Proposed amendments to OSC Rule 48-501 will automatically exempt application to exchange traded funds

August 24, 2015

The Ontario Securities Commission (OSC) announced last week that OSC Rule 48-501 Trading during Distributions, Formal Bids and Share Exchange Transactionswill be amended to remove the requirement that an exchange traded fund (ETF) be designated  in order for trading in units of the ETF to be exempted from the provisions of OSC Rule 48-501.  The amendments are expected to come into force on November 2, 2015.

OSC Rule 48-501 is intended to restrict trading activities to prevent manipulative conduct by persons with an interest in the outcome of certain market transactions.  Prior to these amendments, an ETF was not subject to these restrictions so long as the OSC issued a designation order in respect of such ETF.  According to the OSC, there have been no instances of manipulative or deceptive trading during a distribution of ETF units.  The OSC therefore concluded that the burden imposed by the requirement outweighs the benefit intended by the provision.  The amendments are intended to harmonize OSC Rule 48-501 with the Universal Market Integrity Rules, which were similarly amended in 2010.

For further information, please see the OSC notice of amendment.

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