Market Regulation Services Inc. (RS) today announced the securities commissions of Alberta, BC, Manitoba, Ontario and Quebec have all approved amendments to the Universal Market Integrity Rules regarding short sales and regulatory halts.

The change regarding short sales defined that a person shall be considered to be “short” a security if they hold a right to acquire the security that will not settle within the ordinary settlement period of trade date plus three days; and, they provide an exemption from the pricing restrictions for trades in exchange-traded funds (ETF).

In a market integrity notice released today, RS said that the amendment expands the ability to make a “short exempt” sale in a security that is an “exchange-traded fund”. It noted that since ETFs represent a basket of securities, and are in continuous distribution, they are not prone to the same manipulative pressures that may be present as a result of the improper short sale of other securities.

As a result of the approval of the amendments, RS designates 17 securities as ETFs. In the future, it will consider giving other securities this designation, a decision that will be made in consultation with the Ontario Securities Commission or other applicable securities regulatory authority.

Today’s other change repeals the restriction on order entry on a marketplace during a regulatory halt. Prior to the amendment, no orders be entered on a marketplace during the period of a regulatory halt or suspension. The prohibition was initially introduced to prevent persons, who may obtain specific information about an issuer before another person, from gaining an advantage by entering order first during the period of the regulatory halt or delay.

However, the rule wasn’t working, so RS pursued the amendment. It says that all retail client orders that had been entered directly had to be manually reentered following the lifting of the halt. And, this provided an unintended an advantage to certain traders whose access to the market was more direct.

“With the implementation of the amendment, RS will be able to continue to monitor the entry of the orders and will be in a position to more accurately determine if any person is attempting to take advantage of undisclosed material information during the period of time that the execution of orders is prohibited,” it says. “Unusual orders or patterns of orders can be questioned by RS prior to RS reopening the security for trading.”