New circuit breakers for CDRs

Under new guidance from the still-unnamed new self-regulatory organization for the securities industry, single-stock circuit breakers will be applied to Canadian depositary receipts (CDRs).

In a notice outlining the revised guidance, the new SRO said it is applying circuit breakers to CDRs —  securities that give domestic investors easy exposure to foreign listings — “in order to enhance market integrity in the trading of these securities.”

While circuit breakers can already be applied to certain CDRs, which qualify as actively traded securities, the SRO said that,”given the recent growth and proliferation of CDRs,” it has decided to extend circuit breaker rules to all CDRs.

Those rules aim to ensure that markets remain fair when they are particularly volatile by triggering trading halts on securities that move by a prescribed amount in a short period of time.

“Similar to ETFs which are comprised of listed securities, CDRs have underlying securities that are listed for trading on foreign markets, many of which are considered highly liquid,” the SRO said in a guidance note. “Therefore, ensuring that we may halt the trading of a particular CDR that experiences a rapid price movement will help foster a fair and orderly market for these types of securities.”

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.