Trading has started on the Aequitas NEO Exchange, a new Canadian stock exchange that says it plans to thwart high frequency traders through a series of ‘speed bumps’ and fee structures.
The exchange, which counts on the backing of the Ontario Municipal Employees Retirement System, the Royal Bank of Canada, Barclays, BCE and others, says it will not charge retail investors for real-time market data on shares listed only on NEO. It will also give retail investors free market data on shares listed on both the NEO and the Toronto Stock Exchange (TSX).
The exchange adds that it will waive fees for professional investors trading TSX-listed shares on the NEO until the new market gains a 5 percent share of the Canadian securities trading market. It plans to open up to IPOs later this year.
‘There is a current stranglehold on the dissemination of trading information in Canada and it has resulted in prohibitive and virtually monopolistic pricing,’ Jos Schmitt, president and CEO of the exchange, says in a press release. ‘This prevents numerous investors, including the vast majority of Canadian retail investors and their advisors, from seeing in real-time the full picture of what is really happening in the markets. There is a real need for something new and different in the Canadian market data space.’
Volume on the exchange’s first day of trading last week totaled C$106 mn ($84 mn) in the 45 listed securities but the NEO is targeting a 20 percent share of the Canadian market within four or five years. TMX Group, the dominant exchange operator in Canada, currently has a market share of about 75 percent.
While the NEO’s impact on high frequency trading in Canada is not yet clear, it has already made some impact. TMX, which operates the TSX, has announced a series of changes including minimum order sizes and changes in fee structures that it says will help reduce the advantages of high frequency traders.
