Real-time surveillance provides CIRO with the ability to intervene in the market – including trading halts and varying or cancelling trades. CIRO does not take actions to halt trading lightly – nor does CIRO have the ability to halt trading indefinitely. Ordinarily, CIRO will only intervene to vary or cancel a trade under exceptional circumstances when the trade has an impact on a fair and orderly market or otherwise represents a risk to market integrity.
The price movements of securities (stocks) trigger halts rather than the existence of third-party information. Any security (stock) in the market can be halted at any time. When a security is halted, it cannot be traded by anyone.
Marketplace Thresholds
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Exchanges and alternative trading systems have price and volume thresholds designed to stop/control short-term, unexplained trading volatility. Securities are automatically prevented from being entered into the marketplace when, if executed, they would exceed prescribed price threshold levels. These mechanisms lessen the need for CIRO intervention and help reduce the number of erroneous trades and unexplained price movements. For example, securities that trade at least 500 times and at least $1.2 million a day are automatically stopped from entering the marketplace if the price of the security moves 10% or more. The threshold depends on the price of the security. (See all prescribed Marketplace Thresholds levels). A single-order is relatively common but may not be noticeable to retail traders because it only affects that single order.
Single Stock Circuit Breakers
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A five-minute halt of trading in a security will automatically trigger across all Canadian marketplaces if the price of a security (stock) moves 10% or more from 9:50 a.m. to 3:30 p.m. when the marketplaces and exchanges are open. (Note: Trading is available at some alternative trading venues starting at 8 a.m.). In the first 20 minutes, immediately after the market opens (9:30 a.m. – 9:50 a.m.), a 20% price move will be required to trigger a circuit breaker. A message is broadcast to all traders announcing the SSCB halt. The circuit breaker is designed to slow trading down to give investors the ability to understand what is happening in the market and make decisions based on market conditions. The halt can be extended at the discretion of CIRO staff for another five-minutes or to accommodate a company's news release and timely disclosure of material information. In such cases, a message is broadcasted to all traders announcing the SSCB is replaced with a manual halt. (See CIRO's guidance on the SSCBs and securities subject to SSCBs)
Market-Wide Circuit Breaker
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Market-wide circuit breakers are triggered when there is a severe systemic price decline and are an important volatility control intended to help mitigate extraordinary short-term price volatility on a market-wide basis. This type of circuit breaker is meant to maintain fair and orderly markets. Canada's market-wide circuit breakers are harmonized with those in the U.S. If markets in the United States are not open, the S&P/TSX Composite Index is used to determine circuit breaker thresholds. There are three levels of market-wide circuit breakers triggered when price declines reach certain thresholds. (See the thresholds levels)
Manual Halt Interventions
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Manual halt interventions are for securities that are not eligible for the single-stock circuit breaker and do not meet the liquidity test. Such interventions require surveillance staff's judgment as to when to intervene. (See CIRO's criteria for regulatory intervention for the variation or cancellation of trades)
Timely Disclosure and Pending News
Disclosure rules require that companies report all material information about their business and financial affairs to the public quickly and fairly. These rules aim to ensure that investors are given equal access to material information. CIRO monitors the timely disclosure of this information by companies trading on marketplaces that have retained CIRO as their regulation services provider. News releases issued by listed companies with material information are reviewed by CIRO surveillance staff before being released on the newswires or the company's website. If a news release is unclear or overly promotional, CIRO may ask the company to revise it. When surveillance staff believe that the information is material enough to impact the security (stock) price significantly, they might issue a temporary trading halt to allow the market to absorb the information properly. The reactivation of trading after a halt is called a trade resumption.
When a company fails to make timely disclosure of material information, the provincial securities regulators can issue a Cease Trade Order (CTO), which stops the trading of the company's stock. Once issued, a CTO remains in effect until the company meets its disclosure obligations.
Volatility Pause for Erratic Price Moves
CIRO monitors various bulletin boards, blogs, chat rooms and social media sites on the internet. If surveillance staff notice erratic price moves in stocks, they might issue a trading halt and contact the issuer to see if it has information to explain the movement. We have no jurisdiction or legal authority to remove content from the internet, but staff may ask a company to issue a news release if they believe that material information is leaking into the market or if they believe rumours are affecting the stock price; however, we do not compel specific statements from companies. Public notices about halts and resumptions are on our website and are disseminated over the newswire.
Suspected breaches of trading rules are escalated to CIRO's Trading Review and Analysis (TR&A) department for additional analysis. TR&A can conduct preliminary investigations if there is reason to believe that improper trading is occurring or has occurred and conduct post-trade reviews of trading to assess if there is activity that potentially violates trading rules, including market manipulation. When TR&A staff find evidence of a potential rule violation, the case is referred to CIRO's Enforcement department. Where CIRO identifies any potential violations of securities laws that fall outside its mandate, the matter is forwarded to the appropriate jurisdiction.