Agency-only brokerage ITG has announced its predictions for what’s to come in the Canadian equity markets – with dark pool routing, final order protection rules and the implementation of t+2 trade settlement, to name a few.
According to Doug Clark, ITG Canada’s director of research, 2015 is shaping up to be a challenging year for those trying to capture liquidity in the Canadian equity markets.
“A sharp selloff in oil late in 2014 has largely emptied the pipeline of financing deals in the energy sector. This will challenge dealer profits, and almost certainly reduce the ability of all but the largest dealers to put up facilitation capital,” Clark said. “At the same time continued evolution in the structure of our markets, in the form of new markets, new rules and significant changes to existing markets, will provide short to medium term advantages to the small number of proprietary and agency firms truly capable of understanding and adapting to such evolution.”
Clark pointed to changes to the TSX MOC facility, Alpha, MATCH Now, and the order protection and dark rules, along with the introduction of two trading books at Aequitas this quarter, which will force traders to once again spend more time on understanding market structure than they may prefer.
Clark and ITG Canada expect regulators to act on the following:
1) Frustrated regulators will shock the world by repealing the Canadian dark rules to prevent retail order flow from heading to U.S. markets
2) Changes to the “Market On Close” system will initially frustrate users, and significantly change the nature of index trading in Canada
3) Final Order Protection Rules will be announced. The proposal that markets must have a minimum market share to be protected will be dropped from the final rules.
4) Canada will be a taker on T+2 settlement timing
5) HFT share of equity markets will increase, yet again, in 2015
6) Big Data initiatives will take hold at Canadian trading venues
7) Changes to the CRM rules, and UK commission rules will result in an explosion of Commission Sharing Agreement (CSA) activity in the Canadian market.
“If there is an underlying theme for 2015 it is the continued evolution and complication of market structure to the advantage of those that invest time and the disadvantage of those that do not,” Clark said.
