TSX Select: Is it just another ATS? – 12 November 2010
First Published Sunday, 14th November 2010 08:25 am from Fidessa : Renée Colyer
The opinions expressed by this blogger and those providing comments are theirs alone, this does not reflect the opinion of Automated Trader or any employee thereof. Automated Trader is not responsible for the accuracy of any of the information supplied by this article.
I'm pleased to bring you the
first of our guest blogs, penned by Renée Colyer, CEO,
href="http://www.forefactor.com/"
Inc, which provides a
useful view on the Canadian market.
The emergence of ATSs in Canada and their relative
success has captured the attention of the US, and they are
watching the market microstructure unfold. An American colleague
said to me recently that the result of ATSs is fragmentation and
that it is "a mess that we (Canada) seem bound to create as the
Canadian market heads down the same path as its US counterpart."
I am not inclined to agree that fragmentation is a bad thing, as
I have no proof either way. I do believe we should learn (the
regulators in particular) from any mistakes the US markets have
made while attempting to manage the proliferation of over 40
alternative venues to avoid the mess my colleague is referring
to.
href="http://www.tmx.com/" target="_blank">TSX was
expected to launch a new trading facility (ATS) called title="TSX Photon"
href="http://www.finextra.com/news/fullstory.aspx?newsitemid=18156"
target="_blank">TSX Photon in 2009, based on title="Quantum's"
href="http://www.tmx.com/en/trading/tsxquantum/index.html"
target="_blank">Quantum's technology, specifically
designed to attract high-velocity traders using automated and
algorithmic strategies. The recent proliferation of high
frequency traders would suggest this idea was ahead of its time.
href="http://www.tmx.com/en/news_events/news_releases/10-4-2010_TMXGroup-TMXSelect.html"
target="_blank">TSX Select, set to launch next
February, is much more of the moment. Its technology is again
href="http://www.tmx.com/en/trading/tsxquantum/index.html"
target="_blank">Quantum. However, network latency
monitoring will be undertaken by NetScout (nGenius &
Sniffer).
href="http://www.tmx.com/en/news_events/news_releases/10-4-2010_TMXGroup-TMXSelect.html"
target="_blank">TSX Select has identified its value
proposition as twofold. First, it will offer a dark block order
type that will fill on lit orders (within the same book - title="Quantum"
href="http://www.tmx.com/en/trading/tsxquantum/index.html"
href="http://www.tmx.com/en/news_events/news_releases/10-4-2010_TMXGroup-TMXSelect.html"
target="_blank">Select are not connected on the
back-end). That is, if the lit, smaller orders collectively equal
the threshold that the client has set (e.g. 10%) on a fully
hidden block order, it will execute. It will also source hidden
blocks first. They have priority over all other order types.
Second, it will offer trade-through protection whereas with some
other ATSs a user would have to route away. If you trade on title="TSX Select"
href="http://www.tmx.com/en/news_events/news_releases/10-4-2010_TMXGroup-TMXSelect.html"
target="_blank">TSX Select, you can trade and book
without routing away and be assured that trade-throughs have been
prevented with market data.
What does it all
mean? Just that, once approved, we can add
href="http://www.tmx.com/en/news_events/news_releases/10-4-2010_TMXGroup-TMXSelect.html"
target="_blank">TSX Select to the list of ATSs
competing for volume in Canada.
href="http://www.tmx.com/en/news_events/news_releases/10-4-2010_TMXGroup-TMXSelect.html"
target="_blank">TSX Select will need to leverage
href="http://www.tmx.com/en/trading/tsxquantum/index.html"
target="_blank">TSX Quantum (the main board) as it
continues to dominate the market (Fidessa's data for
the week ending 5th November 2010 shows
href="http://fragmentation.fidessa.com/venuestats/?venue=XTSE&venuedesc=TSX®ion=CA"
target="_blank">TSX's share of the market
at 72.5%, including TSXV). And it is logical that title="TMX Group" href="http://www.tmx.com/"
target="_blank">TMX Group will offer access to that
book and perhaps their other markets through
href="http://www.tmx.com/en/news_events/news_releases/10-4-2010_TMXGroup-TMXSelect.html"
target="_blank">TSX Select in future. title="Alpha"
href="http://fragmentation.fidessa.com/venuestats/?venue=XATS&venuedesc=Alpha%20ATS®ion=CA"
target="_blank">Alpha has significant order flow in
ETFs as well as the not-to-be-dismissed knowledge base and deep
pockets of its shareholders. Fidessa shows
href="http://fragmentation.fidessa.com/venuestats/?venue=XATS&venuedesc=Alpha%20ATS®ion=CA"
target="_blank">Alpha's share of volume
was 18.6% for the same period with
href="http://fragmentation.fidessa.com/venuestats/?venue=CHIC&venuedesc=Chi-X%20Canada®ion=CA"
target="_blank">Chi-X Canada at 4.57%, title="Pure Trading"
href="http://fragmentation.fidessa.com/venuestats/?venue=PURE&venuedesc=Pure%20Trading®ion=CA"
target="_blank">Pure at 2.79%,
target="_blank">MatchNow at 0.87% and title="Omega"
href="http://fragmentation.fidessa.com/venuestats/?venue=OMGA&venuedesc=Omega%20ATS®ion=CA"
target="_blank">Omega at 0.66%.
We will see who comes and who goes and who consolidates.
It is an interesting time for Canada as our market is evolving
more rapidly than ever before. Much to do with microstructure is
afoot.
