Canada a short selling haven Canada is a short selling haven
Paul D. Davis, Charlotte Conlin, Shahen A. Mirakian, Leila Rafi, Sandra Zhao published a research article on McMillan (a leading business law firm) about short selling in Canada. Some of its conclusions:
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Based on our research, it is clear that IIROC’s largely non-interventionist approach and its focus on maintaining liquidity have made Canadian companies attractive targets for short campaigns.
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The number of short campaigns in Canada is utterly disproportionate to the size of our capital markets when compared to the United States, the European Union and Australia.
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As a result of inherent weaknesses in the Canadian short sale regulatory regime, short sellers may well be attracted to the Canadian capital markets.
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When compared to other regulatory regimes, the lack of transparency and the limited enforcement activity by IIROC raise significant issues related to investor confidence and market integrity.
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Canada is a Haven for Short Campaigners.
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The lack of any meaningful penalties for abusive short selling is likely a draw for short campaigners engaging in illegal short selling. There have been no significant regulatory prosecutions of short sellers conducting short and distort campaigns and few enforcement proceedings where short sellers were penalized for naked short selling.
For those of you who are into research papers. There is a paper by John D. Finnerty (Fordham University Graduate School of Business New York) and published by the SEC. The title is:
SHORT SELLING, DEATH SPIRAL CONVERTIBLES, AND THE PROFITABILITY OF STOCK MANIPULATION
Some highlights:
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Manipulative short selling has a long and colourful history
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Stock manipulators carefully timed their aggressive ‘bear raids’ to exert maximum selling pressure. The price declines attracted free riders, and the combined pressure on the prices of the targeted stocks produced virtually assured profits. The manipulators found that they could defeat any opposition by employing “tricks that only sly and astute speculators invent and introduce,”
If you track the book order you will witness with your own eyes how short sellers are manipulation this stock all day every day. Here is another snapshot of how they trade this stock:
| Recent Trades - Last 10 of 1137 | More trades... |
| 11:51:58 | M | 1.28 | -0.03 | 5 | 80 National Bank | 80 National Bank | |
| 11:51:52 | Y | 1.28 | -0.03 | 100 | 79 CIBC | 1 Anonymous | K |
| 11:51:52 | D | 1.28 | -0.03 | 5 | 14 Virtu ITG | 14 Virtu ITG | E |
| 11:51:52 | D | 1.28 | -0.03 | 3 | 80 National Bank | 14 Virtu ITG | E |
| 11:51:52 | D | 1.28 | -0.03 | 20 | 80 National Bank | 14 Virtu ITG | E |
| 11:51:52 | X | 1.28 | -0.03 | 600 | 39 Merrill Lynch | 80 National Bank | K |
| 11:51:52 | D | 1.28 | -0.03 | 1 | 80 National Bank | 14 Virtu ITG | E |
| 11:51:52 | D | 1.28 | -0.03 | 55 | 80 National Bank | 14 Virtu ITG | E |
| 11:51:52 | D | 1.28 | -0.03 | 3 | 80 National Bank | 14 Virtu ITG | E |
| 11:51:52 | D | 1.28 | -0.03 | 50 | 80 National Bank | 14 Virtu ITG | E
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