04.13.2012
By Markets Media

Surveying Canadian Markets

The Canadian marketplace is strong and continues to grow. Trading technology has become increasingly affordable and data more available. However, a few hold ups remain that continue to frustrate participants. Namely, it is the the uncertainty surrounding the Maple-TMX deal, as well as the increasing importance of high-frequency traders as liquidity providers.

The general consensus is that high-frequency trading is here to stay and will continue to grow. Further market fragmentation, which is seen as a positive, keeps competition alive and healthy. But some believe that more choices will lead to higher costs.

“Another marketplace doing the same thing as everyone else will only make routing more complicated and drive a variety of costs higher,” Doug Clark, head of research at ITG Canada, told Markets Media.

Gathering input from traders actively involved in day-to-day roles is needed to make markets more effective. The silence that revolves around Alpha Exchange, TMX Group and regulators needs to be broken so that businesses can grow organically, ultimately helping everyone involved in the markets regardless if they are competitors.

“To this end we have seen both the TMX and Alpha cease having meetings with industry wide advisory groups over the past couple of years,” said Clark. “If a new entrant were to open up and embrace input from all stakeholders, there would be an opportunity for a new entrant to actually improve the marketplace as a whole.”

The other necessity is transparency. Input needs to be displayed in a public setting and should trading systems become more open, pricing will naturally improve. When it comes to institutional trading firms dealing with size, best price remains paramount.

“[Participants] want trading systems that are more transparent that currently exist, and they want more even pricing for retail sized order flow,” said Clark.

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