A survey of short selling in Canada

Edited book (chapter)


Lento, Camillo and Kozyra, James. 2011. "A survey of short selling in Canada ." Gregoriou, Greg N. (ed.) Handbook of short selling. Waltham, MA. United States. Elsevier. pp. 125-135
Chapter Title

A survey of short selling in Canada

Book Chapter CategoryEdited book (chapter)
ERA Publisher ID1821
1034
Book TitleHandbook of short selling
AuthorsLento, Camillo (Author) and Kozyra, James (Author)
EditorsGregoriou, Greg N.
Page Range125-135
Chapter Number7
Number of Pages11
Year2011
PublisherElsevier
Academic Press
Place of PublicationWaltham, MA. United States
ISBN9780123877246
9780123877253
Digital Object Identifier (DOI)https://doi.org/10.1016/B978-0-12-387724-6.00007-6
Abstract

This chapter provides insights into the regulatory framework that governs short sales and the taxation of short sales in Canada, and discusses recent trends in short selling activity in Canada. In Canada, the Investment Industry Regulatory Organization of Canada (IIROC) governs most of the activity related to equity short sales through the Universal Market Integrity Rules (UMIR). A proposal was put forward in 2007 to repeal the uptick rule in Canada altogether, however, the market turbulence of 2008 led the IIROC to defer the proposed removal of the uptick rule. Although not part of the IIROC's UMIR, some short selling activity is also prohibited by certain insiders by the Canada Business Corporations Act (CBCA). There are, however, some exceptions to this prohibition that allow insiders to sell short under certain conditions if they own another security convertible into the security sold or an option or right to acquire the security sold. A short sale becomes taxable when the borrowed shares are repurchased and returned to the original owner. Short sales typically have volumes lower than that of the opposing long position in a given security. Short sale volume consisted of 78% of the average trade volume for the TSX and 83% for the TSXV. The lowest level of short sale volume relative to long positions was seen on the CNSX, with an average rate of 52%. UMIR requirements make it necessary to periodically report the short position held in each security on an account-by-account basis. This requirement allows for an analysis of the rates of turnover of short positions and the percentage of securities on a given marketplace that a short position has been undertaken in.

Keywordsexchange-traded funds; insider short sales; Investment Industry Regulatory Organization of Canada; naked short sales; universal market integrity rules; uptick rule
ANZSRC Field of Research 2020350208. Investment and risk management
500102. Business ethics
Public Notes

© 2012 Elsevier Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording,or any information storage and retrieval system, without permission in writing from the Publisher.

Byline AffiliationsFaculty of Business and Law
Lakehead University, Canada
Institution of OriginUniversity of Southern Queensland
Permalink -

https://research.usq.edu.au/item/q214z/a-survey-of-short-selling-in-canada

  • 1725
    total views
  • 364
    total downloads
  • 1
    views this month
  • 0
    downloads this month

Export as

Related outputs

Does the market price the nature and extent of earnings management for firms that beat their earnings benchmark?
Lento, Camillo, Cotter, Julie and Tutticci, Irene. 2016. "Does the market price the nature and extent of earnings management for firms that beat their earnings benchmark?" Australian Journal of Management. 41 (4), pp. 633-655. https://doi.org/10.1177/0312896216641600
Ex ante expectations and ex post assessment of the nature and extent of earnings management in the MBE setting
Lento, Camillo. 2011. Ex ante expectations and ex post assessment of the nature and extent of earnings management in the MBE setting. PhD Thesis Doctor of Philosophy. University of Southern Queensland.