Introduction TMX Group, through our equities exchanges, clearing house and data services, plays an important role in the Canadian capital markets, giving us insight into the perspectives of a wide range of market participants and stakeholders relevant to the discussion of possible changes to the regulatory framework for short selling in Canada. [...] TMX Group believes that the practice of short selling has a role in the vibrancy of the Canadian capital markets by enhancing market liquidity, transparency and price discovery, however we are also aware that negative perceptions about short selling exist, and that certain stakeholders have observed that the regulatory framework for short selling in Canada is not as robust as in other jurisdiction. [...] In our view, more frequent distribution of data relating to short selling would provide the market with more timely disclosure of short selling and provide greater transparency relating to the composition of the market. [...] However, such a determination may require further analysis given the conflicting results of the most recent study and IIROC’s previous analysis on short sales and failed trades (i.e., IIROC recently published the Failed Trade Study, which reflects an increase in failed trades in the short sale market in Canada (particularly junior securities) during the timeframe analyzed, as opposed to IIROC’s pr. [...] Buy-In Requirements As noted in the Staff Notice, unlike in the United States and the European Union, Canada does not have requirements that, in the event a short sale fails to settle, the short seller is subject to a mandatory buy-in.5 We understand that mandatory buy-in requirements, if imposed, could increase investor confidence in the short-selling market in Canada and bring it into closer ali.
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