04.16.2012
By Terry Flanagan

Alpha to Bring Innovation to Listings

When newly transitioned Alpha Exchange begins its listings service, it will challenge the incumbent Toronto Stock Exchange with new ideas and features.

While it has only been about two weeks since Alpha officially became an exchange, it expects to offer its first listings within a few months.

“We have already had quite a number of declarations of interest,” said Jos Schmitt, chief executive officer of Alpha Exchange. “We have accelerated the entire business development process. We have some indications from issuers that that they will list with us. They are going through the review and due diligence process, taking into account legal considerations. My view is within the next several months we will see the first listings rolling in.”

“Our value proposition from a listing perspective will be unique and will have differentiating components,” added Schmitt.

Alpha will hope to have some of the same success seen in its Intraspread dark pool with its upcoming listings service. Since the launch of Intraspread in June of 2011, dark trading in Canada grew from about 1.5% to 4.5% in January, according to research from Rosenblatt Securities. Intraspead has been primarily geared toward retail investors.

Alpha Group in December received approval from the Ontario Securities Commission for its application to convert its alternative trading platform to an exchange, the culmination of a two year application process. It officially made the transition to full-fledged stock exchange on April 2.

“When you look at the process with regulators and the review that took place, which was over a two year period, this organization has been screened from top to bottom to make sure that all the capabilities and structures are in place,” said Schmitt. “You get a type of quality rubber stamp applied to you. It says a lot about the operational quality and excellence of the organization to tackle multitude of areas whether technical, operations or financial.”

The shift comes while regulators have yet to approve the acquisition of TMX Group by Maple Group, a consortium of Canadian banks and financial institutions. The situation could potentially have substantial conflicts of interest, as some of the backers of Maple are owners of Alpha.

Alpha was founded in 2007 by a group of banks looking to compete with the TMX, in the hopes of driving down fees and bringing an alternative to the markets. Some of those same banks are backers of Maple, including CIBC, TD Bank, National Bank of Canada and Bank of Nova Scotia. Another Alpha shareholder, Bank of Montreal, is not a member of Maple but it is advising TMX on its plan to merge with Maple.

The Maple consortium is planning to also acquire Alpha as part of the TMX acquisition, joining together Canada’s two largest equity trading platforms. However, a recent outage suffered at the Toronto Stock Exchange was also a perfect example of why there needs to be multiple, competing venues in a market.

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