Canadian securities regulators are proposing to continue co-ordinating market-wide circuit breakers with the U.S. market, and are seeking comment on proposed guidance concerning the triggering of those trading halts.
The Investment Industry Regulatory Organization of Canada (IIROC) Wednesday published proposed new guidance on the application of market-wide circuit breakers. Under the guidance, market-wide trading halts would continue to be triggered in Canada concurrently with the U.S. circuit breakers.
Earlier this year, IIROC sought comment on whether market-wide trading halts in Canadian markets should continue to be based on the U.S. market. That trading halt mechanism is currently undergoing in reform in the U.S., in response to the May 2010 flash crash and other recent market disruptions.
Among other things, U.S. regulators are proposing to lower the threshold for triggering a decline, shorten the duration of trading halts, and to simplify the structure of halts. Thresholds will also be calculated daily rather than quarterly, and they will be based on the S&P 500 index, rather than the narrower Dow Jones Index, which is currently used.
In the wake of those planned changes, IIROC sought industry feedback on whether to continue coordinating trading halts with US. markets, to adopt a made-in-Canada approach, or some hybrid model. It reports that the market generally favours continued coordination with the U.S. So, that it what it’s proposing to do. And, on days when Canadian markets are open, but U.S. markets are closed, IIROC proposes to use movement in the S&P/TSX Composite Index to determine if a market-wide circuit breaker should be triggered.
The proposed guidance would take effect on February 4, 2013, which is when changes to the rules governing market-wide circuit breakers in the U.S. become effective on a pilot basis (ending in Feb. 2014). IIROC says that it plans to monitor developments in the U.S. and “may issue revised proposed guidance if additional changes are proposed in the United States that would become effective during the period of the pilot project or after the expiry of the pilot period.”
Comments on the proposed guidance are due by Nov. 26.