Market operator Chi-X Global will introduce a new alternative trading system (ATS) in Canada next year to maintain market share following the takeover of domestic exchange operator TMX Group.
Chi-X Canada plans to launch CX2 ATS in the first quarter of 2013, enabling it to target new types of investor through differentiated functionality and deal with competition.
In addition to competing with the enlarged TMX Group, which now counts Alpha ATS and CDS Clearing and Depository Services among its assets following its takeover by the Maple Group, Steve Grob, director of group strategy at Fidessa, believed Chi-X’s new venue would also help it deal with potential new entrants.
“Chi-X Canada has a fairly healthy 14% share of the market so this additional venue may be its best option to grow and fend off competition,” said Grob. “The launch may also serve as a warning to other alternative venues such as BATS.”
US-based BATS Global Markets stated in its IPO filing that it intends to launch two new markets in Canada and Brazil before the end of this year.
“If you’ve already got one venue and you’ve already been through the regulation and paperwork, it can be fairly easy to set up another venue,” added Grob.
Pricing structure details for CX2 ATS are yet to be released and the Q1 2013 launch date could be pushed back significantly depending on getting approval from regulator the Ontario Securities Commission, but Grob believes traders will be lured with lower trading costs or a technological advantage.
“If this new venue can’t offer something fairly innovative, Chi-X wouldn’t do it at all, so I think they must have something up their sleeve,” Grob said.
Dan Kessous, CEO of Chi-X Canada, said the domestic market was changing dramatically, and the new venue would boost competition and innovation.
“Since our launch we have been committed to providing greater transparency and the means to reduce execution costs. CX2 aims to target under-serviced areas of the market such as institutional and retail investors. We’re excited to build upon Chi-X’s history of innovation with this launch,” Kessous said.
According to Thomson Reuters data, TMX Group and Alpha combined accounted for 77.1% of total volume, with the Toronto Exchange at 62.4% and Alpha at 14.7%, compared with Chi-X Canada’s 13.9%.