In a bid to counter the opening of the new upstart Aequitas Neo Exchange, TMX Group has lowered fees on its exchange.
The move comes amid Neo going live recently, as that exchange sought to compete with the larger TMX Group by offering traders fee market data during its opening. TMX has countered this by lowering take fees to 30 mils (for interlisted stocks) and 23 mils otherwise.
Maker-taker rates on TSX, TSXV and Alpha will be reduced beginning June 1, 2015, subject to regulatory approval.
But TMX didn’t stop there – the bourse added that additional reductions of TSX and TSXV rates are expected over the next two years, in 6 to 9 month intervals, until “optimal levels” are reached for the Canadian capital markets.
TMX Group controls approximately between 65 and 70 percent of all equities trading volume in Canada on its various exchanges/
In a statement on its website, TSX Equities said it has a “long-standing” responsibility to enable vibrant and enduring Canadian capital markets. In keeping with this responsibility and consistent with our plans to reshape the equities trading landscape, we are announcing another bold step in this journey: taking decisive action to optimize maker-taker fees for today’s trading environment.
“The maker-taker fee model has been prevalent in Canada for over a decade, but at its current levels we recognize it may no longer be advantageous for the market,” the statement said. “We are therefore planning to implement an adjustment of maker-taker fees through a program of phased rate reductions, with the intention of ultimately delivering benefits and savings to market participants without destabilizing trading activity or market quality.”
TMX adopted maker taker pricing back in 2005 for Canada’s interlisted securities. In 2013, TMX chose to eliminate the maker-taker fee model on securities trading under $1.00 on Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV), and introduced an inverted fee model on TMX Select.
The maker-taker model remained the prevalent fee model for securities trading above $1.00.
“We believe it is the right time to lower maker-taker rates, but it is imperative that we take a thoughtful, measured approach to determine the appropriate fee levels that will deliver benefits to market participants. We are mindful that an aggressive reduction or ban of rebates could negatively impact both the market and investors.”
In the first phase of the fee reduction, TMX plans to reduce rates by up to 34%. The key fee changes are as follows: This phase alone is estimated to result in a 26% reduction of active fees and 31% reduction in passive rebates across all participant trading in these products on TSX, TSXV and Alpha.
Also, the bourse plans to elimination of volume based pricing tiers and the Electronic Liquidity Provider (ELP) program on TSX.