TSX Market Makers

Dedicated to supporting a vibrant and orderly market

Before a security is listed on TSX, the exchange selects one of 19 approved firms to become the security’s designated Market Maker.

Under the TSX Market Maker system, this firm helps to establish a fair and orderly market for trading in that security. For each security, a Market Maker is required to ensure there is a bid and offer at all times and at an agreed-upon spread goal. This ensures that investors will always have a counterpart to buy or sell from. The Market Maker also contributes to the liquidity and depth of the market.

Among their obligations, Market Makers automatically fill all market-priced odd lots: orders that fall outside the standard block of 100 shares. This ensures liquidity for investors who place orders to buy or sell stock in volumes of fewer than 100 shares.

Through a mechanism called the Minimum Guaranteed Fill (MGF), Market Makers also ensure these orders are filled at the best price. Each stock will have a specific MGF; for example, a particular security may have an MGF of 1099 units. An investor may want to sell 1,000 shares of this stock at the prevailing market price of $5, when only 500 shares have been bid for at that price. Rather than selling half of the investor’s shares at a lower price, the Market Maker will fill the remaining 500 shares of the order at $5.

“The system guarantees that small retail orders, in particular, get filled immediately and at the best posted market price,” says Robert Fotheringham, senior vice-president of equity trading at TMX Group.

Market Makers also provide another service in periods of high volatility: if the market exerts upward or downward pressure on a security during a trading session, the Market Maker will mitigate the pressure by absorbing some of the orders, thereby limiting excessive price swings.

Alongside these day-to-day duties, Market Makers also assist TSX and the Investment Industry Regulatory Organization of Canada (IIROC) in spotting anomalies in the marketplace.

The Market Maker system benefits listed companies – and other issuers as well – by contributing to the stability of the market and ensuring liquidity. But it is important to note that in meeting their responsibilities, TSX Market Makers have access to the same real-time information as all market participants. “Ultimately,” says Fotheringham, “the marketplace determines the price of a security.”