Submissions to Government

PMAC Submission on Joint CSA and IIROC Staff Notice 23-329 Short Selling in Canada

Key Recommendations

  1. Do not make any immediate changes to the regulatory framework with respect to the Canadian short selling regime; and,
  2. Continue to conduct research and to consult with stakeholders regarding the frequency and root causes of failed trades and their relationship to short selling in Canada.


There does not appear to be sufficient data, evidence or rationale to support changes to the current regulatory framework with respect to the short selling regime. The Regulators should therefore not make any immediate changes. Any decisions regarding new regulation in this area should be based on data and evidence rather than perception. The measures suggested in the Staff Notice seem to be primarily directed at preventing failed trades. The existing evidence suggests that failed trades are not a prevalent or pervasive issue in Canada. As we noted in our 2021 Response, the public perception problem with short selling seems to be driven by concerns around misleading statements and short and distort campaigns, which would not be addressed by requirements like pre-borrowing, disclosure, reporting etc.

We are concerned that efforts to regulate short selling may have unintended negative consequences such as decreased liquidity, increased trading costs, loss of information to the market and price uncertainty. Our members are concerned that such pre-borrowing requirements would slow execution, increase turnover in short selling activity in general, and create a chilling effect on legitimate and essential short selling activity. Regulators should consider the costs and benefits of various regulatory options and the experiences of other jurisdictions before deciding which route to take. Regulation should narrowly focus on specific behaviours and desired outcomes. The change to a T+1 settlement period is likely to have a significant impact on settlement; no new regulation should be introduced that could further affect settlement until the impact of the move to T+1 is better understood. We applaud the Regulators’ efforts to gather feedback from market participants on the extent and effect of activist short selling in Canada and to consider the experience of other comparable jurisdictions.

We urge the Regulators to continue to conduct research and to consult with stakeholders regarding the frequency and root causes of failed trades and their relationship, if any, to short selling in Canada.

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