidance or request for comments with respect to single-stock circuit breakers, regulatory intervention for the cancellation or variation of trades and market-wide circuit breakers. IIROC notes, however, that currently none of these mechanisms are triggered by the volume of an order, but instead are based on price impact.
Comments are being accepted until August 8, 2012.