Fishing Trip: Canada's Markets Luring Investors

By Kharouf, Jim | Modern Trader, April 1998 | Go to article overview

Fishing Trip: Canada's Markets Luring Investors


Kharouf, Jim, Modern Trader


Canada, known for drawing vacationers to its great outdoors, is getting visitors all over the globe these days. But this time, the attraction is the upswing in the nation's financial futures markets in Montreal and Toronto.

Canada's markets finally are catching on. After years of being the forgotten markets north of Chicago and New York, the Montreal Exchange (ME) and the Toronto Stock Exchange (TSE) are carving a niche in the global futures marketplace. The ME suddenly has found its stride on its short-term interest rate contract, the three-month Bax futures, while the TSE's Toronto 35 Index futures is beginning to show signs it is a viable contract. Meanwhile, in Winnipeg, the agriculture exchange is streamlining costs by joining its Toronto and Montreal counterparts in Canada's common clearing system. Canadians are not talking about overtaking the Chicago and London markets, but they are getting noticed in the United States and overseas.

What makes these exchanges different today is a combination of developments common to the industry worldwide. Even though the ME will remain an open outcry market, the inevitable changeover to screen-based trading in Paris at the Marche a Terme International de France has forced its locals to find work elsewhere. And what better locale than in French-speaking Montreal? Already a dozen locals have relocated to Montreal and more are expected. The TSE also is transforming itself into a fully automated market that surely will send some more locals to Montreal. The move also appeals to its institutional participants that crave an electronic exchange's cost effectiveness and transparency. There is no question Canada's derivatives markets still are developing, but the growth spurt in some of its most important contracts bodes well for coming years.

Vive le Montreal

Pounded by a freezing rain storm in January that virtually shut down Montreal, the ME defied the weather and ended up posting perhaps its most impressive gains in the Bax or three-month Canadian bankers' acceptance futures (See "Short-term attention," left). But exchange officials and market participants do not see this as a fluke. They are convinced the Bax contract, the first futures listed on the ME in 1988, has momentum and international support. At the end of January, an estimated 60% of the 239,258 open interest contracts were held by non-Canadian investors. Daily trading activity now is split 50/50 between Canadian and international participants.

But Bax volatility is the attention-getter.

"The market itself has narrowed its bid-ask spreads over the last four years, and now its a 1 [cent] spread," says Barry Biniaris, head of Canadian derivatives at Refco Futures (Canada) Ltd., which accounts for 20% of ME volume.

"And we're benefitting from the lack of volatility in the U.S. market," he says. "Eurodollar spreads have tightened up to a half point on the front end, and you can go a whole week with the trading range in the 3 [cents]-4 [cents] range. In Canada, volatility is about 23% on the short end whereas in the U.S., its about 8% or 9%."

That volatility is what has drawn investors in, and the liquidity is keeping them, says Jean-Pierre Gallardo, president and chief executive at Fimat Canada, based in Montreal.

"In the past, the liquidity in the Canadian markets was too poor," Gallardo says. "But we've come from a vicious circle to a virtuous circle."

Large futures commission merchants say much of the interest is coming from Chicago, New York and Europe as fund managers seek new markets. Additional locals from Paris, Toronto and even Chicago have contributed to the Bax's liquidity. The ME has made it easy to get started. A local's trading permit can be purchased instead of a seat that allows you to trade virtually free for six months. Even full seats, priced on the traditional auction basis at about C$85,000 ($59,500), are a fraction of Chicago or New York seat prices. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Fishing Trip: Canada's Markets Luring Investors
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.