The Investment Industry Regulatory Organization of Canada (IIROC) says that it will no longer intervene to vary, or cancel, odd lot trades that occur at unreasonable prices.
IIROC announced Tuesday that, after reviewing its regulatory intervention practices for odd lot trades, “Effective immediately, IIROC is discontinuing its former practice of cancelling or varying certain odd lot trades.”
The regulator notes that many marketplaces that support odd lot trading do not prevent odd lot trades from executing at unreasonable prices. And, it says that, despite this risk, some traders “continue to enter deep limit prices on odd lot orders”, which may result in executions at these prices.
In the past, IIROC has intervened with odd lot trade executions that are not voluntarily amended. However, it has now decided to stop doing that, noting that, “Odd lot executions do not impact the last sale price, volume-weighted average price, closing price or other common benchmarks and market integrity is not impaired by the existence of unreasonable or erroneous odd lot trades.”
If traders can’t agree to amend unreasonable trades between themselves, dealers may be required to settle odd lot trades at the price of execution, IIROC says. And, it says that it expects that any market participant that enters an odd lot order with an unreasonable price “will ensure their clients are not disadvantaged, in accordance with best execution rules.”