Guidance on Guaranteeing a Trade Price for a Client Order

1. Restrictions on Recorded Prices

For a client order, Rule 7.5 of UMIR sets out restrictions on the amount by which the recorded price on a marketplace can be different from the actual price attributed to a client for the execution of that order.

Rule 7.5 prohibits a Participant from providing a “negative commission” to a client. This would occur in situations where either:

• the net cost1 to the client is less than the traded price as executed on marketplaces, or
• the net proceeds2 to the client is more than the traded price as executed on marketplaces.

A “negative commission” would allow a client to trade at a price that could not otherwise be achieved in the open market, and would effectively permit a trade-through of better-priced orders displayed on one or more marketplaces.

Rule 7.5(2) sets out the specific restrictions when a Participant is acting as principal.

When a Participant is selling to a client (i.e., a client order to purchase), the recorded price as traded on marketplaces cannot be:

• higher than the net cost to a client, or
• lower than the net cost to a client by more than the usual agency commission that the Participant would charge to that client for an order of the same size.

When a Participant is buying from a client (i.e., a client order to sell), the recorded price as traded on marketplaces cannot be:

• lower than the net proceeds to the client, or
• higher than the net proceeds to the client by more than the usual agency commission that would be charged by that Participant to that client for an order of the same size.

2. Guaranteeing the Price of a Trade

A client may request that a Participant act as principal and accept an order with a guaranteed trade price. The order will be executed later in that trading day at a guaranteed price that will be determined by an event which will also occur later in that trading day. The Participant may be asked to guarantee a trade at:

• the closing price of a security on a particular marketplace;
• a volume weighted average price (VWAP) calculated during a specific period during a trading day; or
• any other benchmark price which has been approved by the Canadian Investment Regulatory Organization (CIRO).

A Participant who, as principal, agrees to guarantee a trade price that is referenced to a future benchmark event, would in the normal course hedge their principal exposure during the trading day. Later in the trading day, after the benchmark price is available and the guaranteed price has been established, the Participant would execute the trade on a marketplace at the agreed upon guaranteed price.

Any price guaranteed to a client that would vary from the price recorded on the marketplace by more than the amount permitted by Rule 7.5 of UMIR would require a Participant to “move the market”3 to a price that would comply with Rule 7.5.

3. Profit Sharing

Where a Participant is hedging a principal position in the context of guaranteeing a trade price as described above, the Participant may achieve a better price than the price guaranteed to the client. CIRO is of the view that any resulting profit may be shared with the client where the average price of the Participant’s:

• purchases to hedge its position are less than the price guaranteed to the client on the client’s purchase from the Participant; and
• sales to hedge its position are more than the price guaranteed to the client on the client’s sale to the Participant.

CIRO would consider it reasonable for a Participant to share up to 50% of the profits earned through its hedging activities that relate directly to the guaranteed price trade to the client, and would not consider this to be an attempt to provide a “negative commission” to the client or otherwise avoid the application of Rule 7.5. The profit sharing agreement between the Participant and the client cannot be designed as an attempt to provide a trade price that would not otherwise be permitted by Rule 7.5.

4. Guaranteed Outperformance

A Participant may also wish to guarantee a trade price as principal, that “outperforms” a benchmark price, before the Participant begins any hedging activities specific to that client order and prior to the benchmark price being established. Similar to profit sharing, CIRO is of the view that guaranteeing outperformance, based on “reasonably determinable” criteria or for a minor amount, is not an attempt to provide a client a “negative commission” or otherwise avoid the application of Rule 7.5. A Participant may guarantee outperformance up to a maximum of the greater of:

• 50% of the Participant’s historical realized outperformance of the same benchmark over the prior calendar quarter; and
• 25 basis points.

To establish what is “reasonably determinable” a Participant is expected to refer to its historical hedging activities over the preceding calendar quarter relating to the same or substantially similar securities and relating to the same benchmark referenced in the client order. The demonstrated level of outperformance against the benchmark that the Participant historically achieved would be considered “reasonably determinable” for the purposes of this guidance.4

CIRO expects that a Participant that intends to offer guaranteed outperformance trades would have policies and procedures in place to ensure compliance with the criteria described in this guidance.

5. Net Asset Value Orders

As set out in Rules Bulletin 25-0200 Amendments Respecting Net Asset Value Orders and Intentional Crosses, a new definition of a “Net Asset Value Order” was introduced to UMIR effective January 13, 2026.5 A Participant that accepts a Net Asset Value order agrees to execute the order at a price that references the most recent net asset value (NAV) as calculated by the issuer of an Exempt Exchange-traded Fund (ETF). At the time the Participant commits to the execution of a Net Asset Value Order, the NAV must not yet be published by the issuer. While this is similar to what has been described above in the context of guaranteeing a trade price for a client order, Net Asset Value Orders are typically not executed until the following trading day, as NAV is not typically published until after the trading day has ended on Canadian marketplaces.

CIRO does not consider the execution of a Net Asset Value Order as being a guarantee of a benchmark that is subject to the specific requirements set out in this Guidance Note, including the notification requirements described below. All other relevant requirements of UMIR would continue to apply.

6. Notification Requirement

Immediately after a Participant agrees to guarantee the price of a trade to a client, the Participant must provide written notice to CIRO. If a VWAP is to be guaranteed, the calculation period may not commence earlier than the time the order was received from the client. If any types of trades are to be excluded from the calculation of the VWAP, those trade types must be identified in the notice provided to CIRO.

The written notice must indicate:

• the security;
• whether the trade will be a purchase or sale by the Participant;
• the volume of the trade;
• the method of determining the price which the Participant will be guaranteeing. For example:
  • the closing price of a security on a particular marketplace,
  • a VWAP calculated for a specific period during a trading day on one or more identified marketplaces and excluding specific types of trades, or
  • any other benchmark price which has been approved by CIRO;
• the details of any profit sharing agreement entered into between the Participant and the client with respect to the trade;
• the details of any guaranteed outperformance, including the amount of outperformance being guaranteed; and
• the time and the marketplace(s) on which the trade will be executed.

The written notice should be sent to CIRO at:

Market Surveillance Toronto - surveillance@ciro.ca; or

Market Surveillance Vancouver - surveillancewest@ciro.ca.

7. Prior Approval of CIRO

A Participant must obtain CIRO approval PRIOR to the Participant and the client agreeing to the trade, if the intention is to:

• use a benchmark other than the closing price or a VWAP; or
• enter into a profit sharing agreement under which more than 50% of any profit will be shared with a client; or
• guarantee outperformance which exceeds the greater of:
  • 50% of the Participant’s historical realized outperformance of the same benchmark over the prior calendar quarter, and
  • 25 basis points.

8. Questions and Answers

The following is a list of frequently asked questions regarding the guarantee of trade prices, and CIRO’s response to each question:

1. Can a trade be guaranteed at a price that references a benchmark other than closing price or VWAP?

Yes, but guaranteeing a trade price that references a benchmark other than VWAP or closing price requires CIRO pre-approval. Approval must be obtained PRIOR to the Participant and the client agreeing to the trade. As noted above, this does not apply to the execution of Net Asset Value Orders as defined in UMIR.

2. Can outperformance be guaranteed when a Participant has not historically outperformed the benchmark while undertaking hedging activities?

Yes, every Participant can guarantee outperformance up to 25 basis points. Guaranteed outperformance more than that amount can only be provided by a Participant who has demonstrated a historical ability to outperform the same benchmark as reflected in the client order, through hedging a principal position of substantially similar securities. Historical performance must be demonstrated by reference to the preceding calendar quarter.

3. In order to provide “guaranteed outperformance” what policies and procedures are required?

A Participant who intends to guarantee outperformance of a benchmark for a client order would be expected to have reasonable policies and procedures in place to monitor the amounts of “outperformance” being guaranteed and to ensure that these amounts are consistent with historical hedging performance if the guarantee is for more than 25 basis points. A Participant would also be expected to include this activity in its policies and procedures as required under UMIR Rule 7.1 Trading Supervision Obligations. These policies and procedures are subject to compliance reviews by CIRO.

4. Can outperformance of 50 basis points be guaranteed if this is consistent with historical outperformance?

Yes. The maximum amount of outperformance a Participant may guarantee is limited to the greater of 50% of historical outperformance achieved through its hedging activities and 25 basis points. A Participant wishing to guarantee more than that amount would be required to obtain CIRO approval prior to agreeing to the trade with the client.

5. When the trade is executed on a marketplace, is the trade price the actual benchmark, or should the trade price be adjusted to reflect any profit sharing or “outperformance”?

The trade on a marketplace should be executed at the actual net price to the client, including any amount of profit sharing or outperformance provided. The net trade price contracted to the client should match the traded price on a marketplace. If marketplace functionality does not support the execution at the net price to the client, a Participant is permitted to execute the trade at the actual benchmark price. In all cases, the resulting trade to the client must be executed on a marketplace in accordance with Rule 6.4 of UMIR.

6. Can both a guarantee of outperformance AND a profit sharing arrangement be offered on the same transaction?

Yes. A Participant is always able to guarantee a minimum of 25 basis points. However, the maximum that can be guaranteed to a client is limited to the greater of:

• 50% of the Participant’s historical realized outperformance of the same benchmark over the prior calendar quarter; and
• 50% of the profits earned through hedging activities on the particular transaction.

9. Applicable Rules

UMIR Rules this Guidance Note relates to:

• UMIR 7.5

10. Previous Guidance Note

This Guidance Note replaces:

• Guidance Note 12-0010 – Guidance on the Guarantee by a Participant of a Trade Price for a Client Order (January 9, 2012).

11. Related Documents

This Guidance Note is related in part to the following Bulletin:

• Rules Bulletin 25-0200 – Amendments Respecting Net Asset Value Orders and Intentional Crosses (July 17, 2025)

• 1

  “Net Cost” means the amount by which the sum of the total cost of the trade on the purchase of securities based on the purchase price on the marketplace and any commission charged to the client by the Participant exceed the amount of any allowance, discount, rebate and any other benefit with a monetary value that is allowed to the client on the trade by the Participant or any other person.

• 2

  “Net Proceeds” means the amount by which the sum of the total proceeds of the trade on the sale of securities based on the sale price on the marketplace and the amount of any allowance, discount, rebate and other benefit with a monetary value that is allowed to the client on the trade by the Participant or any other person exceeds any commission charged to the client by the Participant.

• 3

  Where applicable, a Participant must move the market in accordance with the requirements set out in UMIR Rule 2.1.

• 4

  Subsection (2) of section 38 of the Securities Act (Ontario) prohibits, with the intention of affecting a trade, any undertaking related to the future value or price of a security. The concept of “guaranteed outperformance” does not provide any guarantee relating to the future value or price of a particular security. “Outperformance”, for the purpose of this Guidance Note, refers to a Participant’s execution ability based on “reasonably determinable” (i.e., a historic “look-back”) criteria or the guarantee of a minor amount which is acceptable to CIRO (25 basis points better than the benchmark).

• 5

  A “Net Asset Value Order” is defined to mean “…an order for the purchase or sale of an Exempt Exchange-traded Fund that is entered on a marketplace to trade at a price that references the most recent net asset value of the Exempt Exchange-traded Fund as calculated by the issuer of the Exempt Exchange-traded Fund in accordance with applicable securities legislation, and where:

  1. the net asset value was not published by the Exempt Exchange-traded Fund issuer at the time the commitment to execute the order was made; and
  2. the price of the order is not based, directly or indirectly, on the quoted price of the Exempt Exchange-traded Fund at the time of order entry.”