The Investment Industry Regulatory Organization of Canada (IIROC) released a proposal for single-stock circuit breakers last week that would halt trading of a security experiencing "rapid, significant and unexpected price movement." The proposal would apply to all securities listed on a Canadian exchange, including inter-listed securities, and would provide tiers of trigger levels in order to "preserve a fair and orderly market" in times of extreme volatility.

Specifically, under the proposed mechanism, trading in a security listed on either the TSX-V or CNSX would be halted for ten minutes if the security experienced a price swing of the greater of 20% and 20 trading increments in a five minute period. TSX-listed securities that experienced a price swing of at least the greater of 10% and 10 trading increments in a five minute period would be halted for five minutes, with a five-minute extension possible. In either case, IIROC could replace the single-stock circuit breaker halt with a traditional "regulatory halt" where so required. There would be circumstances, however, where a single-stock circuit breaker would not trigger a halt in trading, such as after the imposition of a "regulatory halt" in the trading of that security.

IIROC is accepting comments on its proposals until January 17, 2011. Once it has reviewed the comments received and established the final parameters of its proposal, IIROC intends to develop an alert as part of the "STEP" surveillance platform. While the implementation of single-stock circuit breakers would begin as a manual system similar to the current imposition of trading halts, IIROC intends to ultimately automate the process. According to IIROC, however, automation would not commence earlier than April 1, 2011.

As we've discussed in the past, the U.S. SEC is currently piloting single-stock circuit breakers until December 10, 2010. For more information on the U.S. project, see our posts of May 19 and September 21.