(June 8 – 8:55 ET) – The Investment Dealers Association’s board has approved a new procedure for determining securities that are eligible for reduced margin rates.
In the past the decision was based on whether an option is available on the stock, that is no longer the case. Securities will now have to meet specific liquidity and volatility measures to be eligible. The securities that qualify will be known as “Securities Eligible for Reduced Margin”, the new regime will take effect with the publication of the list effective June 30.
The IDA took over producing the list of option-eligible stocks last year after the Canadian Derivatives Clearing Corp. decided to stop doing it. Once the IDA took it over, staff decided to review the parameters for inclusion and they decided to change the criteria to ensure that a “reduced margin rate is only granted to those securities that demonstrate both sufficiently high liquidity and low price volatility”.
The new parameters require that the list will be restricted to stocks that trade above $2 a share and carry a calculated price volatility margin interval of less than 25%. They must maintain a public float greater than $50 million, and have an average daily trade volume greater than 10,000 shares a day, or an average daily traded value of more than $500,000 a day. The stocks must be listed on a Canadian exchange for six months. For those listed less than six months the price minimum is $5, and the public float must be greater than $500 million.
The list will continue to be issued on a quarterly basis.
-IE Staff