Procedures for Handling Certain Designated Trades as Principal

1. Background

The rationale for providing an exemption to allow Participants to complete a principal “take-on” trade off-marketplace is to replace the wide distribution rules of the TSX, which were repealed in 2008. At the time, the wide distribution procedures of the TSX were designed to facilitate the sale of a large block of securities by a Participant to its clients in an efficient manner.1

These transactions typically involve a single holder of a large block of a listed security that is seeking an efficient process to facilitate the sale of all or part of the position. The position to be sold is sufficiently large that the seller engages with a Participant that agrees to acquire the block generally at a discount to current market prices (the “take-on” trade), assume the economic risk of acquiring that block, and attempt to “distribute” the newly acquired securities to end investors (the “unwind” trade).

On occasion, the “take-on” trade may involve more than one Participant. This may be at the specific request of the selling shareholder (e.g., the seller requests a 50/50 split of the volume of the trade between two Participants), and/or the size of the block may limit the ability of a single Participant to assume all the economic risk.

In addition to multiple Participants potentially being engaged in the “take-on” trade with the seller, the “distribution” of the securities to end investors may further broaden the scope of the transaction. For example, a “distribution” to retail clients may be more efficiently achieved through wider exposure to the retail networks of multiple Participants.

UMIR 6.4 prohibits a Participant from trading or participating in a trade in a security other than through the entry of an order on a marketplace. There are available exceptions to this requirement, including through a regulatory exemption under UMIR 6.4(2)(b).

The efficient “distribution” of large blocks of securities to multiple investors is beneficial for the Canadian market and warrants an exemption from UMIR under certain circumstances. As such, Market Regulation Policy may provide one or more exemptions pursuant to UMIR 6.4(2)(b) to allow a Participant or a group of Participants engaging collectively to facilitate a transaction as described above. The exemption(s) from UMIR 6.4 may provide for a principal “take-on” trade(s) to occur at a discount off-marketplace provided that the trade is made in furtherance of a “distribution” to clients. The exemption(s) may also provide for additional off-marketplace trades to allocate the “take-on” trade between multiple Participants involved in the on-market “unwind” transaction, and “distribution” to end investors.

The provision of an exemption(s) to UMIR 6.4 is subject to satisfying several conditions that are described in the Questions and Answers section below.

2. Questions and Answers

The following are specific questions respecting the procedures for the execution of certain designated trades and Market Regulation Policy’s response to each question:

2.1 What is the initial step that is required to facilitate an off-marketplace “take-on” trade in a listed security in furtherance of a “distribution” to clients?

A written application for an exemption(s) to trade off-marketplace pursuant to UMIR 6.4(2)b) must be made to Market Regulation Policy at UMIRRequests@ciro.ca before any “take-on” trade can occur. For a general description of the procedures to be followed and the information to be provided to obtain an exemption pursuant to UMIR 6.4(2)(b), see Guidance Note GN-URPart11-26-0001 – Obtaining a Trading Exemption or Rule Interpretation (January 29, 2026). Further, Appendix A below provides a template of the information required by CIRO when seeking to act as principal with respect to a “take-on” trade under UMIR that involves a “distribution” to clients of a significant block of shares.

2.2 What are the conditions that must be satisfied prior to an off-marketplace exemption(s) being granted?

In the normal course, Market Regulation Policy may provide an exemption(s) to allow the principal “take-on” trade to be executed off-marketplace if:

• the size of the “take-on” trade is such that the trade could not be completed on a marketplace without being disruptive of the market;
• the price of the “take-on” trade varies from the intended price of the “distribution” (or the highest price in a range of possible distribution prices if the price of the distribution has not been finally determined) by an amount that is not more than the usual agency commission that would be charged by that Participant to that client for an order of the same size;2
• the Participant intends to “distribute” the block of shares to its clients and does not already hold client orders for a significant proportion of the block;
• the Participant agrees to execute the “unwind” trade at the distribution price on a marketplace subject to all Requirements, including the Order Protection Rule (OPR) under Part 6 of the Trading Rules; and
• to the extent that the distribution price is more than the greater of 5% or 10 trading increments lower than the prevailing market price at the time the distribution trades are to be executed, the Participant agrees to seek prior approval from Surveillance when moving the market in accordance with the requirements set out in UMIR 2.1 before executing the designated trade.

2.3 What if more than one Participant is involved in the transaction? Does each Participant need to separately seek an exemption(s)?

Any Participant that is involved in the “take-on” trade off-marketplace or the “unwind” trade on a marketplace, would need an exemption before the “take-on” trade occurs. An exemption from UMIR 6.4 is required for any movement of listed securities off-marketplace that results in a change of beneficial or economic ownership. If the structure of the transaction will involve movement of the listed securities acquired in the “take-on” trade through multiple Participants, each leg of the transaction results in a change in beneficial or economic ownership and must be traded on a marketplace pursuant to UMIR 6.4, unless there is an available exception under UMIR 6.4(2), including an exemption that is granted by Market Regulation Policy.

2.3.1 Does every Participant involved in the transaction have to agree to the conditions of the exemption(s)?

Generally, yes. Any Participant that is involved in either the “take-on” trade or the “unwind” trade must agree to all the conditions applicable to any exemption(s) granted.

For Participants that are included in the transaction but are not engaged directly in either the “take-on” trade or the “unwind” trade (e.g., only receive securities as part of efforts to “distribute” through retail networks), many of the conditions set out above in Question 2 would not apply. Although, as noted above, an exemption from UMIR 6.4 may be required if the movement of listed securities represents a change in beneficial or economic ownership. This would occur with any movement of listed securities between Participants but would not include where a Participant has acquired listed securities as part of the “distribution” and is subsequently allocating those shares to their own clients.

Any Participant that is included in the transaction must agree to any conditions that are applicable to that Participant’s role in the transaction. For example, depending on when their involvement in the transaction begins, a Participant that is not directly involved in the “take-on” or “unwind” trades, may still need to agree to a condition that they do not already hold client orders for a significant proportion of the block.

To assist Participants when requesting an exemption(s), in Appendix A we have provided further details on what should be included in the request.

Any exemption(s) under UMIR 6.4(2)(b) or UMIR 11.1 granted by Market Regulation Policy applies only to the transaction described in the exemption application. The Participant must continue to comply with all other applicable requirements under UMIR, Investment Dealer and Partially Consolidated (IDPC) Rules, and securities legislation.

2.4 Does the “take-on” trade need to be a certain size in order to qualify for an off-marketplace exemption?

While Market Regulation Policy does not require a minimum volume or value for a transaction to qualify for an off-marketplace exemption under UMIR 6.4(2)(b), the Participant would need to demonstrate that the “take-on” trade is of a significant size such that the trade could not be completed on a marketplace without being disruptive of the market.

2.5 Are there any other circumstances under which Market Regulation Policy would not provide an off-marketplace exemption to facilitate a “distribution” of a block of listed securities?

Yes. Market Regulation Policy generally will not grant an off-marketplace exemption if, at the time of the proposed “take-on” trade, any Participant that will be involved in the transaction already holds client order(s) to buy a significant proportion3 of the block. In these circumstances, Market Regulation Policy is of the view that it is more appropriate for the transaction to be completed on a marketplace with the Participant acting as agent for both seller and purchaser(s).

However, it is acceptable for a Participant to have received “indications of interest” from clients to participate in the distribution.

2.6 How is a Participant expected to execute the “unwind” trade?

After the “take-on” trade is complete, the Participant would market the “distribution” of the block to clients. The “unwind” trade may be executed concurrent with or following the completion of the “take-on” trade. Unless Market Regulation Policy otherwise agrees, the “unwind” trade must be executed on a marketplace later that trading day in a single principal-client trade for the entire block of securities at the “distribution” price. Depending on the market price at the time when the Participant seeks to print the “unwind” trade at the distribution price on a marketplace, the Participant may need to contact CIRO Market Surveillance4 for prior approval when moving the market price to the price at which the “unwind” trade will occur, pursuant to subsections (3) and (4) of UMIR 2.1 Specific Unacceptable Activities.

After the “unwind” trade has been printed on a marketplace, the Participant may allocate the securities to clients by means of journal entry for the balance of that trading day only.5

2.7 What order markers should be used when executing the “unwind” trade on a marketplace?

Participants should use the multiple client order marker on the buy side and the principal order marker on the sell side when executing the “unwind” trade on a marketplace.

Other requirements under UMIR 6.2 also continue to apply. For example, if the Participant is aware of participation from insiders and/or significant shareholders at the time of executing the “unwind” trade, then the Participant would also include the IA and/or SS marker(s) when printing the cross on a marketplace. The Participant would also need to file a report using the Regulatory Marker Correction System (RMCS6) to remove the IA and/or SS marker for any part of the buy volume that was not allocated to insider(s) and/or significant shareholder(s).

2.8 Should the Participant use the “bypass order” marker when executing the “unwind” trade on a marketplace?

The execution of the “unwind” trade is subject to OPR, unless an exception to OPR is available. Even where an exception to OPR may be available for certain orders (e.g., orders for special settlement7) Market Regulation Policy will still require the “unwind” trade to displace better-priced orders on a marketplace as a condition of an exemption(s) granted for the transaction. Using the “bypass order” marker would limit interference from better-priced orders not included in the disclosed volume on the marketplace on which the unwinding trade is to be executed.

As the “bypass order” marker only limits interference on the marketplace to which an order is sent, the Participant may still have displacement obligations if there are better-priced orders displayed on other marketplaces that are protected marketplaces8 (see Question #9 below).

2.9 When displacing better-priced orders on other protected marketplaces, is a Participant required to use the “bypass order” marker?

While not required, Participants may use the “bypass order” marker on orders sent to displace better-priced orders on other protected marketplaces to avoid interference from undisclosed liquidity. For example, if a Participant sends an order to a protected marketplace to trade with the disclosed volume on that marketplace and does not use the “bypass order” marker, the Participant takes on the risk that the order will interact with undisclosed volume, including hidden orders and the undisclosed portion of iceberg orders and Special Terms Orders. To the extent that not all of the better-priced orders included in the disclosed volume of protected marketplaces are filled, the Participant continues to have a displacement obligation.

For greater certainty, notwithstanding that a Participant enters an order on a particular protected marketplace that is of a sufficient volume and at a price that will fill the disclosed volume, to the extent that the Participant did not use the “bypass order” marker and encounters interference from undisclosed better-priced orders on other protected marketplaces, the Participant may not have met its obligations under OPR.

2.10 Can a Participant allocate shares to clients at a price that is different from the price of the “unwind” trade on the marketplace?

No, the Participant must allocate shares to clients by journal entry at the same price as the execution price of the “unwind” trade on the marketplace.

2.11 What is a Participant expected to do if not all of the “unwind” trade is allocated to clients by the end of the trading day?

If a Participant has not allocated all the securities that were the subject of the “unwind” trade to clients by the end of the trading day, the Participant must take the unallocated securities into its inventory and submit a report using RMCS to set out, among other things, the number of securities marked as a trade to multiple clients which have been taken into inventory.9

To the extent that a Participant has taken unallocated securities into inventory, any future sales of the securities must be completed on a marketplace as a principal trade that is subject to all UMIR provisions, as well as applicable requirements from the Investment Dealer and Partially Consolidated (IDPC) Rules and securities laws.

2.12 If the Participant negotiates the “take-on” trade later in the trading day, would the Participant be given additional time to allocate shares to clients?

Depending on the timing of the negotiation of the “take-on” trade, a Participant may be seeking an off-marketplace exemption later in the trading day and printing the “unwind” trade on a marketplace closer to the end of the trading day. In these cases, the Participant may include a request to extend the allocation period in their exemption application and Market Regulation Policy may extend the time period for the allocation of shares by journal entry to clients until market opening on the following trading day.

2.13 Can Participants seek an exemption in advance, even if they do not have all of the information set out above?

Yes. In some instances, full details of the final structure of the transaction may not be available at the time an exemption request is made. For example, the selling shareholder may not have determined whether one, or multiple Participants will be engaged in the transaction, or the extent to which the distribution through retail networks of additional Participants will be required.

If a Participant is concerned that there may not be another opportunity to seek an exemption at a later date or time, the Participant may apply for an exemption with respect to a potential “take-on” trade at an earlier stage by providing as much detail as possible (for example, up to a certain volume of shares in a listed security, or provide a price range within which the transaction may be completed), even if the details of the transaction have not been finalized.

However, Market Regulation Policy cannot provide blanket exemptions and cannot provide additional exemptions from UMIR 6.4 after a transaction has been completed. To facilitate an efficient exemption process, the Participant should provide as much of the information requested in Appendix A as possible in its exemption application. Where additional exemptions may be required to move securities off-marketplace to Participants that are not involved in the “take-on” or “unwind” trades but that are part of the “distribution” to end investors, these should be included as part of the initial request, even if they are ultimately not required once the transaction is finalized.

Where Market Regulation Policy grants an exemption(s) in advance, the Participant must agree to:

• provide final details once they become available, such as final take-on price and distribution price; size of take-on trade, etc.
• comply with the timelines set out in this Guidance Note, including:
  • at the time of taking-on the block of shares off-marketplace, the Participant should have less than 25% of committed buy orders
  • allocation to clients via journal entry must occur on the same trading day as the execution of the unwinding trade on a marketplace. However, if the unwinding trade was executed close to the end of the trading day, Participants may allocate until market opening on the following trading day.

If it is later determined that the Participant no longer requires one or more of the exemption(s) granted, the Participant should notify Market Regulation Policy at UMIRRequests@ciro.ca.

2.14 Can an exemption still be considered if the transaction fails to meet all of the criteria of a “take-on” transaction?

Where a transaction does not satisfy the criteria of a “take-on” transaction contemplated in this Guidance Note, Market Regulation Policy may consider an exemption application for other specific transactions pursuant to UMIR 11.1(1) provided the Participant demonstrates in writing that the transaction:

• would not be contrary to the provisions of any applicable securities legislation;
• would not be prejudicial to the public interest or to the maintenance of a fair and orderly market; and
• is warranted after due consideration of the circumstances of the particular person or transaction.

3. Applicable Rules

UMIR Rules this Guidance Note relates to:

• UMIR 2.1
• UMIR 6.4
• UMIR 11.1

4. Previous Guidance Note(s)

This Guidance Note replaces:

Guidance Note 23-0055 – Procedures for Handling Certain Designated Trades as Principal (April 17, 2023).

5. Related Documents

This Guidance Note is related to the following Guidance Notes:

GN-URPart11-26-0001 – Obtaining a Trading Exemption or Rule Interpretation (January 29, 2026)

6. Appendices

Appendix A – Template for a “Take-on” Trade / Designated Trade

Appendix A - Template for a “Take-on” Trade / Designated Trade

Before submitting an application to umirrequests@ciro.ca, Applicants should note the following:

• Applicants must fill out boxes 1-11 and 15 as identified below. Other boxes may apply depending on the nature of the transaction.
• Where certain sections of this template cannot be completed at the time of application, the Applicant should provide as much information as possible in their submission. CIRO may grant exemptions on this basis where appropriate, provided that the outstanding details will be included in the Applicant’s final report.
• If additional Participants are to be included in the proposed transaction below, the Applicant must ensure that any additional Participants agree to:
  • the information and representations provided below
  • any conditions set out as part of the exemption, in the event that an exemption is granted by CIRO.

“Primary Participant” – Participant that has been engaged by the Seller of securities and seeks to “take-on” shares off-marketplace

“Secondary Participant(s)” – Where more than one Participant has been engaged by the Seller and seeks to “take-on” shares off-marketplace (either directly from the Seller or from the Primary Participant)

“Additional Participant(s)” – A Participant that has not been directly engaged by the Seller, but that will be involved in the proposed transaction and allocating shares to end investors.

• 1Prior to their repeal, the wide distribution rules of the TSX required that a transaction meet several additional conditions, including:
  • timely public announcement of the wide distribution;
  • a minimum transaction value of at least $25,000,000;
  • distribution to 25 or more clients, with no one client’s allocation being more than 50% of the total allocation; and
  • completion of the wide distribution by the end of the fourth trading session following the announcement of the wide distribution.
• 2In essence, this condition ensures that the request for an exemption to execute the trade on a marketplace is not an attempt to avoid the application of Rule 7.5 of UMIR dealing with recorded prices.
• 3The determination of what constitutes a “significant proportion” is a fact-specific analysis that takes into account various factors, including, but not limited to, the liquidity profile of the security and recent trading patterns in the security. While Market Regulation Policy retains sole discretion in determining what constitutes a “significant proportion” for the purposes of Rule 6.4(2)(b), Market Regulation Policy will generally consider client orders that account for more than 25% of the volume of the distribution to be a “significant proportion”.
• 4Contact information for Surveillance can be found at: Surveillance Contacts
• 5For this purpose, Market Regulation Policy considers the end of the “trading day” to be the close of trading on the last of the marketplaces on which the security trades and which provides pre-trade transparency.
• 6See Notice 21-0122 – Guidance Note – Marker Corrections and the Use of the Regulatory Marker Correction System (July 12, 2021) for guidance on the procedures for reporting order marker corrections.
• 7Section 6.2 of National Instrument 23-101 “Trading Rules” sets out a list of permitted trade-throughs and provides an exception to OPR for the execution of a “non-standard order”.
• 8Both CIRO and the CSA publishes a list of protected and unprotected marketplaces for the purposes of the order protection rule. CIRO and the CSA will only publish a new notice if there are changes to the list of protected and/or unprotected marketplaces (the current list is available at: Universal Market Integrity Rules).
• 9See Notice 21-0122 – Guidance Note – Marker Corrections and the Use of the Regulatory Marker Correction System (July 12, 2021) for guidance on the procedures for reporting order marker corrections. Permitting the unwinding trade to be marked “principal-client” combined with the use of RMCS to the extent that the unwinding trade has not been fully allocated to clients, prevents information leakage on how much of the block of securities was taken into inventory by the Participant.