Canadian Securities Exchange (CSE)

What Is the Canadian Securities Exchange (CSE)?

The Canadian Securities Exchange (CSE), formerly known as Canada’s New Stock Exchange (CNQ), is 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.

Understanding the CSE

The CSE started operating in 2003 as a way of giving companies alternative access to Canadian public capital markets. The CSE is based in Toronto and has a branch office in Vancouver. The exchange was formerly known as the CNQ until it rebranded in November 2008 and became the CSE. It is operated by CNSX Markets Inc.

The CSE operates all electronically and does not have a traditional, physical trading floor. Securities are traded in Canadian dollars. According to the exchange, there were about 580 companies listed on the CSE as of June 2021.  

6.7 billion shares

Trading volume of securities listed on the CSE reached a record 6.7 billion shares in January 2021 (valued at $4.4 billion in Canadian dollars [CADs]), an increase of 16% from the previous high of 5.7 billion shares in January 2018, and an increase of 32% compared to 5.0 billion shares in December 2020.

Trading on the CSE

The trading system is fully automated and based on price-time priority. Although there is no physical trading floor, the system does not take an over-the-counter market approach. It is fully regulated by the Ontario Securities Commission.

There are 683 securities from more than 580 companies listed on the exchange as of June 2021. 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.”

Normal trading sessions are from 9:30 a.m. to 4 p.m. ET every day except Saturdays, Sundays, and holidays.

Listing on the CSE

Companies must meet several key requirements to be listed on the CSE. Companies must demonstrate that they have liquid assets. If they do not have liquid assets, then companies must have a viable plan to show that they can sustain their operations and achieve their goals.

Furthermore, any company that has not started generating revenue must have both a plan outlining how it will develop its business and the financial resources to carry it out. For any company in the mineral or oil and gas exploration industries, it must either have an interest in, or be able to earn an interest in, a property with a technical report.  

The CSE has listed several companies in the Cannabis (CSE Canna) and Blockchain spaces over the past few years.

CSE Composite and CSE25 Indexes

The CSE Composite Index is a broad indicator of market activity for the CSE. The index was launched in February 2015 and covers about 75 percent of all equities listed on the exchange. It is considered a good gauge of the Canadian small-cap market. The companies are listed on the CSE, trade in Canadian dollars, and must have a minimum market cap of $5 million. As of June 2021, there are 424 companies in the CSE Composite Index.

The CSE also publishes the CSE25 Index, composed of the 25 largest stocks on the exchange by market cap. This subindex contains over 52.75% of the total weight of the CSE Composite Index.

Both indexes are rebalanced on a quarterly basis.

The CSE vs. the TSX

The Toronto Stock Exchange (TSX) is the CSE’s primary competitor as a technology-focused Canadian exchange. However, unlike the TSX, the CSE offers simplified reporting requirements and reduces the barriers to listing. The exchange does this through its regulatory model, which attempts to remove the duplication of regulation between the exchange and the provincial securities commissions. By doing so, it eliminates wait times for transaction approvals or reviews and cuts down on the cost and time for companies to get a listing.

To demonstrate this, the exchange’s website directs companies to post the appropriate form online and then issue a press release. After a 24-hour waiting period, they can close the transaction. 

The purpose behind the exchange was to 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.