Canadian Equities Market’s Dramatic Evolution Through Market Fragmentation

A new report from Aite Group examines key market trends in the institutional Canadian equities trading arena. The report is based on Aite Group interviews with 21 asset managers from leading Canadian execution venues, brokers, and buy-side firms, completed in the first half of 2010.

As one of the few financial markets to have largely avoided the global fallout from the 2008 credit crisis, the Canadian market is poised to grow well into the foreseeable future. Similar to other, global financial centres, however, the Canadian equities market has evolved quite dramatically over the last few years and continues to undergo major structural change. Market fragmentation is now the norm, with Canadian exchange TMX Group now representing less than 70% of market share in shares traded. Rapid adoption of electronic trading continues, while the influx of high frequency trading flow has created a certain level of anxiety in the market. Along with these developments has come far-flung regulatory change on everything from order protection and dark pools to naked market access and market data distribution.

“Based on increased market competition, the emergence of new market participants, and potential regulation, even more change can be expected to impact Canadian market structure in the coming years,” said Sang Lee, managing partner with Aite Group and author of this report. “Buy-side firms have not yet completely bought into the market structure changes and the ultimate benefits of sophisticated electronic trading tools. In order to ensure continued growth of the Canadian equities market, Canadian brokers and execution venues must do a much better job of educating and providing guidance to their buy-side customers.”


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