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Best Execution

Best Execution and Multiple Marketplace Disclosure

Caldwell Securities Ltd (“Caldwell”) is committed to make reasonable efforts to ensure clients achieve the most advantageous execution terms reasonably available under the circumstances when executing transactions on behalf of a client, considering factors such as execution price, speed of execution, liquidity, price improvement opportunities, certainty of execution and overall cost of the transaction.  

Caldwell has established practices in accordance with Best Execution and Order Protection regulations such as Investment Industry Regulatory Organization of Canada (“IIROC”) Universal Market Integrity Rule (“UMIR”)5.1, Dealer Member Rule 3300 and National Instrument 23-101, Parts 4 and 6.

Best Execution refers to the obtaining of the most advantageous execution terms reasonably available under the circumstances. Caldwell pursues the execution of each order as expeditiously as practicable under prevailing market conditions.  Orders are routed to the marketplace that will provide the best execution.

Structure of the Canadian Equity Market

There are currently several marketplaces in Canada for the trading of listed securities, including traditional exchanges and Alternative Trading Systems (“ATS”).  The exchange where a company’s stock is listed is referred to as the “primary listing marketplace” for that stock.  Market makers may be appointed by an exchange in order to provide a two-sided market for a security on a continuous basis.  Exchanges set requirements governing the conduct of marketplace participants.

Equity exchanges in Canada used by Caldwell where quotes are protected under current Canadian Order Protection Rules, include:

The Toronto Stock Exchange (“TSX”);
The TSX Venture Exchange (“TSXV”);
The Canadian Securities Exchange (“CSE”); and
NEO Exchange (“NEO”).

ATS provide automated trading systems to bring together orders from buyers and sellers of securities which are listed on other marketplaces (e.g. exchanges).  Unlike an exchange, ATS do not provide directly, or through one or more subscribers, a guarantee of a two-sided market for a security on a continuous or reasonably continuous basis, do not set requirements governing subscriber conduct, and do not discipline subscribers beyond exclusion from participation.   ATS used by Caldwell where quotes are protected under current Canadian Order Protection Rules include:

Nasdaq CXC;
Nasdaq CX2 (formerly CHI-X Canada);
Omega ATS;
Pure Trading (operated by CSE);

Dark Pools, which are a form of ATS, are private exchanges not accessible by the investing public.  They primarily facilitate block trading by institutional investors who do not wish to impact markets with large orders, though some have expanded to include orders of all sizes. Often used to protect proprietary trading information, they are used to take advantage of possible price improvement for liquidity seeking orders (typically smaller sized orders) and potentially incur lower trading fees.  In some cases, Dark Pools enable dealers to internalize order flow. They are referred to as “dark” due to the lack of transparency, as there is no order-book visible and trade details are released after a delay.  The lack of transparency has the opportunity to work in favour of obtaining a better realized price than through an exchange when there is limited liquidity on the exchange of a particular issue of securities.  Dark pools may be broker-dealer owned, agency broker or exchange owned or electronic market makers.  In Canada, they are generally regulated as an ATS, and are registered dealers with IIROC.  Examples of ones used only occasionally by Caldwell include:

Aequitas NEO Book;
LP MatchNow (TriAct Canada);
Nasdaq Canada –CXD

Best Execution Factors

Caldwell considers price (bid and ask), speed, certainty of execution, overall cost of the transaction and any other factor relevant to the execution of the order.

Caldwell uses an electronic Smart Order Router (“SOR”) to direct all Canadian equity orders in seeking best execution and order protection.  The SOR seeks the best price across all Exchanges and visible ATS simultaneously, filling as much of the order as possible.   Best execution is determined by the consolidated market view or by other price discovery mechanisms, whether the security trades on a listed marketplace or whether it trades Over the Counter (“OTC”).   Unfilled portions are booked on the Default Exchange, which for Caldwell, is the TSX, as it has the highest volume of orders in its book.

The SOR is programmed with parameters to seek the best possible outcome in consideration of prevailing market conditions, the size of the order, the specific security and liquidity.  In the case of a sell, the SOR will route order to the marketplace with the highest bid price, while in the case of a purchase, to the marketplace with the lowest ask price.

In seeking best execution, the SOR may break the order into multiple smaller orders, sending each to multiple execution venues either in parallel or in sequence, in keeping with client instructions on the handling of the order.

In the event not all marketplaces are available for trading, or the SOR is unavailable or limited, orders received are directed to the Default Marketplace or to ATS as determined by the circumstances in the marketplace at the time, consistent with the client best interest and the obligation to seek the most advantageous execution terms reasonably available in the circumstances.

In the event trading on a particular security has been halted in a particular marketplace, all orders for that security will be halted and will remain in that marketplace until the halt has been lifted.

In respect of US equities, Caldwell does not have direct access to exchanges or ATS.  Instead, Caldwell will direct orders to one of a couple of US broker dealer intermediaries for execution.   Such intermediaries also use SORs and are subject to the same requirements as they relate to best execution.

Hours of Operation for Trading in Canadian Listed Securities

Caldwell trading staff and systems are available for order execution between 9:30 am EST and 4:00 pm EST (“Hours of Operation”), Monday through Friday, excluding Canadian statutory holidays. Staff may be available outside of marketplace hours; however, trade execution outside of the Hours of Operation is treated on a best efforts basis. 

Standard Handling of Orders

Immediately executable orders received for Canadian listed securities are routed to the marketplace with the best bid or offer and the remainder, if any, residing on the default marketplace.


An order received prior to Default Marketplace opening (9:30AM EST) will be routed in the SOR to book to the pre-opening of the Default Marketplace defined for that security for execution upon opening, in accordance with the Default Marketplace calculated opening price protocol.

Continuous Session

Active orders, defined as any portion of a market order or a limit price order which is immediately tradable based on current market conditions, received during the Hours of Operation, will be routed by the SOR to the marketplace with the best price at the time of execution.  The SOR evaluates all Exchanges and visible ATS for best price when executing active orders.

Passive orders, defined as the unfilled balance of an active order or any limit price order which is not immediately executable, received during the Hours of Operation, are booked to the Default Marketplace for that security where it will remain until filled, changed, expired or cancelled.

Changes to an outstanding order, or portion of an outstanding order, will be handled in the same manner as a new order received, with an active order re-evaluated for best price execution across all Exchanges and visible ATS, and a passive order booked to the Default Marketplace for that security.


Orders received after the Default Marketplace closing (4:00 PM EST) will be queued in the SOR for routing to the pre-opening of the Default Marketplace on the following business day.

Order Execution

Certain types of orders have specific handling implications in a multiple marketplace environment. These have been addressed as follows: 

Day Orders

A Day Order is an order only valid for the day it is entered (between the marketplace hours) and handled as per the “Standard Handling of Orders” noted above.  Any unfilled portion of a Day Order will expire at the close of business of the marketplace where the order was last entered.

Good Until Cancel or Good Through Orders

Good Until Cancel orders are orders that will remain open until filled, cancelled or they expire.  Caldwell will, at the end of each month, cancel any open Good Until Cancel orders.  The system used by Caldwell will also only permit such order to be open for a maximum of 90 days.  The SOR will route any immediately unfilled portion of these orders to the Default Marketplace if they are not immediately executable at the time of entry. These orders will remain booked until executed, cancelled, changed or expired, whichever comes first.

Market Orders

A Market Order is an order to buy or sell a security immediately, at the best available price at the time the order is entered. Market Orders are routed with priority when received. In cases of extreme market volatility or liquidity imbalance, as a result of their being tagged with speed as a priority, a market order may trade at a price which is significantly different than the expected execution price.   Investors are advised to use aggressively priced limit orders in place of market orders to reduce the risk of the order trading at a price outside of a preconceived ‘acceptable’ range.  Any unfilled portion of a Market Order will expire at the close of business of the marketplace where the order was active.

Limit Orders

A Limit Order is an order for a security at a specific minimum sale price or maximum purchase price that is not to be exceeded, which on the one hand provides control over the execution price but on the other, reduces the certainty of execution. Limit Orders will be handled in the priority they are received.

It is possible for a limit order to miss the opportunity to buy or to sell a stock in a fast moving market. Aggressively priced limit orders, meaning an order with a higher/lower price than the prevailing offer/bid price, will trade much like a market order, increasing the certainty of execution without the risk of the order trading at a price outside of a predetermined ‘acceptable’ range.

Any unfilled portion of a Limit Order will expire at the close of business of the marketplace where the order was active.

Special Terms Orders

Special Terms Orders are orders with specific terms that are not executable in the regular marketplace. Special Terms Orders will only post to the Special Terms Market of the primary listing Exchange, unless they are immediately executable on an alternative marketplace at the time of entry. Any unfilled portion of a Special Terms Order will expire at the close of the primary listing Exchange.

Stop Loss Orders (Canadian Markets)

Stop Loss Orders are orders that become Market Orders or Limit Orders when a standard trading unit (referred to as a board lot) trades at or superior to the stop price on the marketplace in which the order has been booked. Stop Loss Orders are booked to the primary listing Exchange. A Stop Loss market order is filled at the best available market price once the stop price is activated. However, if the order enters the market when the stock or overall market is experiencing dramatic fluctuations including rapid declines, an investor may receive a price that is much different than expected.

Caldwell does not encourage the use of Stop Loss limits.  Stop Loss orders received notwithstanding, are reviewed by the Head Trader to ensure the size of the order is not at a level that would result in market volatility should the On Stop price be activated.


A cross trade refers to a situation where Caldwell receives an order to buy and an order to sell the same security and approximately the same time.  Internal or intentional crosses are recorded on the market at the midway price between the bid and ask at the time the orders are received. 

Disclosure of Marketplace

Trade confirmations state that an order has been executed on one or more marketplaces or alternative marketplaces. Client may contact their Investment Advisor for further details regarding which marketplace or alternative marketplace a trade was executed.

The information contained herein is current as of May 31, 2019.

This disclosure has been modified since the prior posted disclosure (dated  December 2013) for the purposes of providing increased transparency regarding:

  • the marketplaces Caldwell’s Smart Order Routing (“SOR”) technology references,
  • the SOR handling practices by order type, and how the SOR achieves best execution

Disclosure of Conflict of Interest

Urbana Corporation is a related entity of CSL, and owns 49% of the Canadian Securities Exchange (CSE). Thomas S. Caldwell, Chairman & CEO of CSL, is Chairman of the CSE and his role is to oversee strategy and governance.