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Capital Markets

Trading systems: Canada makes the crossing

ATS operators sunk by Icebergs in Europe turn to America and Asia. ITG, which launched its crossing centre in Canada as recently as the fourth quarter of 2005, has already seen its market share rise to 4.1% of the volume of the dominant Toronto Exchange, TSX.

Crossing networks have struggled to make a big impact in Europe but they are rapidly gaining traction in the Canadian market.

Crossing networks are alternative trading systems that anonymously match orders at the mid point of the bid-offer spread.

ITG, which launched its crossing centre in Canada as recently as the fourth quarter of 2005, has already seen its market share rise to 4.1% of the volume of the dominant Toronto Exchange, TSX.

Instinet

Instinet, which plans to launch a continuous crossing network called ICX this year, is the latest entrant to the market, in which TriAct and Liquidnet are also active.

“In speaking with our Canadian clients, it’s clear that there is a rapidly growing demand for fully electronic, off-exchange liquidity sources” says Tal Cohen, senior vice-president at Instinet. “We believe that ICX will provide a much-needed alternative in the Canadian equity marketplace.”

Demand for alternative trading systems has soared in Canada in recent years as Canadian equities, dominated by the energy, commodity, and paper sectors, have outperformed markets including those of the US.

Increased interest in the market has focused investor attention on the market’s high spreads. The average spread for stocks traded on the TSX is more than 10 basis points, and as wide as 40bp for some shares.

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