The Ontario Securities Commission is proposing changes to the rules dealing with trading during distributions, takeovers, and other major transactions.

A year ago, the OSC published a proposed rule for comment. At the same time, Market Regulation Services Inc. published proposed revisions to the Universal Market Integrity Rules concerning the same issues. The OSC and RS are aiming to ensure consistency between the rule and the UMIR. On Friday, the changes made as a result of the comments are being republished for a further 60-day comment period.

The rule governs the activities of dealers, issuers and others in connection with a distribution of securities, a securities exchange take-over bid, an issuer bid or an amalgamation, arrangement, capital reorganization or similar transaction. The rule is intended to prescribe what is acceptable trading, and aims to stamp out manipulative trading around these sorts of transactions.

The OSC notes that one of the key purposes of the reformulation of the rule is to harmonize to the extent possible, with the Securities and Exchange Commission’s regulation in this area, as well as the UMIR amendments. It notes that while the comments expressed a desire to have harmonization, in some cases, such as different restricted periods for different types of transactions, comments preferred the original approach of a single restricted period they felt was more appropriate to Canada.

The RS amendments aim to combine prohibitions and restrictions relating to market stabilization and market balancing activities into a single rule; and, introduce exemptions from the prohibitions and restrictions relating to market stabilization and market balancing for trading in “highly-liquid” securities and exchange-traded funds.

It places restrictions on underwriters, dealer-managers and others involved in these sorts of transactions. Exemptions are also provided for certain trades such as basket trades, program trades, portfolio rebalancing due to index changes and arbitrage activities for inter-listed securities, among other circumstances.