1. GENERAL
1.1 Purpose
These Market Maker Rules (Rules) establish requirements for institutions applying to be, approved as, and continuing to act as Market Makers on IDSX (the Exchange). These Rules aim to:
- promote liquidity in securities admitted to trading on IDSX;
- support continuous, efficient and orderly price discovery;
- encourage reasonable bid-ask spreads;
- improve investors’ ability to execute transactions;
- promote fair, orderly and transparent markets; and
- establish conduct, risk-management and operational-capability standards for Market Makers.
2. DEFINITIONS
2.1 Defined terms
Unless the context otherwise requires:
- “Market Maker” means a Market Participant approved by IDSX to provide continuous or regular bid and offer quotations in one or more Designated Securities.
- “Designated Security” means a security for which IDSX has approved a Market Maker to perform market-making activities.
- “Two-Sided Quote” means the simultaneous maintenance of a valid Bid and valid Offer in a Designated Security.
- “Bid” means a price and quantity at which a Market Maker is willing to purchase a Designated Security.
- “Offer” or “Ask” means a price and quantity at which a Market Maker is willing to sell a Designated Security.
- “Spread” means the difference between the best valid Offer and best valid Bid submitted by the Market Maker.
- “Maximum Spread” means the maximum permitted Spread for a Designated Security as specified by IDSX.
- “Minimum Quote Size” means the minimum quantity or notional value that must be maintained on each side of a Market Maker’s quotation.
- “Quote Presence” means the percentage of the applicable quoting period during which a Market Maker maintains a compliant Two-Sided Quote.
- “Market Making Agreement” means a commercial agreement under which a Market Maker agrees to provide market-making services for a security.
- “Market Making Schedule” means the schedule issued or approved by IDSX specifying the parameters for a Designated Security, including Maximum Spread, Minimum Quote Size, Quote Presence and other applicable requirements.
3. ELIGIBILITY
3.1 General Requirements
An applicant seeking approval as a IDSX Market Maker must satisfy the Exchange that it:
- is a duly established legal entity and is of good standing and commercial reputation;
- has appropriate experience in securities trading, market making, brokerage, proprietary trading, capital markets or other relevant financial-market activities;
- has sufficient financial resources and capital for its proposed activities;
- maintains reliable trading systems and appropriate technical infrastructure;
- employs appropriately qualified trading, risk-management, operational and compliance personnel;
- maintains adequate internal controls, compliance arrangements and risk-management systems;
- satisfies applicable IDSX fit-and-proper requirements for its directors, controllers and relevant personnel;
- has the operational capacity to comply continuously with its quoting obligations; and
- holds any licence, registration, authorisation or regulatory permission required by applicable law for its proposed activities.
4. APPROVAL OF MARKET MAKERS
4.1 Application
An applicant must apply in the form prescribed by IDSX. IDSX may require:
- corporate registration documents and ownership and control information;
- details of directors and responsible officers;
- regulatory licences, registrations or authorisations;
- financial information and evidence of relevant capital-markets experience;
- trading-system documentation;
- risk-management and compliance policies and procedures;
- business-continuity and disaster-recovery arrangements;
- professional-indemnity insurance information, where applicable; and
- any other information reasonably required by IDSX.
4.2 Assessment
IDSX may assess the applicant’s financial resources, technical capability, personnel and experience, governance, internal controls, compliance arrangements, risk-management framework and operational readiness. Before approval IDSX may require further information, interviews, technical or connectivity testing, or simulated quoting. Approval may be subject to conditions.
4.3 Approval for Individual Securities
Approval as a IDSX Market Maker does not authorise activity in every security admitted to IDSX. A Market Maker must receive IDSX approval or designation for each Designated Security and must not claim official designation unless IDSX has approved it.
5. DESIGNATED SECURITIES
5.1 Designation
IDSX may appoint or approve one or more Market Makers for a Designated Security. More than one Market Maker may provide services in the same security.
5.2 Market Making Schedule
IDSX may establish a separate Market Making Schedule for each Designated Security. It may specify:
- Minimum Quote Size and Maximum Spread;
- minimum Quote Presence and minimum price increment;
- applicable quoting periods and price bands;
- quoting methodology and commencement date; and
- any other security-specific requirements.
Parameters may differ between securities having regard to liquidity, market capitalisation, price, free float, volatility and trading activity.
6. TWO-SIDED QUOTING OBLIGATIONS
6.1 Continuous or Regular Quoting
Except as otherwise permitted by IDSX, a Market Maker must maintain valid Two-Sided Quotes during the applicable periods specified by IDSX. It must not systematically maintain only one side where two-sided quoting is required.
6.2 Genuine Trading Interest
All quotations must represent genuine trading interest. A Market Maker must not submit orders or quotations to create a false or misleading appearance of liquidity, supply or demand, trading activity or price movement. Prohibited conduct includes spoofing, layering, wash trading, fictitious transactions, manipulative order placement and any other conduct prohibited by IDSX Rules or applicable law.
7. MINIMUM QUOTE SIZE
A Market Maker must maintain Bid and Offer quotations meeting the Minimum Quote Size in the applicable Market Making Schedule. It may be expressed as a number of securities, minimum monetary value or another measure determined by IDSX. If execution reduces the remaining quantity below the minimum, the Market Maker must restore a compliant quotation within a reasonable period, subject to market conditions and IDSX requirements.
8. MAXIMUM SPREAD
A Market Maker must ensure the Spread between its Bid and Offer does not exceed the applicable Maximum Spread. IDSX may use a fixed percentage, absolute monetary amount, price-based tiers, liquidity-based tiers, volatility-based parameters or another methodology. IDSX may adjust the Maximum Spread where reasonably necessary to reflect market conditions.
9. QUOTE PRESENCE
IDSX may establish a minimum Quote Presence for each Designated Security. It will ordinarily be calculated as:
Compliant Two-Sided Quoting Time ÷ Applicable Quoting Time
A period counts only when the Market Maker simultaneously meets the Two-Sided Quote, Minimum Quote Size and Maximum Spread requirements. IDSX may prescribe appropriate exclusions.
10. TEMPORARY RELIEF FROM QUOTING OBLIGATIONS
IDSX may temporarily suspend, modify or waive quoting obligations. Circumstances may include extreme volatility; trading suspension; a material unresolved issuer event; abnormal or unreliable market data; IDSX system failure; material technical failure affecting the Market Maker; disruption to settlement, custody or other market infrastructure; force majeure; exceptional market conditions; or any other circumstance in which mandatory quoting may adversely affect market integrity or orderly trading. Relief may be conditional and may be withdrawn at any time.
11. INVENTORY AND FUNDING
A Market Maker is responsible for maintaining sufficient securities inventory, cash, funding, credit facilities, settlement capacity and risk limits to support its activities. IDSX does not guarantee availability of securities, financing or liquidity. A Market Maker remains responsible for losses arising from its inventory, funding or trading activities.
12. SHORT SELLING AND SECURITIES LENDING
Where activities involve short selling, securities borrowing or lending, synthetic positions or similar arrangements, the Market Maker must comply with all applicable IDSX Rules and laws and regulations. Market Maker approval does not itself create an exemption from short-selling, securities-lending, settlement or regulatory requirements.
13. MARKET MAKING AGREEMENTS
13.1 Commercial Arrangements
An issuer, Sponsor, Underwriter or other permitted party may enter into a Market Making Agreement with a IDSX-approved Market Maker. It may address service fees and period, Designated Securities, liquidity objectives, reporting, termination and other commercial terms.
13.2 Prohibited Terms
An agreement must not require or encourage a Market Maker to maintain a predetermined price, guarantee an increase in value, keep the market price above the issue price, create artificial volume, manipulate price, submit non-genuine orders or transactions, or act inconsistently with IDSX Rules or applicable law. IDSX Rules prevail over an inconsistent agreement term.
14. SPONSORS AND MARKET MAKING
Where IDSX requires a Sponsor to ensure appropriate market-making arrangements for a listed security, the Sponsor must ensure they are effective before trading begins or within another period specified by IDSX. A Sponsor may act as Market Maker only after separately obtaining required approval, or appoint another IDSX-approved Market Maker. Sponsor approval does not confer Market Maker status.
15. FAIR AND ORDERLY TRADING
A Market Maker must act fairly and professionally and support an orderly market. It must not use its status or access to manipulate a security’s price; create artificial activity; mislead investors or Market Participants; trade improperly using material non-public information; conduct artificial transactions with related or controlled accounts; manufacture volume; improperly influence opening or closing prices; or interfere with genuine price discovery.
16. CONFLICTS OF INTEREST
A Market Maker must maintain appropriate arrangements to identify, manage and, where appropriate, disclose conflicts. Where it also acts as a Broker, Trading Participant, Underwriter, Sponsor, adviser, issuer affiliate or other financial-service provider, it must manage conflicts between those activities. IDSX may require information barriers, functional segregation or other controls.
17. DISCLOSURE
IDSX may publicly disclose market-making information, including the Market Maker’s identity, Designated Security, arrangement commencement and termination dates, status, applicable Market Making Schedule information and other information IDSX considers appropriate for transparency. An issuer, Sponsor, Underwriter or Market Maker must not describe an arrangement falsely or misleadingly.
18. SYSTEMS AND TECHNOLOGY
A Market Maker must maintain systems and technical capabilities appropriate to its activities, including where applicable reliable IDSX connectivity; appropriate market-data access; automated or manual quoting; pre-trade risk controls; order and position limits; emergency order cancellation or kill-switch functionality; abnormal-order monitoring; system logging; cybersecurity; and business-continuity and disaster-recovery arrangements.
19. ALGORITHMIC MARKET MAKING
A Market Maker may use algorithmic systems to generate or manage quotations, subject to IDSX requirements. It must appropriately test them before deployment; establish price and quantity controls; safeguard against erroneous or abnormal orders; maintain emergency suspension or kill-switch functionality and activity records; monitor algorithm performance and behaviour; and provide appropriate human oversight. The Market Maker remains fully responsible for orders, quotations and transactions generated by its systems.
20. RISK MANAGEMENT
A Market Maker must maintain a risk-management framework proportionate to the nature and scale of its activities. As relevant, it should address market, inventory, liquidity, operational, technology, counterparty, settlement, legal and compliance, and concentration risks. It must establish appropriate limits and escalation procedures for material exposures.
21. RECORD KEEPING
A Market Maker must maintain complete and accurate records of its IDSX activities, including where applicable orders, quotations, executions, cancellations, amendments, positions, risk limits, system logs, compliance reviews, relevant communications, Market Making Agreements and evidence of compliance with Market Making Schedules. Records must be retained for the period required by law and IDSX Rules and provided to IDSX on reasonable request.
22. IDSX SUPERVISION
IDSX may monitor activity in real time or after trading, including Quote Presence, Spreads, Quote Size, cancellation rates, order-to-trade ratios, volume, position behaviour, unusual patterns, related-account transactions and compliance with Market Making Schedules. IDSX may require explanations of unusual activity or relevant records, data or information.
23. FAILURE TO MEET MARKET-MAKING REQUIREMENTS
Where a Market Maker fails to meet requirements, IDSX may issue a notice or warning; require remediation, an explanation or a remediation plan; impose conditions; suspend or terminate designation for a security; suspend or terminate Market Maker status; or take other disciplinary or supervisory action available under IDSX Rules. IDSX may consider the nature, frequency, duration and seriousness of non-compliance.
24. VOLUNTARY WITHDRAWAL
A Market Maker intending to cease services for a Designated Security must give IDSX prior notice in the prescribed form and period. Unless IDSX approves otherwise, it must continue to comply until termination takes effect. IDSX may require an issuer or Sponsor to establish replacement arrangements before the existing Market Maker ceases activity.
25. REVOCATION OF DESIGNATION
IDSX may suspend or revoke a designation if a Market Maker repeatedly fails quoting requirements; lacks sufficient resources; experiences material or persistent technology failures; materially breaches IDSX Rules; engages in manipulation or other serious misconduct; no longer meets eligibility requirements; loses a required regulatory permission; fails to provide requested information; or otherwise presents a material risk to market integrity or orderly trading.
26. MULTIPLE MARKET MAKERS
IDSX may permit multiple Market Makers for one Designated Security. Each must independently determine its Bid, Offer, Quote Size, inventory and trading strategy. They must not agree or coordinate to fix prices, Spreads, Quote Sizes, market shares, trading activity or other competitive conditions, except where expressly permitted by law and IDSX Rules.
27. ISSUER INFLUENCE OVER QUOTATIONS
An issuer, Sponsor, Underwriter or related party must not require a Market Maker to maintain a security at or above a specified price. A Market Maker must not agree to maintain a security above its issue price, guarantee a minimum price, prevent a fall below a specified level or otherwise artificially influence price. A Market Maker provides liquidity and supports orderly price discovery; it does not guarantee or support a security’s value.
28. EXCEPTIONAL MARKET CONDITIONS
Where exceptional market conditions exist, IDSX may modify Maximum Spread, Minimum Quote Size or Quote Presence; suspend quoting obligations or trading in a Designated Security; impose order restrictions; modify price-protection mechanisms; or take other action reasonably necessary for a fair and orderly market. A modification may apply to one security, a class of securities, one Market Maker or the market generally.
29. RELATIONSHIP WITH OTHER IDSX RULES
A Market Maker must comply with all other IDSX Rules applicable to its status and activities, including, where applicable, the General Rules, Trading Rules, Trading Participant Rules, Market Conduct Rules, Listing Rules, and Technology and Connectivity Requirements.