The research concludes that the new market has added diversity without detracting from the key markers of market quality.

Using CMCRC developed technology, MQ Dashboard, a number of metrics reflecting market efficiency and fairness were examined, including market share, trade size, depth of liquidity, effective spread, price impact, information leakage and end of day dislocation.

Professor Michael Aitken, CMCRC CEO, said that looking at these metrics side-by-side with other Canadian marketsshowed that Chi-X 2 hadn't adversely impacted the quality of the Canadian marketplace.

Chi-X 2's fee structure rewards liquidity takers as opposed to liquidity providers, contrary to mechanisms in place in most other markets. Chi-x 2 undertook this initiative to attract retail investors and small- to mid- tier brokers to its trading platform. Chi-X 2 jumped over its immediate competitors providing liquidity 30% of the time at the NBBO.

"Our analysis demonstrates Chi-X 2's market share (3-5%) does not appear to have come at the expense of overall Canadian market quality. While the market share of TMX Select and Omega were reduced by around 1% each, this hasn't negatively affected any of the efficiency or fairness metrics we typically use to assess market quality."

In highlighting the potential of systems like the Market Quality Dashboard, which coralls big data, Professor Aitken noted that too little of the debate around market design changes such as market fragmentation has been based on empirical evidence.

"What needs to be examined is how specific market design changes impact specific metrics representing fairness and efficiency. Comparing these metrics across markets enables one to compare apples with apples to address the universal mandate of regulators of ensuring that market design and changes thereto pass the dual tests of fairness and efficiency," he said. "Too much market design change is made on the basis of fiat rather than evidence. What is needed is a combination of big data from a variety of markets and sources, relevant metrics (which follow from ones definitions of fairness and efficiency) and technology to bring all the elements together to quickly and effectively visualize the result of a market design change. Until we do this we are destined to endless debates of little value.

Watch Professor Aitken talk more about Chi-X 2 here: http://youtu.be/fjbyxoRF0Js