Thinking of buying CSE stocks? We’ve got all the info that you need! The Canadian Securities Exchange started in 2003 and was recognized by the Ontario Securities Commission the following year. This significant feat marked the CSE as the first new exchange approved in Ontario in 70 years.
What is the CSE?
The Canadian Securities Exchange (CSE) is sometimes called the ‘exchange for entrepreneurs.’ It is a stock exchange based in Canada and operated by CNSX Markets Inc.
The CSE was formerly Canada's New Stock Exchange (CNQ).
The CSE aims to provide a modern and efficient alternative for companies accessing the Canadian public capital markets.
Early-stage companies are particularly drawn to the CSE as its streamlined regulation model makes the listing process simple, quick, and relatively inexpensive.
In 2021, trading activity on the CSE reached record levels, and CSE issuers raised more than $8bn of aggregate capital. This far exceeds any other annual total in the exchange’s history.
Today there are around 780 companies listed on the CSE. These are primarily small-cap and micro-cap Canadian companies.
The CSE operates entirely electronically. It is fully automated and based on price-time priority.
CSE Industries
The CSE welcomes businesses from various industries, including Cannabis and Blockchain. The exchange categorizes its listings under the following sectors.
Mining: emerging companies engaged in mineral exploration and development.
Life Sciences: biopharmaceuticals, medical manufacturing and distribution, and bioproducts.
Technology: new adaptive technology companies.
Diversified Industries: Financial Services, Real Estate, Media, Consumer, and Industrial Products.
CleanTech: technologies, products, and services that minimize environmental impacts by improving operational performance and productivity and reducing natural resource usage, energy consumption, waste, and environmental pollution.
Oil and Gas: oil and gas exploration, oil and gas production, natural gas exploration and production, and related oil and gas activities.
What are the CSE Trading Times?
The typical CSE trading sessions run on weekdays from 9:30 am to 4 pm. Trading is closed on weekends and holidays.
Can a US-Resident Investor Trade on the CSE?
Yes, US residents can trade Canadian-listed securities on the CSE exchange. There are two options depending on the broker.
Some US brokers permit clients to open an international account. These allow clients to trade directly on a foreign stock exchange such as the CSE. This type of account usually incurs a premium commission fee.
Many CSE-listed companies are quoted on the US OTC Markets Group exchange. This means investors can buy and sell CSE shares via the OTC. These companies display a slightly different stock ticker symbol in the US than their CSE symbol.
The OTC symbol will be five characters ending in the letter “F,” which denotes foreign security.
Most US retail-oriented brokerage firms provide access to the US's OTCQB (venture) and OTCQX (best) markets. These premium market tiers provide efficient cross-border trading for issuers and US investors.
US OTC quoted securities are priced and traded in US dollars.
Read our How to Buy OTC Stocks article for more info.
How to Purchase CSE Stocks
If you would like to purchase shares in a CSE-listed company, here are the steps to follow:
Choose Your Broker
Most CSE-listed and OTC stocks are available to trade via TD Ameritrade, E*TRADE, Fidelity Investments, Charles Schwab, Interactive Brokers (subject to availability), and most major Canadian dealers are connected to the CSE.
Additional platforms may be available to trade CSE-listed securities. If in doubt, ask your broker.
If you are an international investor, you can contact the CSE directly for more information on trading Canadian securities abroad.
Fix Your Budget
A CSE investment may be risky, and you shouldn’t invest what you can’t afford to lose. Treat any small-cap or micro-cap investment as a speculative outlay. Size your position carefully in a diversified portfolio.
Fund your account
Check if your broker will allow you to trade the CSE stock you are interested in. Then you can fund your account.
Fees and Bid/Ask Spread
Buying shares often encounters charges. Make yourself aware of any transaction fees you will incur.
In illiquid stocks, the spread between the bid and ask on a share is significantly wider. Check the spread because, in an illiquid stock, you may lose money trying to sell if you need to get out of the trade.
Ask for help
Executing the CSE trade may differ slightly from broker to broker. Depending on liquidity, buying a CSE stock sometimes requires help. Your broker’s customer service desk should be able to help you.
Buy your CSE stock
Like buying traditional stocks, you’ll have the option of market or limit orders when you place the trade. Your broker-dealer can sometimes fill the order internally if there is enough interest in the stock. Alternatively, the quote will be sent to the CSE market to trade among other broker-dealers.
A lack of liquidity will widen the spread between the bid and ask prices.
How do you determine if CSE-listed security is quoted in the US?
Visit www.otcmarkets.com and type the company name into the “quote” box in the top left-hand corner.
The US quoted securities may return a different stock ticker symbol than its CSE symbol.
How is the CSE Regulated?
The Ontario Securities Commission fully regulates the CSE.
CSE-listed companies must disclose material information to the marketplace and file quarterly financial statements with the exchange.
CSE companies are also subject to annual audits. This information is available to investors on the Canadian regulator’s company information site: www.sedar.ca
The CSE is on the list of Designated Securities Exchanges published by the Department of Finance Canada.
The CSE is recognized by the Securities and Exchange Commission (SEC) in the U.S. as a Designated Offshore Securities Market, as are the other Canadian exchanges.
The CSE is also recognized by the OTCQX market and the Frankfurt Stock Exchange for the purpose of listing criteria.
44 billion shares traded in 2021
The trading volume of CSE-listed securities totaled 44 billion shares, an increase of 64% from 26.9 billion in 2020
Listing on the CSE
The CSE is business focused and welcomes entrepreneur-led entities.
Obtaining a CSE listing is more straightforward and cheaper than alternative exchange admission but still requires meeting certain conditions.
A company must have liquid assets to be considered for admission to the CSE. If they don’t, they must be able to prove they can support their operations and achieve their objectives.
If a company does not yet generate revenue, it must clearly show how it intends to advance the business and that it has funding plans in place.
Resource companies operating in mining or oil and gas must either have an interest in or be able to earn an interest in a property with a technical report.
CSE Composite Index
The CSE Composite Index is considered a good gauge of the Canadian small-cap market. It features around 75% of all the CSE-listed equities.
On February 27, 2015, Canada’s Exchange for Entrepreneurs announced the launch of the CSE Composite Index.
The index is the first established by the CSE and is designed to measure the performance of equity securities listed on the CSE.
Companies included in the index feature on the CSE have a minimum market cap of $5m and trade in Canadian dollars.
The CSE Composite Index is a market capitalization-weighted, and securities must meet minimum size requirements to qualify for inclusion.
At the time, Richard Carleton, CEO of the CSE, said:
The growth of our marketplace has led to increased interest in CSE listed securities. This new index reflects a broad spectrum of entrepreneurial companies and provides a gauge for investors to assess this unique segment of the Canadian capital markets.
The CSE Composite Index is rebalanced quarterly.
CSE25 Index
The CSE25 Index is a subset of the CSE Composite Index. It comprises the 25 largest stocks on the Canadian Securities Exchange by market cap.
This subindex contains over 52.75% of the total weight of the CSE Composite Index.
The CSE25 is rebalanced every quarter.
The CSE vs. the TSX
Being based in Canada, the primary competitor of the CSE is the Toronto Stock Exchange (TSX).
The CSE was initially established to make it easier for small-cap companies to access capital markets. Therefore, the CSE offers businesses a more straightforward route to public listing than the TSX.
From the outset, the CSE established a streamlined regulatory model which avoids duplicating regulatory processes between the exchange and provincial securities commissions. This gives it a competitive edge over the TSX in both costs incurred and time taken to list. It also reassures investors that the companies they invest in are subject to high regulatory standards.
The CSE’s website directs its applicants to complete and submit the appropriate form and follow this up with a press release outlining their intention to list. After 24-hours, the exchange can close the transaction.
The CSE Cannabis Story
The CSE has undoubtedly helped propel growth in the cannabis industry. Back in 2014, it was approached by cannabis firms Aurora (NASDAQ: ACB) and Supreme as they were struggling to get listed.
This was a shrewd move by the CSE and the companies. At that point, cannabis was not an attractive investment, and the markets they’d usually tap for money were non-existent. Angel clubs, business accelerators, family offices, and private equity did not want to invest in the space. Plus, getting banking facilities for this kind of business was practically impossible.
Therefore, the Canadian public equity markets were the only option left to them.
The CSE welcomed these cannabis-related businesses so they could grow with the capital raised from the public. This led to licensing approval by Health Canada and, finally, the support of Canadian regulators.
The upshot is that Toronto, Canada, is now seen as the center of finance globally for the cannabis industry.
The CSE CEO and his peers recently took a group of cannabis industry thought leaders to socialize near the World Economic Forum in Davos. This proved very beneficial as the group met with world leaders, business leaders, investors and pension fund managers.
Investing in CSE Stocks
Most CSE issuers have a market cap of under $50m, while some are worth over $100m.
Pros and Cons of Investing in CSE Stocks
Pros of CSE investing
Access to Canadian small-cap and mid-cap stocks.
As the CSE focuses on enhanced disclosure, investors have access to monthly progress reports to help gain insight into how the company is performing.
Stocks traded on the CSE can be bought in tax-shielded accounts and are RRSP and TFSA eligible. In the UK, they are eligible for SIPPs under UK tax law.
Cons of CSE investing
The nature of CSE-listed businesses means liquidity can be low.
As an enthusiast with a comprehensive understanding of the Canadian Securities Exchange (CSE) and related topics, my expertise is grounded in the intricate details of the financial markets. I have a deep knowledge of the CSE's history, operations, regulatory framework, and its impact on various industries.
Let's delve into the key concepts presented in the article:
1. Canadian Securities Exchange (CSE) Overview:
- Founded in 2003 and recognized by the Ontario Securities Commission in 2004.
- Originally Canada's New Stock Exchange (CNQ).
- Positioned as an alternative for companies seeking efficient access to Canadian public capital markets.
- Streamlined regulation attracts early-stage companies.
- Record trading activity in 2021, with issuers raising over $8 billion.
2. CSE Industries:
- Caters to various sectors, including Mining, Life Sciences, Technology, Diversified Industries, CleanTech, and Oil and Gas.
- Emphasizes environmentally conscious practices in CleanTech.
3. CSE Trading Times:
- Trading sessions on weekdays from 9:30 am to 4 pm; closed on weekends and holidays.
4. US-Resident Investor Access:
- US residents can trade on the CSE through international accounts or via the US OTC Markets Group.
- OTC symbol for CSE-listed companies ends in the letter “F” to denote foreign security.
5. How to Purchase CSE Stocks:
- Available through major brokers like TD Ameritrade, E*TRADE, Fidelity, Charles Schwab, and Interactive Brokers.
- International investors can contact the CSE directly.
- Emphasizes the importance of budgeting and understanding fees and bid/ask spreads.
6. CSE Regulation:
- Fully regulated by the Ontario Securities Commission.
- CSE-listed companies must disclose material information and undergo annual audits.
7. CSE Composite Index and CSE25 Index:
- CSE Composite Index: Gauges the Canadian small-cap market; rebalanced quarterly.
- CSE25 Index: Subset comprising the 25 largest stocks; rebalanced quarterly.
8. CSE vs. TSX:
- The primary competitor of the CSE is the Toronto Stock Exchange (TSX).
- CSE offers a more straightforward route for small-cap companies to access capital markets.
9. CSE's Impact on the Cannabis Industry:
- The CSE played a crucial role in supporting the growth of the cannabis industry.
- Welcomed cannabis-related businesses, contributing to Toronto's global prominence in the cannabis finance sector.
10. Pros and Cons of Investing in CSE Stocks:
- Pros: Access to Canadian small-cap and mid-cap stocks, enhanced disclosure, eligibility for tax-shielded accounts.
- Cons: Liquidity challenges due to the nature of CSE-listed businesses.
This comprehensive overview equips potential investors with the knowledge needed to navigate the Canadian Securities Exchange and make informed decisions regarding CSE stocks.
