Nasdaq CXC Limited

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Relief from subsection 7.1(1) of National Instrument 21-101 Marketplace Operation to permit Nasdaq CXC Limited to implement a new functionality that would allow for interaction between conditional orders and firm dark orders.

Applicable Legislative Provisions

National Instrument 21-101 Marketplace Operation, s. 7.1.

National Instrument 21-101 Marketplace Operation, s. 15.1.

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions, s. 3.6.

September 10, 2025

IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO, QUEBEC, BRITISH COLUMBIA, ALBERTA,
SASKATCHEWAN, MANITOBA, NOVA SCOTIA,
NEW BRUNSWICK, PRINCE EDWARD ISLAND,
NEWFOUNDLAND AND LABRADOR,
NORTHWEST TERRITORIES,
NUNAVUT AND YUKON
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
NASDAQ CXC LIMITED
(the Filer)

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) to vary and restate the decision issued on August 18, 2022 (the 2022 Decision) granting an exemption pursuant to section 15.1 of National Instrument 21-101 Marketplace Operation (NI 21-101) from the requirement in subsection 7.1(1) to permit the implementation of new functionality on the Filer's marketplace in respect of a Conditional Order Interaction (as defined below) (the Varied Exemption).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a coordinated review application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the decision is the decision of the principal regulator and evidences the decision of each other Decision Maker.

Interpretation

Terms defined in National Instrument 14-101 -- Definitions, Multilateral Instrument 11-102 -- Passport System, National Policy 11-203 Process for Exemptive Relief in Multiple Jurisdictions and NI 21-101 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is a corporation established under the Canada Business Corporations Act.

2. The Filer's head office is in Toronto, Ontario, Canada.

3. The Filer operates a "recognized exchange" as defined in NI 21-101.

4. The Filer is not in default of securities legislation in any jurisdiction.

5. The Filer currently offers trading functionality whereby participants may enter non-committed orders that generate an invitation to send a firm order when there is a contra-side match (Conditional Order) and is proposing to include additional types of Conditional Orders.

Conditional Orders

6. The Filer proposes to continue to offer Conditional Orders on the PureStream Order Book (PureStream) and introduce additional Conditional Orders on the CXD Conditional Order Book to Nasdaq CXC Limited members (Members).

7. Conditional Orders do not require a firm commitment to trade. Instead when it is possible for a Conditional Order to be matched or paired with one or more orders, a "firm-up" request will be sent to the Member who entered the Conditional Order and the Member will be given a short time window in which to act on the firm-up request by entering a new order that is then considered firm.

8. The only information that is shared through the firm-up request is symbol and side. The firm-up request does not display the size of the order, the price or the identity of the potential counterparty.

9. When a new order is sent in response to a firm-up request, a Member is able to modify the order instructions, which may or may not impact the order's matching priority (on the CXD Conditional Order Book) or pairing priority (on the PureStream) or the opportunity to match or pair. If the Member does not respond to a firm-up request in the time window provided, the Conditional Order will be rejected and not treated as an order.

10. Conditional Orders will facilitate large-sized trades, as they will only be available in respect of PureStream orders, CXD Conditional Orders and Extended Firm-up time (XFT) Orders, which are subject to a minimum order size that is either (a) greater than 50 standard trading units and $30,000 in nominal value, or (b) greater than $100,000 in nominal value (Minimum Order Size).

11. Only the Member who entered the Conditional Order can see the size of the order and the price, which they entered, and the contra side of a Conditional Order will not know the Conditional Order size or price.

PureStream and Conditional Orders

12. The Filer currently operates PureStream, which is made available to Members on the Nasdaq CXD Trading Book (CXD) and is a 'dark' book.

13. PureStream only supports order interaction between PureStream orders and will support order interaction between PureStream orders and PureStream Connect orders (see paragraph 23 below). PureStream orders do not interact with any other order types in the CXD Central Limit Order Book (CLOB). XFT Orders on the CXD Conditional Order Book, or CXD Conditional Orders that have not opted-in for PureStream Connect (see paragraph 23 below).

14. PureStream orders are paired with one another based on a specified liquidity transfer rate, instead of a specific price. A liquidity transfer rate, or "LTR" indicates the percentage volume of a Reference Trade a user is willing to trade.

15. A Reference Trade is any trade of at least one standard trading unit of a particular security displayed in a consolidated market display other than a reported trade resulting from a match between two PureStream orders (subject to certain exceptions).

16. When orders are paired, streams are established which are held by the Nasdaq Canada system (Exchange System). When a Reference Trade occurs, the Exchange System calculates the volume of a potential match for each stream based on the stream's LTR and the size of the Reference Trade (Volume Considered).

17. For situations stemming from small Reference Trades, the Exchange System continually aggregates all Volume Considered and calculates a Volume Weighted Average Price (VWAP) of Volume Considered (LTR Calculated Volume).

18. When the LTR Calculated Volume meets or exceeds a minimum aggregate level for the security, a trade will be printed at the VWAP of the total Volume Considered for the total size of the LTR Calculated Volume.

19. Members are able to use a conditional parameter that can be added to any PureStream order.

CXD Conditional Order Book and Conditional Orders

20. The Filer proposes to introduce a CXD Conditional Order Book that will operate as an independent pool of liquidity on the CXD Trading Book separate and distinct from PureStream and the CXD CLOB.

21. The CXD Conditional Order Book will support CXD Conditional Orders and XFT Orders and accept CXD Connect Orders (see paragraph 22 below) and immediate-or-cancel orders that meet the CXD Conditional Minimum Size (COB IOC). While both CXD Conditional Orders and XFT Orders are types of Conditional Orders, they differ in that the CXD Conditional Order has a shorter firm-up time than the XFT Orders. CXD Conditional Orders are eligible for PureStream Connect (see paragraph 23 below); XFT Orders are not.

22. Members entering orders on the CXD CLOB may elect to have these orders be eligible to cross over, or connect, to the CXD Conditional Order Book (CXD Connect) if the order meets certain conditions. A CXD Connect Order is an order entered on the CXD CLOB where the Member has opted-in for CXD Connect, priced at the midpoint of the NBBO or better, and meets the Minimum Order Size after all available liquidity has been displaced on the CXD CLOB. If these conditions are met, a CXD Connect Order will cross over to the CXD Conditional Order Book and initiate a firm-up request if a CXD Conditional Order is available.

23. Members may elect to have CXD Conditional Orders interact with both PureStream Orders and CXD Conditional Orders (PureStream Connect). If a Member opts-in for PureStream Connect, a CXD Conditional Order will move from the CXD Conditional Order Book to the PureStream Order Book where it will be eligible to be paired in a stream and then move back to the CXD Conditional Order Book if a CXD Conditional Order becomes available to trade against (a PureStream Connect Order).

24. The CXD Conditional Order Book will support the order interaction between CXD Conditional Orders and other CXD Conditional Orders, XFT Orders, CXD Connect Orders and COB IOC Orders. XFT Orders will be able to interact with other XFT Orders and CXD Conditional Orders. XFT Orders are not eligible to interact with CXD Connect Orders or COB IOC Orders.

Policy Rationale

25. Where a Conditional Order receives a firm-up request from either a PureStream, CXD Connect or COB IOC Order that has not added a conditional parameter (the Conditional Order Interaction), this could be considered a "display" of the PureStream, CXD Connect or COB IOC Order that generated the firm-up request.

26. The Conditional Order Interaction will give Members the opportunity to seek price improvement on large size orders while minimizing market impact. If the Filer were required to comply with the pre-trade transparency requirements in subsection 7.1(1) of NI 21-101 with respect to a Conditional Order Interaction, the anticipated benefits of Conditional Orders would be lost.

27. Guidance in subsection 5.1(4) of Companion Policy 21-101CP (21-101CP) outlines criteria that the securities regulatory authority may consider in granting an exemption from the pre-trade transparency requirements in subsection 7.1(1) of NI 21-101.

28. The Filer believes that the Varied Exemption can be granted because:

(a) a Conditional Order Interaction will be limited to the Minimum Order Size;

(b) PureStream, CXD CLOB, and CXD Conditional Order Book orders that are available to interact with Conditional Orders have consented to the Conditional Order Interaction. The Filer considers a participant to have opted into interacting with Conditional Orders on PureStream by nature of entering a PureStream order in the system. If the participant does not want to interact with a Conditional Order on PureStream the Filer expects that participant not to use the PureStream order type. CXD CLOB or COB IOC Orders that are able to interact with CXD Conditional Orders are explicitly required to opt-into CXD Connect or required to direct their orders to the CXD Conditional Order Book. If a participant does not want to interact with a CXD Conditional Order the participant will not opt-in for CXD Connect or direct their COB IOC Order to another book.

(c) when a firm-up invitation is provided to the Member who entered the Conditional Order, such invitation will only provide symbol and side (i.e., buy or sell), of the PureStream, CXD Connect or COB IOC Order. The size of the PureStream, CXD Connect or COB IOC order cannot be inferred with precision, other than that it meets the Minimum Order Size for all PureStream orders and CXD Conditional Order Book orders (i.e., (a) greater than 50 standard trading units and $30,000 in nominal value, or (b) greater than $100,000 in nominal value.) Similarly, the price is not conveyed but may only be inferable without precision.

(d) when a firm-up invitation is provided to the Member who entered the Conditional Order on PureStream or the CXD Conditional Order Book, the Member receiving the invitation will be unable to determine whether the contra side order is another Conditional Order or a firm PureStream, CXD Connect or COB IOC order and therefore, will not be able to determine whether the contra-side liquidity is immediately actionable, and

(e) there is no guarantee that the Member who entered the Conditional Order will respond to a firm-up invitation with a firm order.

29. In addition, subsection 5.1(4) of 21-101CP provides that, in granting an exemption, the securities regulatory authority may consider whether each order entered on the marketplace meets the size threshold set by a regulation services provider as provided in subsection 7.1(2) of NI 21-101. As of the date of this Order, no size threshold has been set. However, the Filer believes that the Minimum Order Size is an appropriate size threshold for an exemption contemplated in subsection 5.1(4) of 21-101CP.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Varied Exemption is granted and the 2022 Decision is varied and restated as indicated herein, provided that:

(a) Conditional Order Interaction applies to participant orders that have consented to interact with Conditional Orders.

(b) PureStream orders and Conditional Orders on PureStream meet the Minimum Order Size.

(c) CXD Connect Orders and Conditional Orders on the CXD Conditional Order Book meet the Minimum Order Size.

(d) An invitation to firm up through a Conditional Order Interaction conveys only symbol and side as known order elements; information about price or quantity is not conveyed and may only be inferable without precision.

(e) An invitation to firm up through a Conditional Order Interaction does not enable the recipient to determine whether the contra-side liquidity is immediately actionable.

(f) The Filer will test the Conditional Order Interaction feature for the additional Conditional Orders prior to implementation to ensure the functionality works as designed.

(g) The Filer will analyze the impact of the Conditional Order Interaction feature and will share the results with the Decision Makers. The manner and format of the analysis will be agreed to with staff of the Decision Makers no later than 90 days after the signing of this decision.

"Michelle Alexander" 
Associate Vice President, Trading and Markets 
Ontario Securities Commission