04.12.2012
By Terry Flanagan

Alpha Solidifies Position

With the transition of Alpha Group’s ATS to an exchange, it further reinforces the status of the trading platform as a legitimate alternative to the incumbent Toronto Stock Exchange.

“For sure, being an exchange adds an element of legitimacy,” said Nick Thadaney, chief executive officer of ITG Canada. “It also carries other privileges as well, such as being able to list securities.”

However, despite the change, it has been business as usual for the most part at Alpha.

“It’s the equivalent of a company changing their name,” added Thadaney. “Their status changed, but as far as their operations it’s been mostly the same.”

Alpha officially made the transition to full-fledged stock exchange last week. The Ontario Securities Commission in December gave approval for the alternative trading system, founded in 2007, to operate as an exchange, which would also allow it to offer stock listings.

“It is a very important step for us to become an exchange, as it comes with new business opportunities and the ability for Alpha to deliver value to an entire new set of industry stakeholders,” Jos Schmitt, chief executive of Alpha told Markets Media in January. “It allows us to provide a listing service and provide organizations with the ability to list securities on Alpha, the new generation Canadian exchange.”

“Another benefit that comes with being an exchange is that we can accept market makers,” Schmitt continued. “We will leverage this to introduce new and innovative market making models that will be far more focused on liquidity provision than existing models. This will apply to our own listed securities, as well as securities not listed on but traded on Alpha.”

The change 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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