TSX ratchets up its competitive game
Summer launch planned for 'dark' trading system to match anonymous buyers and sellers
BOYD ERMAN
From Friday's Globe and Mail
June 8, 2007 at 6:19 AM EDT
TSX Group Inc. is finally getting into the game of matching big buyers and sellers of stock through anonymous and automated systems, yet another step in the stock exchange operator's attempt to meet competition on every front.
The owner of the Toronto Stock Exchange won regulatory approval for its ATX "dark" trading system this week, and is planning a summer launch, chief executive officer Richard Nesbitt said yesterday at a conference for investors and analysts. ATX was originally slated to open in 2006, but delays held it up and enabled competitors to get a head start.
After drawing criticism last year for appearing slow to meet the coming competitive challenges in almost every line of business, the former monopoly has shifted gears and reeled off announcement after announcement on new partnerships and technology.
"We've been moving at what can only be described as a blistering pace," Mr. Nesbitt told analysts and investors yesterday at a company-sponsored gathering in Toronto.
Announcements, however, are the easy part. The delay in getting ATX up and running illustrates the reality of the exchange world. It's complex, highly regulated and involves myriad connections with customers who use many different systems.
In other words, plans easily go awry. But the TSX can't afford delays, because the competition isn't waiting.
ATX is part of the TSX Group's plan to fight off competition from Perimeter Financial Corp.'s BlockBook and Liquidnet.
The systems, known in trader lingo as "dark pools of liquidity," are designed to appeal to secretive money managers who increasingly want to avoid using human traders for fear that information about their intention to buy or sell will leak into the market.
TSX Group is also girding for competition against its main stock market, the Toronto Stock Exchange, and must seamlessly switch over to its fast new trading engine, Quantum, later this year. That's because three new "alternative trading systems" promising fast, low-cost trading are expected to get rolling over the next year.
The big six banks and Canaccord Capital, the country's largest independent brokerage, have teamed up to launch a system called Alpha. Pure Trading plans to launch soon after numerous delays. Instinet, which operates markets in the United States, Europe and Asia, also plans an alternative trading system in Canada.
Amid all this competition, many players may fail.
"While it is interesting to watch this explosion of trading venues in Canada, it is hard to imagine more than one or two Canadian-based systems (other than the TSX) capturing enough market share to be successful," according to a recent report from TD Securities on the exchange landscape.
Looming over all that immediate competition is the closely watched faceoff with the Montreal Exchange, which trades derivatives in Canada while the TSX focuses on stocks. The TSX can't enter the fast-growing derivatives market for two years because of a non-compete agreement, but a preview of the battle between the country's two main exchange operators is shaping up in the energy business.
The TSX's energy trading arm, NGX, earlier this year reached an agreement to partner with IntercontinentalExchange Inc. of the U.S. to reach more traders and offer more products.
Montreal, meantime, has teamed up with the owner of the New York Mercantile Exchange and plans to launch its own energy market.
The race is now on to lock up traders' loyalties, and the TSX is fast-tracking plans, NGX president Peter Krenkel said. "We expect to have this running very, very quickly." |
