04.11.2012
By Markets Media

Proliferation Of The ATS

Alternative Trading Systems in the Canadian marketplace are putting the pressure on their exchange counterparts. A plethora of ATSs have been yearning to increase market share as consolidation of the markets via the Maple Group-TMX deal looms.

Even tradition equity players are considering the introduction of new asset classes to their systems as demand for fixed-income increases amid the low interest rate environment extended by central banks. In late March, bond ATS CanDeal surpassed the Toronto Stock Exchange in terms of total value traded. The recent slump in equities has been a boon for fixed-income and in turn, an ATS that offers traders and banks access to rich liquidity and electronic trading for bonds and money markets.

The recent uptick in demand for support of different asset classes is real, but it will take more than the end users to make electronic execution across all markets a reality.

“The demand for the expansion of non-equity classes has definitely increased in recent months, although the up-take on new products can be a long and costly endeavor for an ATS,” Sean Debotte, director of business development at Omega ATS, told Markets Media.

“Products such as OTC bonds would benefit greatly from an ATS facilitation as the additional transparency provided by fully electronic execution would decrease spreads and increase visibility for all Canadian investors,” Debotte continued. “However, it is not the sole responsibility of the ATS to bring these products to the street. The combined cooperation of Broker/Dealers, Vendors, and ATS’s is required to facilitate new products.”

Of course, the elephant in the room remains the outcome of the Maple Group-TMX merger. Calls of a nationalistic play aside, most market participants are of the consensus that eventually, the deal will go through. The merger of TMX Group with Alpha and Maple are boosting the support for additional marketplaces throughout Canada.

As long as new participants strive to add value from a price and product perspective, they will be welcome in Canada.

“We can only anticipate that further fragmentation will continue to be a value-add, as independent trading destinations are the key drivers of these innovations. The proposed Maple Deal and subsequent Alpha integration should lead to a temporary consolidation of market fragmentation,” said Debotte.

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