Aequitas, Upstart Stock Exchange in Toronto, Marks One Year since Launch

By Posadzki, Alexandra | The Canadian Press, March 22, 2016 | Go to article overview

Aequitas, Upstart Stock Exchange in Toronto, Marks One Year since Launch


Posadzki, Alexandra, The Canadian Press


Upstart stock exchange marks one year

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TORONTO - Nearly a year ago, a new upstart stock exchange launched in Toronto with an ambitious goal: to create a stock market where ordinary investors wouldn't fall prey to predatory trading strategies.

Statistics released by the Aequitas NEO Exchange, which provide a glimpse into trading activities on the new stock market, suggest the plan is working, according to president and CEO Jos Schmitt.

"On our market, over 50 per cent of all the trades are taking place between regular or natural investors -- so a retail investor or an institutional investor trading with another retail investor or institutional investor," says Schmitt.

"That is an incredible achievement. ... It means that you are avoiding unnecessary intermediation, and unnecessary intermediation is typically the source of predatory trading."

Predatory trading strategies are employed by some high-frequency traders, or HFTs, to make a virtually risk-free profit at the expense of investors.

In one such strategy, referred to as front running, an HFT that has discovered an investor's intent to buy a particular stock will race ahead and purchase all of the outstanding shares of that stock on all of the various exchanges.

The HFT will then sell the shares to the investor at a slightly higher price and pocket the difference.

The Aequitas NEO Exchange, which celebrates the one-year anniversary of its launch on Sunday, has a "speed bump" in place to prevent high frequency traders from using such strategies.

So far, the exchange has captured four to six per cent of trade volume in Canada, says Schmitt. It aims to have 20 per cent market share by mid-2019.

In addition to trading securities that are listed on the TSX and the TSX Venture Exchange, Aequitas has also launched a listing service that allows companies looking to issue stock to list on the NEO Exchange rather than the TSX.

Growing that side of its business has been a challenge, says Schmitt.

"What we saw is a lot of interest," says Schmitt. "People loved our value proposition, but everyone was looking at it like, 'We would love to be on your exchange but we would like to be the second one, not the first one. We want to make sure that it all works and that there's not going to be any issues.'"

In January, the NEO exchange announced it had snagged its first application for a listing -- the PowerShares DWA Global Momentum Index ETF, which is expected to start trading later this month.

While it continues to focus on growing its trading and listing businesses, Aequitas is also tackling another goal -- to provide real-time market data at a competitive price. …

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