Request for Comments – Proposed Public Interest Rule Amendment to the Cboe Canada Trading Policies – Primary Peg – Cboe Canada Inc.
Introduction
Cboe Canada Inc. (Cboe Canada or the Exchange) is publishing certain proposed amendments (collectively, the Public Interest Rule Amendment) to Cboe Canada's trading rules (the Trading Policies) in accordance with the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto, which is attached as Schedule 4 to the Exchange's recognition order. The Public Interest Rule Amendment was filed with the Ontario Securities Commission (the OSC) and is being published for comment. A description of the Public Interest Rule Amendment is set out below, and a blackline of the relevant amendments against the existing rules is attached as Appendix A.{1}
Description of the Public Interest Rule Amendment
The Exchange is proposing to offer a new order modifier, the Primary Peg, by adding a new item of the same name to the list of order modifiers set out in Section 5.07(3) of the Trading Policies.
The Primary Peg (alternately referred to as the "Near-side Peg") will provide Members with the flexibility to allow the price of their orders on NEO-L{2} and NEO-N to float in reference to current market prices, by pegging the price to the NBBO on the same ("near") side of the market, as follows:
• buy orders are pegged to the bid (i.e., the protected National Best Bid or NBB), with or without an offset; and
• sell orders are pegged to the offer (i.e., the protected National Best Offer or NBO), with or without an offset.
As explained in the new provision that defines the new term "Primary Peg":
• where an offset amount is set for a visible Primary Peg order, it must result in the price of such order being inferior or equal to the inside quote on the same side of the market; and
• a Primary Peg order with an offset amount shall only include a time-in-force of Regular Hours Only, or if entered during regular trading hours, a time-in-force of Day.
For completeness and clarity, we are also introducing another new defined term to Section 5.07(3)-"Market Peg"-which is meant to account for the existing term "Far-side Peg" used in Section 9.08(5) (Commentary), which pertains only to Conditionals on the MATCHNow Trading Book.{3}
A trading example that illustrates how the Primary Peg will function is attached as Appendix B.
Expected Date of Implementation
We are seeking to implement this Public Interest Rule Amendment on or around September 30, 2025.
Rationale and Relevant Supporting Analysis
This order modifier obviates the need for traders to constantly adjust the price of their orders, either by canceling and resubmitting or amending their existing orders. This provides greater efficiency for all traders that prefer (or have an obligation) to quote at or near the NBBO.
Expected Impact on Market Structure, Members, Investors, Issuers and Capital Markets
The impact on market structure, Members, investors, and capital markets is expected to be neutral to positive, given that the proposed order modifier already exists today on multiple Canadian marketplaces (see additional details in the section entitled "New Feature or Rule" below), and it will simply provide a similar type of flexibility as is already available to marketplace participants on other marketplaces.
Expected Impact on Exchange's Compliance with Ontario Securities Law and on Requirements for Fair Access and Maintenance of Fair and Orderly Markets
The proposed change will have no impact on Cboe Canada's continuing compliance with Ontario securities law, including requirements for fair access and the maintenance of fair and orderly markets.
Consultation and Internal Governance Process
Cboe Canada has received feedback from several Members (including several that act as Designated Market Makers and several that trade as liquidity providers) expressing strong interest in the Primary Peg. In addition, the proposed change was reviewed and approved by the Executive Committee and by the Regulatory Oversight Committee of the Exchange's board of directors.
Expected Impact on the Systems of Members or Service Vendors
Making use of the Primary Peg is voluntary. For Members and DEA Clients that elect to make use of the Primary Peg (and the vendors who service those Members and DEA Clients), any impact on their systems will be minimal, as the proposed change will simply require creating the ability to enter a value for each of the new order entry fields that Cboe Canada will establish for this new order modifier. Cboe Canada believes that a reasonable estimate of the time needed for Members, DEA Clients, and service vendors to modify their own systems in this way is 60 days or less, based on previous experiences with the creation of new order entry fields.
Alternatives Considered
No alternatives were considered.
New Feature or Rule
The Primary Peg is not a new feature in Canada. The following Canadian marketplaces currently offer the exact equivalent or a variant of the Primary Peg:
• Canadian Securities Exchange (see https://cms.thecse.com/wp-content/uploads/2025/01/CSE-Order-Types-and-Functionality-1.pdf under the heading "Peg Orders" and https://cms.thecse.com/wp-content/uploads/2025/01/CSE2-Order-Types-and-Functionality.pdf under the heading "Peg Orders");
• Nasdaq CXC Limited (see https://www.nasdaq.com/solutions/nasdaq-canada-advanced-orders); and
• TMX Group Inc./Toronto Stock Exchange (see https://www.tsx.com/en/trading/toronto-stock-exchange/order-types-and-features/dark-trading).
Moreover, the Canadian Securities Administrators acknowledged the existence of the Primary Peg order type as being in use on Canadian marketplaces as early as 2009, as well as in the United States for several years before that. See Joint CSA/IIROC Consultation Paper 23-404, Dark Pools, Dark Orders, and Other Developments in Market Structures in Canada, (2009) 32 OSCB 7877 at 7879 (Oct. 2) (available at https://www.osc.ca/sites/default/files/pdfs/bulletins/oscb_20091002_3240.pdf) ("Marketplaces have also introduced market pegged orders (also referred to as reference priced orders) that are priced and re-priced to a reference price such as the national best bid (offer) or a marketplace's best bid (offer). One type of market pegged order is the primary peg order. A primary peg order is a visible order that is automatically priced (and then subsequently re-priced as necessary) to equal either the best bid, in the case of a buy, or the best offer in the case of a sell. Although this order type is relatively new to Canada, it has existed in the United States for over ten years.").
In addition to being a staple within the Canadian securities industry for many years now, the Primary Peg continues to be in use on many marketplaces in the United States today, including several of the US exchanges owned by Cboe Canada's parent company. See, e.g., Rules of Cboe BZX Exchange, Inc., Rule 11.9(c)(8)(A) (available at https://cdn.cboe.com/resources/regulation/rule_book/BZX_Exchange_Rulebook.pdf); and Rules of Cboe BYX Exchange, Inc., Rule 11.9(c)(8)(A) (available at https://cdn.cboe.com/resources/regulation/rule_book/BYX_Rulebook.pdf).
Comments
Comments should be provided, in writing, no later than June 23, 2025, to:
Joacim WiklanderChief Executive Officer and PresidentCboe Canada Inc.65 Queen Street WestSuite 1900Toronto, ON M5H 2M5
with a copy to:
Trading & Markets DivisionOntario Securities Commission20 Queen Street West22nd FloorToronto, ON M5H 3S8
Please note that, unless confidentiality is requested, all comments will be publicly available.
APPENDIX A
BLACKLINE OF CBOE CANADA TRADING POLICIES REFLECTING THE PUBLIC INTEREST RULE AMENDMENT
5.07 Order Types and Order Modifiers (available in all Trading Books)
| [...] | ||
| (3) Order Modifiers -- Functional Attributes | ||
| [...] | ||
| Market Peg (aka Far-side Peg) | A non-visible order, the price of which is automatically adjusted by the Exchange Systems in response to changes in the NBBO to peg to the opposite side of the market (i.e., buy orders are pegged to the offer and sell orders are pegged to the bid), with or without an offset amount (aka a "Peg Offset"). This modifier is only available on MATCHNow (for Conditionals only). See Section 9.08(5) (Commentary) for additional details. | |
| [...] | ||
| Primary Peg (aka Near-side Peg) | A visible or non-visible order, the price of which is automatically adjusted by the Exchange Systems in response to changes in the NBBO to peg to the same side of the market (i.e., buy orders are pegged to the bid and sell orders are pegged to the offer), with or without an offset amount. Where an offset amount is set by the Member for a visible Primary Peg order, it must result in the price of such order being inferior or equal to the inside quote on the same side of the market. A Primary Peg order with an offset amount shall only include a time-in-force of Regular Hours Only, or if entered during regular trading hours, a time-in-force of Day. This modifier is not available on NEO-D. | |
APPENDIX B
NEO-L PRIMARY PEG (AKA NEAR-SIDE PEG) -- VISIBLE -- TRADING EXAMPLE
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The current NBBO is 10.00 -- 10.02.
Primary Peg (aka Near-side Peg) order B1 to buy 100 shares entered with a peg offset amount of 0, Trader Type = LST, Broker = A:
- B1 priced at 10.00
Primary Peg (aka Near-side Peg) order B2 to buy 200 shares entered with no peg offset amount value provided, Trader Type = LST, Broker = A:
- B2 priced at 10.00
Primary Peg (aka Near-side Peg) order B3 to buy 300 shares entered with a peg offset amount of --0.01, Trader Type = LST, Broker = A:
- B3 priced at 9.99
Primary Peg (aka Near-side Peg) order B4 to buy 100 shares entered with a peg offset amount of +0.01:
- B4 rejected as Primary Peg (aka Near-side Peg) buy orders on NEO-L can only peg at or away from the NBB.
Primary Peg (aka Near-side Peg) order S1 to sell 400 shares entered with a peg offset amount of 0, Trader Type = LST, Broker = C:
- S1 priced at 10.02
Primary Peg (aka Near-side Peg) order S2 to sell 500 shares entered with no peg offset amount value provided, Trader Type = LST, Broker = C:
- S2 priced at 10.02
Primary Peg (aka Near-side Peg) order S3 to sell 600 shares entered with a peg offset amount of +0.01, Trader Type = LST, Broker = C:
- S3 priced at 10.03
Primary Peg (aka Near-side Peg) order S4 to sell 100 shares entered with a peg offset amount of --0.01, Trader Type = LST, Broker = C:
- S4 rejected as Primary Peg (aka Near-side Peg) sell orders on NEO-L can only peg at or away from the NBO.
The NEO-L order book is as follows, after the valid Primary Peg (aka Near-side Peg) orders described above are added to the book:
Ord Broker Trader Type Order Type Buy Size Buy Price Sell Price Sell Size Order Type Trader Type Broker Ord B1 A LST Primary Peg (aka Near-side Peg) 100 10.00 10.02 400 Primary Peg (aka Near-side Peg) LST C S1 B2 A LST Primary Peg (aka Near-side Peg) 200 10.00 10.02 500 Primary Peg (aka Near-side Peg) LST C S2 B3 A LST Primary Peg (aka Near-side Peg) 300 9.99 10.03 600 Primary Peg (aka Near-side Peg) LST C S3
Note: Example shown above would occur in an identical manner if these orders were sent to NEO-N.
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{1} Consequential changes to Cboe Canada's Trading Functionality Guide reflecting the Public Interest Rule Amendment, in the event that it is approved, will be implemented, and a revised version of the Trading Functionality Guide will be published by the Exchange on its website, on or before implementation of the Public Interest Rule Amendment.
{2} Capitalized terms used but not defined herein are as defined in the Trading Policies.
{3} No functionality change will result from the new defined term of "Market Peg"; this new term is just meant to distinguish from the new concept of "Primary Peg" being introduced for the first time on NEO-L and NEO-N, even though it essentially already exists for MATCHNow Conditionals via the "Near-side Peg" feature.