I wanted to confirm that naked short selling was possible on the TSX. I don't know whether any of the present manipulation of NOT involves naked short selling but I thought you might like to find out how the OSC (Ontario Securities Commission) "deals" with this practise. So I sent an email and received this reply.

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Dear Mr. Lindsey:

Thank you for contacting the Ontario Securities Commission (“OSC”) regarding naked short selling.

Section 48 of the Securities Act(Ontario), requires that a person who places an order to sell a security, and who at the time of placing the order does not own the security, shall declare that he or she does not own the security. There are no other specific provisions in Ontario securities law that pertain to naked short selling.

For matters regarding the trading of securities on recognized Canadian stock exchanges, the OSC has recognized certain self-regulatory organizations, including IIROC, as permitted by the Securities Act. IIROC regulates operations and standards of practice for debt and equity marketplaces in Canada and enforces the Universal Market Integrity Rules (UMIR). UMIR is a common set of equities trading rules designed to ensure fairness and maintain investor confidence. These rules create the framework for the integrity of trading activity on marketplaces in Canada, including the TSX and the TSX Venture Exchange, and allow for the competitive operation of exchanges, quotation and trade reporting systems, and alternative trading systems. UMIR has provisions relating to various trading practices, including manipulative or deceptive methods of trading, short selling, front running, best execution obligations, order entry and order exposure, as well as trading halts, delays and suspensions.

IIROC's Market Surveillance department has robust systems and processes for detecting and investigating inappropriate market activities. This surveillance facility has state-of-the-art systems and software that detect price or volume anomalies in stock trading patterns. In addition, the IIROC Trading Review & Analysis department conducts post-trade reviews of trading data using a variety of tools to look for trading that violates UMIR, including manipulative trading patterns. If warranted, preliminary investigations regarding insider trading by persons over whom IIROC has no jurisdiction are forwarded to the appropriate securities commission, including the OSC, for additional investigation and possible enforcement action. Additional information about the IIROC may be found on their web-site at www.iiroc.ca.

I appreciate the time you have taken to contact the Ontario Securities Commission.

Sincerely,

Allan Krystie
Senior Inquiries Officer
Ontario Securities Commission
inquiries@osc.gov.on.ca

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