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January 1, 2001

Nasdaq Invades the Great White North: But Will Canadians Want to Go Through Quebec?

By Sanford Wexler

Also in this article

  • Nasdaq Invades the Great White North: But Will Canadians Want to Go Through Quebec?
  • Page 2

The Nasdaq Stock Market is heading North. It will soon launch Nasdaq Canada. In the first of a three-step plan, Nasdaq workstations were installed last November at ten Canadian securities firms in Montreal, Quebec. The firms can now trade Nasdaq-listed companies directly, rather than through their U.S.-based offices or U.S. broker dealers. These issuers include 42 Canadian companies previously listed exclusively on Nasdaq. (All told, there are 146 Canadian companies listed on Nasdaq). Nasdaq also has launched the web site, www.nasdaq-canada.com.

In the past, Canadian investors who wished to buy or sell the 42 Canadian companies that were only traded on Nasdaq in the U.S. had to open an account with a firm based in the U.S. to execute their orders. Canadian brokerages were restricted from trading these 42 Nasdaq stocks because they were not registered in Canada.

Nasdaq Canada enables Canadian investors to buy and sell these 42 Canadian companies, which are now registered in Canada (as well the some 5,000 companies that are listed on Nasdaq U.S.) through Canadian NASD member brokers with offices in Quebec. Trading still remains in U.S. dollars.

"This [market] is permitting Canadian investors to deal through their local Canadian firms in their local Canadian stocks," said John Wall, president of Nasdaq International. "These [Canadian] stocks are being opened up to a greater pool of liquidity and investors."

Canadian retail investors will also save on transaction fees, Wall noted. "The transaction costs may not be less right away," he added, "but as competition builds among the ten [Nasdaq Canadian] firms these fees will probably come down."

Dual Currencies

Over the next two years, Nasdaq plans to implement trading in both U.S. and Canadian dollars and wants to introduce the SuperMontage in Canada. It also will eventually permit Canadian companies to list exclusively on Nasdaq Canada. A truly new market is being created in Canada, said Nasdaq's Wall.

In recent years, the demand for trading Canadian companies that are listed on Nasdaq has increased dramatically. According to Nasdaq, in 1999, the U.S. dollar volume for trading these Canadian firms was about $134 billion. Last year this figure had climbed to over $663 billion.

The initiation of phases two and three is dependent upon the success of the first phase, said Nasdaq's chairman Frank Zarb in a statement. "Our ultimate goal is linking Nasdaq Canada to a global trading platform that will include Nasdaq markets in Asia and Europe," Zarb said.

Paul Chalmers, executive vice president, international trading at Vancouver-based Cannacord Capital, which is one of the ten firms participating in Nasdaq Canada, thinks that it will have little immediate effect on how his desk conducts their everyday business. "It's not going to change things an awful lot," he said. "We are still going to route our order flow to the United States to a large extent. But it will permit us to become market makers on certain stocks, particularly stocks that trade both in Canada and in the U.S. We'll also be able to execute without paying execution costs to some of the U.S. broker dealers."