TMX Group Inc. has rolled out a series of changes to its fee schedule for equity trading, as well as a new electronic liquidity provider (ELP) incentive program for the Toronto Stock Exchange (TSX). These changes are intended to enhance trading activity and liquidity on TSX and TSX Venture Exchange and to provide cost savings for all marketplace participants. “As Canada’s primary source of liquidity for equities, we are focused on providing the trading community with a highly efficient marketplace characterized by competitive fees, high performance technology, and ease of access to our marketplace,” said Kevan Cowan, president TSX markets and group head of equities, in a press release.
Changes to the equity trading fee schedule are a continuation of TMX Group’s ongoing efforts to incentivize liquidity providers and reduce the overall cost of trading Canadian equities. The fee schedule changes, effective January 1, 2009, will increase liquidity-providing credits for all market participants and reduce the spread between the active fee and passive credit for 90% of market participants. Registered market makers, including exchange traded fund (ETF) market makers, also benefit from a guaranteed $0 fee cap per trader and increased liquidity-providing credits. Furthermore, revised pricing models for ETF trading, specialty priced crosses, and must be filled trades are based on customer feedback and will promote trading growth in these areas. Given that many of the changes are structured to respond to customer needs, it is expected that the impact of the proposed changes will be to improve TMX Group’s competitive position in North America. Based on historical trading activity, patterns and product mix, changes to the trading fee structure could reduce trading fees by approximately $11 to $14 million on an annual basis if offsetting benefits, including when increased volumes, are not realized. However, actual trading fees will depend on future trading activity, patterns and product mix.
The ELP program offers aggressive fee incentives to experienced high-velocity traders using proprietary capital and passive electronic strategies on the TSX Central Limit Order Book. “TSX is committed to retaining its position as the central point of price discovery in Canada,” said Robert Fotheringham, senior vice president, rading, in the release. “We are confident that the participation of ELPs will benefit investors, traders, and issuers alike by tightening spreads, reducing friction costs and increasing overall turnover. We also look forward to attracting significant liquidity from outside of Canada and to further entrenching TSX’s role as a global market centre,” he said.