The Investment Dealers Association has proposed a regulation to ensure stocks traded on the Canadian Trading and Quotation System Inc. are not eligible for margin.

Currently, certain stocks listed on the TSX Venture Exchange, including Capital Pool Companies, Tier 3 listings and Inactive Tier 2 listings are all ineligible for margin. The proposed rule notes that listing standards set by the CNQ are less strict than those of the TSXV’s Capital Pool Companies listing class and therefore “granting loan value to CNQ listed securities would result in unequal margin treatment of certain classes of Canadian listed securities”.

“Adoption of the attached proposed amendment will have no effect on market structure, as at present CNQ securities are not eligible for loan value,” it says. “There is also no effect on member versus non-member level playing field, competition generally, costs of compliance and conformity with other rules.”

The proposed rule notes that it did consider allowing the use of margin for CNQ listed securities with prices or capitalization above a certain threshold. “However, it was decided that securities with higher prices or capitalization are likely to migrate to senior exchange and therefore a price or capitalization based rule was considered unnecessary.”

The proposal also notes that the Bourse de Montréal is also in the process of passing this amendment. Implementation of this amendment will therefore take place once both the IDA and the Bourse have received approval to do so from their respective recognizing regulators.