Chi-X Canada ATS Limited Subscriber Manual Purpose

Chi-X Canada ATS Limited Subscriber Manual
Purpose
This document explains Chi-X Canada’s policies, procedures, and technology. Because the
information contained in this document is subject to change at any time, please contact Chi-X
Canada for the most recent updates at support@chi-xcanada.com.
How to Subscribe
Subscriber Eligibility
Chi-X Canada Subscribers must be members of the Investment Industry Regulatory Organization
of Canada (IIROC) in good standing with the ability to clear trades on a continuous net
settlement (CNS) basis with the Canadian Depository for Securities (CDS). If a Subscriber ceases
to be a member of IIROC it shall also cease to be a Subscriber of Chi-X Canada. If a Subscriber
has its membership privileges suspended by IIROC, it status as a Subscriber of Chi-X Canada will
also be suspended. The latest version of the Chi-X Canada approval criteria is provided below.
Please check for any updates on the Chi-X Canada website.
Chi-X Canada Approval Criteria for Subscribers, Data Vendors and Sponsored
Participants
1. Subscribers must be registered in all Canadian jurisdictions in which they do business and
in good standing with IIROC.
2. Subscribers must execute Chi-X Canada’s Subscription Agreement in accordance with
National Instrument 21-101 before Chi-X Canada execute any order to buy or sell
securities from such Subscriber.
3. Subscriber must provide Chi-X Canada information about such Subscriber’s clearing
arrangements, including the identification of such Subscriber’s clearing broker.
4. Subscriber must conduct its trading activities in compliance with the Universal Market
Integrity Rules and any other order or direction made by IIROC.
5. Subscribers, Data Vendors and Sponsored Participants must make timely payment of all
fees charged by Chi-X Canada for market data and other fees charged for Services.
6. Subscribers, Data Vendors and Sponsored Participants must receive written pre-approval
from Chi-X Canada for any data re-distribution by such Subscriber, Data Vendor, or
Sponsored Participant to any third party.
7. Subscribers, Data Vendors and Sponsored Participants must provide monthly notification
to Chi-X Canada of the number of professionals and non-professional market data users.
8. Subscribers, Data Vendors and Sponsored Participants must furnish promptly to Chi-X
Canada any information required by Chi-X Canada to confirm the accuracy of the
reported number of users of each category receiving data through such Subscriber, Data
Vendor, or Sponsored Participant
Chi-X Canada may from time to time modify these criteria as it deems necessary and any such
modifications will be posted on the Chi-X Canada website.
Available Documents
The following documents are available for subscribers:
 Chi-X Canada Subscriber Agreement – contract between Chi-X Canada and
Subscribers
 Chi-X Canada Subscriber Manual – general policies and procedures on Chi-X Canada
(this document)
 Chi-X Canada Connectivity Guide – connectivity options and bandwidth
recommendations
The following documents are available for vendors:
 Chi-X Canada Vendor Agreement – contract between Chi-X Canada and vendors
(covers order entry and market data)
The following technical specifications are also available for order routing and market data
connectivity:
 Chi-X Canada FIX Specification – orders using FIX format.
 Chi-X Canada CHIXMD Specification – Chi-X Canada direct unicast market data
information.
 Chi-X Canada CHIXMMD Specification – Chi-X Canada direct multicast market data
information.
The following Chi-X Canada Market Data Agreements are also available for market data
customers:
 Chi-X Canada Market Data Use Agreement – for Chi-X Canada market data
customers using Chi-X Canada market data for internal use only.
 Chi-X Canada Data Distribution Agreement – for Chi-X Canada market data
customers who distribute Chi-X Canada Market Data to third parties.
Please contact Chi-X at Canada (888) 310-1560 for more information about becoming a
Subscriber.
The Chi-X Canada Alternative Trading System
Chi-X Canada is a fourth-generation, alternative trading system (ATS) running on open-standard
and commoditized technologies, and architected to maximize speed, performance and reliability.
Market Overview
Market Type
Alternative
Trading
System
(ATS)
Market Operation
A continuous auction
market based on strict
price/time priority.
• Customer orders
are protected from
trade-through,
locked and crossed
markets
Securities
Traded
TSX®-listed
and TSX®
Venture
securities
Market Data
Disseminated electronically
either directly or through
third-party data vendors.
The data feed offers full
depth of book (price volume)
as well as trade data.
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Order Entry
Industry-standard FIX protocol
order entry via third-party and
proprietary execution
management systems.
• Advanced order types
• Low latency, high volume
message processing
• Intelligent Order Book™
• Market-level smartrouting to
displayed markets
Trading Hours
The ATS shall allow Subscribers to trade in a continuous auction market between the hours of
8:30 a.m. and 5:00 p.m. (Eastern Time) on business days.
Dynamic Order Re-pricing
Orders that are entered on Chi-X Canada that cross the National Best Bid Offer (“NBBO”) and
would either trade-through or quote-through a better priced protected order will be automatically
re-priced to prevent a trade-through or crossed market from occurring. In addition, orders that
are entered at the NBBO that would lock the market will also be re-priced. When an order is repriced, its price priority after each re-pricing is determined by the price level to which it has been
re-priced, while its time priority is determined by the time each re-pricing occurs. When repricing multiple orders to the same price level, the time sequence for the re-pricing will be
determined by each order’s original timestamp or by the timestamp associated with the last repricing.
Dynamic order re-pricing is available between 9:30 a.m. to 4:00 p.m. (Eastern Standard Time).
Before 9:30 a.m. and after 4:00 p.m. (Eastern Standard Time), orders will be re-priced once and
then have their price remain static. When an order has been re-priced outside of normal market
hours, the order must be modified or cancelled and replaced in order to change the price of the
order again.
Holiday Schedule
The system will be available for trading on all business days – Monday through Friday inclusive –
from 8:30 a.m. to 5:00 p.m. Eastern Time, excluding Canadian Statutory Holidays. A list of the
current year’s holiday schedule can be found on Chi-X Canada’s website www.chi-xcanada.com
Eligible Securities
Chi-X Canada offers trading in all Toronto Stock Exchange listed securities and TSX-Venture listed
securities. We do not trade debentures or notes.
Minimum Price Increment - Chi-X Canada will allow the entry of orders in the minimum tick
increment allowed by UMIR:
 For stocks with a previous close price >= $.50 a minimum price increment of $.01 CAD
 For stocks with a previous close price < $.50 a minimum price increment of $.005
Board Lot Sizes
Chi-X Canada will only permit orders to be entered in Board lots that are defined as Standard
Trading Units by UMIR which are determined by the previous day’s National Last Sale Price
(NLSP) also as defined by UMIR. An order that is entered as an odd lot or a mixed lot will be
rejected.
Chi-X Canada Intelligent Order Book™
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Chi-X Canada consumes and consolidates market data feeds from all displayed markets in
Canada. This enables Chi-X Canada to be able to calculate the best bid and offer in the market
(“National Best Bid Offer”, or “NBBO”) which in turn facilitates compliance with the Order
Protection Rule (“OPR”) and the ability to prevent locked and crossed markets.
From the market data feeds, the matching engine dynamically updates the NBBO for all securities
eligible to trade on Chi-X Canada. If a Subscriber’s order is not marked CSO and designated as a
directed action order (“DAO”) for the purposes of the Order Protection Rule the system will
automatically re-price the order to a price within the quote if the order would cross the NBBO to
create a “crossed market” or trade outside the NBBO (trade-through). In addition, any buy order
not marked CSO entered at the National Best Offer (“NBO”) or any sell order not marked CSO is
entered at the National Best Bid (NBB) that would result in a “locked market” it will be re-priced
to a price within the NBBO in order to prevent the locked market from occurring. When an order
is re-priced it will be placed in time priority behind any other orders at a price level. By re-pricing
orders in these scenarios, Chi-X Canada is able to meet its OPR obligations and facilitate
compliance by Subscribers with rules that prohibit Subscribers from intentionally locking or
crossing the market
Where an order would not result in a trade through or a locked or crossed market, it will execute
against orders posted in the Chi-X Canada book at or within the consolidated best bid/offer.
To see several illustrative examples of order re-pricing please refer to Appendix A –
Trade-through, and Locked and Crossed Market Order Re-pricing Condition
Order Entry Interface
All orders entered and/or modified or cancelled by Chi-X Canada Subscribers will be entered
using the Financial Information eXchange (FIX) protocol. FIX allows Subscribers and their
software developers to integrate Chi-X Canada into their proprietary trading systems which can
be used to build customized front ends. All orders are entered via FIX into the Core Matching
Engine in the Chi-X Canada FIX protocol which supports all Canadian-specific and UMIR required
fields.
FIX Order Entry Bandwidth Recommendations:
Bandwidth recommendations for submitting orders via FIX are gauged on expected Subscriber
order volume. The following table shows the maximum number of inbound orders (and/or
cancels) per second that can be handled, with no buffering or delay, with different capacity
connections:
Order Protocol
Connection Bandwidth Examples
64kb
128kb
FIX Message Capacity
Standard
High Frequency
Market Data Interface
Chi-X Canada Market Data is available in both unicast and multicast protocols.
a) CHIXMD Market Data Interface
CHIXMD is Chi-X Canada’s web-based direct market data feed that provides pre and post-trade
data about orders entered into and executed on Chi-X Canada. Chi-X Canada’s data feed contains
information concerning buy, sell and sell short orders, and last match price.
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Chi-X Canada’s data service utilizes a protocol specifically designed for the high-speed
dissemination of real-time order book information.
The CHIXMD market data feed connection between Subscribers and Chi-X Canada is established
using a lightweight point-to-point protocol, built on top of TCP/IP sockets that allow delivery of a
set of sequenced messages from a server to a client in real-time. CHIXMD guarantees that the
client receives each message generated by the server in sequence, even across underlying
TCP/IP socket connection failures.
b) CHIXMMD Market Data Interface
CHIXMMD is Chi-X Canada’s real-time multicast market data feed that delivers market data in
UDP multicast packet streams which are published over the Chi-X Canada multicast market data
network. There are multiple data streams published over this network for resiliency and
redundancy purposes. All streams carry identical content about Chi-X Canada market data. By
subscribing to these data streams, market data customers receive the latest market data updates
from the Chi-X Canada trading platform including information about buy, sell and sell short orders
and last match traded price.
The multicast message recovery service offers message recovery to market data customers.
Market data customers can connect to a designated MMRS server and request for past message
retransmission. The recovery process is implemented via a TCP connection established by a
request sent by the market data customers to the MMRS server.
Initially customers may choose to receive either Chi-X Canada’s unicast or multicast market data
feeds. Over time Chi-X Canada’s unicast market data feed will be fully migrated to Chi-X Canada’s
multicast market data feed.
Both the CHIXMD and CHIXMMD market data feeds are available at Chi-X Canada’s primary and
secondary sites for resiliency purposes.
CHIXMD and CHIXMMD Market Data Bandwidth Recommendations
Chi-X Canada recommends that Subscribers allocate at least 10Mb/sec for Chi-X market data.
Market Data Protocol
CHIXMD and CHIXMMD
Connection Bandwidth Examples
10Mb
16Mb
Recommended
Ample
As trading volumes on Chi-X Canada grow, the volume of quote messages will also grow and
consequently increase the CHIXMD and CHIXMMD market data feed bandwidth requirement. ChiX Canada actively monitors the number of quote messages that are being generated by the
market. Should the situation arise, Chi-X Canada will provide Subscribers notification of any
changes that are needed to be made in the CHIXMD and CHIXMMD bandwidth requirement.
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Chi-X Canada Order Handling and Instructions
Matching Engine – The Chi-X Canada Alternative Trading System accepts buy, sell, and sell
short orders from system Subscribers, comparing them in real-time and executing trades from
matching orders based on strict price/time priority. Orders accepted by Chi-X Canada that are not
immediately matched are “posted” in the engine’s Intelligent Order Book™, a dynamically
updating real-time database of limit orders, where they are visible to other Subscribers.
Quotation for orders posted in the Chi-X Canada book is disseminated to system Subscribers as
non-attributed quotes anonymously aggregated at each price level; no Subscriber's identity is
disclosed during any part of the order lifecycle - before, during, or after an execution unless a
Subscriber opts in for post trade attribution.1
Opt-in Attribution – Although quotation for orders entered in the Chi-X Canada book is
normally disseminated to system Subscriber’s as non-attributed quotes, Subscribers are able to
choose to have information about their Subscriber ID be displayed, post trade, on an order-byorder basis. Whereas most Canadian marketplaces enable Subscribers to opt-out of attribution by
entering an order as anonymous or with Broker ID #001, Chi-X Canada enables Subscribers to
opt-out of being anonymous by entering an order as attributed with their Subscriber ID. Orders
that are designated as attributed will display a Subscriber’s ID on a post trade basis - Subscriber
ID’s are displayed for trades that occur.
Priority Matching
All orders follow the following sequence of execution priority; price/time.
Price Priority
Example
Priority
P1
P2
P3
Size
300
100
100
Bid
10.00
9.99
9.98
Offer
10.01
10.02
10.03
Size
500
600
100
The buy order for 300 shares has execution priority because it is the highest price bid. Likewise,
the sell order for 500 shares has execution priority because it is the lowest price offer.
Time Priority
Example
Priority
P1
P2
P3
1
Size
100
100
100
Arrival Time
9:30:00
9:31:00
9:35:00
Bid
10.00
10.00
10.00
Subscribers’ identities are necessarily disclosed when trades are submitted to CDS
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Where two or more orders are posted at the same price, the order that was entered first has
execution priority. In this example, the buy order for 300 shares entered at 9:30:01 has
execution priority because it was entered before the other two orders for 100 shares each at the
same price.
Chi-X Canada’s Order Protection Solutions
Chi-X Canada employs two solutions to reasonably prevent trade-throughs on its marketplace; repricing done by Chi-X Canada’s Intelligent Order Book, and trade-through prevention by Chi-X
Canada’s Smart Order Router. Chi-X Canada Subscribers are provided choice in selecting which
solution best fits their trading needs. Subscriber’s are also able to by-pass both solutions by
sending CSO orders (which have been designated as DAO orders for the purposes of the Order
Protection Rule) which will be immediately entered on Chi-X Canada without reference or regard
to prices on other marketplaces.
Please Refer to Appendix A – Trade-through, and Locked and Crossed Market Order
Re-pricing Condition
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Chi-X Canada ATS Limited Intelligent Order Handling
Strategies
Chi-X Canada offers Subscribers a choice of order handling strategies to improve trading
efficiencies and help achieve best price and best execution. Chi-X Canada Subscribers select from
a suite of order handling strategies on an order-by-order basis (default settings are available).
Strategies that route orders to other market centers will route on a “service bureau” basis in
which the receiving destination knows the underlying Subscriber as the executing broker (i.e. the
TSX, TSX Venture, Pure, Omega, Alpha and TMX Select will know the Subscriber as the order
originator, not Chi-X Canada).
Chi-X Canada’s Smart Order Router
Chi-X Canada offers pre-configured (Standard Strategies) as well as customizable smart order
routing strategies (Custom Strategies):
Pre-configured Smart Routing Strategies
Subscribers have the following options to choose from when selecting a pre-configured smart
order routing strategy:
A) Posting destination:
Chi-X Canada, TSX, Alpha, TSX-Venture
Orders will scan the Chi-X Canada book for liquidity at a price equal to or better than the best
prices displayed on other markets; if sufficient liquidity to fully execute an order is not resident
on the Chi-X Canada book, the SmartRouter sprays order(s) for any residual shares out to other
markets displaying liquidity at the consolidated best price. Any residual shares that remain
unexecuted after scanning and spraying are posted to either: Chi-X Canada, TSX, Alpha, or TSXVenture as determined by the Subscriber.
B) Dynamic/Non-Dynamic:
Subscribers may elect to have the SmartRouter continuously scan the market and pull the order
from the posting marketplace to re-spray if the posted order becomes marketable on other
venues.
C) Access to Dark Liquidity
Subscriber’s may elect, if desired, to have their orders interact with orders on the MatchNow Dark
Pool.
If at any point in time there exists a displayed market of which a Subscriber is not a member,
Chi-X Canada and the Subscriber can discuss alternative order handling options; which include,
but are not limited to disabling routing to that market.
SMARTROUTER CUSTOM STRATEGY
Chi-X Canada’s SmartRouter has several configurable components that allow us to create custom
smart routing configurations:
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•
•
•
•
•
Ping Destination - a blind IOC, to seek hidden liquidity for example
Routing Table – market routing priority, also determines overspray priority
Posting Destination
Dynamic/ Non-dynamic – re-interact with the market following a post/ stay put
Top-Of-Book/ Multi-Price Level – price sensitive spraying/ time sensitive spraying
Chi-X Canada makes ongoing enhancements to its SmartRouter to permit new and additional
tailored custom strategies to meet the specific routing needs of our customers.
SmartRouter Odd/Mix Lot Order Handling:
Currently, CHI-X Canada, Omega and TMX Select only accept orders which are a multiple of the
Standard Trading Unit (STU), i.e. a Round Lot. The TSX, , TSX-Venture, Pure and Alpha accept
Odd Lot orders, however, an Odd Lot will not match with a Round Lot. The SmartRouter will
intelligently handle Odd Lot orders based on the following guidelines:
 Do not spray CHIX, or Omega with Odd or Mixed Lots.
 Do not consider Odd Lot quotes from the TSX in routing decisions.
Chi-X Canada SmartRouter Special Cases and Special Terms Order Handling
Order Type
Stop Order
Opening Order Pre9:30 a.m.
Opening Order Post
9:30
Market Order Pre9:30 a.m.
Market Order
between 9:30 a.m.
and 4:00 p.m.
Closing Order Pre9:30 a.m.
Route
TSX – Direct
TSX-Venture Direct
TSX – Direct
TSX-Venture Direct
REJECT
TSX – Direct
TSX – Venture Direct
SMRT *
TSX – Direct
TSX – Venture Direct
Closing Order Post9:30 a.m.
TSX – Direct
TSX – Venture Direct
GTC
Odd Lots
REJECT
TSX – Direct
TSX-Venture Direct
SMART CHIX Dynamic
SMART X DYNAMIC
Pre-9:30 a.m.
Special Terms Limit
Order
Pegged Orders
CSO
CHIX - Direct
CHIX - Direct
CHIX - Direct
Description
Stop and Stop Limit orders are directed to the TSX, or
TSX-Venture.
Limit/ Market On Open orders go directly to the TSX or
TSX-Venture Opening Auction.
Limit/ Market On Open orders post 9:30 are rejected
to prevent any routing errors.
Market Order pre-9:30 go directly to TSX Opening
Auction as a Market On Open order.
Market orders between 9:30 and 4:00 use the
specified SMART Strategy. (Market orders after 4:00
are rejected)
Limit On Close orders are not available until 9:30.
Market On Close orders go directly to the TSX or TSXVenture Opening Auction.
Limit/ Market On Close Orders are directed to the TSX
or TSX-Venture (Limit/ Market On Close orders after
4:00 are rejected).
Good Till Cancel orders are rejected.
Odd Lots are directed to the TSX or TSX-Venture.
SMART X DYNAMIC orders entered before 9:30 a.m.
are converted to CHIX DYNAMIC orders.
Limit orders with MinQty , FOK, or AON parameters
are directed to CHIX.
Pegged orders are directed to CHIX.
Orders market CSO route directly to CHIX.
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Chi-X Canada ATS Limited Order Types
Traditional Order Types
Market Order – An order to buy or sell a security at the best available price on Chi-X Canada
but will not trade at a price outside the NBBO.
Limit Order – An order to buy or sell a security at a price equal to, or better than, the specified
limit price.
Short Sell Order – An order to sell a security that the seller does not own (either directly or
through an agent or trustee) at the time of the order.
Short-marking Exempt Order – An order by an account to buy or sell a security that meets
the definition of a short-marking exempt as defined by UMIR.
Advanced Order Types
Intentional Cross
The simultaneous entry of both an order to buy and sell the same amount of a security at the
same price entered by the same Subscriber. In accordance with IIROC guidance on rules for dark
liquidity, Chi-X Canada will accept better priced intentional crosses including those entered with a
price of a half trading increment.
Internal Cross
An intentional cross between two accounts that are managed by a single firm acting as a
portfolio manager with discretionary authority in managing the investment portfolio.
Basis Cross
A cross of at least 80% of the component share weighting of the basket of securities, index
participation unit, or derivative instrument that is the subject of the basis trade. In accordance
with UMIR, prior to execution, the Subscriber shall report details of the transaction to IIROC.
VWAP Cross
A VWAP cross is a cross of a security at the volume weighted average price of multiple trades on
a marketplace or on a combination of marketplaces over a specified time period. The volume
weighted average price is the ratio of value traded to total volume. In accordance with UMIR,
where applicable, prior to execution, the Subscriber shall report details of the transaction to
IIROC.
Contingent Cross
A cross resulting from a paired order placed by a Participant on behalf of a client to execute an
order on a security that is contingent on the execution of a second order placed by the same
client for an offsetting volume of a related security as defined in UMIR.
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Sweep and Cross Order
This order type will facilitate an Intentional Cross by displacing any better priced orders on
protected markets. Chi-X Canada will route IOC's to all protected markets that contain displayed
prices that are better than the customer’s limit price. The IOC's will be sent to all markets
simultaneously and carry the Bypass marker. Once Chi-X Canada has attempted to execute
against all better prices on the protected markets, it will send a "cross" order to the Chi-X Canada
book.
Bypass Order
The Bypass order marker indicates that the user does not want the order to interact with
undisplayed orders or undisplayed portions of iceberg or X-berg orders on the Chi-X Canada
market. Orders marked with the Bypass marker will be treated as Immediate-Or-Cancel (IOC).
Chi-X Sweep Order™ (CSO)
The CSO order marker indicates that the user has already checked the quotes of all other
markets before routing to Chi-X Canada. This order will not be eligible for Chi-X Canada
smartrouting, and Chi-X Canada's dynamic re-pricing and trade-through prevention mechanism
will not apply. It will trade with the best priced contra-side order(s) without consideration of
prices on other marketplaces.
Subscribers and their vendors will use the CSO when smartrouting orders to Chi-X Canada. Since
the Subscriber's or Subscriber's vendor's smartrouter will route to Chi-X Canada after taking a
snapshot of the consolidated market data, there isn't a need for Chi-X Canada to perform the
price check a second time before executing the order. The CSO order allows Subscribers or their
vendors who are using smartrouting technology to "opt-out" of Chi-X's re-pricing and tradethrough protection mechanism, as they are performing the price checking on their own.
Post Only Order
An order that will post in the Chi-X Canada order book intended to provide liquidity. If the order
upon entry would result in a trade, the order will be re-priced one tick increment more passively
and booked. This order will not interact with hidden liquidity. Post-only orders may be combined
with any other order type including non-displayed orders. Two contra side post-only nondisplayed orders eligible to match will not execute. Instead, both orders will maintain their price
until executing against an active order. In addition, no execution will take place between a
resting dark 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 booked at the locked price.
Reserve/ Iceberg
An order where a customer determines the number of shares to be displayed, 2 while the
remainder is hidden in reserve. When the visible portion is fully executed, a new visible displayed
size is refreshed, drawing from the amount of the reserve. New displayed sizes will refresh until
the amount of the reserve is less than the displayed amount. At that point, the remaining reserve
quantity will be displayed. An example of how priority is determined for Iceberg orders is
provided below.
The displayed quantity must be equal or greater than one standard trading unit (STU) or such greater size as
designated by IIROC.
2
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Example – Display Priority, Reserve/ Iceberg
In the example below, the displayed buy order share sizes of 100, 200, and 100, respectively, will
be executed against matching sell (or sell short) orders based on time priority. The reserve
quantities of 900 and 300 will not become eligible for matching until all displayed shares at that
price level have been exhausted.
Display
100
200
100
Reserve
(900)
(300)
0
Arrival Time
9:30:00
9:31:00
9:35:00
Bid
10.00
10.00
10.00
The X-berg
An order that is similar to an Iceberg order. However, instead of the displayed size being the
same every time the order is refreshed, the displayed quantity is chosen at random by the
system within a pre-specified range set by the customer. A customer sets the amount of shares
to be displayed and the amount of shares to held in reserve when first entering the order. An
example is as follows:
Example – X-berg
Quantity
50000
Price
10.00
Display Quantity
1000
Reserve
49000
Random Refresh Range
+/- 500
Possible Display QTY Refreshes (STU = 100)
1500 Random (Maximum 1000 + 500)
1400 Random
1300 Random
1200 Random
1100 Random
1000 Random (Original Display Quantity)
900 Random
800 Random
700 Random
600 Random
500 Random (Minimum 1000 – 500)
Chi-X Canada Non-displayed Orders
Minimum Quantity
A Minimum Quantity order, such as All-or-None (AON), is an order that will only execute if there
is sufficient demand or supply for the entire order. These orders are not displayed in the Chi-X
Canada book.
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Mid Peg Order
The Chi-X Canada Mid Peg Order is a non-displayed order that floats at the mid point of the
NBBO which is calculated and updated in real time by Chi-X Canada’s Intelligent Order Book. Mid
peg orders also provide Subscribers the option to enter a limit price with the order. Unique to this
order type, when the NBBO spread is an odd increment, Mid Point Orders will execute at half
penny prices. The Mid Peg Order is an ideal tool for Subscribers to reduce market impact and to
be offered price improvement opportunities.
The Mid Peg Order is only available from 9:30 a.m. to 4:00 p.m. Any Mid Peg Orders entered
between 8:30 - 9:30 a.m. will be held by the system until 9:30 a.m. At 9:30 a.m. the orders will
be “booked” and become eligible for trading. Mid Peg Orders entered after 4:00 p.m. will be
rejected and any Mid Peg Orders remaining on the book at 4:00 p.m. will be cancelled.
Hidden Order
A non-displayed limit order that adheres to the same execution priority conditions as other nondisplayed order types.
Execution Priority
Non-displayed orders will always execute after lit orders at the same price. After all lit orders
have been displaced, the hidden portion of an Iceberg or X-berg order is then given execution
priority followed by fully hidden orders that are executed in price/time priority. Price priority for a
re-priced non-displayed order is not affected by an underlying limit price. Time priority for a nondisplayed order that re-prices is determined by the time that each re-pricing occurs. When repricing multiple non-displayed orders to the same price level, the time sequence for the re-pricing
will be determined by each order’s original timestamp or by the timestamp associated with the
last re-pricing.
Chi-X Canada Peg Order Types
Pegging is only available from 9:30 a.m. to 4:00 p.m. Pegged orders entered between 8:30 9:30 a.m. will be held by the system until 9:30 a.m. At 9:30 a.m. the orders are “booked” and
become eligible for trading. Pegged orders entered after 4:00 p.m. will be rejected. All Pegged
orders remaining on the book at 4:00 p.m. will be cancelled.
Primary – A “Primary Peg” buy/sell order will peg to the consolidated best bid/ask.
 Primary Peg orders can be entered as either displayed or non-displayed in the
Chi-X Canada book, and subscribers also have the option of entering a limit price
with the order.
Mid – Mid-Peg orders are described above under Chi-X Canada Non-displayed Orders.
Market – A “Market Peg” buy/sell order will peg to the consolidated best ask/bid adjusted by a
trading increment as defined by UMIR.
 In order to prevent locked markets, Market Peg orders will execute at the best
bid/ask adjusted by a penny for securities priced equal to or greater than $.50
and by a half-penny ($.005) for securities priced less than $.50.
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
Primary Peg orders can be entered as either displayed or non-displayed in the
Chi-X Canada book, and subscribers will also have the option of entering a limit
price with the order
Peg Offset – An increment/ decrement offset of the peg price that allows a pegged order to
become more passive/aggressive than the quote to which it is pegged.
Example: a Primary Peg Buy order with a +$0.01 offset will peg to the consolidated bid price plus
one cent.
Execution priority: Execution priority for non-displayed pegged orders follows the same
execution priority that was described above for “Chi-X Canada Non-displayed Orders”. Execution
of any non-displayed pegged order or Hidden Order at the NBBO must also be in conformance
with UMIR requirements that would allow for such executions. Execution priority for displayed
pegged orders continues to follow price/time priority with its price and time priority being
affected by re-pricings in the same manner as described below for dynamically re-priced orders.
Pegged Order Handling


From 8:30 - 9:30 a.m.
Pegged orders will be accepted but will be held by the system until 9:30. At 9:30 a.m.
the orders are “booked” and become eligible for trading.
From 4:00 p.m. to 5:00 p.m.
Pegged orders entered after 4:00 p.m. will be rejected. All pegged orders remaining on
the book will be cancelled at 4:00 p.m.
Time in Force Conditions
IOC – An “Immediate or Cancel” (IOC) order is one in which any portion of the order that is not
filled immediately is cancelled.
FOK – A “Fill or Kill” order must execute as a complete order as soon as it becomes available on
the market, otherwise the order is cancelled.
DAY – A Day Order will remain live on the Chi-X Canada book for the duration of the trading day
or until cancelled by the subscriber. At the end of the Chi-X Canada trading day (5:00 pm
Eastern Time) all outstanding, unfilled Day orders will be cancelled.
GTD – A “Good ‘Till Date” (GTD) order expires at the earlier of a specified Expire Time or the end
of the Chi-X Canada trading day. At the end of the Chi-X Canada trading day (5:00 pm
Eastern Time) all outstanding, unfilled Day orders will be cancelled.
GTC – “Good ‘Till Cancelled” (GTC) orders will be cancelled at the end of the day.
All orders that remain on the Chi-X Canada book expire and are cancelled at the end of the Chi-X
Canada trading day (5:00 pm Eastern Time).
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Chi-ControlsTM Risk Management Suite
Customer Command Center
The Customer Command Center is a web based application that provides Chi-X Canada
Subscribers with a risk management tool enabling them to monitor and disable order flow
originating from clients that are directly accessing the market. The Customer Control Center
includes the following features:





Displays the number of open orders resting on Chi-X Canada, sorted by UMIR ID;
Displays the number of open orders that have been routed using Chi-X Canada’s; smart order
router, sorted by UMIR ID;
It allows the user to halt trading for an individual UMIR ID;
It allows the user to halt trading for all registered UMIR ID's of a designated client;
It allows the user to re-start trading for any individual UMIR ID or combination of UMIR ID's.
Cancel on Disconnect
Subscribers have the option to have all open orders cancelled upon disconnection to Chi-X
Canada ATS.
No-Self Cross
This feature is enabled on a trader ID basis and will prevent the trader ID from trading with itself
to avoid a “wash trade.”
Subscribers can choose from one of the following implementations:
 Cancel the Active order
 Cancel the Passive order
 If the orders are different in share quantity, reduce the larger order and cancel the other
one.
Order Entry Parameters
Price limit – Price limits are determined as a percentage of value from the last sale price.
Different parameters are set for different priced securities. The settings are predetermined by
Chi-X Canada in order to prevent erroneous orders from interacting with the order book.
Share limit – Subscribers are able to set the maximum number of shares permitted per order
per security. If an order is entered which exceeds the share limit, the order will be rejected and
sent back to the Subscriber.
Notional limit – Subscribers are able to set the maximum notional value per order per security.
The notional value of a trade is calculated by the number of shares multiplied by the price of the
security. If an order is entered which exceeds the notional limit the order will be rejected and
sent back to the Subscriber.
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Clearing and Settlement
Clearing
Chi-X Canada operates under the exchange clearing model.
Locked-in subscriber trades are reported at the end of the day by Chi-X Canada to CDS.
Subscribers report their trades to their custodians who will in turn report allocations to CDS.
On T+1 Chi-X Canada Subscribers review the CDS trade comparison reporting based on trades
submitted to CDS from Chi-X Canada and the custodian
On settlement date CDS, via the CNS process, will debit/credit Subscriber custodians’ CDS ledger
and bank account for the trades
Settlement
All trades done on Chi-X will settle regular way on T+3.
In the case of a special direction for clearing and settlement from the primary exchange (as a
result of an event such as de-listing, for example) Chi-X Canada will make the appropriate
adjustments to indicate the special clearing (as agreed upon with CDS) to Chi-X Canada's end of
day file before the file is shipped off to CDS.
Because Chi-X Canada is a fully anonymous market, for instruments trading with a same day
cash settlement Chi-X Canada will halt the symbol prior to the commence of trading at Chi-X
Canada’s open at 8:30 a.m.
Non-Standard Settlement
Chi-X Canada will only accept standard settlement orders. In the case of a special direction for
clearing and settlement from the primary exchange (as a result of an event such as de-listing, for
example) Chi-X Canada will make the appropriate adjustments to indicate the special clearing (as
agreed upon with CDS) to Chi-X Canada's end of day file before the file is shipped off to CDS.
Chi-X Canada will not trade symbols with same-day cash settlements. Symbols with same day
cash settlement will be halted on the system prior to the commencement of trading.
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APPENDIX A
Trade-through and Locked and Crossed Market Order Re-pricing
Condition
Canada’s Order Protection Rule (OPR) requires all visible, immediately accessible, better-priced
limit orders to be filled before other limit orders at inferior prices, regardless of the marketplace
where the order is entered. As stated in the CSA’s Notice of amendments to NI 21-101 and NI
23-101, “the obligation to not trade through is owed by all marketplace participants to the
market as a whole.” The purpose of the Rule is to ensure that if an order is entered on a market
with the best price, it will be executed ahead of inferior priced orders irrespective of where the
order is posted. OPR requires all marketplaces recognized under the ATS Rules to establish,
maintain, and enforce, written policies and procedures that are reasonably designed to prevent
trade-throughs on that marketplace.
Chi-X Canada takes in external market data feeds from the transparent Canadian marketplaces
(e.g. Chi-X, TSX, TSX-Venture, Pure, Omega, Alpha, and TMX Select) directly. These external
market data feeds are consolidated to provide the matching engine with real-time market price
information for the purpose of re-pricing orders that would otherwise trade-through. In addition,
the matching engine also facilitates Subscriber compliance in not intentionally locking or crossing
a market.
In accordance with Chi-X Canada’s Order Protection Rule Policies and Procedures, when an order
is received directly by Chi-X Canada, it compares the price of the order to the prevailing market
for trade-through obligations (based on Chi-X, TSX, TSX-Venture, Pure, Omega, Alpha, TMX
Select and Chi-X Canada itself) and will reasonably prevent a trade-through on its marketplace by
re-pricing the order passively by one standard trading increment. Subscribers wishing to take
direct responsibility for demonstrating they have complied with OPR may override this
mechanism by entering a CSO order which is designated DAO orders for OPR purposes.
The system will not reject orders because of trade-through. Should an order be entered at a price
that would result in a trade-through or a locked or crossed market, the system will automatically
re-price the orders as shown in the examples below. Orders that are re-priced will be given time
priority behind any other orders at that price level irrespective of whether or not an order was
entered as a market or limit order. In the case of an IOC or FOK order, the order will be
cancelled back to the Subscriber if it is not executed as per the IOC or FOK instructions.
Example #1 - Trade-Through Prevention (ILLUSTRATIVE)
Consolidated Market Display
Chi-X Canada Book Quote
BID
10.10
10.09
ASK
10.13
10.14
Given the market conditions noted above, aggressively priced Buy and Sell orders will be repriced as described below.
A SELL order entered at a price lower than the consolidated BID will be re-priced to equal the
consolidated BID plus a trading increment as follows:
Original Price
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Order Re-price
SELL Limit
SELL Market
10.09
None (MKT)
10.11
10.11
A BUY order entered at a price greater than the consolidated ASK will be re-priced to equal the
consolidated ASK minus a trading increment as follows:
Order Price
10.14
None (Mkt)
BUY Limit
BUY Market
Order Re-price
10.12
10.12
In circumstances where the prevailing market conditions change after a re-priced order has
already been entered into the Chi-X Canada book, the matching engine performs dynamic,
virtually instantaneous, real-time re-pricing in reaction to market data ensuring that the order has
maximum execution potential within the constraints of the customers original order instructions.
Note: Dynamic order re-pricing is only available between 9:30 a.m. to 4:00 p.m. (Eastern Time).
Before 9:30 a.m. and after 4:00 p.m. (Eastern Time), orders will be re-priced only once and then
remain static. In this circumstance, the order must be modified or cancelled and replaced in order
to change the price.
Example #2 - Dynamic Order Re-pricing: Market Order (ILLUSTRATIVE)
Consolidated
Market Display
Chi-X Canada Book
Quote
BID
ASK
10.10
10.13
10.10
10.14
Chi-X Canada Subscriber Order Re-pricing behavior is
illustrated in the next table
BUY Market
Original Order
Price
Order Reprice
None (MKT)
10.12 (MKT)
MKT instruction is retained in
memory in the matching engine
The buy market order is re-priced to 10.12, preventing a trade through and a locked market.
However, the original instruction of MKT is retained in memory in the matching engine. As a
result, the order price will float with the inside ask adjusted by a trading increment until the
order is cancelled or becomes eligible for execution on terms that would not violate tradethrough obligations.
Updated
Consolidated Market
Display
Chi-X Canada Book
Quote
BID
ASK
10.12
10.13
10.12 (MKT)
10.14
Spread narrows because Chi-X
Canada is the new inside bid
Following a quote refresh the prevailing market conditions change and the consolidated inside
ask updates to 10.14. The market buy order would not cause a trade-through if executed
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against the 10.14 sell order on Chi-X Canada. As a result the market order becomes eligible for
execution and a match occurs at 10.14.
Updated
Consolidated Market
Display
Chi-X Canada Book
Quote
BID
ASK
10.12
10.14
10.14 (MKT)
10.14
Execution occurs at 10.14
Note: Dynamic order re-pricing is only available between 9:30 a.m. to 4:00 p.m. (Eastern Time).
Before 9:30 a.m. and after 4:00 p.m. (Eastern Time), orders will be re-priced only once and then
remain static. In this circumstance, the order must be modified or cancelled and replaced in order
to change the price.
Example#3 - Dynamic Order Re-pricing: Limit Order (ILLUSTRATIVE)
Consolidated Market Display
Chi-X Canada Book Quote
BID
10.10
10.09
ASK
10.13
10.15
Chi-X Canada Subscriber Order Re-pricing Behavior is illustrated in the
next table
Original Order
Price
BUY Limit
10.14
Order Re-price
10.12 (10.14)
10.14 limit
instruction is
retained in memory
in the matching
engine
The buy limit order is re-priced to 10.12 in order to prevent a trade-through. However, the
original instruction of a 10.14 limit is retained in the memory of the matching engine. In this
circumstance, the order price will float with the inside ask adjusted by a trading increment until
the order is cancelled or becomes eligible for execution that would not violate trade-through,
up to the original limit price.
BID
Updated Consolidated Market
Display
Chi-X Canada Book Quote
ASK
10.12
10.12 (10.14)
10.13
10.15
Spread narrows
because Chi-X
Canada is the new
inside bid
Following a quote refresh the prevailing market conditions change and the consolidated inside
ask updates to 10.15. There is a sell order on Chi-X Canada at 10.15 but the limit buy order
would not be eligible for execution because it is capped at the original 10.14 limit instruction.
BID
ASK
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Updated Consolidated Market
Display
Chi-X Canada Book Quote
10.14
10.15
10.14
10.15
10.14 limit top is
reached and
enforced –
No execution
Note: Dynamic order re-pricing is only available between 9:30 a.m. to 4:00 p.m. (Eastern Time).
Before 9:30 a.m. and after 4:00 p.m. (Eastern Time), orders will be re-priced only once and then
remain static. In this circumstance, the order must be modified or cancelled and replaced in order
to change the price
Please refer to the Chi-X Canada Canada FIX specification for detailed descriptions of
how order types are implemented.
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APPENDIX B
Chi-X Canada Clearly Erroneous Trade Policy
Definition - the execution of an order to buy, sell, or sell short a security, entered in error (e.g. in
terms of price, quantity, side or symbol) at a price substantially away from, or inconsistent with,
the prevailing market price for that security at the time of execution.
Chi-X Canada reserves the right to initiate a review of a clearly erroneous trade, regardless of
whether or not a Subscriber request has been submitted, if it determines in its sole discretion
that circumstances warrant such a review.
In such instances Chi-X Canada will notify the relevant Subscriber trading contacts, as provided
by the Subscriber, via electronic mail or telephone as conditions warrant, that a trade will be
reviewed pursuant to this policy. Market participants that are not relevant parties will not be
notified that a trade is under review.
Chi-X Canada designated principals, with the consent of IIROC will exercise their sole discretion
under this policy to cancel or amend a trade, where needed, that is the result of a Chi-X Canada
system error or malfunction. Furthermore, Chi-X Canada will follow direction from IIROC to
cancel, vary or correct a trade and facilitate the cancellation or amendment of a trade when both
counterparties to the trade agree to the trade cancellation or amendment. In this circumstance,
notification will be made to IIROC. Decisions will be made in a timely fashion and in all cases a
decision will be made no later than the close of business on the trading day of the occurrence
which led to the review being initiated.
Chi-X Canada will promptly notify the relevant parties and IIROC via electronic mail, and
telephone as conditions warrant, of its decision to cancel a trade or trades.
After Chi-X Canada processes the cancellation or amendment of any clearly erroneous trade, the
trade is null and void.
©2013 Chi-X Canada ATS Ltd., member IIROC/CIPF. All Rights Reserved. CHI-X is a registered
trademark in jurisdictions throughout the world.
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