NEO TRADING

A LEVEL PLAYING FIELD FOR ALL

Striking The Right Balance

Aequitas NEO Exchange’s DMM program is designed to strike the right balance between obligations and benefits. Securities traded on the exchange are categorized in four different tiers based on median daily traded value.

Each DMM will have an assignment that proportionately has the same number of securities per tier so that each DMM supports a broad range of securities. Through aligning the interests of issuers, investors and market makers, our DMM program delivers reliable, innovative liquidity provision. We seek to engage with, and track the performance of, each DMM program participant.

Each DMM, trading through its own account for all assigned securities, at all times:

  • will be focused on ensuring fair and orderly markets and maintaining reasonable price continuity and liquidity;
  • is required to maintain continuous two-sided quoting with size and spread requirements (see below) based on the security tier, in both the Lit Book and the NEO Book™ independently;
  • will act as an odd lot dealer providing automatic executions of odd lot orders at the NBBO;
  • will facilitate the opening, delayed opening and resumption of trading for its assigned Aequitas NEO Exchange listed securities; and
  • will have the opportunity to compete for assignments in TSX/TSX-V listed securities, measured on time spent at the NBBO relative to other DMMs.

DMM incentives include:

  • Matching priority based on their daily traded volume per security, per trading book; (see description of MMVA below);
  • Participation in a Performance Bonus Program (PBP) which is a monthly monetary incentive if eligibility criteria are met or exceeded;
  • Issuer Performance Program for assigned Aequitas NEO Exchange listed securities at the issuer's option.
 
 

ETFs & CEFs

Obligations
(per Book & per Security)
TSX/TSXV Listed
Tier 1 Tier 2 Tier 3
Quoting Two-sided quote, X% of
time between 9.30am-4.00pm
95% 95% 95%
Size & Spread Number of Board lots (BL)
within X% of last sale price
minimum 5 BL on each side
50 BL
3%
30 BL
4%
15 BL
5%

Securities other than ETFs & CEFs trading >=$1

Obligations
(per Book & per Security)
TSX/TSXV Listed
Tier 1 Tier 2 Tier 3
Quoting Two-sided quote, X% of
time between 9.30am-4.00pm
95% 95% 95%
Size & Spread Number of Board lots (BL)
within X% of last sale price
minimum 2 BL on each side
10 BL
1.5%
6 BL
3%
4 BL
5%

Securities Trading < $1

Obligations
(per Book & per Security)
TSX/TSXV Listed
0.05-0.2 0.21-0.50 0.51-0.99
Quoting Two-sided quote, X% of
time between 9.30am-4.00pm
95% 95% 95%
Size & Spread Number of Board lots (BL)
within fixed spread,
minimum 1 BL on each side
4 BL
$0.03
4 BL
$0.05
4 BL
$0.07

Corporate Issuers

Obligations
(per Book & per Security)
NEO Listed
Tier 1 Tier 2 Tier 3
Quoting Two-sided quote, X% of
time between 9.30am-4.00pm
95% 95% 95%
Size & Spread Number of Board lots (BL)
within X% of last sale price,
minimum 2 BL on each side
10 BL
1.5%
6 BL
3%
4 BL
5%
Presence X% of the time @ NBB and NBO 20% 30% 40%

ETFs & CEFs

Obligations
(per Book & per Security)
NEO Listed
Tier 1 Tier 2 Tier 3
Quoting Two-sided quote, X% of
time between 9.30am-4.00pm
95% 95% 95%
Size & Spread Number of Board lots (BL)
within X% of last sale price,
minimum 5 BL on each side
50 BL
2%
30 BL
3%
15 BL
4%
Presence X% of the time @ NBB and NBO 20% 30% 40%

Structured Products

Obligations
(per Book & per Security)
NEO Listed
Tier 1 Tier 2 Tier 3
Quoting Two-sided quote, X% of
time between 9.30am-4.00pm
    95%
Size & Spread Number of Board lots (BL)
within X% of last sale price,
minimum 5 BL on each side
    30 BL
5%
Presence X% of the time @ NBB and NBO     40%

 

DMM performance metrics will be published on the website during Q4 2015.

The patent pending Market Maker Volume Allocation (MMVA) is the main DMM incentive to balance their obligations. The MMVA is a matching priority process whereby a DMM’s order in the book at a given price, will get priority over other orders in the same book at that price if the MMVA has not exceeded a certain percentage (initially set at 15%) at that point in time. Only visible orders from the DMM in a specific book and security can receive priority under the MMVA. Only trades in a specific security that occur during continuous trading in a specific trading book count towards the accumulated daily traded volume for that security in that book (e.g. crosses and anything that happens in other books or during other trading phases are excluded).

DMMs will be able to benefit from the MMVA for a full month if they meet their obligations for 75% of the trading days in the previous month. Conversely, DMMs will lose the MMVA benefit for a month if they fail to meet the obligations in either the Lit Book or NEO Book. MMVA for the security will be reinstated only when they have met their obligations again for a full month.

Competition for Assignments

DMMs have the ability to compete for assignments in TSX and/or TSX-V listed securities. To do so, a DMM must outperform the incumbent DMM across the following two factors:

  • Threshold Pass Rate Factors – which, depending on the type of security, are identical to the existing DMM obligations as outlined in the tables above. Requirement to meet these factors for 75% of the trading days in a month.
  • Competitive Factors – NBBO presence, with passive traded volume used as a tie breaker.

The table below outlines the aforementioned factors, showing the ‘Threshold Pass Rate Factors’ for securities priced over $1 as an example:

DMM Assignments for Other Traded Securities

Factors Tier 1 Tier 2 Tier 3 Details
Threshold Pass Rate Factors*
(Same as those who win MMVA benefit)
Quoting 95% 95% 95% Two sided quote, X% of time between 9:30-4:00
Size/Spread 10BL
1.5%
6BL
3%
4BL
5%
# of BLs w/in X% of last sale price, min 2 BL each side
Competitive Factors*
(To win assignment)
NBBO Presence
  1. NBBO Presence rounded to the nearest 5%
  2. If multiple DMMs are tied on the rounded NBBO Presence, the DMMs’ average daily traded passive volume (over the month) will be used as a tie breaker

*Threshold Pass Rate Factors are monitored across both the Lit Book & NEO Book. The NBBO Presence is only measured in the Lit Book, but the assignment, if applicable, is won for both the Lit Book & NEO Book.