CIRO Trader cheat sheet

Canadian securities regulation is layered: provincial securities acts, CSA National Instruments, IIROC/CIRO rules, and exchange rules all apply to a trading desk simultaneously.

The primary conduct standard is the fair, honest, and professional treatment of clients; conduct rules apply regardless of whether a specific rule names the activity.

Material conflicts of interest must be identified, disclosed, and managed or avoided; disclosure alone does not cure a conflict that cannot be reasonably managed.

Personal trading by registered representatives generally requires pre-clearance or reporting, with restricted/prohibited lists governing issuers in sensitive mandates.

Insider trading prohibitions attach to material non-public information (MNPI) from any source, including clients, issuers, and colleagues; tipping is itself a violation.

Recordkeeping rules require retention of order tickets, client instructions, and communications for prescribed periods; electronic communications are discoverable and must be captured.

Registration categories determine permitted activities; acting beyond registration (e.g., advising without suitability obligations) is a regulatory breach.

Supervision is a positive duty: firms must have written procedures, designated supervisors, and evidence of review, not merely a policy manual.

Canadian equity marketplaces include exchanges (TSX, TSXV, CSE) and alternative trading systems (ATSs); all are subject to NI 21-101 marketplace operation requirements.

Order protection rule: marketable orders must be routed to the best-priced protected order across Canadian marketplaces before trading at a worse price.

Best execution in Canada is measured across price, speed, certainty, and total cost; the obligation attaches to the dealer, not to any single venue.

Dark pools and dark orders provide no pre-trade transparency; trades typically print post-trade, with minimum size thresholds for certain dark functionality.

Market makers and designated brokers have obligations (continuous two-sided quotes, guaranteed fills) that ordinary participants do not carry.

A dealer acting as principal trades against its client; as agent it acts for the client. Capacity must be disclosed on the confirmation.

Odd lots, special terms, and basis-crosses are handled outside normal board-lot continuous trading and carry distinct handling rules.

Crossing networks and internal crosses must comply with marketplace and UMIR requirements, including price improvement and priority rules.

Board lot on Canadian exchanges is 100 shares for securities priced at or above $1.00 and 500 shares below $1.00.

Settlement for Canadian equities is T+1; trade date obligations, allocations, and affirmations must be completed to meet the settlement cycle.

Short sales must be marked as short, and a dealer must have reasonable grounds to believe the security can be borrowed before executing a short sale.

A limit order specifies a maximum purchase price or minimum sale price; a market order accepts the next available price and carries price risk.

Iceberg/reserve orders display only a portion of quantity; hidden quantity loses time priority until refreshed.

Price improvement occurs when an order executes at a better price than the prevailing best quote; it must be documented and consistent with best execution.

Corporate actions (splits, dividends, mergers) require adjusting open orders, positions, and client records on the effective date.

Wash trades, pre-arranged trades outside permitted facilities, and trades at prices unrelated to the market are prohibited under UMIR.

A derivative's value derives from an underlying; counterparty credit risk, market risk, and liquidity risk must each be assessed separately.

Listed options: buyer pays premium and has a right; writer receives premium and carries an obligation, with margin requirements set by the clearing corporation.

Futures are standardized, exchange-traded, and marked to market daily through a clearing house that interposes itself as counterparty.

Forwards are bilateral OTC contracts carrying counterparty credit risk; swaps exchange cash flows and are typically documented under an ISDA master agreement.

Structured products combine a derivative with a note or deposit; payoff formulas, caps, barriers, and principal protection terms must be explained to clients.

Suitability for derivatives requires assessment of the client's knowledge, risk tolerance, and capacity to bear loss, including margin calls.

Hedging versus speculation changes the risk profile and documentation; the stated purpose should match the actual position and client objectives.

Leverage magnifies both gains and losses; margin calls can force liquidation, so the client must understand the liquidity demand before trading.

Client orders take priority over proprietary orders for the same security at the same price; front-running client orders is prohibited.

Best execution factors: price, speed, likelihood of execution and settlement, size, nature of the order, and total cost including commissions and fees.

Orders must be entered promptly and accurately; holding an order to benefit the firm or another client is a breach.

Order priority on a marketplace is price first, then time; broker preferencing and internalization must not disadvantage the client.

A dealer must not trade ahead of a client order it holds, and must not use knowledge of a client order for the firm's or another client's benefit.

Best execution policies must be reviewed and updated; the firm must be able to demonstrate how orders were routed and why.

Client instructions that specify a venue or price may relieve the dealer of part of the best execution analysis for that order, but not all duties.

Errors and omissions (wrong side, wrong quantity, duplicate fills) must be corrected promptly, documented, and escalated under firm procedures.

Reportable trades must be submitted to the appropriate regulator/marketplace within prescribed timeframes; accuracy and timeliness are both required.

Clearing interposes a central counterparty, novating trades so that counterparty credit risk shifts from the original parties to the clearing house.

Settlement for Canadian equities is T+1; fixed income conventions differ and are specified by the instrument and market.

Failed trades trigger buy-ins and compensation rules; the failing party bears the cost of covering the failed delivery.

Trade matching and affirmation must be completed by the prescribed deadline to support the settlement cycle; unmatched trades are at risk of failure.

Large trader and significant shareholder reporting thresholds require filings when positions cross prescribed levels.

Short sale positions and failed deliveries are subject to reporting and close-out requirements separate from ordinary trade reporting.

Records of allocations, confirmations, and settlement instructions must be retained and reconcilable to the firm's books.

Wash trading (simultaneous buy and sell with no change in beneficial ownership) is prohibited because it creates false volume.

Spoofing: entering orders with intent to cancel before execution to induce others to trade is manipulative and prohibited.

Layering: entering multiple orders at different prices to create a false impression of depth, then cancelling, is a form of spoofing.

Painting the tape: trades designed to create the appearance of activity or to move the price are prohibited, including self-trades and matched orders.

Marking the close: trading near the close to influence the closing price is manipulative, particularly where the close is a valuation reference.

Insider trading and tipping on MNPI violate market integrity rules; MNPI includes information about pending orders and client flow.

Pump-and-dump and other schemes that disseminate false information to move prices are prohibited regardless of the venue used.

Surveillance obligations require firms to monitor for manipulative patterns and to escalate and report suspicious activity.

Know-your-client (KYC) requires collecting and updating financial circumstances, objectives, time horizon, risk tolerance, and knowledge.

Suitability requires a reasonable basis to believe a recommendation fits the client's KYC profile; the obligation is ongoing, not one-time.

Know-your-product (KYP) requires the firm to understand the product's risk, cost, and features before recommending it.

Discretionary accounts require written authorization and ongoing supervision; unauthorized trading is a serious breach.

Conflicts of interest (compensation incentives, proprietary products, principal trading) must be disclosed and managed; priority goes to the client's interest.

Account documentation (new account forms, updates, client instructions) must be complete, current, and retained.

Third-party authorization and trading authority must be documented; acting without authority exposes the firm to liability.

Complaint handling must be timely, recorded, and escalated; complaint records are regulatory evidence of supervision.