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Canada’s securities regulators are resisting calls to temporarily restrict short-selling amid the novel coronavirus pandemic, saying in a joint statement there is “no evidence” that such trading is responsible for any recent market declines.

The Canadian Securities Administrators, the umbrella organization for the country’s provincial securities regulators, issued a statement on Wednesday saying it has been monitoring short-selling bans imposed in a number of countries – including Spain, Italy and France – but believes such a ban would have a negative impact on liquidity.

The Investment Industry Regulatory Organization of Canada, the self-regulatory organization that oversees Canada’s investment dealers as well as trading across the country, is also a signatory to the statement. Data collected by IIROC show that short-selling has made up a low percentage of market activity since the start of the pandemic and is consistent with short-selling activity before the outbreak, both organizations said in the statement.

“There is no evidence that short-selling activity has been the driver of recent market declines,” the organizations said.

When a trader “shorts” a stock, they do so in anticipation that the price of the stock is going to decline. Typically, a short-seller will “borrow” shares in a company for a fee, and immediately sell them. When it comes time to return to those borrowed shares, the short-seller purchases the shares at what the trader hopes is a reduced price, and then pockets the difference. Many large institutional investors use short-selling as a way to hedge their positions and limit exposure, while others target companies that they believe are overvalued.

In March, several European regulators imposed bans on short-selling in an effort to tame market turbulence. Similarly, in 2008, at the height of the global financial crisis, the U.S. Securities and Exchange Commission banned short sales of certain financial institutions and the Ontario Securities Commission followed suit, prohibiting traders from shorting 13 stocks, which included Canada’s Big Five banks and several insurance companies.

In the joint statement released Wednesday, the CSA and IIROC said that research conducted subsequent to those 2008 bans showed that there were unintended “negative impacts” from those short-selling bans.

The topic of short-selling has been a hot-button issue in Canada even before the pandemic. In November, six lawyers from Bay Street firm McMillan LLP released a 155-page research paper, arguing Canadian companies have been disproportionately targeted by short-sellers, often through negative publicity campaigns, compared with companies in the United States, Australia and the European Union. The report called Canada a “haven” for such campaigns.

In an e-mail, Paul Davis, a partner at McMillan and one of the authors of the study, said he was aware of recent efforts to persuade Canada’s regulators to impose temporary bans similar to those in other jurisdictions.

“There has been some ‘quiet’ lobbying by some market participants for the regulators to impose additional restrictions on short selling during this volatile period,” Mr. Davis said.

IIROC, which monitors short-selling activity, has defended its approach, saying that short selling plays an important role in the marketplace. This includes the exposure of overvalued companies – what is referred to as “price discovery” – and in extreme cases such as Sino-Forest Corp., outright fraud. IIROC also requires short sales to be marked as such, and can declare that certain securities are ineligible for short-selling.