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Canada IIROC Electronic Trading Rules

canada-iiroc-electronic-trading-rulessource

Use when routing orders to Canadian marketplaces such as TSX, TSX Venture, Cboe Canada or an ATS, where NI 23-103 section 3 and UMIR Rule 7.1 require automated pre-trade controls and UMIR 6.2 order designations on every order.

Domain
Regulatory Compliance
Version
1.1.0
Reading
4 min
Hands off to
4
Handed off from
0
License
Apache-2.0
CoversGeneric Execution

When to Use

Use this skill when deploying algorithms that route orders to Canadian marketplaces (TSX, TSX Venture, Cboe Canada — formerly NEO — CSE, and the ATSs). Under National Instrument 23-103 s.3 and UMIR Rule 7.1, a marketplace participant must run automated pre-trade controls over every order before it reaches a marketplace: credit and capital thresholds, price and size parameters, limits on the value of unexecuted orders, and the regulatory designations that UMIR 6.2 requires on entry.

When NOT to Use

  • Non-Canadian venues. These controls are jurisdiction-specific. US market access is governed by SEC Rule 15c3-5 (sec-rule-15c3-5-risk-controls-us) and the EU by MiFID II RTS 6 (mifid-ii-algo-trading-compliance-eu). The short-marking exempt designation has no US or EU analogue — do not port it.
  • As the firm's only short-sale control. The engine checks designation, not the pre-borrow arrangements UMIR requires for certain short sales, and not failed-trade reporting.
  • As a substitute for marketplace-level controls. CIRO's marketplace threshold regime (single-stock circuit breakers, price freezes) runs at the venue. It does not discharge the participant's own obligation under NI 23-103 s.3(5) to set and control its own filters.

Prerequisites

  • Trading system that produces normalized order objects with side, quantity, limit price (or None for a market order), and the account's owned position in the security.
  • A live reference price (last traded price) per symbol. The engine fails closed when the reference price is missing, zero or non-finite — plan for stale-feed handling rather than being surprised by rejections.
  • Firm-determined threshold values. Neither NI 23-103 nor UMIR prescribes any numeric limit; the participant sets, documents and periodically reassesses each one (NI 23-103 s.3(5), s.3(6)).
  • A flag identifying accounts that qualify for the "short-marking exempt" designation.

Workflow

  1. Rule Initialization: Instantiate CiroPreTradeRiskEngine with a RiskLimits object. Set max_open_order_notional_cad if you want this engine to enforce the unexecuted-order-value control; leaving it None disables it and the obligation falls elsewhere in your stack.
  2. Order Interception: Call validate_order(order) synchronously before the order reaches the FIX gateway, and inspect is_compliant. If your routing path has no rejection branch, call enforce_order(order) instead — it raises RegulatoryViolationError so a forgotten return-value check cannot leak an order to the venue.
  3. Input Sanity, Fail Closed: Non-positive quantity, non-finite or negative price, and an unusable reference price are rejected up front (INVALID_ORDER_PARAMETERS, REFERENCE_PRICE_UNAVAILABLE). This is deliberate: NaN compares False against every threshold, so an unchecked NaN price would pass every downstream test.
  4. Size, Notional and Aggregate Checks: Quantity against max_order_quantity; this order's notional against max_order_value_cad; and, when configured, open_order_notional_cad + this order against max_open_order_notional_cad. A market order (price=None) is valued at the reference price so it is still caught by the notional controls.
  5. Price Collar: Limit orders deviating more than max_price_deviation_pct from the reference price are rejected. Market orders carry no limit price and are not collared — size and notional are their only constraints here.
  6. UMIR 6.2 Designation Check: Decide the designation before routing, not after:
    • If the account is short-marking exempt, every order from it — purchase as well as sale — must carry the SME designation and must not also be marked short (UMIR 6.2(1)(b)(ix)). Its use is mandatory, not optional.
    • Otherwise, a sale of a security the account does not own must be marked "short" (UMIR 6.2(1)(b)(viii)) — and a sale fully covered by owned inventory must not be. Over-marking is a misdesignation too.
  7. Rejection Handling: Log every rejection with its ViolationCode and halt routing. Persist the record for supervisory review under UMIR 7.1.

Full procedure: see references/workflows.md. Standards reference: see references/standards.md. Printable pre-flight checklist: see assets/checklist.md.

Common Pitfalls

  • Post-Trade Only: Relying on T+1 drop-copy reconciliation. NI 23-103 s.3(2) requires automated controls pre-trade; post-trade monitoring is an addition to them, not a substitute.
  • Failing Open on Missing Market Data: Skipping the price collar when the reference price is zero, None or NaN. A gap in the feed is exactly when a fat-finger order is most dangerous — a control that quietly stops running is worse than no control, because nobody notices.
  • Treating SME as an Optional Extra Flag: Marking a qualifying account's order both "short" and "short-marking exempt", or marking only sales SME and leaving its purchases unmarked. SME replaces the short marker and applies to both sides of the account's flow.
  • Only Checking Under-Marking: Marking a fully covered long sale as "short" is a UMIR 6.2 misdesignation in its own right and corrupts the audit trail CIRO relies on.
  • Static Price Limits: Hardcoding a "$50 limit" instead of linking price collars to the current reference price.
  • Confusing Single-Order and Aggregate Controls: A per-order notional cap does not satisfy the Policy 7.1 control on the value of unexecuted orders. A thousand small orders can breach a capital threshold that no single order does.
  • Citing Repealed Rules in Controls Documentation: UMIR 3.1 (short sale price restrictions, the tick test) was repealed effective September 1, 2012. Short-sale obligations now live in the UMIR 6.2 designations and the pre-borrow provisions.

Verification

  • Simulate a "fat-finger" market order for 1,000,000 shares and confirm the engine blocks it before FIX transmission.
  • Submit an order with a NaN limit price and with a zero reference price; confirm both are rejected rather than silently passed.
  • Submit a purchase from a short-marking exempt account with no designation; confirm IMPROPER_SME_MARK.
  • Run python -m unittest discover -s skills/canada-iiroc-electronic-trading-rules/scripts and confirm all tests pass.

Verify it, from the repository root

python -m unittest discover -s skills/canada-iiroc-electronic-trading-rules/scripts

Hands off to 4

Skills this document names, usually in When NOT to Use, as the owner of a case it excludes.

SEC, FINRA, MiFID II, FCA, SEBI

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