The Bourse de Montréal Inc.’s plan to extend trading hours is raising concerns among investment dealers.
In a submission to the MX’s consultation on a proposal for longer trading hours — it’s contemplating moving the open from 2am to 8pm the previous day to facilitate trading while Asia’s markets are open — the Investment Industry Association of Canada (IIAC) said dealers have a number of concerns.
To begin with, dealers are worried about market liquidity and integrity during the new trading hours, said the IIAC.
“The Bourse’s regulatory division must be able to identify potential market issues, as Asian Trading Hours may well increase risk of abusive or manipulative trading practices,” it said.
Additionally, the IIAC says dealers don’t approve of the proposal’s approach to clearing, which would include overnight margin calling, as it adds “significant additional costs and logistical complications.”
Following the CME clearing model — where margin is called in the morning, rather than overnight — “would have made the Asian Trading Hours Initiative much more palatable for clearing brokers,” it said.
The IIAC also noted that dealers question whether the additional revenue that’s generated by overnight trading will justify the costs.
“It is unlikely that firms without a 24-hour operations team will be promoting overnight trading to clients,” it said, adding that launching extended hours in the first quarter of 2021 would be too soon for dealers to adapt.