24 • An incoming MGF-eligible order for 2500 arrives: • 500 shares are filled by orders in the CLOB, leaving a balance of 2000 shares • 800 shares are allocated to the Market Maker 1 as a MGF fill (40% of 2000 shares) • 1200 shares are allocated to the Market Maker 2 as a MGF fill (60% of 2000 shares) 3.5 Participation From time to time, while providing market making services, it may be important for Market Makers to create or offset a position quickly in order to protect against losses inherent in performing their market making function. Responsible Designated Trader (also referred to as “Registered Trader” or “RT”) participation is an optional feature that enables Market Makers to “participate in” (i.e., trade against) a fraction of incoming orders by receiving priority of execution within the CLOB in their assigned securities (“Participation”). Participation Option is a feature that allows Market Makers to determine the size of the order that they will participate with when they have Participation turned ON and the other market maker has Participation turned OFF. See Section 3.5.2 for more details on Participation Option. Market Makers can electronically turn their Participation on or off independently for each side of the market intraday. When Participation is turned on, TSX automatically generates participation orders for a Market Maker to trade with a specified percentage of any incoming order that is equal to or less than the size of the Total MGF. Market Makers may also specify a Maximum Volume Allocation for each security assignment, per side. This is the maximum number of Participation shares that a Market Maker will get filled on, after which TSX automatically turns Participation off for that security and side. This provides a mechanism to help Market Makers prevent accumulating an excessively large position in a short period of time. The accumulation of Participation shares is reset each time a Market Maker turns Participation on or off. 3.5.1 Allocation of Participation Fills Market Makers can optionally turn Participation ON at their own discretion. If only one Market Maker turns Participation ON at a given time, then that Market Maker is allocated the full Participation eligible fill (up to 40% of the incoming order, rounded to the nearest board lot1). If both Market Makers have Participation turned on at a given time, then the total Participation eligible fill remains at 40% of the incoming order, but is allocated between the two Market Makers on a pro-rata basis based on each Market Maker’s individual contribution to the Total MGF size. For example, assume the following scenario: • 5000 shares available in the CLOB • Total MGF = 2500 comprised of: • Market Maker 1’s MGF = 1000 (40% of the Total MGF) • Market Maker 2’s MGF = 1500 (60% of the Total MGF)
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