A long-time market maker on the Toronto Stock Exchange is expanding its activities to the TSX Venture Exchange.
Independent Trading Group has entered into an agreement with Aldridge Minerals to make a market in the Canadian mining company’s shares for the next year. Aldridge will pay Independent $5,000 (Canadian) per month, starting yesterday.
“While we’ve been making markets on the Toronto exchange for a long time, this is our first foray into the Venture market,” Dave Houlding, president of Independent told Traders Magazine. “It’s the logical next step.” The firm was formed in 1992 and ranks as one of the Top 3 market makers at Toronto, according to Independent’s website.
It is not unusual for firms listed on the TSX Venture exchange to contract with market making firms, either directly or indirectly via a consultant, for market making services. So far this year, a number of TSX Venture-listed issuers, including Red Tiger Mining, Caribou King Resources, Forum Uranium, and Driven Capital have done so.
The role of the market maker at TSX Venture is not unlike that of a New York Stock Exchange designated market maker, Houlding explained.
In the U.S. however, the practice of issuers paying for market making is illegal. In 1997, the Financial Industry Regulatory Authority banned payments by issuers to market makers. The concern at the time was that the payments could incent market makers to manipulate their quotes in order to generate trading in the security.
Still, some in the industry and on Capitol Hill would like to see the law reversed. Both Nasdaq OMX Group and NYSE Euronext have petitioned the Securities and Exchange Commission to make an exception in the case of exchange-traded funds.
Also, a Republican congressmen indicated earlier this year he would propose a bill that would allow issuers to pay for market making.
TSX Venture does have certain rules barring issuers from paying for market making. Houlding says his firm’s arrangement with Aldridge is in compliance with the exchange’s rules.
As for the Aldridge-Independent arrangement, the market maker will not receive shares or options as compensation. According to a statement from Aldridge, the two organizations are unrelated and unaffiliated entities. Independent may have acquired a direct interest in the Aldridge’s shares, however. The agreement is subject to the approval of TSX Venture.
