| Canadian Investment Regulatory Organization

Rule Text

A Participant acting as principal or an Access Person shall not enter an order on a marketplace for a particular security that on execution would be a short sale if the Participant or Access Person has previously executed a sale in that security that became a failed trade in respect of which notice to the Market Regulator was required pursuant to Rule 7.10 unless:
1. the Participant or Access Person has made arrangements for the borrowing of the securities necessary to settle any resulting trade prior to the entry of the order; or
2. the Market Regulator has consented to the entry of such order or orders.
A Participant acting as agent shall not enter a client order or a non-client order on a marketplace that on execution would be a short sale if the client or non-client has previously executed a sale of any listed security that became a failed trade in respect of which notice to the Market Regulator was required pursuant to Rule 7.10 unless:
1. the Participant has made arrangements for the borrowing of the securities necessary to settle any resulting trade prior to the entry of the order; or
2. the Participant is satisfied, after reasonable inquiry, that the reason for any prior failed trade was not as a result of any intentional or negligent act of the client or non-client.

Defined Terms:

NI 21-101 section 1.1 – “order”

NI 21-101 section 1.4 – Interpretation -- “security”

UMIR section 1.1 – “Access Person”, “failed trade”, “listed security”, “Market Regulator”, “marketplace”, “non-client”, “Participant”, “Policy”, and “short sale”.

UMIR section 1.2(2) – “trade”

History

On November 15, 2024, the applicable securities commissions approved amendments to UMIR to consolidate provisions related to short selling to a common location within UMIR. See CIRO Bulletin 24-0349 – “Amendments Respecting the Reasonable Expectation to Settle a Short Sale” (December 5, 2024).

Rule Text

Before entering an order on a marketplace to sell a security that on execution would result in a short sale, a Participant or Access Person must have a reasonable expectation to settle any resulting trade on the date contemplated on the execution of the trade.
Subsection (1) does not apply to the short sale of a security by:
1. a person that is deemed to own the security, provided that the Participant has been reasonably informed that the person has a reasonable expectation to deliver such security in such number and form as to permit the settlement of the trade:
  1. as soon as all restrictions on delivery have been removed; and
  2. by no later than thirty-five consecutive calendar days following the trade date;

Defined Terms:

NI 21-101 section 1.1 – “order”

NI 21-101 section 1.4 – Interpretation -- “security”

UMIR section 1.1 – “Access Person”, “marketplace”, “Participant”, “Policy”, and “short sale”.

UMIR section 1.2(2) – “trade”

History

On November 15, 2024, the applicable securities commissions approved amendments to UMIR to add a new positive requirement to have, prior to order entry, a reasonable expectation to settle on settlement date any order that upon execution would be a short sale. See CIRO Bulletin 24-0349 – “Amendments Respecting the Reasonable Expectation to Settle a Short Sale” (December 5, 2024).

Effective August 11, 2026, the applicable securities commissions approved amendments to UMIR 3.3 to add a new deemed-to-own exception with respect to the requirement to have a reasonable expectation to settle. See CIRO Bulletin 26-0067 – “Amendments Respecting Reasonable Expectations to Settle Short Sales” (April 2, 2026).