Guidance on Single-Stock Circuit Breakers

1. Background

It is CIRO’s view that market forces should generally drive trading activity without regulatory interference. Ordinarily, CIRO will only exercise its discretionary regulatory intervention to vary or cancel a trade in specific circumstances as set out in UMIR 10.9(1)(d) and 10.9(2) and further detailed in Guidance Note 12-0258 - Guidance on Regulatory Intervention for the Variation or Cancellation of Trades (August 20, 2012).

The SSCB regime was implemented in addition to the guidance relating to variation and cancellation of trades referenced above, and is intended to address rapid, significant and unexplained price movement in a particular security that calls into question whether there is a “fair and orderly market” for that security. SSCBs are intended to operate as part of a multi-tiered approach to controlling short term, unexplained price volatility. The four identified levels of control are described below:

• The first set of controls is at the Participant level. Participants are required, under Part 1 of Policy 7.1 of UMIR, to have policies and procedures reasonably designed to ensure that trading is carried out in compliance with the applicable Requirements, which include provisions of securities legislation, UMIR, the Trading Rules3 and the Marketplace Rules.4
• The second set of controls would be at the marketplace level. Each marketplace is expected to have effective volatility parameters in place that would detect “erroneous orders” prior to execution.5
• The third set of controls is SSCBs.
• The fourth set of controls are market-wide circuit breakers which would trigger and halt trading on all marketplaces when there are declines in prices which affect the market generally.6

Given the “tiered” nature of these controls, the content of the Requirements at each level must be co-ordinated to ensure that there are no readily identifiable gaps and that each set of controls is capable of “working” effectively in conjunction with the other levels. Market integrity requires that there be a “fair and orderly market” in the trading of all listed securities. Notwithstanding the SSCB regime, CIRO retains the discretionary power to intervene, if required, to ensure a “fair and orderly market” in the trading of a listed security when:

• the security is not subject to SSCBs or
• the security is subject to SSCBs but the breaker has not been triggered.

2. Operation of SSCBs

SSCBs apply to:

• each security that is a constituent of the S&P/TSX Composite Index
• each Exempt Exchange-traded Fund (ETF)7, the assets of which are comprised principally of listed securities
• each Canadian Depositary Receipt8 (CDR), the assets of which are comprised solely of foreign securities and
• each security that is considered “actively-traded” for the purposes of this guidance, including any qualifying leveraged ETFs (Leveraged ETFs)9 (collectively qualifying securities).

Trigger levels for SSCBs:

• for each qualifying security that is not Leveraged, there would be a halt in the event of a price increase or decline of:
  • at least 10% and 20 trading increments in a five-minute period between 9:50 a.m. and 3:30 p.m.
  • at least 20% and 40 trading increments in a five-minute period between 9:30 a.m. and 9:50 a.m. or
  • at least 20% and 40 trading increments in a five-minute period during the 30- minute period following the resumption of trading after a regulatory halt, including a regulatory halt caused by the triggering of a SSCB
• for qualifying Leveraged ETFs, the trigger level is calculated by multiplying the standard trigger levels for non-leveraged qualifying securities by the ETF’s leverage ratio.
  For example, for a qualifying Leveraged ETF with a 2:1 ratio, the trigger levels are set at twice the usual levels of non-leveraged qualifying securities such that there would be a halt in the event of a price increase or decline of:
  • at least 20% and 40 trading increments in a five-minute window between 9:50 a.m. and 3:30 p.m. or
  • at least 40% and 80 trading increments in a five-minute window after 9:30 a.m. and before 9:50 a.m. and during the 30-minute period following the resumption of trading after a regulatory halt (including a regulatory halt caused by the triggering of an SSCB).
• the threshold used to calculate the trigger level of a particular security may be temporarily widened by Market Integrity Officials with notice, when acting in response to an extraordinary event where increased volatility may be considered “normal” trading activity
• prices of trades that may execute outside the “best bid – best ask” spread are excluded from the trigger calculation.

In addition, SSCBs:

• apply from 9:30 a.m. to 3:30 p.m.
• provide an initial trading halt of 5 minutes that may be extended for a further 5-minute period
• would result in the cancellation of any trade that executed at more than 5% beyond the trigger level.

3. Securities Covered

CIRO maintains a daily list of all listed securities that are subject to SSCBs on its website. Any party that wishes to download the SSCB-eligible securities list from our website should contact CIRO staff by e-mail at [email protected] to set up a Secure File Transfer Protocol (SFTP) account.

A listed security not covered by the SSCB program will continue to be subject to regulatory intervention by a Market Integrity Official by exercising their existing authority under UMIR 10.9.10

3.1 Actively-Traded Securities

CIRO believes that it is important that SSCBs are not applied too widely as this could inadvertently capture price movements that may be representative of the normal trading patterns of a particular security, such as those securities which are less liquid, have lower value and historically demonstrate higher short-term volatility. As such, for the determination of an actively-traded security for the purposes of SSCBs, CIRO:

• uses a weighted average rather than a simple average in the calculation of the trading volume and value criteria, and
• excludes data from the first five trading days of a newly listed security in the weighted average volume and value calculations.

1. Use of Weighted Average

CIRO uses weighted averages to determine whether a listed security is considered “actively-traded.” To qualify, the security will have traded, on at least one marketplace as reported on a consolidated market display, during the three previous calendar months immediately before the determination date:

• a weighted average of at least 500 times per trading day and
• with a weighted average trading value of at least $ 1,200,000 per trading day.

For the volume and value calculations above, we use an exponentially weighted average with a half-life11 of ten days, instead of the simple average. Our analysis indicated that using this approach to determine an actively-traded security has several benefits, including:

• places more importance on the security’s recent trading activity and
• faster updates to SSCB selection criteria, so actively traded securities are added to the program sooner, and newly inactive ones are removed more quickly, than would’ve occurred as under past methods.

2. Exclusion of Initial Trading Data of Newly Listed Securities

With respect to newly listed securities, we will exclude the volume and value trading data of the first five trading days from the weighted average calculation of volume and value. This approach avoids incorporating excessive trading volumes sometimes found in the initial trading phase of new listings when determining if a security is actively-traded. We believe that this method results in a better representation of the “normal” trading activity of new listings.

Our analysis indicates that this approach improves the actively-traded selection criteria and better captures securities that should be subject to SSCB protection.

4. SSCB Trigger Levels

A SSCB will be triggered for a particular security if its price increases or declines by at least 10% and 20 trading increments in a 5-minute period. The inclusion of a minimum tick requirement avoids the inappropriate triggering of SSCBs for securities with lower value which historically demonstrate higher short-term volatility when measured only by percentage price movement. To account for additional volatility that may be present in the post-open (9:30 a.m. to 9:50 a.m.) and in the 30-minute period following the resumption of trading after a regulatory halt (including a regulatory halt caused by the triggering of a SSCB), a SSCB will be triggered for a particular security only in the event of a price increase or decline, in a 5-minute period, of at least 20% and 40 trading increments. A Market Integrity Official may, with notice, temporarily widen the threshold of a particular security in response to an extraordinary event where increased volatility may be considered “normal” trading activity.

The below table provides a summary of the applicable trigger levels:

When determining a price increase or decline, CIRO compares each trade price of a security traded on a marketplace (the potential “triggering” trade) to a reference price. For this calculation, the reference price is any transaction in that particular security in the 5-minute period immediately preceding the potential “triggering” trade. Generally speaking, to determine a reference price CIRO looks to the lowest price in the 5-minute period to determine a price increase, and looks to the highest price in the 5-minute period to determine a price decline. If the last trade occurred more than five minutes earlier, no reference price is calculated and the SSCB will not trigger.

The price of any trade that is permitted by UMIR or by the Order Protection Rule to be executed outside of the “best bid – best ask” spread will not trigger a SSCB nor will it be used in calculating price movement for the purposes of establishing a “trigger” point. Prices of trades (other than those described above) that execute on dark marketplaces are included in the calculation of the reference price in the same way that these trades are currently included in the calculation of the “last sale price” under UMIR.

5. Length of Trading Halt

Following the triggering of a SSCB, the “triggered” security will be halted for a period of five minutes. A Market Integrity Official may extend the halt by a further five minutes if a significant imbalance of buy and sell orders remains.

If during the 5- or 10-minute (as applicable) halt, CIRO determines that a further halt is required, for instance to facilitate the dissemination of material news that may have leaked into the market, CIRO will send an electronic notice to market participants and replace the SSCB halt with a traditional regulatory halt.

Unless such a regulatory halt is imposed, each marketplace may resume trading at the expiry of the 5- or 10-minute period. Immediately after a SSCB halt is triggered, marketplaces should prepare to resume trading by either:

• entering a “pre-open” state to allow for order entry and the dissemination of an indicated “calculated opening price” or
• permitting order entry and using a “shotgun” opening at the resumption of trading.

6. Trading Hours during which SSCBs may be Triggered

SSCBs are operational between the hours of 9:30 a.m. and 3:30 p.m. CIRO is of the view that the post-open (9:30 a.m. – 9:50 a.m.) is a period of natural volatility during which care must be taken to avoid the unnecessary triggering of SSCBs. CIRO takes this additional volatility into account by increasing the required price movement to 20% and 40 trading increments during the post-open period.

During periods when SSCBs are not operational, including the period of 3:30 p.m. – 4:00 p.m., a Market Integrity Official continues to have the ability to exercise their powers to halt or suspend trading in a particular security, as provided under UMIR 10.9(1)(a).

7. Handling Trades Executed after the Triggering of a SSCB

CIRO expects, given the volume and speed of trading in the current market, that some trades will occur after the triggering of a SSCB but prior to the invocation of the trading halt across all marketplaces. A Market Integrity Official will use their authority granted under UMIR 10.9(1)(d)12 of UMIR to cancel any trade that is more than an additional 5% beyond the reference price than the calculated trigger price, as these trades are clearly in a zone where a person would not have had a reasonable expectation of execution at that time. Any trades that execute at a price less than an additional 5% beyond the trigger price will not be cancelled.

8. Special Circumstances

There are certain circumstances when a SSCB should not be triggered even if market prices experience the qualifying movement within the specified period of time. In particular, a SSCB will not be invoked for the balance of the trading day following the triggering of the market-wide circuit breaker (as the triggering of the market-wide circuit breaker indicates that market sentiment, not liquidity issues for that particular security, is responsible for the price movement).

9. Applicable Rules

Rules this Guidance Note relates to:

• UMIR 1.1
• UMIR 10.9
• UMIR Policy 7.1

10. Previous Guidance Note

This Guidance Note combines and replaces:

• Guidance Note 14-0170 – Guidance Respecting the Expansion of Single-Stock Circuit Breakers - Partially Repealed Guidance (July 10, 2014).
• Guidance Note 16-0138 – Additional Guidance Respecting Single-Stock Circuit Breakers and Marketplace Thresholds (June 20, 2016).
• Guidance Note 20-0009 – Additional Guidance Respecting Securities Covered by Single-Stock Circuit Breakers (January 14, 2020).
• Guidance Note 23-0006 – Additional Guidance Respecting Application of Single-Stock Circuit Breakers (January 19, 2023).

11. Related Documents

This Guidance Note is related to the following Guidance Notes:

• Guidance Note 12-0258 - Guidance on Regulatory Intervention for the Variation or Cancellation of Trades (August 20, 2012).
• Guidance Note 15-0186 - Guidance on Marketplace Thresholds (August 5, 2015).
• Guidance Note 16-0138 - Additional Guidance Respecting Single-Stock Circuit Breakers and Marketplace Thresholds (June 20, 2016).
• Guidance Note GN-URPart9-25-0001 - Guidance on Market-wide Circuit Breakers (August 19, 2025).

This Guidance Note is related to the following Bulletin:

• Rules Bulletin 15-0022 – Update Respecting the Expansion of Single-Stock Circuit Breakers (January 28, 2015).

• 3Per UMIR 1.1, “Trading Rules” means National Instrument 23-101 – Trading Rules, as amended, supplemented and in effect from time to time.
• 4Per UMIR 1.1, “Marketplace Rules” means the rules, policies and other similar instruments adopted by an Exchange or a QTRS as approved by the applicable securities regulatory authority but not including any rules, policies or other similar instruments related solely to the listing of securities or derivatives on an Exchange or to the quoting of securities on a QTRS.
• 5Under section 8 of National Instrument 23-103 - Electronic Trading and Direct Electronic Access to Marketplaces, marketplaces are required to prevent the execution of orders exceeding price and volume thresholds set by a marketplace or a regulation services provider. For additional guidance on marketplace thresholds, see Guidance Note 15-0186 - Guidance on Marketplace Thresholds (August 5, 2015) and Guidance Note 16-0138 - Additional Guidance Respecting Single-Stock Circuit Breakers and Marketplace Thresholds (June 20, 2016).
• 6See Guidance Note GN-URPart9-25-0001 - Guidance on Market-wide Circuit Breakers (August 19, 2025).
• 7In UMIR, an Exempt Exchange-traded Fund means a mutual fund for the purposes of applicable securities legislation, the units of which:
  1. are a listed security or a quoted security; and
  2. are in continuous distribution in accordance with applicable securities legislation
     but does not include a mutual fund that has been designated by the Market Regulator to be excluded from the definition.
• 8A Canadian Depositary Receipt or CDR is a product listed on an Exchange and represents shares of foreign-listed securities.
• 9A Leveraged ETF uses financial derivatives and debt to amplify the daily returns of an underlying index. Leveraged ETFs aim at keeping a constant amount of leverage during the investment time frame such as a 2:1 or 3:1 ratio. If a Leveraged ETF has a 2:1 ratio, this means that each dollar of investor capital is matched with an additional dollar of invested debt, theoretically returning 2% where the index returns 1%. This could also work in the opposite direction with amplified losses.
• 10Also see Guidance Note 12-0258 – Guidance on Regulatory Intervention for the Variation or Cancellation of Trades (August 20, 2012).
• 11“Half-life” is the period of time in which the exponential weight reduces to one-half.
• 12UMIR 10.9(1)(d) provides that a Market Integrity Official may, in governing trading in securities on the marketplace, vary of cancel any trade which, in the opinion of such Market Integrity Official, is unreasonable or not in compliance with UMIR or any Policy.