CSE Market Making Policy Changes and What They Mean for Public Companies

On February 19, 2026, the Ontario Securities Commission approved amendments to the Canadian Securities Exchange Listing Policies relating to issuer-contracted market making and promotional activity. The British Columbia Securities Commission also approved the amendments. They are now in force.

That approval formalizes something important.

Liquidity support on the CSE can no longer operate in informal grey areas. It now sits inside a defined regulatory framework with explicit restrictions, enhanced disclosure, and real enforcement authority.

These CSE market making policy changes are not cosmetic. They change how issuers must structure liquidity arrangements, how compensation may be paid, and how promotional activity must be separated from trading.

If you are listed on the CSE, or planning to go public there, this is material.

Why the CSE Introduced These Market Making Policy Changes

Private market making arrangements were not prohibited before. Issuers could engage third parties to provide liquidity by entering orders intended to facilitate trading.

What was missing was structure.

The exchange has now created that structure.

The amendments introduce:

• Mandatory written agreements
• Restrictions on compensation
• Public disclosure before commencement
• Prohibitions on related party market making
• Clear separation between promotional activity and liquidity provision
• Explicit exchange oversight and enforcement powers

When exchanges move from guidance to codification, the signal is clear. Oversight is tightening.

For issuers, that means liquidity planning must now be deliberate and defensible.

Written Agreements Are No Longer Optional

An issuer must now execute a written agreement before engaging anyone to conduct market making activity.

That agreement must include:

• Confirmation that the market maker does not conduct promotional activity for the issuer
• A termination clause triggered if the exchange identifies non-compliance
• An acknowledgement that no funds have been provided, directly or indirectly, to facilitate trading beyond agreed compensation

This does two things.

First, it forces clarity between marketing and trading functions.

Second, it creates documentary accountability. If an arrangement is reviewed later, the structure must stand on its own.

For companies preparing to list, this means your liquidity strategy must be structured at the same time as your governance framework.

You cannot bolt this on after listing.

Compensation Must Be Cash and Must Be Reasonable

One of the most significant aspects of the CSE market making policy changes is the elimination of equity-based compensation for market making.

Under the new framework:

• Compensation must be reasonable and proportionate to the issuer’s financial resources
• Compensation must reflect the value of services provided
• Compensation cannot be based on maintaining minimum share price or trading volume
• Compensation cannot be tied to market performance
• Compensation cannot be paid in shares or options
• Compensation must be paid directly

That is a structural shift.

Historically, in certain segments of the junior market, equity-based liquidity arrangements were used. That practice is now clearly prohibited on the CSE.

From a regulatory perspective, this removes potential incentives that could distort trading behavior.

From a company perspective, this forces realistic budgeting.

Cash planning now becomes part of your capital markets strategy.

If you are going public with limited working capital, this must be factored into your financing model.

Promotional Activity and Market Making Must Be Separate

The amendments draw a firm line between promotion and liquidity.

An issuer may not retain the same person to perform both promotional activity and market making.

In addition:

• Inactive issuers are prohibited from engaging in promotional activity.
• A promoter cannot engage another person to conduct market making for the same issuer.

This addresses a long-standing structural concern in junior markets.

Promotion generates attention. Liquidity creates perceived depth. When those two are bundled, perception can become disconnected from fundamentals.

The exchange has chosen to separate them.

Transparency over optics.

That direction aligns with broader regulatory trends across Canadian markets.

Disclosure Now Comes First

Under the new policy, market making activity cannot begin until disclosure obligations are met.

Issuers must disseminate a news release disclosing:

• That a market making arrangement has been entered into
• The identity and contact information of the market maker
• The start and expected end date
• Compensation details if the market maker is not a registered dealer

If the market maker is not a dealer, the issuer must also:

• File a Personal Information Form
• Provide a copy of the executed agreement
• Identify the dealer through which trading will occur
• Confirm that no additional funds were provided to facilitate trading beyond agreed compensation

Upon termination of the arrangement, the issuer must issue another news release and update its notice.

This level of disclosure ensures that investors understand exactly who is providing liquidity and under what structure.

The days of quiet liquidity support arrangements are over.

Related Party Market Making Is Prohibited

The policy prohibits issuers from engaging a related person to conduct market making.

This is a governance control.

Liquidity support must be independent.

For companies planning to go public, this reinforces a broader message: governance standards are rising across exchanges. Independence is no longer implied. It must be demonstrated.

If you are structuring your board and capital markets relationships, this should be part of the discussion early.

The Exchange Now Has Clear Enforcement Authority

The CSE now has explicit authority to:

• Impose conditions on market making activities
• Impose conditions on the issuer
• Require cancellation of non-compliant agreements
• Prohibit retention of specific market makers

This matters.

Liquidity arrangements are no longer just contractual. They sit under direct exchange oversight.

Regulatory risk must now be considered alongside market risk.

For disciplined issuers, this is manageable. For informal structures, this introduces exposure.

How These Changes Affect Trading Dynamics

These CSE market making policy changes will influence trading behavior.

First, incentives shift. Without equity-based compensation or performance thresholds, market makers are compensated for service, not outcome.

Second, volatility driven by bundled promotion and liquidity may decline. Structures that once supported aggressive short-term optics are no longer viable under the new framework.

Third, issuers may increasingly rely on registered dealers rather than independent liquidity providers, given the reduced disclosure burden and regulatory oversight through CIRO.

The broader effect is increased market integrity.

For investors, that improves confidence.

For issuers seeking institutional participation, that credibility matters.

What This Means for Companies Considering a CSE Listing

If you are evaluating whether to go public on the CSE, these amendments should be incorporated into your planning process.

Liquidity strategy must now include:

• Cash budgeting for compliant market support
• Governance review for independence
• Clear drafting of written agreements
• Disclosure sequencing
• Ongoing monitoring for compliance

Public markets reward preparation.

Companies that treat listing as a transaction often struggle with post-listing obligations.

Companies that treat listing as the beginning of a disciplined reporting and governance structure tend to perform better over time.

The regulatory standard has been raised. That is not a deterrent. It is a filter.

Serious operators benefit from clarity.

The Broader Regulatory Direction

The February 2026 approval reflects a broader shift in Canadian markets toward:

• Greater transparency
• Clear separation of promotional and trading functions
• Conflict of interest controls
• Enhanced surveillance alignment

This reduces regulatory arbitrage between exchanges and increases overall market credibility.

Confidence attracts capital.

Capital supports growth.

Growth supports valuation.

That is the longer-term return on investment.

Final Perspective

Liquidity is important. But credible liquidity is more important.

The CSE market making policy changes introduce structure where ambiguity once existed. They eliminate equity-based liquidity incentives. They require disclosure before activity begins. They separate promotion from trading. They strengthen enforcement.

For companies committed to building sustainable public market credibility, this is constructive.

For companies preparing to list, the message is straightforward.

Structure properly. Separate functions. Budget realistically. Disclose transparently.

Public markets evolve. Standards rise. Those who prepare benefit.

For more insight on structuring compliant market making arrangements or preparing for a CSE listing under the current framework, contact us.