Crackdown on Naked Shorts Spurs Hope for More Canadian ECM Deals

Stock exchange operators are hoping that new rules meant to crack down on naked short selling in Canada could drive more activity in the subdued market for share sales.

The practice of making short bets without first borrowing those shares is banned in Canada — just like in the US. However, Canada’s regulators and stock exchange operators say that lax rules and light oversight have allowed it to happen too often. That allows investors to bet against an outsized number of shares, especially in smaller companies.

Now, the Canadian Investment Regulatory Organization is weighing feedback on a new rule that ...