Investment Industry Regulatory Organization of Canada- Reply Thank you for your email to the Investment Industry Regulatory Organization of Canada (IIROC), concerning Isodiol International Inc. (ISOL)
Please note that staff at IIROC continuously monitor trading and review all instances of unusual trading. As such, the information you have provided will be reviewed and assessed.
IIROC’s market surveillance, and trade review analysis ensures that trading is carried out in accordance with Universal Market Integrity Rules (UMIR) and applicable provincial securities law. IIROC continuously monitors all trading on all 14 Canadian equity marketplaces and alternative trading systems. (For a list of equity marketplaces IIROC regulates,click here.)
IIROC uses a state-of-the-art advanced technology system known as the Surveillance Technology Enhancement Platform (STEP), which offers a unique consolidated view of trading on all marketplaces that helps to detect unusual activity. STEP gives IIROC the tools, including real time capability, to monitor and identify possible violations of UMIR across all Canadian trading platforms. For your convenience, I am also including a link to our website that speaks about how IIROC monitors trading activity: Surveillance of Trading Activity.
IIROC has confidential investigation procedures and as such staff cannot comment on a potential investigation unless it becomes a matter of public record. By keeping information confidential, we protect the integrity of our investigation, ensure the complaint process is not used to affect the market and maintain fairness to those who may be the subject of a complaint that does not result in an investigation or sanction. Even though we will not be providing you with an update or the results of our review, please be assured that appropriate action will be taken.
Short Sales
Please note that IIROC monitors trading and settlement to detect violations, investigate and enforce short sale rules. Short sales are permitted in Canada, however, naked short sales are not. IIROC utilizes a surveillance alert which looks for declines in the price of a security associated with changes in the rate of short selling, based on a comparison to historical short selling patterns for the particular security. IIROC also monitors for failed trades which may be indicative of non-permitted short sale transactions.
Further to your comment regarding the, “significant combined short position of 17,314,367 shares as at December 15, 2017”, please note that the figure you refer to actually represents the total volume of short sales that took place during the period of December 1 to 15, NOT the outstanding short positions as at December 15, 2017 (the volume of short sales is not necessarily indicative of the total remaining short positions at the end of the period). The CSE publishes a consolidated short position report on their website where you can obtain information on the outstanding short positions for ISOL.
HFT/Algorithmic Trading (what you have termed “Bot-Bidding”)
Algorithmic trading (ALGO) is a legal, automated order generation system for the purchase and sale of securities based on certain parameters which have been established by the holder of the account. The orders entered by an algorithmic trading system are subject to the same trading rules (UMIR) and requirements as orders which have been entered manually by a dealer or an investor.
ALGO trading is widely used by pension funds, mutual funds, investment banks, and other buy-side institutional traders to break down large block trades into several smaller trades in an attempt to manage market impact and risk. Algorithmic trading is available through many dealers and is also used by sophisticated retail investors. In a continuous auction marketplace, the best-priced orders have priority whether such orders have been generated automatically by an algorithmic trading system or by manual entry.
HFT attempts to profit by capitalizing on market liquidity imbalances or short-term pricing inefficiencies. HFT is not a strategy per se, rather a means of implementation and execution of a particular trading strategy on one (or several) electronic trading platforms and is characterized by higher trading volumes (using smaller board lots), shorter holding periods, and smaller incremental profits.
Stock Forums
IIROC monitors bullboards, blogs, chat rooms and social media sites on the Internet, however, does not have regulatory jurisdiction over individuals who post their views or opinions on such sites. Given the unregulated nature of the internet, investors should be careful about relying on unverified information obtained from chat rooms or other social media sites. Investors should always attempt to verify information through an objective and authoritative source, such as a company’s public disclosures and filings, which can be found on the SEDAR website. Investors should also seek financial advice from a qualified (registered) financial professional.
IIROC’s jurisdiction
- IIROC does not have regulatory jurisdiction over public companies or the officers, directors or employees of those companies or the general public. They fall under the regulatory jurisdiction of the provincial securities commissions in Canada.
- IIROC does have regulatory jurisdiction over IIROC dealer members and their registered employees (i.e. the firm where you have your brokerage account and the registered individuals that work there). Here is a list of the firm’s IIROC regulates: Dealers We Regulate.
If during the course of a trading review we detect UMIR or securities act violations by insiders or the general public, we will refer those matters to the appropriate provincial securities commission. Should we detect violations by IIROC dealer members or their registered employees and there is sufficient evidence to support a potential breach of UMIR, IIROC will take appropriate action against the IIROC dealer member or its registered employees. If there are no indications of violations of UMIR, IIROC will close the file with no action taken.
Appropriate action may involve formal disciplinary proceedings or other measures such as a cautionary letter or a warning letter. Formal disciplinary proceedings become matters of public record, however other measures taken by IIROC are not. Formal disciplinary actions against an IIROC-regulated firm or its registered employees are posted on our website here: News Releases
Sincerely,
Debra Haggarty
Sr. Complaints & Inquiries Specialist
Investment Industry Regulatory Organization of Canada
121 King St. W., Ste. 2000, Toronto, Ontario M5H 3T9
1-877-442-4322
investorinquiries@iiroc.ca