Part 1 - Definitions and Interpretation
For the purposes of UMIR, the following terms shall be as defined by applicable securities legislation except that:
“person” includes any corporation, incorporated association, incorporated syndicate or other incorporated organization.
“trade” includes a purchase or acquisition of a security or a derivative for valuable consideration in addition to any sale or disposition of a security or a derivative for valuable consideration.
“security” does not include a derivative.
displayed on an Exchange that is then open for trading and in respect of which trading in the particular derivative
on that marketplace has not been:
The definitions of a “dealer-restricted person” and “issuer-restricted person” include a person acting jointly or in concert with a person that is also a dealer-restricted person or an issuer-restricted person, as applicable, for a particular transaction. For the purposes of these definitions, “acting jointly or in concert” has a similar meaning to that phrase as defined in section 91 of the Securities Act (Ontario) or similar provisions of applicable securities legislation, with necessary modifications. In the context of these definitions only, it is a question of fact whether a person is acting jointly or in concert with a dealer- or issuer-restricted person and, without limiting the generality of the foregoing, every person who, as a result of an agreement, commitment or understanding, whether formal or informal, with a dealer-restricted person or an issuer-restricted person, bids for or purchases any restricted security will be presumed to be acting jointly or in concert with such dealer- or issuer-restricted person.
The definition of “restricted period”, with respect to a prospectus distribution and a “restricted private placement”, refers to the end of the period as the date that the selling process ends and all stabilization arrangements relating to the offered security are terminated. Rule 1.2(6)(a) provides interpretation as to when the selling process is considered to end. As further clarification, the selling process is considered to end for a prospectus distribution when the receipt for the prospectus has been issued, the Participant has distributed all securities allocated to it and, is no longer stabilizing, all selling efforts have ceased and the syndicate is broken. Selling efforts have ceased when the Participant is no longer making efforts to sell, and there is no intention to exercise an over-allotment option other than to cover the syndicate’s short position. If the Participant or syndicate subsequently exercises an over-allotment option in an amount that exceeds the syndicate short position, the selling efforts would not be considered to have ceased. Securities allocated to a Participant that are held and transferred to the inventory account of the Participant at the end of the distribution are considered distributed. Subsequent sales of such securities are secondary market transactions and should occur on a marketplace subject to any applicable exemptions (unless the subsequent sale transaction is a distribution by prospectus). To provide certainty around when the distribution has ended, appropriate steps should be taken to move the securities from the syndication account to the inventory account of the Participant.
Rule 2.2 prohibits a Participant or Access Person from doing various acts if the Participant or Access Person “knows or ought reasonably to know” that a particular method, act or practice was manipulative or deceptive or that the effect of entering an order or executing a trade would create or could reasonably be expected to create a false or misleading appearance of trading activity or interest or an artificial price. Rule 2.3 prohibits a Participant or Access Person from entering an order on a marketplace or executing a trade if the Participant or Access Person “knows or ought reasonably to know” that the entry of the order or the execution of the trade would result in the violation of various securities or regulatory requirements.
In determining what a person “ought reasonably to know” reference would be made to what a Participant or Access Person would know, acting honestly and in good faith, and exercising the care, diligence and skill that a reasonably prudent Participant or Access Person would exercise in comparable circumstances. In essence, the test becomes what could a Participant or Access Person have been expected to know if the Participant or Access Person had:
Rule 7.1 requires each Participant prior to the entry of an order on a marketplace to comply with applicable regulatory standards with respect to the review, acceptance and approval of orders. Each Participant that is a dealer must be a member of a self-regulatory entity. Each Participant will be subject to the by-laws, regulations and policies as adopted from time to time by the applicable self-regulatory entity. These requirements may include an obligation on the member to “use due diligence to learn and remain informed of the essential facts relative to every customer and to every order or account accepted.” While knowledge by a Participant of “essential facts” of every customer and order is necessary to determine the suitability of any investment for a client, such requirement is not limited to that single application. The exercise of due diligence to learn essential facts “relative to every customer and to every order” is a central component of the “Gatekeeper Obligation” embodied within the trading supervision obligation under Rule 7.1 and 10.16. In addition, securities legislation applicable in a jurisdiction may impose review standards on Participants respecting orders and accounts. The regulatory standards that may apply to a particular order may vary depending upon a number of circumstances including:
Defined Terms:
NI 14-101 section 1.1(3) – “jurisdiction”, “securities legislation" and “securities regulatory authority”
NI 21-101 section 1.1 – “order” and “self-regulatory entity”
NI 21-101 section 1.4 – Interpretation -- “security”
UMIR section 1.1 – “Access Person”, “best ask price”, “best bid price”, “connected security”, “consolidated market display”, “dealer-restricted person”, “derivative”, “Electronic Trading Rules”, “Exchange”, “issuer-restricted person”, “last sale price”, “limit order”, “listed security”, “Market Operation Instrument”, “market order”, “marketplace”, “Marketplace Regulator”, “Marketplace Rule”, “offered security”, “Participant”, “Policy”, “QTRS”, “quoted security”, “restricted period”, “restricted private placement”, “restricted security”, “standard trading unit”, “trading day” and “UMIR”
UMIR section 1.2(2) – “person” and “trade”
Related Provisions:
UMIR section 1.1 – definitions of “last sale price” and “standard trading unit”
UMIR section 2.2. – Manipulative and Deceptive Activities
UMIR section 2.3 – Improper Orders and Trades
UMIR section 6.3 – Exposure of Client Orders
UMIR section 6.4 – Trades to be on a Marketplace
UMIR section 7.1 – Trading Supervision Obligations
UMIR section 7.7 – Trading During Certain Securities Transactions
UMIR section 8.1 – Client-Principal Trading
UMIR section 9.1 – Regulatory Halts, Delays and Suspensions of Trading
UMIR section 10.16 – Gatekeeper Obligations of Directors, Officers and Employees of Participants and Access Persons
Regulatory History:
Effective February 25, 2005, the applicable securities commissions approved amendments that came into force on May 9, 2005 to add subsections (6) and (7) to section 1.2 and to add Parts 1 and 2 of Policy 1.2, related to amendments to the market stabilization rules in UMIR 7.7. See Market Integrity Notice 2005-007 – “Amendments Respecting Trading During Certain Securities Transactions” (March 24, 2005).
Effective April 1, 2005, the applicable securities commissions approved amendments to add Part 3 (“Ought Reasonably to Know”) and Part 4 (“Applicable Regulatory Standards”) of Policy 1.2. See Market Integrity Notice 2005-011 – “Provisions Respecting Manipulative and Deceptive Activities” (April 1, 2005).
In connection with the recognition of IIROC and its adoption of UMIR, the applicable securities commissions approved an amendment to section 1.2 that came into force on June 1, 2008 to make editorial changes. See Footnote 1 in Status of Amendments.
Effective January 8, 2010, the applicable securities commissions approved amendments to subsection (6) of section 1.2 and to add subsection (8) to section 1.2, related to amendments to the market stabilization rules in UMIR 7.7. See IIROC Notice 10-0006 – “Provisions Respecting Trading During Certain Securities Transactions” (January 8, 2010).
Effective February 1, 2011, the applicable securities commissions approved amendments to add the reference to “Rule 6.4” to subsection (3) of section 1.2. See IIROC Notice 09-0328 – “Provisions Respecting Implementation of the Order Protection Rule” (November 13, 2009).
Effective March 1, 2013, the applicable securities commissions approved amendments to renumber clause (c) of subsection 1.2(1) as clause (d) and to add new clause (c) to reference the CSA’s Electronic Trading Rules. See IIROC Notice 12-0363 – “Provisions Respecting Electronic Trading” (December 7, 2012).
Effective December 9, 2013, the applicable securities commissions approved amendments to the French version of UMIR. See IIROC Notice 13-0294 “Amendments to the French version of UMIR” (December 9, 2013).
Effective September 18, 2015, the applicable securities commissions approved amendments to subsection 5 and 8 of UMIR 1.2. See IIROC Notice 15-0211 - Notice of Approval – “Provisions Respecting Unprotected Transparent Marketplaces and the Order Protection Rule” (September 18, 2015).
Effective December 14, 2022, the applicable securities commissions approved amendments to subsections 1.2(2) and 1.2(8). See IIROC Notice 22-0140 – “Amendments Respecting the Trading of Derivatives on a Marketplace” (September 15, 2022).
There is no history log for this rule.