Changes are afoot in the Canadian trading markets.
Change, long believed to be the only true constant in the universe and in the equities market structure, isnt just limited to the U.S. Traders in the Great North are also embracing changes to their market structure as a result of technology, regulation and the buy-sides ongoing search for alpha. Independent broker and technology company ITG recently conducted a survey of what Canadian trading professionals are focusing on its Trading Matters Conference in late April.And the results resemble what their U.S. counterparts are focused on.
According to ITG, the event drew more than 120 buy-side and sell-side attendees for panel discussions on topics including next-generation ETFs, the impact of MiFID II financial regulations and the role of independent investment research. Here are some of the observation recorded:
ETFs are potential worry spot. A majority of respondents (64%) are very concerned or somewhat concerned that liquidity could be negatively impacted by the growing use of exchange-traded funds.
To remain competitive in the ETF space, 38% of respondents say brokers need to provide capital as an ETF market maker, while 36% think brokers need to develop analytics to provide Net Asset Value transparency for ETFs.
Only 19% see a need for brokers to build ETF-specific algos.
Secondly, broker transparency was discussed. Canada remains one of the few developed equity markets to employ public broker numbers for trades, and those surveyed say the broker numbers are still extremely relevant (42%) or somewhat relevant (48%) in todays market.
Lastly, the implications of the upcoming implementation of MiFID II regulation was also discussed. Most Trading Matters conference attendees agreed that the coming MiFID II rules on unbundling research from execution will likely be positive for independent research providers, as smaller asset managers devote more of their investment research budgets to the independents. 84% of respondents currently use independent research at least some of the time.
Also, the survey showed that unbundling is not just a European phenomenon, with 17% of respondents reporting that they are already fully unbundled and another 44% planning to unbundle in 2018 or thereafter.
Commenting on the Trading Matters Conference panel discussions and the results of the survey, Etienne Phaneuf, CEO of ITG Canada, said the Canadian investment industry is in a period of evolution, with changing fund flows, market structure and financial regulation creating new challenges for institutional investors. We are committed to partnering with our clients to provide innovative tools and expert guidance to navigate the road ahead.
