11.23.2016

A Regulatory Solution to Canada’s Market Data Problem

NEO Exchange – TORONTO – Aequitas Innovations Inc. and its subsidiary Aequitas NEO Exchange Inc. (“NEO” or “NEO Exchange”) are disappointed that the Competition Bureau of Canada has decided not to continue its investigation into the TMX Group at this stage. The Competition Bureau opened up an investigation after NEO filed a formal complaint requesting a federal investigation into certain anti-competitive practices of the TMX Group in December 2015. NEO believed, and continues to believe, that the TMX Group is using its dominant market position to maintain control over the pricing of market data in the Canadian capital markets. The main victims of the lack of consolidated market data outside of trading desks and proprietary trading firms in Canada are the retail investors, their investment advisors and public listed companies.

“Mandating consolidated market data gives retail investors and investment advisors the tools they need to fairly participate. I will keep saying this until I see the necessary and required movements to protect investors.”

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“We have no doubt the Bureau did a thorough assessment of the issue and we thank them for their effort,” stated Jos Schmitt, President & CEO, NEO Exchange. “This decision was reached because not enough investment dealers demonstrated support for a competitive solution that would give retail investors and investment advisors access to consolidated market data at a reasonable price. We will not speculate why dealers would not seek a lower cost solution, as we understand they face numerous other priorities. It is, however a sad day for Canadian capital markets – and the country as a whole – when no one is ready to put the best interests of the little guy first.”

With a competitive commercial solution no longer a current option, NEO must call on the Canadian Securities Administrators (CSA), the provincial securities regulators, to mandate access to consolidated market data for all investors, including retail investors and their investment advisors.

Over the course of the past 12 months, market fragmentation in Canada has increased and the market share of the Toronto Stock Exchange (TSX) has further declined due to increased competition in trading. Yet today, retail investors and investment advisors only have access to TSX and TSX Venture Exchange (TSXV) data, which is simply not enough. On any given day this market data represents less than 35% of ETF trading and less than 60% of trading activity in TSX and TSXV-listed securities.

This lack of access to information is a detriment to investors and to our markets overall:

  • With only a partial view of trading activity in TSX and TSXV-listed securities, retail investors and the majority of investment advisors are missing valuable data to help make more informed investment decisions.
  • Unaware that they only have a partial view, retail investors and investment advisors may be led to have negative perceptions about the liquidity and transparency of Canadian-listed securities – a potentially negative impact on overall investor confidence and willingness to invest.
  • Investment opportunities in Canada’s publicly listed securities are often rejected due to the perceived lack of trading activity – a potentially negative impact on Canada’s economy and the ability of Canadian companies to raise capital.

“I have said it before and I will say it again: it’s time to put the best interests of our investors and our public companies, first,” continued Schmitt. “Mandating consolidated market data gives retail investors and investment advisors the tools they need to fairly participate. I will keep saying this until I see the necessary and required movements to protect investors.”

NEO recognizes that the CSA and the Investment Industry Regulatory Organization of Canada (IIROC) have taken positive steps recently to begin to address the issue of access to market data. NEO is encouraged by these signals and encourages them to continue their efforts. The US securities regulator took a clear and strong stance on the issue by mandating access to consolidated market data for everyone many years ago. They re-affirmed this commitment again last December 2015. It’s time for Canada to follow their lead.

About Aequitas Innovations Inc.

Aequitas Innovations, founded by a diverse group of prominent investors representative of all Canadian capital market stakeholders, is the parent company of the NEO Exchange and NEO Connect. The NEO Exchange is a new Canadian stock exchange using a bold new blueprint that puts investors, businesses looking to raise capital and dealers first. Launched in March 2015, it offers an innovative trading venue and a value added listing venue for capital raising companies and investment products. NEO Connect is Canada’s new fund distribution platform.

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