1 Order Types and Functionality Guide September 3, 2024 Revised: September, 2024 Version 1.7 SEP 03
Document Management 5 Scope 5 Section 1 Overview 6 1.1 Key Contacts 6 1.2 Regulation 6 1.3 Order and Trade Reporting 7 Section 2 Trading Sessions 8 2.1 Hours of Operation 8 2.1.1 TSX and TSX Venture Exchange 8 2.1.2 TSX Alpha Exchange 8 2.2 Pre-Open 9 2.2.1 Calculated Opening Price (COP) 9 2.3 Opening 10 2.3.1 Opening Allocation 10 2.3.2 Guaranteed Orders 12 2.3.3 Delayed Opening 12 2.4 Continuous Trading 12 2.5 Odd Lot trading 14 2.6 Market on Close (MOC) 15 2.6.1 MOC-Eligible Securities 15 2.6.2 Participating in MOC 15 2.6.3 MOC Imbalance Determination 16 2.6.4 MOC Imbalance 16 2.6.5 Calculated Closing Prices 16 2.6.6 Price Movement Extension 16 2.6.7 Closing Call Allocation 17 2.6.8 MOC Volatility Parameters 17 2.7 Post Market Cancel Session 17 2.8 Extended Trading Session 18 2.9 Must Be Filled (MBF) Session for Option Expiry 18 Section 3 Products & Order Features 19 3.1 TSX DRK 19 3.1.1 TSX DRK Trading on TSX and TSXV 19 3.2 Cancel on Disconnect 21 3.2.1 Configuration Levels 21 3.3 Order Protection Rule (OPR) Features 22 3.3.1 Directed Action Order (DAO) 22 3.3.2 Order Protection by Re-price 22 3.3.3 Order Protection by Cancel 22 3.4 Post Only 22 3.5 Drop Copy 23 3.6 Self-Trade Prevention 24 3.6.1 Self-Trade Prevention 24 3.6.2 Self-Trade Management 25
Section 4 Order Types 27 4.1 Change Former Order instructions (CFO) 27 4.2 Market Orders 27 4.3 Limit Orders 28 4.4 Limit On Open (LOO) Orders 29 4.5 Duration 29 4.5.1 Day Orders 29 4.5.2 Good Til Cancelled (GTC) 29 4.5.3 Good Til Date (GTD) 29 4.5.4 Immediate or Cancel (IOC) 29 4.5.5 Fill or Kill (FOK) 29 4.6 On-Stop Orders 30 4.7 Iceberg Orders 32 4.8 Short Sales 33 4.8.1 Short Market Exempt (SME) marker 34 4.9 Anonymous Orders 34 4.9.1 Broker Preferencing 34 4.10 Bypass Orders 35 4.11 Long Life Orders 35 4.12 Cross Types 35 4.12.1 Basis Cross 35 4.12.2 VWAP Cross 36 4.12.3 Contingent Cross 36 4.12.4 Internal Cross 36 4.12.5 Bypass Cross 36 4.12.6 Derivative Cross 36 4.12.7 Special Trading Session Cross 36 4.12.8 Contingent Cross 37 4.13 Order Features 38 4.13.1 TSX Alpha Order Processing Delay 38 4.13.2 MinimumGuaranteed Fill (MGF) 38 4.13.3 Buy-ins 38 Section 5 Market Maker Program & Odd Lot Dealer System 39 5.1 TSX Market Maker Program 39 5.1.1 Odd Lots 40 5.1.2 MinimumGuaranteed Fill (MGF) Size 40 5.1.3 RT Participation 42 5.2 TSXV Odd Lot Dealer Program 43 5.3 TSX Alpha Odd Lot Dealer Program 44 Section 6 Other Features 45 6.1 Minimum Ticks 45 6.1.1 Standard Trading Units 45 6.1.2 Standard Trading Price Increments 45 6.2 Trading Controls 46 6.2.1 Halts 46 6.2.2 Marketplace Threshold Parameters 46 6.2.3 Bid/Ask Limit 47 6.2.4 Single Stock Circuit Breakers 47
6.3 Order Markers 47 6.3.1 NCIB Marker 47 6.4 Account Types 47 6.5 Debentures 48 6.6 USD-Denominated Securities 48 6.7 Clearing Arrangements 48 6.7.1 Clearing Give-up 48 6.7.2 Special Settlement Terms 48 6.8 Erroneous Trade and Trade Amendment Policy 49 6.9 Reports 49 6.9.1 Daily Diary Files 49 6.9.2 Compliance Alerts Reporting System (CARS) 49 6.10 Fees & Billing 50 Section 7 Account Management Contacts 52
5 Document Management This document shall be updated on an annual basis, or with any newly introduced features or functionality, whichever occurs sooner, by the TMX Markets product & sales team. It is available in both English and French on the TMX website. Scope This document provides an overview of trading on all three TMX equity markets; Toronto Stock Exchange, TSX Venture Exchange, and TSX Alpha Exchange. It is intended to provide an introduction to the functional operation and order types of each market and serve as a reference for new and existing trading participants. For details on becoming a member, fees, connectivity and technical specifications, or additional information related to trading, please refer to the links below or contact a TMX Account Manager. REFERENCES Link TMX Trading Policies http://tmx.complinet.com/en/tsx_rulebook.html http://tmx.complinet.com/en/tsxv_rulebook.html www.tsx.com/resource/en/1069 TMX Fee Schedule www.tsx.com/trading/toronto-stock-exchange/fee-schedule www.tsx.com/trading/tsx-venture-exchange/fee-schedule www.tsx.com/trading/alpha/fee-schedule www.tsx.com/trading/tsx-drk/fee-schedule TMX Specifications (FIX Order Entry & STAMP Feeds) www.tmxwebstore.com/my-specifications TSX DRK Liquidity Guide www.tsx.com/trading/toronto-stock-exchange/order-types-and-features/ dark-trading TSXMarket Making ProgramGuide www.tsx.com/ebooks/en/market-making/ TMX Datalinx www.tmxinfoservices.com UMIR Rules www.ciro.ca/rules-and-enforcement/universal-market-integrity-rules Canadian Investment Regulatory Organization www.ciro.ca Ontario Securities Commission www.osc.gov.on.ca British Columbia Securities Commission www.bcsc.bc.ca Alberta Securities Commission www.albertasecurities.com
6 Section 1 Overview TMX Group operates three fully electronic marketplaces that represent the primary trading destinations of choice and sources of liquidity for equity trading in Canada. Toronto Stock Exchange Canada’s primary market. The largest and most recognized source of liquidity for Canadian equity trading of senior board securities. TSX Venture Exchange Canada’s public venture equity marketplace dedicated to trading junior equities from around the world during their early stages of growth. TSX Alpha Exchange TSX Alpha Exchange provides a competitive alternative for the active order flow of natural investors by promoting a higher quality of execution through increased fill certainty and sizes and lower trading costs. Each marketplace is supported by TMX’s proprietary Quantum XA technology platform, and provides different features, functionality, and pricing to offer choice and flexibility of execution to various trading participants. 1.1 Key Contacts The TMX Markets Account Management team is your resource for information on being a Participating Organization / Member of TMX’s equity marketplaces, new trading products and services, and how to access Canada’s capital markets efficiently. We are dedicated to providing Participating Organizations / Members and the investment community with a high level of customer service and support. Support is available from 7:00 a.m. – 5:30 p.m. on all trading days. CONTACT Phone Email Account Management N/A trading_sales@tmx.com Equities Trade Desk 416 947-4357 equities.operations@tmx.com Market Solutions Team 416 947-4705 equities.operations@tmx.com 1.2 Regulation The Canadian Investment Regulatory Organization (CIRO) is the self-regulatory organization (SRO) which oversees all trading activity on TMX’s equity marketplaces. CIRO regulates securities trading and market-related activities of participants, and administers and enforces the Universal Market Integrity Rules (UMIR) which applies to all participants trading on TMX Group equity marketplaces. All markers, identifiers, and order types required by UMIR and/or CIRO are supported by TMX’s equity marketplaces.
7 1.3 Order and Trade Reporting Order and trade messages which include both public and private data may be submitted to the TMX through the TSX FIX order entry protocol through the client’s order entry connection. Corresponding responses will be sent to the client through this connection. TMX also provides a broadcast feed which provides real-time public trade and quote, as well as the participant’s private data associated with all its trades and orders. TMX provides real-time market data feeds in the proprietary STAMP and TMX eXtreme Message Transfer (XMT) protocols. STAMP Level 2 data feed is a real-time data transmission service that provides pre- and post-trade data delivered in a tag based data format and variable record length messages. TMX XMT Level 1 and Level 2 data feeds are a real-time data transmission service that provides pre- and post-trade data delivered in a binary data format and fixed record length messages. Level 1 content includes equity quote and equity trade information. Level 2 content includes full depth of book equity order and trade information.
8 Section 2 Trading Sessions 2.1 Hours of Operation 2.1.1 TSX and TSX Venture Exchange TIME (ET) Session 7:00 AM – 9:30 AM Pre Open – Orders may be entered, but will not be executed. The COP is displayed and continuously updated. 9:30 AM Market on Open (MOO) – All matching orders are executed at a single opening trade price. Any remaining orders not filled during the opening, with the exception of Limit on Open orders, are carried through to the continuous limit order book. 9:30 AM – 4:00 PM Continuous Trading – All regular order types are accepted. 3:50 PM – 4:00 PM Market On Close (MOC) – The MOC facility consists of 2 market states: 3:50 pm Imbalance Period – Allow entry of new Market on Close orders, with no cancels or amends. Allow entry of Limit on Close orders on either side and with any volume, with no cancels and aggressive price amends only. 3:56 pm Freeze Period – The Freeze Period begins simultaneously across all symbols at a random point between 3:56 pm and 3:57 pm. Allow entry of Limit on Close orders on either side and with any volume, with no cancels or amends. Limit on Close orders entered are treated as “Pegged LOC orders”, which means that if the price is more aggressive than the MOC Reference Price, then it is repriced to the MOC Reference Price Imbalance messages are published every 10 seconds during this time. Trades publish at 4:00 unless a Price Movement Extension is required. 4:00 PM – 4:10 PM Price Movement Extension – The PME period is designed to solicit further liquidity to offset a remaining imbalance. If the calculated closing price (“CCP”) exceeds the PME range and requires a Price Movement Extension, a new MOC imbalance is calculated and published after which LOC orders opposite to the imbalance are accepted subject to a new price collar. If the new CCP does not exceed the CPA parameters, trades publish at 4:10 pm. During this time, open orders may be cancelled by the dealer for symbols that are not in a “closing delayed” stock state. 4:10 PM – 4:15 PM Post Market Cancel Session – During this session, open orders may be cancelled by the dealer. 4:15 PM – 5:00 PM Extended Trading Session – Orders at the last sale price are accepted, but trades may only occur at the last sale price except when the last sale price is an invalid tick and for regulatory approval of a specialty price cross. If the last sale price is at invalid tick, a rounded equivalent of the last sale price, Rounded LSP, will be utilized instead. Day orders participate in this session. MBF session for option expiry takes place during Extended Trading once per month, the evening before an option expiry day. 2.1.2 TSX Alpha Exchange TIME (ET) Session 7:00 AM – 8:00 AM Pre Open – New orders or CFO’s are not allowed, only cancels are permitted. 8:00 AM – 5:00 PM Continuous Trading – At 8:00 am continuous trading commences. All regular order types are accepted. 5:00 PM – 5:30 PM Post Market Cancel Session – During this session, open orders may be cancelled by the dealer.
9 2.2 Pre-Open The TSX, TSX Venture and TSX Alpha markets support a pre-open session. During the TSX and TSX Venture preopen session, market and limit priced orders, including Limit on Open (LOO) orders, can be entered but will not be executed until the market opens. Limit orders that were previously booked as GTC or GTD are available to be CFO’ed and/or cancelled during this session. Odd lot orders may be entered as well. During the TSX Alpha pre-open session new orders or order amendments are not permitted. Orders resting in the TSX Alpha order book may be cancelled. 2.2.1 Calculated Opening Price (COP) The COP is calculated as follows. It is displayed and continuously updated during the entire Pre-Open session on the TSX and TSXV. 1. The COP is determined as the price where the most shares can trade. 2. If there is more than one price that satisfies the first criterion, then the COP is the price that leaves the least imbalance. 3. If there is more than one price that satisfies the second criterion, then the COP is the price that is closest to the previous trading day’s Closing Price. (The TSX/TSXV closing price is used on TSX/TSXV markets). The following orders participate in the COP calculation: • Previously booked duration orders (GTC or GTD). • Regular board lot sized market and limit orders received during the pre-open session; odd lots do not contribute to COP formation. • LOO orders are treated the same as standard limit orders for the opening priority allocation. • The entire board lot disclosed and undisclosed portions of iceberg orders are included in the COP calculation; however the remaining imbalance will not include the reserve volume of any icebergs. Orders priced more aggressively than the current COP are displayed at the COP price instead of revealing their true limit price. Market priced orders are also displayed at the COP instead of revealing their unconditional market price. Example: Calculated Opening Price Assume at 9:00 a.m., the following orders exist in the system: Previous Day’s Close price: $10.02 BID OFFER Order # Broker Quantity Price Price Quantity Order # 001 A 1,000 10.00 MKT 200 002 003 B 200 9.99 9.99 500 004 005 C 200 9.99 10.00 100 006 10.01 100 007
10 Possible Open Prices: PRICE Tradable Volume Remaining Imbalance Deviation from Prev. Day’s Close Price $10.01 0 - $0.01 $10.00 800 Bid of 200 $0.02 $.9.99 700 Bid of 700 $0.02 $9.98 0 - $0.04 The COP will be: $10.00 since this price maximizes the tradable volume. 2.3 Opening TSX Alpha TSX Alpha supports a pre-open session where only cancels are permitted. Odd lots resting in the Odd lot book with a price equal to or more aggressive than the better of the opposite side of the Alpha BBO or the Protected NBBO will autoexecute at the better of these prices against the odd lot dealer prior to transitioning into the continuous trading session. The market transitions directly into continuous trading at 8:00 a.m. The first continuous trade of the day is subject to price volatility parameters based on the listing market’s (i.e. TSX / TSXV) previous day closing price. TSX and TSXV TSX and TSXV support a Market on Open (MOO), which is a visible single price opening call market at 9:30 a.m. All orders, with the exception of Limit on Open orders, not filled during the opening are subsequently booked in the continuous market at their limit price and are then eligible to trade throughout the day in the continuous market. Unexecuted LOO orders will be cancelled after the opening auction, before the commencement of the continuous trading session. Must Be Filled orders (TSX only) will be filled as part of the opening. Registered Market Makers (TSX) and odd lot dealers (TSXV) will auto-execute marketable odd lots at the NBBO at the end of the opening. 2.3.1 Opening Allocation At the opening call, matching of orders is performed sequentially at the COP (Note each starts with orders from the imbalance side using the total volume of guaranteed fill1 orders and then limit orders priced at the COP, allocated to orders from the non-imbalance side) 1. Trade with the disclosed volume of offsetting Guaranteed Fill orders entered by the same PO, provided that neither order is an unattributed or jitney order; then 2. Trade with the disclosed volume of offsetting Guaranteed Fill orders, then 3. Trade with the disclosed volume of offsetting limit orders priced at the COP entered by the same PO, according to time priority, provided that neither order is an unattributed or jitney order; then 4. Trade with the disclosed volume of offsetting limit orders priced at the COP according to price/time priority; then 5. Trade with the undisclosed volume of offsetting Guaranteed Fill orders, according to time priority; then 6. Trade with the undisclosed volume of offsetting limit orders priced at the COP according to time priority. When trades are executed in the Opening Auction, the COP sets the last sale price. If there are no trades at the Opening, the close price from the previous trading day sets the open price. 1. The following orders are guaranteed a complete fill at the Calculated Opening Price (COP): MBF, MKT and Better Price Limit orders (those priced better than the COP). Undisclosed order volume of Iceberg orders that meet these criteria are not guaranteed a fill if the order is on the side that has the imbalance.
11 If the round lot portion of a mixed lot order is fully filled in the Opening Auction, the odd lot portion of the order is auto-executed at the opposite side of the Protected NBBO immediately following the Opening Auction. If the Protected NBBO is locked or crossed, odd lot matched is suspended until the Protected NBBO is no longer locked or crossed. Undisclosed portions of iceberg orders have the same priority as disclosed portions. If during the opening allocation, the displayed portion of an iceberg order partially trades, its remaining displayed volume retains priority after the opening. There is no distinction between Active or Passive orders during the Opening Allocation. Please refer to the TSX Markets Fee Schedule posted on the TMX website for more information on opening fees. On the TSX, Must Be Filled (MBF) orders for option expiry are treated the same as any other regular market priced order in the opening and the MBF marker is not publicized on any of these orders. Example: Opening Allocation Assume at 9:30 a.m., the following orders exist in the system: Previous Day’s Close price: $10.02 BID OFFER Order # Broker Quantity Price Price Quantity Broker Order # 001 A 1,000 10.00 MKT 200 79 002 003 B 200 9.99 9.99 500 79 004 005 C 200 9.99 10.00 100 80 006 10.01 100 2 007 The following trades are allocated in the following order: TRADE Buy Order # Sell Order # Volume Price 1 001 002 200 $10.00 2 001 004 500 $10.00 3 001 006 100 $10.00 Resulting order book: BID OFFER Order # Broker Quantity Price Price Quantity Broker Order # 001 A 100 10.00 10.01 100 2 007 003 B 200 9.99 005 C 200 9.99
12 2.3.2 Guaranteed Orders On TSX and TSXV, aggressively priced displayed limit orders that are better than the COP and displayed market priced orders are both guaranteed to trade fully in the opening. Non-displayed portions of these orders will contribute to COP formation but the non-displayed portions are not guaranteed. A guarantee means that the security will not open unless the guaranteed portions of these orders are completely filled. In the event that the guaranteed portions of orders are not filled the security will move into a Delayed Open state. 2.3.3 Delayed Opening The opening occurs automatically at 9:30 a.m. unless otherwise delayed due to either: 1. A systematic delay due to a price movement relative to the previous day’s closing price beyond acceptable system parameters configured by TMX staff. If the symbol is an ETF, then the systematic delay is due to a price movement relative to the midpoint of the protected NBBO just before the previous day’s close. Most opening delays are systematic due to price movements, and typically cleared within a few minutes. 2. A manual delay initiated by TMX staff where more time is needed to validate an appropriate opening price. TMX staff will open the market manually (re-scheduled or immediately) once the opening price has been validated. 3. An automatic delay due to an unfilled imbalance of guaranteed orders. In the case of an automatic delay the market is opened manually (re-scheduled or immediately) by TMX staff once the imbalance of guaranteed orders has been resolved. (Either more liquidity is provided to offset the guaranteed portions of orders or the guaranteed orders themselves are either removed or price adjusted.) Special openings in unusual circumstances can be delayed longer and scheduled by TMX staff to open at a specific time to coincide with other external events. During an opening-delay orders can still be entered and/or cancelled until the opening takes place. A rescheduled opening can be cancelled and either further delayed or opened immediately. 2.4 Continuous Trading TSX/TSXV TSX and TSX Venture operate a real-time, continuous auction market that matches individual orders with continual price discovery from 9:30 AM to 4:00 PM in the central limit order book (CLOB). This period is referred to as the Regular Session. All regular order types are accepted during this session. During the regular session, orders are individually displayed in the CLOB. Displayed portions of CLOB orders are given trading priority based on Price/Broker/Long Life/Time priority. Broker priority does not apply if either side has marked their order Anonymous or Jitney. For more information, see the Broker Preferencing section. At a given price, orders will be processed in the following sequence: 1. Broker Preference amongst displayed portions of Long Life orders (in time priority if multiple matches exist). 2. Broker Preference amongst displayed portions of non-Long Life orders (in time priority if multiple matches exist). 3. Displayed portions of all other Long Life orders (in time priority if multiple matches exist). 4. Displayed portions of all other non-Long Life orders (in time priority if multiple matches exist). 5. At this step, if the incoming order was marked ‘bypass’ the undisclosed portions of icebergs are replenished and there is no further matching. 6. Undisclosed portions of Long Life icebergs (in time priority if multiple matches. There is no broker preferencing amongst undisclosed portions of icebergs). 7. Undisclosed portions of non-Long Life icebergs (in time priority if multiple matches. There is no broker preferencing amongst undisclosed portions of icebergs). 8. Broker preference amongst dark volume in time priority.
13 9. Dark order volume in time priority. 10. Any remaining portion of the incoming order is then booked or cancelled (depending on the trader’s “duration” instructions). TSX Alpha Alpha also operates a real-time, continuous auction market that matches individual orders with continual price discovery from 8:00 AM to 4:00 PM in the central limit order book (CLOB). This period is referred to as the Regular Session. All regular order types are accepted during this session. During the regular session on TSX Alpha, the same Price/Broker/Time priority exists as on TSX/TSXV, with the exception of interactions with dark orders. At a given price, orders will be processed in the following sequence: 1. Broker Preference amongst displayed portions (in time priority if multiple matches exist). 2. Displayed portions of all other orders (in time priority if multiple matches exist). 3. At this step, if the incoming order was marked ‘bypass’ the undisclosed portions of icebergs are replenished and there is no further matching. 4. Undisclosed portions of icebergs (in time priority if multiple matches exist. There is no broker preferencing amongst undisclosed portions of icebergs). Example: Matching Priority on TSX / TSXV / TSX Alpha during Continuous Trading Assume the CLOB is as follows: (ordered in time priority) Last Sale Price: $10.00 BID OFFER Broker Total Qty. Visible Qty Price Price Visible Qty. Total Qty. Broker A 1,000 9.99 10.01 200 A B 200 9.99 10.01 500 B C 10,000 100 9.99 D 100 9.99 An incoming order is received from Broker B to Sell 5,000 @ Market. The following trades take place in the following order: BUYER Seller Volume Price Comments B B 200 9.99 Given same price level, seeks same-broker order first. A B 1,000 9.99 Given same price level, and no same-broker orders remain, will prioritize by time. C B 100 9.99 D B 100 9.99 C B 3,600 9.99 Iceberg volume reloads to fill the entire remaining quantity of the active order.
14 Resulting order book: BID OFFER Broker Hidden Qty. Quantity Price Price Quantity Hidden Qty. Broker C 6,300 100 9.99 10.01 200 A 9.99 10.01 500 B Cross Interference on TSX and TSXV During continuous trading an attributed cross will seek to match previously booked attributed orders from the same PO at the cross price. The side of the cross that remains unfilled (because it gives up this volume) is then killed immediately. Regular crosses are subject to this “cross interference” and only allowed at or inside the best bid/ask but some specialty crosses are exempt from these rules. See the Crosses section for more detail. Cross Interference on TSX Alpha During continuous trading attributed or unattributed crosses will not be subject to interference from orders in the TSX Alpha CLOB. 2.5 Odd Lot trading TSX/TSXV Orders with volume less than a standard trading unit are considered an odd lot and do not trade in the regular CLOB. The majority of listed securities are assigned an RT on TSX and an odd lot dealer on TSXV. The RT/odd lot dealer automatically guarantees a complete fill at the Protected NBBO for incoming odd lot orders priced at or better than the opposite Protected NBBO. If the odd lot order’s price is not marketable the odd lot order is displayed in the odd lot book and will trade at the Protected NBBO with the RT/odd lot dealer once its price becomes better than or equal to the opposite side Protected NBBO. If an opposite side odd lot order is entered with the exact same volume and priced at or better than a resting odd lot order’s price, then the odd lots can trade against each other. For stocks with no RT/odd lot dealer, odd lots can only trade against each other in the manner described above. In all cases, odd lot matching only occurs within the context of the protected NBBO. Odd lots only trade as “All or None” which means partial fills are not accepted. It is possible for the odd lot book to display orders with overlapping prices when resting odd lot orders can match on price but not on volume. TSX Alpha Orders with volume less than a standard trading unit are considered an odd lot and do not trade in the regular CLOB. The majority of TSX Alpha traded securities are assigned an odd lot dealer. The odd lot dealer automatically guarantees a complete fill at the better of the Protected NBBO and the Alpha best bid or offer for incoming Odd Lot orders priced at or better than the opposite side’s price. If the odd lot order’s price is not marketable the odd lot order is displayed in the odd lot book and will trade at its limit price with the odd lot dealer once its price becomes better than or equal to the opposite side of the better of the Protected NBBO and the Alpha best bid or offer. If an opposite side odd lot order is entered with the exact same volume and priced at or better than a resting odd lot order’s price, then the odd lots can trade against each other. For symbols with no odd lot dealer, odd lots can only trade against each other in the manner described above. In all cases, odd lot matching only occurs within the context of the Protected NBBO plus the Alpha BBO. Odd lots only trade as “All or None” which means partial fills are not accepted. It is possible for the odd lot book to display orders with overlapping prices when resting odd lot orders can match on price but not on volume.
15 2.6 Market on Close (MOC) The Market on Close (MOC) facility is an electronic call market that establishes the closing price for eligible listed stocks on Toronto Stock Exchange and TSX Venture Exchange. The MOC facility is a value added service for Toronto Stock Exchange (TSX) / TSX Venture Exchange (TSXV) providing equal access and opportunity in setting the closing price, increased price discovery efficiency, and reducing the volatility of the closing price for symbols eligible for the MOC facility. The facility provides a fair benchmark for the fund management industry and provides a mechanism to minimize tracking error caused by deviations from the closing price. Derivative traders also benefit from the MOC facility as they require reliable benchmark closing prices for index related securities for basis, swaps, and options trades. The MOC facility was introduced to TSX in 2004 and has since been widely adopted as an efficient and effective mechanism to establish the closing price. The facility was further extended to TSXV in 2012 to aid in portfolio and index rebalancing activities for recent Venture indices and index tracking ETFs. As of Oct 18, 2021, the facility has been modernized to improve transparency, better align with global markets and improve consistency of execution. For details on the new MOC model, please refer to the TSX MOC Detailed Guide. Initially the MOC facility was introduced on TSX for the constituents of the S&P/TSX Composite Index. With the increase in the number of indices and the increase in the number of ETFs, there has been steady growth in the symbols added to the MOC facility. Currently TSX and TSX Venture support a MOC session, available for specified securities. TSX Alpha does not support a MOC session. 2.6.1 MOC-Eligible Securities All TSX listed equities are eligible for the TSX MOC Facility, with the exception of ETFs, rights, warrants, notes, debentures, sustainable bonds and exchangeables. The TSXV MOC facility includes constituents of industry recognized indices as well as certain symbols that are MOC eligible based on participant demand and feedback. 2.6.2 Participating in MOC The MOC book is independent and runs in parallel with the CLOB. Orders in the MOC book are not disseminated publically. MOC trades occur as a result of interaction between the four following types of orders: 1. MOC orders: are priced at “market” and only execute at the MOC calculated closing price. MOC orders are entered into the MOC book during Post Open and Imbalance period (7:00 am - 3:56 pm2) and are queued in time priority. MOC orders cannot be cancelled after the imbalance is published at 3:50 pm and may be board lot, mixed lot or odd lot sized orders with regular settlement terms. Odd lot MOC orders are executed only if there is a board lot MOC fill first. MOC orders may be marked short, for jitney purposes, and/or anonymous. 2. Limit on Close (LOC) orders: are limit orders that only trade at the calculated closing price. LOC orders may be board lot, mixed lot or odd lot sized orders. LOC orders are accepted up to the close on either side of the order book without restrictions on their limit price. LOC orders received during the Freeze Period (3:46 pm2 – 4:00 pm) are designated as “Pegged LOC” orders. Pegged LOC orders are “pegged” to the MOC Reference Price such that the price is re-priced to the MOC Reference Price if it is more aggressive (buy orders with a price greater than the Reference Price, and sell orders with a price lower than the Reference Price). For Pegged LOC orders less aggressive than the Reference Price, the limit price remains as entered and there is no difference from a normal LOC order. Cancelling and modifying LOC orders Post Open (9:00 am – 3:50 pm): LOC orders may be cancelled or modified. MOC Imbalance (3:50 pm – 3:56 pm2): No LOC order cancels permitted. Modifications to LOC order price only permitted to more aggressive price. MOC Freeze (3:56 pm2 – 4:00 pm): No LOC order cancels or modifications permitted. PME (4:00 pm - 4:10 pm): MOC market and MOC limit orders entered before 4 pm cannot be cancelled or modified; Post imbalance LOC orders may be cancelled or modified. 2. Note that the MOC Freeze period starts at a random time between 3:56pm – 3:57pm, which is the end of the Imbalance period.
16 3. CLOB orders: Regular limit orders and non-pegged dark orders that have been placed in the central limit order book and remain open in the book at 4:00 pm are eligible to be drawn into the MOC facility in order to satisfy the MOC imbalance. Note that LOC orders and CLOB orders compete equally to satisfy the MOC imbalance. Non-displayed portions of CLOB orders (icebergs) are allocated after other visible CLOB or LOC orders at the same price, but before dark orders. 2.6.3 MOC Imbalance Determination MOC orders and LOC orders that are priced equal to or more aggressive than the reference price at the time of the calculation are considered when determining the MOC imbalance. The reference price for the imbalance calculation that is published every 10 seconds between 3:50 pm – 4:00 pm is the TSX or TSXV Best Bid and Offer mid-point. The reference price for the 4:00 pm imbalance calculation (if necessary) is the TSX or TSXV last sale price. The imbalance side and size are determined as the difference between the aggregate eligible buy MOC/LOC volume and aggregate eligible sell MOC/LOC volume. 2.6.4 MOC Imbalance At the start of the Imbalance period (3:50 pm). MOC imbalance messages are disseminated through the feeds to be sent every 10 seconds identifying: • Symbol • Reference Price • Imbalance Side • Imbalance Volume • Paired Volume • Market Order Imbalance Volume • Market Order Imbalance Side • Near Indicative Closing Price • Far Indicative Closing Price • Price Variation This notification provides an opportunity to offset the imbalance using MOC orders between 3:50 pm and 3:56 pm, and LOC orders between 3:50 pm and 4:00 pm. At 4:00 pm, where a PME is necessary, the PME MOC imbalance message is published once to let traders know that TMX will be accepting offsetting orders between 4:00 and 4:10 pm. The fields sent in the PME MOC imbalance message are: • Symbol • Reference Price • Imbalance Side • Imbalance Volume 2.6.5 Calculated Closing Prices At 4:00 p.m., the calculated closing price (“CCP”) is determined by combining the orders in the MOC Book with those in the central limit order book. The CCP is validated against the PME range. The PME range is defined as the greater of either (i) five trading increments or (ii) the PME percentage parameter, from both the VWAP of the last 20 minutes of regular market trading and the last board-lot sale price from the continuous market. If the CCP does not violate the PME range then the symbol will close at the CCP and trades will be published, otherwise a price movement extension (PME) period between 4:00 pm and 4:10 pm will be initiated for that symbol. MOC will fill all MOC orders against other offsetting MOC orders and offsetting LOC orders and offsetting CLOB orders up to a maximum price volatility percentage. This metric is known as the Closing Price Acceptance (CPA) parameter. 2.6.6 Price Movement Extension The PME period is designed to solicit further liquidity to offset a remaining imbalance. During the PME (4:00 pm - 4:10 pm). Limit orders, on the contra-side of the imbalance may be entered into the MOC book; such orders are not displayed. At 4:10 pm the CCP is recalculated and validated against the closing price acceptance (CPA) parameters, which is a price control parameter that is used to either accept or reject the CCP that is derived from the PME. If there is a violation of the CPA parameter, the symbol will close at the price that matches the most volume, leaving the least imbalance within the CPA range.
17 2.6.7 Closing Call Allocation The closing call allocation is the priority in which MOC Orders and orders residing in the central limit order book are matched at the closing price. Orders will be executed in the Closing Call based on the following allocation: 1. MOC Market Orders shall trade with offsetting MOC Market Orders entered by the same PO, according to time priority, provided that neither order is an unattributed or jitney order; then 2. MOC Market Orders shall trade with offsetting MOC Market Orders, according to time priority; then 3. MOC Market Orders shall trade with the offsetting limit orders (LOC, Pegged LOC, DRK, or disclosed volume of continuous visible orders) entered by the same PO, according to price/time priority, provided that neither order is an unattributed or jitney order; then 4. MOC Market Orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or CLOB) according to price/time priority; then 5. LOC / Pegged LOC / disclosed volume of continuous limit orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or disclosed volume of continuous lit orders) entered by the same PO, according to price/ time priority, provided that neither order is an unattributed or jitney order; then 6. LOC / Pegged LOC / disclosed volume of continuous limit orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or CLOB orders) according to price/time priority; then 7. Undisclosed volume of continuous limit orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or CLOB orders) according to price/time priority; then 8. DRK limit orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or disclosed volume of continuous lit orders) entered by the same PO, according to price/time priority, provided that neither order is an unattributed or jitney order; then 9. DRK limit orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or CLOB orders) according to price/time priority; then 10. Passive Pegged LOC** orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or disclosed volume of continuous lit orders) entered by the same PO, according to price/time priority, provided that neither order is an unattributed or jitney order; then 11. Passive Pegged LOC** orders shall trade with offsetting limit orders (LOC, Pegged LOC, DRK, or CLOB orders) according to price/time priority. 2.6.8 MOC Volatility Parameters The following parameters are in place to manage price volatility: MARKET & PRODUCT PME % CPA TSX 3% or five trading increments 10% TSX Venture 5% or five trading increments 15% Preferreds 1% 5% 2.7 Post Market Cancel Session The Post Market Cancel Session is supported on TSX, TSXV and TSX Alpha. It provides a five minute window after the continuous trading session closes from 4:10 p.m. - 4:15 p.m. on TSX/TSXV for trading participants to cancel any open orders that they do not wish to participate in Extended Hours Trading. TSX Alpha supports a Post Market Cancellation session from 5:00 p.m. - 5:30 p.m. ** At the time of closing, if the MOC reference price is less aggressive than the closing price (and the closing price is within the order limit price), Pegged LOC orders are repriced to the closing price to participate in the closing auction. Such orders are referred to as “Passive Pegged LOC” orders and are last in priority for allocation.
18 2.8 Extended Trading Session The Extended Trading Session also referred to as the “Special Trading Session” or “Last Sale Trading” operates from 4:15 p.m. – 5:00 p.m. on TSX and TSX Venture. TSX and TSX Venture During the Extended Trading Session, odd lots, board lots and crosses can trade at the official last sale price determined by MOC or if no MOC, by the last independent trade (“Last Sale Price” or “LSP”) from the CLOB session. If the LSP is at an invalid tick, a rounded equivalent of the LSP can be used (“Rounded LSP”). If the LSP is at a half tick, the Rounded LSP will be the LSP rounded up to the nearest valid tick. For example, if the LSP is $5.815, the Rounded LSP is $5.82. Orders priced at or better than the Last Sale Price are carried forward from CLOB (but not from MOC) and where those order prices are better than the LSP those orders are re-priced to the LSP and are eligible to trade in the Special Trading Session at the LSP or Rounded LSP. On-stop orders are also eligible to trade in the Special Trading Session if the on-stop order is triggered as a result of an MOC changing the LSP. 2.9 Must Be Filled (MBF) Session for Option Expiry The Must Be Filled session is supported on the TSX only and is provided for entering MBF orders to offset expiring derivatives positions. The MBF session takes place once per month on the Thursday immediately before the option expiry day. Option expiry day always occurs on the third Friday of every month. The MBF order entry session occurs during the Extended Session (4:15 p.m. - 5:00 p.m.) and the resulting trades occur in the next day’s (Friday’s) opening. The net MBF imbalance for each security is made public before the pre-open session on expiry day. This publicity ensures that market participants have a chance to respond with enough liquidity to satisfy the MBF orders. Imbalances less than 5,000 shares are not publicized. A buy imbalance means there are excess MBF buy orders and a sell imbalance means there are excess MBF sell orders. On the expiry day (Friday morning) all the MBF orders that were entered the previous day are treated like pre-open market orders and are thus guaranteed a fill at the COP. The MBF orders are visible to market participants but the MBF condition on those orders is not public. Trading participants can enter, change or cancel MBF Orders during the MBF session (the day before expiry) but cannot enter, change or cancel an MBF order on the expiry day. MBF orders must be in board lot multiples. Example: MBF Orders A trader must enter an MBF order when that trader has written an uncovered call to buy 5,000 of ABC @ $10.00 that will be exercised because ABC is currently trading at $12 (i.e. the call is in the money). The trader who wrote the call has an obligation to deliver the stock at $10 when it is exercised upon expiry and since the call was not covered the trader who wrote the call must buy the stock to be in possession of the underlying security (5,000 shares of ABC) upon expiry. To ensure possession of the stock the call writer must enter an MBF order to purchase 5,000 ABC @ Market. That order will then trade at the market opening on expiry day.
19 Section 3 Products & Order Features 3.1 TSX DRK TSX DRK is a dark pool with deep liquidity and rich functionality, offering fully hidden orders and features on TSX and TSXV-listed securities, and is uniquely integrated with the TSX and TSXV displayed order books, Canada’s deepest pool of visible liquidity. TSX DRK offers a variety of unique features to accommodate a wide range of dark strategies, including more efficient dark active sweeping strategies to help facilitate best execution at reduced costs, and mechanisms to control the environment under which a trade is executed to help minimize information leakage. • Posting orders on TSX DRK facilitates continuous access to both orders expressly seeking dark price-improving liquidity and orders otherwise seeking interaction with Canada’s deepest displayed order book, providing increased fill opportunities. • Liquidity takers can find significant value through meaningful price improvement and reduced trading costs. All TSX DRK functionality is available on both TSX and TSX Venture listed symbols. 3.1.1 TSX DRK Trading on TSX and TSXV TSX DRK currently offers dark limit and pegged order types, Seek Dark Liquidity® (SDL®) orders that specifically target dark liquidity, and a Contra Midpoint Only+ (CMO+) facility to allow trading between like-minded investors. This dark functionality is integrated with the displayed order book and can be entered using standard FIX tags applicable to the TSX-FIX order entry protocol. • DRK Midpoint Peg orders will peg to the Protected NBBO midpoint. They will always provide meaningful price improvement of at least a full trading increment unless the Protected NBBO spread is one trading increment. In this case the price improvement provided will be half a trading increment. • DRK Primary Peg orders will peg to the same-side Protected NBBO, and can be entered with an optional aggressive or passive offset. • DRK Market Peg orders will peg to the opposite-side Protected NBBO, but will default to one-tick inside the opposite-side Protected NBBO. Offsets on DRK Market Pegs will be accepted, but can only be passive offsets. • DRK MPI (Minimum Price Improvement) Peg orders will provide the minimum required price improvement except where the Protected NBBO spread is two-ticks or less, in which case the order will peg to the same side Protected NBBO. No offsets are permitted on DRK MPI Peg orders. • DRK limit orders will provide meaningful price improvement to small orders however large orders will be eligible to trade against a DRK limit order at the Protected NBBO on TSX/TSXV once all visible volume on TSX/TSXV has been exhausted. • Contra Midpoint Only Plus (CMO+) orders will peg to the Protected NBBO midpoint, and are subject to a randomized 400 to 600 millisecond delay upon entry. CMO+ orders will only execute against other CMO+ orders, with the exception of an optional feature to allow CMO+ orders, on entry, to execute actively against all resting midpoint-eligible dark liquidity. • Seek Dark Liquidity (SDL) is a feature available for use only with orders marked as IOC or FOK. It is intended to be used where seeking to execute a dark only liquidity taking strategy, including where seeking solely to obtain price improvement for a client order. SDL is well suited for use as a dark probe by a smart order router to systematically access low cost, price improving dark liquidity before routing to the available visible book. Users of SDL will have the option of restricting their dark executions to prices that provide price improvement, or can allow for executions against dark resting liquidity at-the-quote, subject to their stated limit price as well as regulatory requirements applicable to at-the-quote dark trading.
20 Active pegged orders and SDL orders will not interact with visible passive orders. Only DRK limit orders, with the exception of an active DRK limit order with a MIS condition, can interact with passive displayed orders. When executing against both dark and displayed resting orders, these DRK limit orders will execute through an allocation sequence according to price-visibility-broker-Long Life-time priority, ensuring the priority of displayed orders over dark orders. Pre-trade Transparency There is no pre-trade transparency of DRK orders meaning order responses and changes in order attributes are not disseminated publicly. As DRK orders are fully hidden they do not contribute to the symbol’s quote. All order responses are fully encrypted in the Broadcast feed. Post-trade Transparency There is full post-trade transparency of DRK execution prices which will update the last sale price and be provided to the TMX information processor’s Consolidated Last Sale (CLS) feed. All DRK tag details, with the exception of the IsDark and IsMidOnly tags, are classified as private content and therefore fully encrypted. The IsMidOnly tag will identify all CMO+ to CMO+ trades on the public market-data feeds, allowing for executions within the CMO+ facility to be clearly distinguished. This does not apply to CMO+ orders that trade on entry against resting non-CMO+ dark liquidity. The IsDark tag will enhance transparency of dark trading on TSX and TSXV by identifying all trades where the passive side of the trade is dark. Eligible Symbols for DRK Orders TSX/TSXV securities that are enabled to accept DRK orders are identified based on information communicated by TSX/TSXV through notices to Participants/Members, as well as designations on a daily basis within the symbol status message distributed on TMX market data feeds. If technical issues arise such that a symbol is unable to accept DRK orders, any change to that symbol’s eligibility will be communicated to all participants through a stock status message which will have the Accept Undisplayed tag set to “N”. Once the issue has been addressed, that symbol may have its eligibility reinstated. When this occurs a stock status message will be disseminated with the Accept Undisplayed tag set to “Y”. These events will be followed by external notification by TSX/TSXV Trading Support serving as further notification of the event. Minimum Quantity and Minimum Interaction Size DRK orders may be submitted with an optional Minimum Quantity (MinQty) or Minimum Interaction Size (MIS) instruction that specifies minimum volume parameters that must be met for the order to trade. MinQty and MIS are available for use with all DRK order types, specifically pegs, DRK limit orders, SDL orders, and CMO+ orders. Minimum Quantity – MinQty is an optional instruction that will prevent an order from trading unless the total tradable volume meets or exceeds the volume specified in the MinQty instruction. Minimum Interaction Size – MIS is an optional instruction that specifies the minimum size that any single contra-side order must be in order to be eligible to trade against the ‘MIS order’. For more information on MinQty and MIS, see the TSX DRK Liquidity Guide. Post Only DRK Orders The Post Only order feature is available on all DRK limit, DRK pegged, and CMO+ orders with a limit price. A DRK Post Only order will reject immediately on entry if any part of the order is immediately executable with a visible order during continuous trading. If on entry the DRK Post Only order is immediately executable with a contra-side dark order, the DRK Post Only order will book at its limit price or pegged value as applicable, and subject to any other pricing constraints to avoid locking/crossing the Protected NBBO. As indicated by the above, two contra-side Post Only DRK orders that are eligible to match based on price will not execute. Instead, both will maintain their price until executing against an active order. In addition, no execution will take place between a resting DRK limit order and an incoming contra-order marked Post Only with the same price as the resting order. Instead, both orders will sit in the book at the locked price and will not execute against each other unless the first resting DRK limit order is CFO’d by the trader and becomes a new order in accordance with existing TSX CFO handling procedures. In the scenario where the first DRK resting order referred to above is instead a non-Post Only pegged order, it will only execute actively when a Protected NBBO repricing causes it to become more aggressively priced.
21 3.2 Cancel on Disconnect Cancel on Disconnect (COD) is an optional gateway session feature that will restrict order entry on user-specified session bundles and attempt to cancel all open orders per session upon an involuntary loss of connectivity between TMX and the client. Cancel on Disconnect will assist users to mitigate risks associated with managing open orders on all TMX markets when there is an involuntary loss of connectivity. Once COD is triggered, the session bundle will be blocked, new orders entered on that order entry port will not be accepted and order acknowledgments will not be sent. All open orders pertaining to the triggered session bundle will be cancelled, with the exception of duration orders (i.e. GTC/GTD), MOC orders and LOC orders and cancellation that is prevented due to the stock/stock group state (e.g. stock state is inhibited). The session bundle will be automatically unblocked after a brief period of time to allow for reconnection. Availability of COD: SESSION Availability Pre-open Yes Continuous Trading Yes Post Market Cancel Session Yes Extended Trading Yes COD functionality is available for all gateway sessions connecting to Toronto Stock Exchange, TSX Venture Exchange and TSX Alpha. Order cancellation confirmation messages as result of COD will be designated by a TSX FIX tag. To enable the Cancel on Disconnect feature, the COD Application Form must be completed and submitted to a TMX Account Manager by a TSX Participating Organization, TSXV Member, or TSX Alpha Member, including for DMA client sessions through which access to TSX, TSXV, or TSX Alpha is provided. 3.2.1 Configuration Levels Clients can specify one of the following levels of COD service for each enabled session: Level 1 If a session is enabled for Level 1 COD, then COD will be triggered if there is no activity in the session for two consecutive heartbeat periods. Level 2 If a session is enabled for Level 2 COD, then COD will be triggered if there is no activity in the session for two consecutive heartbeat periods or if the session gets disconnected from the client side without TMX receiving any log-out or sign-off request from the client (i.e. abnormal/socket disconnect). Level 3 If a session is enabled for Level 3 COD, then COD will be triggered if there is no activity in the session for two consecutive heartbeat periods or if the session gets disconnected from the client side without TMX receiving any logout or sign-off requests from the client or if the client is gracefully disconnected after TMX receives the log-out/sign-off request from the client. For all three levels of service, if an order is cancelled due to a COD trigger, order cancellation confirmation messages with a COD indicator will be sent once reconnection on the associated sessions is established.
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