What Is the Canadian Securities Exchange (CSE)?
The term Canadian Securities Exchange (CSE) refers to an electronic alternative stock exchange for small-cap and microcap firms and emerging companies in Canada. The exchange began operations in 2003 and was recognized and approved by the Ontario Securities Commission as a stock exchange the following year. The exchange operates electronically, which means there is no physical trading floor. Nearly 800 companies trade on the exchange, which operates during normal trading hours Monday to Friday, except on holidays. The CSE is based in Toronto with an office in Vancouver.
Key Takeaways
- The Canadian Securities Exchange is an electronic stock exchange with almost 800 listed companies in almost 800 listed companies.
- The goal of the CSE is to provide a modern and efficient alternative for small- and mid-cap companies looking to access the Canadian public capital markets.
- Trading takes place Monday to Friday (except on holidays) during normal trading hours.
- The CSE Composite Index is a broad indicator of the exchange's market activity.
- Unlike other major exchanges, the CSE has simplified reporting requirements and reduces listing barriers.
Understanding the Canadian Securities Exchange (CSE)
The Canadian Stock Exchange is among several major stock exchanges in Canada. It was established and began operations in 2003 as Canada’s New Stock Exchange or CNQ. It was designed to give companies alternative access to Canadian publiccapital markets.The exchange was officially recognized as a stock exchange in 2004. It was rebranded in November 2008 and was renamed the CSE. It is operated by CNSX Markets and is based in Toronto with a branch office in Vancouver.
The CSE operates electronicallyand does not have a traditional, physical trading floor.The trading system is based on price-time priority and doesnot take an over-the-counter market approach. Itis fullyregulated by the Ontario Securities Commission. The exchange is operations Monday to Friday except holidays. The trading schedule is as follows (all times are in Eastern time):
- Pre-open between 7 a.m. ET and 9:30 a.m.
- Normal trading from 9:30 a.m. to 4 p.m.
- Closing price session between 4:15 p.m. and 5 p.m.
- System shut down at 8 p.m.
As of June 2022, 791 companies were listed on the exchange.All listed securities trade in the Canadian dollar (CAD). Companies listed on the CSE come from a number of different industries, including mining, oil and gas, technology, life sciences, clean technology, government debt, and structured debt. According to the exchange’s website, all securities listed on the Toronto Stock Exchange (TSX) and TSX Venture Exchange are traded on the CSE as “alternative market securities.”
Companies must meet several requirements before they can list on the CSE. These include:
- Demonstratedliquid assets or a viable plan to show theycan sustain theiroperations and achieve theirgoals
- A proven revenue stream or a plan outlining how they willdevelop their business and the financial resources
- An interest in or the potential for earning one in a property with a technical report for mineral or oil and gas exploration companies
The CSE has listed several companies in the Cannabis (CSE Canna) and Blockchain spaces over the past few years.
Special Considerations
The purpose of the exchange wasto strengthen investor confidence in emerging companies through enhanced disclosure and high regulatory oversight standards. The result is a stock exchange that maximizes liquidity and fosters an entrepreneurial spirit while also offering better protection to investors and their accounts.
As with most exchanges, indexes are used as a broad indicator of the CSE's market activity.
- The CSE Composite Index was launched in February 2015 and covers about 75% of all listed equities that trade on the exchange. As such, it is considered a gauge of the Canadian small-cap market. In order to be included, companies must trade in CAD and must have a minimum market cap of $5 million.There were 464 companies in the index as of June 2022 with a heavy weighting in the life sciences industry followed by the mining sector.
- The CSE also publishes the CSE25 Index, which is a subset of the larger composite index. It is composed of the 25 largest stocks on the exchange by market cap and contains over 52.75% of the total weight of the CSE Composite Index.
Both indexes are rebalanced on a quarterly basis. As of June 24, 2022, the CSE Composite Index returned -65.5% and the CSE25 returned -68.3% in a one-year period.
The Canadian Securities Exchange (CSE) vs. the Toronto Stock Exchange (TSX)
As noted above, the CSE is among several key exchanges that operate in Canada. The Toronto Stock Exchange (TSX) is the CSE’s primary competitor as a technology-focused Canadian exchange. The TSX is part of the TMX Group, which operates other Canadian exchanges, including the TSX Venture Exchange, the Montreal Exchange, and the TSX Alpha Exchange.
Exchange Type and Listings
Both the CSE and the TSX operate electronically. The latter had a physical trading floor until 1997 when it shut its doors and began entirely electronic trading. There are 1,640 Canadian and international companies listed on the TSX—more than double the number listed on the CSE. These companies represent a broad spectrum of industries in the Canadian economy, including oil and gas, mining, technology, retail, and financial services.
Reporting Requirements
While the CSE offers simplified reporting requirements and reduces listing barriers in order to remove the duplication of regulation between the exchange and the provincial securities commissions. This eliminates waittimes for transaction approvals or reviews and cuts down onthe cost and time for companies to geta listing.
The TSX, on the other hand, has more rigid requirements. Reports must be filed to one or more entities, including the exchange, investors, and the regulatory body. The recipient of these documents depends on the type of report being issued.
