Seven of the biggest investment dealers in Canada are teaming up to establish an alternative trading system (ATS) in a bid to increase equity trading efficiencies and make the country more globally competitive.
The new platform - called Alpha - is being set up by BMO Capital Markets, Canaccord Capital, CIBC World Markets, National Bank Financial, RBC Capital Markets, Scotia Capital and TD Securities but will be open to all dealer institutions that want to join as participating organisations. The firms are understood to have contracted with Capco to design the new platform.
The new ATS will feature a continuous electronic order platform where trading will occur on a price-time priority basis. The system will also ensure trades are made on the best market available, and will take into account current exchanges in operation and other alternative systems being launched in Canada.
Jos Schmitt, CEO of the ATS initiative, says: "Our trading system will provide a seamless integration of trading venues so that investors in Canadian equities can enjoy the benefits of trading on a best execution basis in a multiple marketplace environment."
Schmitt says the future strength of Canadian capital markets depends on the ability to achieve the same kind of efficiencies already being realised around the world by using new technology.
The ATS is expected to launch in 2008, subject to regulatory approval.
The new platform is being introduced under rules established by Canadian securities regulators that set out requirements for order and trade reporting, information consolidation and market integration to ensure fair and transparent trading.
Earlier this year, Interagency broker Instinet launched an alternative trading system in Canada. The platform, called Instinet Canada Cross (ICX), operates as a continuous, electronic auction market for the trading of Canadian exchange-listed securities.
Instinet said last year that its new ICX platform would "provide a much-needed alternative in the Canadian equity marketplace".
News of the Alpha ATS hit shares in the Toronto Stock Exchange. The TSX stock price recovered from an early morning low of C$40 to trade 8.6% down from the overnight close at C$43.35 a share by mid-morning.