Canadian alternative trading system provider Alpha Group aims to launch a redesigned dark pool in Q2 2011, following alterations prompted by a regulatory review.
Alpha had planned to launch dark trading late last year, offering a platform that would give buy- and sell-side firms guaranteed price improvement versus the national best bid and offer. The firm also hoped that the dark pool would attract retail investors by offering lower pricing than the maker-taker models operated on rival lit exchanges.
“We wanted retail orders to trade at lower fees and benefit from price improvement; and we wanted institutional buy-side players to have the opportunity to access retail liquidity,” said Jos Schmitt, CEO at Alpha Group.
However, Alpha's plans were put on hold in November 2010, at the request of the Investment Industry Regulatory Organization of Canada. To enable it to upgrade its surveillance system, the regulator imposed a freeze on all major system and functionality changes by trading venue operators that is now expected to last until the end of this month.
In addition, the postponed public comment period that ended in January 2011 required Alpha to abandon the proposed design for its dark pool's internalisation engine. “We got a lot of feedback during the review process. Respondents commented that they would have to slice orders across multiple subscribers to benefit from the spread and they preferred a simpler solution,” said Schmitt. “The new solution allows us to achieve our same objectives, without doing any form of internalisation. It also allows buy-side users to simply place a large order, and then it's managed.”
Alpha Group is currently awaiting regulatory approval for its revised submission.