(February 13 – 16:10 ET) – The Toronto Stock Exchanges is warning traders about the short-selling in conjunction with the new single-stock futures now trading on the Montreal Exchange.
The Montreal Exchange has introduced the trading of single-stock futures where each futures contract represents 100 shares of the underlying stock. On January 31, futures on Nortel Networks Corp. commenced trading commenced on the ME.
The TSE notes that under its short selling rules, a person who has purchased and holds a share futures contract may sell the underlying equity, up to the number of shares represented by the futures contract at a price that is below the price of the last board lot sale of the security.
But the TSE notes that a sale of the underlying security made in anticipation of the purchase of a futures contract will be considered a “short sale”. It may not trade at a price below the price of the last sale of a board lot of the security.
The TSE says it considers the purchase of a futures contract in conjunction with the stock’s sale at a price below that of the last board lot sale to be manipulative trading if the person:
- offers or intends to offer the futures for sale following the sale of the underlying equity; or
- makes or intends to make additional sales of the underlying equity at the same price as short sales.
-IE Staff