TMX Group is restructuring its equities trading offering.
Over the coming months, changes will be made to the Toronto Stock Exchange, TSX Venture Exchange, TMX Select and Alpha Exchange offerings. The changes will include introducing a new, domestic trading model that will benefit both retail and institutional clients.
As well, TMX Group will offer effective solutions to participants who do not use speed-based trading strategies, in an effort to reduce market complexity.
In June 2015, TMX Group will introduce a new trading model on Alpha that will offer improved execution quality for natural trading flow, while also encouraging liquidity providers who are willing to commit to a minimum order size.
The model was developed to support regulations that address the issue of Canadian dealers looking to execute natural trading flow with wholesalers in the U.S. where, unlike in Canada, customer segmentation and payment for order flow are permitted.
Specifically, under the new Alpha model, a short order-processing delay, along with a minimum size threshold for liquidity-providing orders and rebates for active flow, will help deliver improved execution quality for natural investors. The features will also reduce trading costs for retail and institutional dealers.
TMX Group will also be streamlining its market structure to more effectively serve client needs, while minimizing complexity, fragmentation and associated costs. Effective June 2015, TMX Group intends to close TMX Select and Alpha Exchange’s IntraSpread facility.
In addition, key features and functionality will be harmonized across TSX, TSXV and Alpha to provide an improved user experience. These changes include eliminating the opening auction on Alpha, and migrating Alpha to the TMX Quantum XA trading platform.
A word on technology
Technological advancements have helped make markets more integrated and efficient.
At the same time, however, some changes have hindered market participants who don’t require or depend on high-speed trading. To increase the confidence of these participants, TMX Group will introduce a new long life order type on TSX and TSXV in Q4 2015.
These orders will require a minimum resting time in books and, as a result, they’ll receive priority over other orders at the same price. Key benefits will include increased fill rates for natural passive order flow, as well as reductions in fleeting liquidity, unnecessary intermediation and message traffic.