Canada's securities and markets regulators will continue to let investors take short positions on trades despite several European exchanges banning bets against stocks in an attempt to steady market activity amid the COVID-19 pandemic.
The Canadian Securities Administrators (CSA), an umbrella organization for Canada's provincial and territorial securities regulators, and the Investment Industry Regulatory Organization of Canada (IIROC) issued a rare joint statement on Thursday to address recent volatile market conditions.
The statement reaffirmed that Canada's capital markets continue to operate in a "fair and orderly fashion" despite the significant volume and volatility observed over the past several weeks as the pandemic spreads worldwide.
“During this period of increased volatility, CSA members are in close contact with IIROC’s surveillance and analytics teams, to ensure our markets continue to function in a fair and orderly manner," said Louis Morisset, CSA chair and president and chief executive officer of the Autorité des marchés financiers, in a release.
The CSA and IIROC stated there are no plans to introduce short-selling restrictions, a move that has already taken place in France, Italy, Spain, Greece, and Belgium to help stabilize financial markets.
The regulators said there's no evidence short selling, where an investor profits as a stock price falls, is responsible for current volatile market conditions. The CSA and IIROC said they may, however, introduce limits on certain short-selling activities if they determine the need to do so through new information or analysis.
"IIROC’s data shows that short-selling activity continues to represent a low percentage of total market activity and remains consistent with short selling activity prior to the pandemic," the regulators said.
Last month, TMX Group Inc., which owns and operates the TSX and TSX Venture, issued a statement informing investors that it planned to keep stock markets open despite several violent swings in the S&P/TSX Composite Index that triggered circuit-breakers, causing a pause in trading activity for 15 minutes.
The exchange owner said at the time it "feels strongly" that it is in the best interest of publicly-listed companies, investors and other participants for markets to remain open.
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