TMX Group today announced that it is restructuring its equities trading offering to strengthen Canada's capital markets and meet its customers' evolving needs.
Over the coming months, changes will be made to the Toronto Stock Exchange (TSX), TSX Venture Exchange (TSXV), TMX Select and Alpha Exchange offerings. The changes are aimed at further improving the Canadian trading landscape by introducing a domestic trading model with superior trading economics for retail and institutional orders, offering effective solutions to participants who do not use speed-based trading strategies, and reducing market complexity.
"We have heard and understand our customers' needs and we are taking action to deliver responsive and responsible solutions that together will provide important benefits, both to individual investors and to the broader market," said Kevan Cowan, President, TSX Markets and Group Head of Equities, TMX Group. "Our market-driven solutions are both innovative and in keeping with Canada's regulatory framework, which lies at the heart of our capital markets."
Keeping trades in Canada
In June 2015, TMX Group plans to introduce a new trading model on Alpha that will offer improved execution quality for natural trading flow, while incentivizing liquidity providers willing to commit to a minimum order size. This model was developed in a manner consistent with the regulations governing Canada's equities markets to address the issue of Canadian dealers looking to execute natural trading flow with wholesalers in the US where, unlike in Canada, customer segmentation and payment for order flow are permitted. Specifically, under the new Alpha model, a short order-processing delay (speed bump), together with the minimum size threshold for liquidity-providing orders and rebates for active flow, will deliver superior execution quality for natural investors and reduce trading costs for retail and institutional dealers.
Empowering all to trade with confidence
Trading technology advancements have greatly benefited capital markets, making them more integrated and more efficient than ever. At the same time, some changes have contributed to increasing challenges among certain participants, who do not require or depend on speed or sophisticated technology to achieve their trading objectives. To increase participants' confidence, in Q4 2015 TMX Group will introduce a new Long Life order type on TSX and TSXV. These orders will be required to commit to a minimum resting time in the book, and in return, Long Life orders will receive priority over non-Long Life orders at the same price. Key benefits of this innovative order type include increased fill rates for natural passive order flow as well as reductions in fleeting liquidity, unnecessary intermediation and message traffic.
Reducing market complexity
Canadian market participants are experiencing increasing market complexity. Through a series of initiatives, TMX Group will be streamlining its market structure to more effectively serve client needs, while minimizing complexity, fragmentation and associated costs. Effective June 2015, TMX Group intends to close TMX Select as well as Alpha Exchange's IntraSpread facility. In addition, key features and functionality will be harmonized across TSX, TSXV and Alpha to provide an improved user experience. These changes include eliminating the opening auction on Alpha and migrating Alpha to the TMX Quantum XA™ trading platform.
"TMX Group welcomes all feedback on our proposed solutions," added Cowan. "We are keenly aware that it is critical for all participants to feel confident in the markets they use, and we are fully committed to listening and adapting our market model to meet their evolving needs."
The changes to the TSX, TSXV and Alpha offerings are subject to regulatory approval, including public comment periods.