TSX Dark Liquidity Guide

10 3. Interacting with Resting Dark Liquidity 3.1 Eligibility All TSX and TSXV participants are able to submit and interact with DRK orders through their current order entry sessions. There is no need to “Opt in” to receive the benefits of interacting with dark liquidity. Visible orders will always seek price improvement opportunities by first attempting to trade against a dark order as per the order allocation sequence described in Section 5.1 – Allocation priority and Order matching. Once all price improvement fills have been exhausted, visible and dark volume will be allocated up or down to the order’s limit. 3.2 Seeking Dark Liquidity without Interacting with Visible Volume Participants have a number of options for seeking dark liquidity on TSX and TSXV without interacting with visible volume. Seek Dark Liquidity feature The ‘Seek Dark Liquidity’ (SDL) feature is available for Participants wishing to execute a trading strategy seeking price improvement fills and executing only against resting DRK orders. This feature better facilitates the integration of TSX DRK into dealers’ multi-venue dark routing strategies where attempting to access dark only or when sweeping dark before lit. The SDL feature is only available for use with orders marked as IOC or FOK. SDL can be set by participants to either of the two following options: Option 1 Trade against DRK resting orders at prices up to and including one tick inside the opposite side Protected NBBO (or the order’s limit price if less aggressive). Option 2 Trade against DRK resting orders at prices up to and including the opposite-side Protected NBBO (or the order’s limit price if less aggressive). When Option 2 is selected, executions against dark liquidity resting at the opposite-side Protected NBBO will be subject to regulatory restrictions applicable to ‘at-the-quote’ dark trading. Consequently, where there is resting visible liquidity on TSX/TSXV at the opposite-side Protected NBBO, an incoming SDL order marked for Option 2 will only be executable against DRK resting orders to a maximum of one tick inside the opposite side Protected NBBO. Use of DRK Peg orders with IOC or FOK Users can also simulate SDL functionality by placing IOC or FOK conditions on their DRK Pegged order. Use of IOC/FOK on a pegged order will ensure execution only against resting DRK price improving orders, and is another means of facilitating the integration of TSX DRK into routing strategies attempting to access dark only, or sweeping dark before lit on multiple venues. For example, use of IOC/FOK with a DRK Market Peg or DRK Midpoint Peg order will ensure execution only against price-improving resting contra-side liquidity. Any unfilled volume will cancel back allowing a participant to then route the balance to other dark or visible venues. Priced limit orders Using IOC/FOK on a DRK Limit or visible limit order can also facilitate interaction with resting dark liquidity so long as the limit price is not priced at or through the opposite side Protected NBBO. Users attempting to trade only against DRK resting orders via a priced limit order may face the risk of interacting against visible resting orders due to a price change while the priced limit order is in flight. SDL functionality or the use of IOC/FOK with DRK Pegged orders address this risk by ensuring execution only against resting dark liquidity.