Market Maker System

The role of the Market Maker on Toronto Stock Exchange (TSX) is to augment liquidity, while maintaining the primacy of an order-driven continuous auction market based on price-time priority. TSX's Market Maker system maximizes market efficiency and removes the interfering influence of a traditional specialist. In the TSX environment, a Market Maker manages market liquidity through a passive role. Market Makers are visible only when necessary to provide a positive influence when natural market forces cannot provide sufficient liquidity.

Click here to access a list of TSX Market Making Firms.

TSX Market Maker responsibilities

  • Call a 2-sided market providing market continuity within a pre-specified range
  • Contribute to market liquidity and depth
  • Maintain activity in the market
  • Fulfill the needs of retail-sized order flow through guaranteed minimums (MGFs) that interact with aggressive orders whenever orders in the central limit order book do not meet the size required to fill aggressive orders at the quote
  • Assist in the opening and with inquiries and anomalies
  • Service odd lots

Market Makers do not have any proprietary pre-trade information or access to information regarding trade order entry of other participants.

Performance measurement system

TSX continuously monitors the performance of all Market Makers at Toronto Stock Exchange with respect to their ability to contribute to the overall market in terms of creating liquidity, depth and continuity.

  • Spread Maintenance - Measures the Market Maker's ability to call a 2-sided market.
  • Participation - Measures the participation of Market Makers in their security of responsibility.
  • Liquidity - Measures whether Market Makers are lining the book with reasonable depth.

Allocation of securities of responsibility

Securities allocations are considered firm privileges and responsibilities. These allocations are awarded when securities are newly issued and when there are changes in responsibility. TSX's Allocation Committee determines which firms are awarded securities to manage as Market Makers based on among others:

  • A firm's overall performance in managing existing responsibilities;
  • A firm's competitive service level bids;
  • A firm's ability to remain within its qualification requirements; and
  • Special request by issuers.

Qualification requirements of a Market Maker firm

Generally Market Maker firms are required to:

  • Maintain sufficient firm capital based on the classification in securities of responsibility;
  • Maintain a minimum number of assignments so as to maintain their presence; and
  • Maintain a certain ratio of assignments in highly liquid versus less liquid securities.