Trading Functionality Guide

Transcription

Aequitas NEO Exchange Inc.
Trading Functionality Guide
AEQUITAS NEO EXCHANGE
1
2015/04/17
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Table of Contents
1
DOCUMENT VERSION HISTORY ....................................................................................... 5
2
INTRODUCTION ................................................................................................................ 6
3
CONTACT INFORMATION ................................................................................................. 6
4
OVERVIEW ........................................................................................................................ 7
TRADING BOOKS ...............................................................................................................7
4.1.1 Lit Book ....................................................................................................................7
4.1.2 NEO BookTM...............................................................................................................8
4.1.3 Dark Book .................................................................................................................8
4.1.4 Crossing Facility.........................................................................................................8
HOURS OF OPERATION ........................................................................................................8
4.2.1 Lit Book ....................................................................................................................8
4.2.2 NEO BookTM...............................................................................................................8
4.2.3 Crossing Facility.........................................................................................................8
TRADED SECURITIES ..........................................................................................................9
CLASSIFICATION OF TRADER IDS ...........................................................................................9
4.4.1 NEO TraderTM IDs classified as Retail ...........................................................................9
4.4.2 Latency Sensitive Trader IDs ......................................................................................9
5
TRADING IN THE LIT BOOK ........................................................................................... 11
CONTINUOUS TRADING .....................................................................................................11
5.1.1 Price Display............................................................................................................11
5.1.2 Odd-Lots and Mixed-Lots..........................................................................................11
6
TRADING IN THE NEO BOOK.......................................................................................... 12
CONTINUOUS TRADING .....................................................................................................12
6.1.1 Price Display............................................................................................................12
6.1.2 Size-Time priority ....................................................................................................13
6.1.3 Speed Bump ...........................................................................................................14
7
PRINTING TRADES IN THE CROSSING FACILITY ......................................................... 14
8
ORDER TYPES & MODIFIERS ......................................................................................... 15
MARKET ORDER ..............................................................................................................15
LIMIT ORDER..................................................................................................................15
DURATION ORDERS - MODIFIERS.........................................................................................16
8.3.1 Fill or Kill Order (FOK) ..............................................................................................16
8.3.2 Immediate or Cancel (IOC) ......................................................................................16
8.3.3 Good for Day Order .................................................................................................16
8.3.4 Good till Time Order.................................................................................................16
8.3.5 Regular Hours Only (RHO)........................................................................................16
OTHER ORDER MODIFIERS .................................................................................................16
8.4.1 Iceberg Orders ........................................................................................................16
8.4.2 Mixed Lot ................................................................................................................16
8.4.3 Odd Lot...................................................................................................................17
FUNCTIONAL ORDER MODIFIERS ..........................................................................................17
8.5.1 Attributed & Anonymous ..........................................................................................17
8.5.2 Directed-Action Order (DAO) ....................................................................................17
8.5.3 Passive Only Reprice ................................................................................................17
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8.5.4 Passive Only Cancel .................................................................................................17
8.5.5 Protect & Reprice .....................................................................................................17
8.5.6 Protect & Cancel ......................................................................................................17
8.5.7 Self-Trade Prevention (STP) .....................................................................................18
8.5.8 Mid-Point Pegged .....................................................................................................18
8.5.9 Bypass Order ..........................................................................................................18
8.5.10
Short Sale ...........................................................................................................18
CROSS TYPES .................................................................................................................19
8.6.1 Bypass Cross ...........................................................................................................19
8.6.2 National Cross .........................................................................................................19
8.6.3 Internal Cross..........................................................................................................19
8.6.4 Basis Cross..............................................................................................................19
8.6.5 Contingent Cross .....................................................................................................19
8.6.6 VWAP Cross ............................................................................................................19
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SMART ORDER ROUTER.................................................................................................. 20
OVERVIEW.....................................................................................................................20
SPEED SPRAY .................................................................................................................20
CYCLE BY PRICE & SPRAY...................................................................................................20
LATENCY NORMALIZATION..................................................................................................20
DIRECTED ORDERS ..........................................................................................................20
AUTOMATED JITNEY..........................................................................................................20
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DESIGNATED MARKET MAKER (DMM) PROGRAM......................................................... 21
OVERVIEW.....................................................................................................................21
DMM OBLIGATIONS .........................................................................................................21
DMM BENEFITS ..............................................................................................................22
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OTHER FEATURES ........................................................................................................... 23
CIRCUIT BREAKERS ..........................................................................................................23
CANCEL ON DISCONNECT ...................................................................................................23
STANDARD TRADING UNITS................................................................................................23
STANDARD TRADING PRICE INCREMENTS................................................................................24
SECURITY TIERS..............................................................................................................24
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1 Document Version History
Date
2015/04/17
2015/04/17
Comments / Revision Type
Launch version
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2 Introduction
This document contains a description of Aequitas NEO Exchange functionality as of launch1
and will be updated as new functionality becomes available and reviewed at least annually.
All capitalized words are defined in the Aequitas NEO Exchange Trading Policies (the “Trading
Policies”); however, in the case of a discrepancy between this document and the Trading
Policies, the Trading Policies will apply.
3 Contact Information
NEO Trading Services and the Account Management team are the two main points of contact
for anything relating to trading solutions. Contact trading services for any support enquiry
and the account management team for anything relating to our products and services.
CONTACT
Trading Services
Account Management
PHONE
(416) 933-5950
(416) 933-5955
EMAIL
[email protected]
[email protected]
Trading Services support is available Monday through Friday as follows:


Production Support:
GTE Support:
06:00 (EST) to 17:30 (EST)
09:00 (EST) to 17:00 (EST)
1
The launch will be delivered in two phases. The initial launch, as of March 27, 2015, supports the trading of TSX
and TSXV listed securities, which will be followed by Aequitas NEO Exchange listed securities mid-2015. This
document contains the available functionality for the first phase and will be updated to cover the second phase once
that functionality is available.
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4 Overview
Trading Books
4.1.1 Lit Book
The Lit Book puts the long-term investor first by prioritizing NEO TraderTM orders ahead of
those designated as coming from “Latency Sensitive Traders”. This provides an opportunity
to interact with reliable liquidity while providing a favourable cost structure for long-term
investors’ dealers.
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4.1.2 NEO BookTM
The NEO BookTM provides an opportunity for investors looking to trade size without the
intermediation of predatory trading strategies, all at a minimal flat fee. The NEO BookTM
rewards those who post orders of significant size by prioritizing them ahead of smaller orders
at the same price/time. Active retail orders trade for free in this book, interacting with posted
size –reducing fragmentation through higher average trade sizes.
4.1.3 Dark Book
The Dark Book is scheduled to launch in Q1 2016, at which point this document will be
updated to describe related functionality.
4.1.4 Crossing Facility
The Crossing Facility is a service available to all market participants. It supports the execution
of various types of crosses in any of the securities traded on Aequitas NEO Exchange free of
charge. Only intentional crosses are allowed; cross interference with orders in any of the
trading books is not supported.
Hours of Operation
4.2.1 Lit Book
TIME
9:30am - 4:00pm
SESSION
Continuous Trading - All order types and order modifiers are
accepted
4.2.2 NEO BookTM
TIME
SESSION
8:00am - 5:00pm
Continuous Trading - All order types and order modifiers are
accepted
4.2.3 Crossing Facility
TIME
8:00am - 5:00pm
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SESSION
Continous Trading – All intentional cross types accepted for all
traded securities
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Traded Securities
The Aequitas NEO Exchange trades all TSX and TSX Venture listed securities 2 with the
exception of USD denominated securities (.U)3. See above for trading session information.
Classification of Trader IDs
A key component for our trading solutions is the differentiation between Trader IDs as being
either a NEO TraderTM or a Latency Sensitive Trader. Members have the responsibility
to certify their Trader IDs as one of these two categories, defined in the Trading Policies and
set out here:
“Latency Sensitive Trader” or “LST” means either:
a) a proprietary trader of a Member, trading for its own account, using automated, colocated trading strategies; or
b) a DEA Client using automated, co-located trading strategies and making its own
routing decisions without passing through a Member’s order routing technology,
where “using automated, co-located trading strategies” means using a server installed in the
same data centre as, or in close proximity to, any Canadian exchange or alternative trading
system located in the Greater Toronto Area.
“NEO TraderTM” means an account type or an investor that trades through an account type,
other than LST (e.g. “Client” account type).
4.4.1 NEO TraderTM IDs classified as Retail
Trader IDs that handle flow exclusively from Retail Customers can be classified as such. The
only difference between a Retail NEO Trader and a regular NEO Trader is that the former can
take liquidity for free in the NEO BookTM. All other aspects remain the same.
4.4.2 Latency Sensitive Trader IDs
An LST is a Trader ID that meets one of the two criteria above. An example of the first
category would be a Designated Market Maker, but includes any dealer that trades for its own
account using co-located automated trading strategies.
For the second part of the definition, which includes DEA clients, the key component is who
makes the routing decision. An example of who fits in to this category would be those DEA
2
3
Aequitas NEO Exchange listed securities will be traded as of the listings launch planned for mid-2015
Support for .U symbols will be added during 2015
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clients that access markets directly (using only dealer provided pre-trade risk filters) and
directs orders to venues without relying on their dealers to make the routing decisions. Any
type of client flow where the client has no control over which marketplace their orders get
routed to is not considered to be LST.
LST FAQs
We have received some queries about the interpretation of our LST definition. The Q &A set out below
has been developed to assist our Members.
Q: Is a marketplace router considered a Member’s order routing technology?
A: Yes; the entity that operates the router does not matter for the definition. Regardless if it is a
marketplace router, a non-marketplace vendor’s router or proprietary technology, it is the Member that
is responsible for the order routing.
Q: If a DEA client sends directed orders through an order router, does that mean they are
not considered LST as they are in fact passing through an order router, which is part of the
criteria?
A: No, this is not how the definition should be interpreted. The intention of the definition is to allow all
clients, including those that normally trade with a speed-based strategy, to be treated similarly to other
router users when relying on the Member’s router. The key component is who makes the routing
decision. If a DEA client makes the decision to which venue their order should be sent and just uses the
router as a mechanism to get there, they are still considered to be LST. In order for them not to be
considered LST they have to give up the decision of how to route the order to their dealer.
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5 Trading in the Lit Book
Continuous Trading
A tradable order entered into the Lit Book will execute against resting orders (other than
special terms orders – see section 5.5.3) in accordance with the following priority rules:
a) A resting order at a particular price will be executed in priority to all orders at inferior
prices;
b) A visible resting order has priority over a non-visible resting order at the same price
at the time of execution;
c) If multiple resting orders exist at the same price then the priority sequence is as
follows:
i.
If applicable, a DMM resting order due to the Market Maker Volume Allocation
(see section 10.3),
ii.
Any resting orders from the same Member as the incoming tradable order
(broker preferencing):
A.
All NEO TraderTM resting orders from that Member according to time priority,
B.
All other resting orders from that Member according to time priority,
iii.
All NEO TraderTM resting orders according to time priority, then
iv.
All other resting orders according to time priority; and
d) An order loses its time priority if
i.
its visible volume is increased,
ii.
the price is amended,
iii.
the order attribution is amended (to/from anonymous).
5.1.1 Price Display
All visible orders resting in the Lit Book except odd lots are displayed on the public data feed
with broker attribution (unless marked anonymous).
5.1.2 Odd-Lots and Mixed-Lots
The Aequitas NEO Exchange does not have an order book for odd lot orders. Instead, odd lot
orders are automatically executed upon entry by the DMM at the current NBB or NBO. If the
odd lot order is a limit order, it will be booked at its limit price and only trade at the NBBO
only when it reaches its limit price.
A mixed lot order will be split into a board lot and an odd lot portion upon entry. The odd lot
portion of a resting mixed lot order will only trade when the board lot portion is completely
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filled. The odd lot order will receive the same price as the last traded price of the board lot
portion.
6 Trading in the NEO Book
Continuous Trading
Only IOC and FOK orders entered in the NEO BookTM may interact with resting orders in the
NEO BookTM to remove liquidity. Any other order entered into the NEO BookTM that would be
immediately tradable upon entry will be cancelled back to the user (unless flagged as protect
and reprice). Furthermore, some IOC/FOK orders are subject to a speed bump (see section
6.1.3 below).
A tradable order entered into the NEO BookTM will execute against resting orders in accordance
with the following priority rules:
a) A resting order at a particular price will be executed in priority to all orders at inferior
prices;
b) A visible resting order has priority over a non-visible resting order at the same price
at the time of execution;
c) If multiple resting orders exist at the same price then the priority sequence is as
follows:
i.
Any DMM resting order at that price may get priority subject to the Market Maker
Volume Allocation (see section 10.3),
ii.
Any resting orders from the same Member as the incoming tradable order
(broker preferencing) will be matched according to Size-Time priority (see
section 6.1.2), then
iii.
All other resting orders according to Size-Time priority (see section 6.1.2).
If orders are marked as Regular Hours Only, they will be expired back to the originator at
4PM.
All remaining resting orders in the NEO BookTM will be cancelled back to the originator at the
end of the trading day.
6.1.1 Price Display
The NEO BookTM provides a market-by-price display only, meaning that all orders resting in
the NEO BookTM that are priced at or outside the NBBO are disseminated on the public data
feed by price level. The volume for each price level is:
a) For non-pegged orders priced outside the NBBO, the aggregate volume of all visible
orders at that price level (iceberg volume is not included); and
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b) For orders priced at the NBBO, the aggregate volume of all visible orders at the NBBO,
plus the aggregate volume of all tradable mid-point pegged orders.
Mid-point orders that are not tradable are removed from the public market data feed until
such time as the market conditions change and the mid-point volume becomes executable.
Trades executed in the NEO BookTM are disseminatied on the public data feed with broker
attribution (unless the order was entered as anonymous).
6.1.2 Size-Time priority
The size-time matching priority is an allocation methodology utilized in the NEO BookTM to
determine the sequence in which orders will trade when there are multiple potential matches
at a given price. First if any single resting order can completely fill the incoming order, that
order will trade. If more than one resting order can fill the incoming order completely (or if
no resting order can fill it completely) the highest overall size-time ranking score among those
resting orders will determine which trades first. The size-time ranking is calculated as a
weighted average of three different order rankings: the remaining resting order size, the
priority timestamp and the time of the last partial fill. The weighting used for the calculation
is subject to change and will be published by notice to Members.
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An order loses its time priority (priority timestamp) if its visible volume is increased, the price
is amended or the order attribution changes (to/from anonymous).
6.1.3 Speed Bump
All incoming IOC/FOC orders originating from a Trader ID that is classified as a Latency
Sensitive Trader will be subject to a randomized delay of 3-9 milliseconds. The delay occurs
before the order is released into the exchange engine. An order entered into the Exchange
system cannot be modified or cancelled while subject to the speed bump; the order will be
fully processed with any non-tradable volume cancelled back to the originator.
No other order types or order operations from any market participant are subject to the speed
bump.
7 Printing trades in the Crossing Facility
The crossing facility is available to print crosses at or inside the NBBO, without interference
from orders resting in the Lit Book or NEO BookTM.
Printing crosses:
a) A Member may report crosses made off-exchange, subject to any regulatory
provisions applicable to the entry of crosses.
b) National and Internal crosses entered during the continuous trading session must be
made at a price that is at or within the NBBO.
c) Bypass crosses and specialty price crosses such as Basis, Special Terms and VolumeWeighted Average Price will not be reflected in the last traded price and will not be
used in the determination of the closing price.
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8 Order Types & Modifiers
The Aequitas NEO Exchange features a number of order types and modifiers that are available
in the Lit Book, NEO BookTM and the Crossing Facility.
ORDER TYPE, MODIFIER AND
ATTRIBUTE
Limit Order
Market Order
Fill or Kill (FOK)
Immediate or Cancel (IOC)
Good for Day
Good till Time
Regular Hours Only
Iceberg
Mixed Lot
Odd Lot
Attributed & Anonymous
Directed-Action Order
Passive Only Reprice
Passive Only Cancel
Protect & Reprice
Protect & Cancel
Self-Trade Prevention
Mid-Point Pegged
Bypass Order
Short Sale
Bypass Cross
National Cross
Internal Cross
Basis Cross
Contingent Cross
VWAP Cross
AVAILABLE IN
LIT BOOK
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
No
No
No
No
No
No
AVAILABLE IN
NEO BOOK
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
AVAILABLE IN
CROSSING FACILITY
No
No
No
No
No
No
No
No
No
No
Yes
Yes
No
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Market Order
As defined in UMIR, a market order is an order to be executed upon entry to a marketplace
to buy or sell a security at the best ask or bid price. Market orders are available in both the
Lit Book and the NEO BookTM.
Limit Order
As defined in UMIR, a limit order is an order to buy or sell a security at a specified maximum
or minimum price. Any unfilled part of an executed limit order is converted to a new limit
order at a price equal to the price of the last fill of the order, or the last traded price. Limit
orders are available on both the Lit Book and the NEO BookTM.
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Duration Orders - Modifiers
Duration order types will determine the amount of time an order remains active and
executable in the Lit Book and NEO BookTM.
8.3.1 Fill or Kill Order (FOK)
A limit order or market order that is to be filled immediately in full, or cancelled. Available on
both the Lit Book and the NEO BookTM.
8.3.2 Immediate or Cancel (IOC)
A limit order or market order that is to be filled immediately in full or in part, with the unfilled
quantity cancelled. Available on both the Lit Book and the NEO BookTM.
8.3.3 Good for Day Order
A limit order that is valid until it is fully filled or cancelled, and expires at the end of the
continuous trading session (or at the end of the extended trading session for eligible
securities). Available on both the Lit Book and the NEO BookTM.
8.3.4 Good till Time Order
A limit order that is valid until it is fully filled or cancelled, and expires at a specified time.
Available on both the Lit Book and the NEO BookTM.
8.3.5 Regular Hours Only (RHO)
An order that is valid for “regular hours only” can only be entered between 9:30am and
4:00pm in the Lit Book and between 8:00am and 4:00pm in the NEO BookTM. Any resting
orders marked RHO are considered expired at 4:00pm by the system. Available on both the
Lit Book and the NEO BookTM.
Other Order Modifiers
8.4.1 Iceberg Orders
An iceberg order is a limit order that specifies a total size and a disclosed size. Once the
disclosed size is executed in full, another order will be displayed with priority corresponding
to the release time, and the undisclosed size, or “reserve”, will be reduced accordingly.
8.4.2 Mixed Lot
A limit or market order containing at least one board lot and one odd lot. Available on the Lit
Book only.
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8.4.3 Odd Lot
A limit or market order containing less than one board lot. Available on the Lit Book only.
Functional Order Modifiers
8.5.1 Attributed & Anonymous
A limit order entered into the exchange system is by default attributed, unless marked
anonymous by the user. Anonymous orders do not benefit from broker preferencing. Orders
with special settlement terms must be attributed. Available on both the Lit Book and the NEO
BookTM.
8.5.2 Directed-Action Order (DAO)
A limit or market order as defined in National Instrument 23-101 Trading Rules. Available on
both the Lit Book and the NEO BookTM.
8.5.3 Passive Only Reprice
A limit order that is repriced to one trading increment from the opposite side of the NBBO
(NBO-1 for buy orders and NBB+1 for sell orders) at the time of a price amendment if any
portion of the order is tradable upon entry. Available on both the Lit Book and the NEO
BookTM.
8.5.4 Passive Only Cancel
A limit order that is cancelled at time of entry if any portion of the order is immediately
tradable. Available on both the Lit Book and the NEO BookTM. This is the default order handling
instruction if a tradable passive order is entered onto the NEO BookTM.
8.5.5 Protect & Reprice
A limit or market order that will execute to the extent possible at the NBBO before adjusting
the price of any residual volume that would trade at a worse price than available on another
marketplace, or unintentionally lock/cross the market. Orders will be repriced to one trading
increment from the opposite side of the NBBO (NBO-1 for buy orders and NBB+1 for sell
orders). Available on both the Lit Book and the NEO BookTM. Note: on the NEO BookTM, resting
orders are not eligible to trade with one another; as a result, these tradable passive orders
will only be repriced.
8.5.6 Protect & Cancel
A limit or market order that will execute to the extent possible at the NBBO before cancelling
any residual volume that would trade at a worse price than available on another marketplace,
or unintentionally lock/cross the market. Available on both the Lit Book and the NEO BookTM.
Note: on the NEO BookTM, resting orders are not eligible to trade with one another; as a result,
these tradable passive orders will only be canceled.
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8.5.7 Self-Trade Prevention (STP)
A limit or market order that identifies eligibility to trade with other orders originating from the
same Member with the same self-trade key, as set by the user. The user can use STP to
achieve the following treatment of such trades:
Trade no Print – when an incoming order executes against opposite side resting
interest marked STP originating from the same Member with the same selftrade key, the trade occurs, however it is not disseminated on the public trade
feed and does not update the last traded price, daily volume, value, or other
trading statistics. The trade is still sent to the Clearing Corporation for
settlement to facilitate reconciliation.
Self-trade prevention applies to unintentional crosses in the continuous trading session only.
The designation is applicable to board lot orders and the board lot portion of mixed lot orders.
8.5.8 Mid-Point Pegged
A limit or market order that can only execute at the mid-point of the NBBO. The execution
price is automatically adjusted in response to changes in the NBBO. A mid-point pegged
order is an order in the NEO BookTM where the volume of the order is displayed at the NBB or
NBO.
In the NEO BookTM, only tradable mid-point volume will be displayed. If a mid-point pegged
order is not tradable as a result of its limit price being above (below) the limit price for a buy
(sell) order, the volume will not be displayed until such time as the market conditions change
or the limit price is amended. Available on the NEO BookTM.
8.5.9 Bypass Order
A limit or market IOC or FOK order that, when marked bypass, will only execute with visible
quantity, skipping any hidden volume, including the non-visible portion of iceberg orders, at
a given price level. Note: tradable mid-point pegged order volume in the NEO BookTM will
execute against incoming bypass orders as the volume is displayed at the NBB or NBO.
8.5.10 Short Sale
A limit or market sell order where the Member has indicated that the order quantity is fully or
partially to be sold short.
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Cross Types
8.6.1 Bypass Cross
An intentional cross entered at an agreed-upon price during the continuous trading session
indicating that, at time of submission, all visible better-priced order quantity has been
executed (via submission of a bypass order), allowing for printing without interference from
any orders in the Lit Book and NEO BookTM.
8.6.2 National Cross
An intentional cross entered at an agreed price during the continuous trading session, which
at the time of entry is at or within the NBBO.
8.6.3 Internal Cross
An intentional cross between two accounts managed by the same portfolio manager , which
at the time of entry was at or within the NBBO.
8.6.4 Basis Cross
An intentional cross whereby a basket of securities is transacted based on the execution of
related exchange traded derivatives.
8.6.5 Contingent Cross
An intentional cross resulting from a paired order placed by the Member on behalf of a client
that was contingent on the execution of a different order for the same client with an offsetting
volume in a related security.
8.6.6 VWAP Cross
An intentional cross executed at a volume-weighted average price of a security.
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9 Smart Order Router
Overview
The Aequitas Smart Order Router (SOR) delivers the benefit of a multitude of routing
strategies and a unique latency normalization technique. The approach is designed to protect
tradable orders from predatory tactics which leverage speed and assymetric access to
information used by some of the high-frequency trading (HFT) firms active today in Canada.
Depending on which SOR package has been subscribed to, a selection of predefined routing
tables preferencing certain marketplaces for active and passive orders is available, as well as
the option for full customization.
The Aequitas SOR can be integrated with any OMS and will function as an extension or backup
for an existing SOR solution.
Speed Spray
The Speed Spray Strategy will spray all markets and price levels at the same time (up to the
limit price of the order).
Cycle by Price & Spray
The Cycle by Price & Spray Strategy will iterate through each price level, one at a time (up to
the limit price of the order), and spray.
Latency Normalization
The Aequitas SOR normalizes the speed at which orders are delivered to each transparent
trading venue in Canada, ensuring they all arrive at the same time. By synchronizing the
impact of tradable orders across multiple marketplaces, a fairer trading environment is
created.
Directed Orders
Directed orders allow the customer to send an order directly through to a specified
marketplace without using one of the SOR’s routing strategies.
Automated Jitney
The Aequitas SOR offers the possibility for dealers to benefit from all the features of the SOR
without incurring the cost of becoming a member/subscriber of all marketplaces. By routing
trades to a jitney provider for those marketplaces where the dealer is not a member or
subscriber, they can still provide clients with best execution capabilities and fulfil their
regulatory requirements.
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10 Designated Market Maker (DMM) Program
Overview
Liquidity is a vital contributor to investor confidence and issuer success. The Aequitas NEO
Exchange DMM program establishes a balance between obligations and benefits to achieve
meaningful results. A DMM leverages its experience, technology and innovation to provide
liquidity to securities trading on the Aequitas NEO Exchange (TSX Listed, TSX-Venture Listed
& NEO Listed). All DMMs must be IIROC members trading for their own accounts to assist in
maintaining a fair and orderly market and to achieve reasonable price continuity for assigned
securities in both the Lit and NEO BookTM. In the interest of transparency, participants will be
monitored with performance metrics made available to ensure maximum effectiveness of the
program.
DMM Obligations
DMM obligations include two-sided continuous quoting with size and spread requirements
over a proportionate assignment of liquid and illiquid securities. This ensures viable economics
for market makers and a viable liquidity safety net for those securities that need it the most.
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For Aequitas NEO Exchange listed securities, the DMM will also be responsible for facilitating
the opening call, delayed opening and resumption of trading following a halt for assigned
securities.
DMMs must also facilitate the automatic execution of all odd lot orders for their assigned
securities. To ensure there is auto-execution of odd lots across most, if not all securities traded
on Aequitas NEO Exchange, for any unassigned securities we have introduced a fourth tier
for which there are no quoting obligations and no benefits, only odd lot obligations. At the
discretion of the DMM to whom it has been assigned (or any other DMM willing to take on the
quoting obligations), a Tier 4 security can at some later point be reclassifiedas a Tier 3 security
and regular quoting obligations would then apply.
TSX & TSXV listed
securities
Obligations
Tier 1
Tier 2
Tier 3
95%
95%
(per Book and per Security)
Quoting
Two-sided quote, X%
between 9.30am-4.00pm
of
time 95%
Size & Spread
Number of board lots (BL) within X% 5BL, 3%
of last sale price, minimum 1 BL on
each side
3BL, 5%
2BL, 7%
Presence
X% of the time @ NBB and NBO
20%
30%
Quote Range
X% with defined limit of Y% from 3%, 5%
NBB/O
5%,
7.5%
7%, 9%
10%
See section 11.5 for tier definitions.
DMM Benefits
To balance their obligations, DMMs are provided with a unique Market Maker Volume
Allocation (MMVA) for their assigned securities. The MMVA allows the DMM to participate in
the Lit Book and NEO BookTM (independently), up to 15% of the daily traded volume in that
book. DMM orders will be given matching priority until they reach the 15% maximum
allocation, at which time their orders will resume the normal priority sequencing. The priority
only applies to the visible portion of their order. Any non-visible volume will trade according
to regular matching priorities. The MMVA allocation is executed without order fragmentation
which means that the full size of their visible order will move to the top of the queue and
trade with the next incoming order if they have not exceeded their 15% allocation.
2015/04/17
22
11 Other Features
Circuit Breakers
The Aequitas NEO Exchange has implemented two types of circuit breakers to minimize the
risk of erroneous trades: Static Price Bands and Dynamic Price Bands. Both of these apply in
the Lit Book and NEO BookTM during the opening call and continuous trading session. In the
event a circuit breaker is triggered, the security will automatically go into a no matching halt
state.
The static price band is based on a deviation from a reference price, which will be set each
day to the opening price for the security, or if no opening has occurred, the previous day’s
closing price.
The dynamic price band is based on a deviation from the last sale price.
Price
<$0.10
<$0.25
<$0.50
<$1.00
<$5.00
<$10.00
<$20.00
<$40.00
<$80.00
>=$80.00
Static Price Band
400%
200%
100%
75%
50%
30%
20%
15%
15%
7%
Dynamic Price Band
300%
150%
75%
50%
40%
25%
15%
10%
7.5%
5%
Cancel on Disconnect
A Member can instruct Aequitas NEO Exchange to cancel all orders in the event that the FIX
session those orders were entered through gets disconnected. The functionality can be
configured on each FIX session independently.
Standard Trading Units
The Standard Trading Unit for a given symbol is defined in UMIR as per the table below.
Price
> $1.00
Between $0.10 and < $1.00
< $0.10
2015/04/17
Board Lot
100 shares
500 shares
1000 shares
23
Standard Trading Price Increments
Price Range
< $0.50
> $0.50
Tick Size
0.005
0.010
Security Tiers
All securities traded on the Aequitas NEO Exchange belong to a specific tier. The tier is used
to determine the DMM obligations for a security (see section 10.2). The tier is determined by
the Median Daily traded Value (MDV) for each security. MDV is calculated based on monthly
trading activity across all Canadian marketplaces and the security tiers are revised once per
quarter.
TIER
1
2
3
MDV
> $10,000,000
$1,000,000 - $10,000,000
< $1,000,000
Any security that trades less than 100 times per day is automatically put in Tier 3 regardless
of MDV.
2015/04/17
24

Trading Functionality Guide

Transcription

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