Canada's Industry Regulatory Organization has proposed the implementation of single-stock circuit breakers.
The IIROC’s proposal is similar to one implemented by the Securities and Exchange Commission in June following the so-called “flash-crash” on May 6 when the Dow Jones Industrial Average lost more than 600 points in only 12 minutes.
The IIROC’s new single-stock circuit breakers would apply to all securities listed on any exchange in Canada and those dually listed in Canada and the U.S, the organization overseeing investment dealers said. The proposal is out for public comment until January 16.
Currently, the IIROC can implement so-called “universal market integrity rules” which allow it to delay, stop or suspend trading at any time when it determines it is in the public interest to create a fair and orderly market. However, in a statement, the IIROC said that such a methodology was not adequate to deal with trading in multiple securities in diverse marketplaces in a short period of time.
Under the IIROC’s proposal, the circuit breaker would be implemented when a stock price either increases or decreases past a certain threshold. Trading would be halted for five minutes on shares listed on the Toronto Stock Exchange (TSX) and for those listed on small-cap exchanges such as TSX Venture or CNSX, trading would be halted for ten minutes.
In the case of securities trading on the TSX, the threshold for triggering the circuit breaker would be if a price moves by either 10 percent or ten trading increments – whichever is greater—over a five minute interval.
When it comes to shares trading on the TSX Venture or CNSX, the trading would be halted if the price of a security moves by the greater of 20 percent or by 20 trading increments over ten minutes.