CSA proposes cease on crypto short selling
19 March 2019 Toronto
Image: Shutterstock
The Canadian Securities Administration (CSA) and Investment Industry Regulatory Organisation of Canada (IIROC) have proposed a halt on cryptocurrency short selling, in a joint consultation paper entitled “Proposed Framework for Crypto-Asset Trading Platforms”.
The paper outlined: “To reduce the risks of potentially manipulative or deceptive activities, in the near term, we propose that platforms not permit dark trading or short selling activities, or extend margin to their participants.”
“We may revisit this once we have a better understanding of the risks introduced to the market by the trading of crypto assets.”
CSA and IIROC noted in the paper that platforms facilitate the buying and selling of crypto assets and perform functions similar to one or more of exchanges, alternative trading systems, clearing agencies, custodians and dealers.
According to CSA and IIROC, depending on their structure, they may also introduce novel features, which create risks to investors and capital markets that may not be fully addressed by the existing regulatory framework.
Additionally, the paper reads “global incidents point to crypto assets having heightened risks related to loss and theft as compared to other assets”.
It was also stated: “Where securities legislation applies to platforms we are considering a set of tailored regulatory requirements for them to address the novel features and risks (the proposed platform framework).”
The proposed platform framework referred to in the consultation paper considers how existing regulatory requirements may be tailored for platforms.
Meanwhile, it should not be construed as acceptance by the CSA that securities and/or derivatives legislation may not apply to any particular offering involving crypto assets, the paper cited.
Additionally, the proposed platform framework will apply to platforms that are subject to securities legislation and that may not fit within the existing regulatory framework, CSA and IIROC highlighted.
They added that it will apply both to platforms that operate in Canada and to those that have Canadian participants.
The paper outlined: “To reduce the risks of potentially manipulative or deceptive activities, in the near term, we propose that platforms not permit dark trading or short selling activities, or extend margin to their participants.”
“We may revisit this once we have a better understanding of the risks introduced to the market by the trading of crypto assets.”
CSA and IIROC noted in the paper that platforms facilitate the buying and selling of crypto assets and perform functions similar to one or more of exchanges, alternative trading systems, clearing agencies, custodians and dealers.
According to CSA and IIROC, depending on their structure, they may also introduce novel features, which create risks to investors and capital markets that may not be fully addressed by the existing regulatory framework.
Additionally, the paper reads “global incidents point to crypto assets having heightened risks related to loss and theft as compared to other assets”.
It was also stated: “Where securities legislation applies to platforms we are considering a set of tailored regulatory requirements for them to address the novel features and risks (the proposed platform framework).”
The proposed platform framework referred to in the consultation paper considers how existing regulatory requirements may be tailored for platforms.
Meanwhile, it should not be construed as acceptance by the CSA that securities and/or derivatives legislation may not apply to any particular offering involving crypto assets, the paper cited.
Additionally, the proposed platform framework will apply to platforms that are subject to securities legislation and that may not fit within the existing regulatory framework, CSA and IIROC highlighted.
They added that it will apply both to platforms that operate in Canada and to those that have Canadian participants.
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