Registered CHX Market Maker (MM) in good standing are entitled to good faith margin consideration and a defined SEC Rule 203 exemption for bona fide market making for locate requirements. CHX market makers may trade only on a proprietary basis and may not handle agency orders on the Exchange within the same trading account/unit. Appropriate information barriers must be established if the Participant firm transacts as a CHX market maker and has other unrelated securities business activities.
Market makers must register with the Exchange to receive favorable exempt credit and short sale treatment. To obtain this treatment, CHX market makers must submit their market making orders to the CHX Matching System from a specifically-designated account.
Market makers are obligated to contribute to the maintenance of fair and orderly markets. The Exchange has established specific performance standards to quantify that obligation. A market maker must (on a per security basis):
- Use an automated system to maintain a continuous two-sided principal quotation, for at least a round lot, in each of the securities in which it is registered;
- Maintain adequate minimum capital in accordance with Article 7; and
- Either (1) submit at least 5% of its quotations at prices which are at or improve the NBBO in a manner that attributes market data revenue to the Exchange; or (2) trade at least 1% of the total number of shares executed on the Exchange.
As part of the continuous two-sided quotation requirement, market makers will be obligated to maintain quotes (reflect orders in the CHX Matching System) within rule-defined price obligations which are reasonably related to the prevailing market prices in each security.
A market maker may be involuntarily deregistered if it fails to meet these performance standards.
A complete description of market maker rights and obligations can be found in Article 16 of CHX’s Rules.