Omega Securities has received a notice of approval from Ontario Securities Commission (OSC) regarding the proposed initial operations of a second alternate trading system – Lynx ATS.
Lynx ATS will be Canada’s first trading venue with no subscription fees, market data fees, or connectivity fees.
Omega Securities intends to deploy a maker/taker style pricing model on the new venue with rebates paid to the passive side of all equities transactions and fees charged to the active side. Further, this new facility will offer the speed, functionality, matching priority, and order type flexibility as Omega ATS.
“We wanted to offer the Canadian trading community the lowest total cost marketplace in the Industry. The only way to compete effectively was to diversify our offering and level the playing field through liquidity providing incentives,” said Brian Crew, president and CEO of Omega Securities. “It has become abundantly clear that other existing marketplaces have no plans to reduce the number of trading venues they operate, despite the lack of diversity offered within its venues. OSI will take the initiative and apply the necessary competitive pressures, in an effort to evoke cost savings for the Canadian trading community.”
Omega Securities, which also operates Omega ATS, says that the new platform is necessary to create a level playing field in the Canadian exchange industry, which for many years has been dominated by TMX Group’s Toronto Stock Exchange, but in recent years has seen new venues, including dark pools, spring up.
With the consolidation of Maple and the approval of CX2, Omega Securities believed it was necessary for its competitiveness to operate a second marketplace.
“The distinguishing characteristic of Lynx is that there are no fees,” said Sean Debotte, director of business development at Omega ATS. “Every other destination other than Omega charges a monthly subscription fee, connectivity, and market data fees. Lynx will have absolutely no fees.”
In 2011, Omega ATS switched from a maker-taker pricing structure to taker-maker, removing fees on orders that take liquidity, essentially allowing these investors to trade for free.
“Lynx will compete with the classic maker taker books in Canada,” said Debotte. “We will continue to serve our Omega subscribers who like the Omega pricing model. But through Lynx we will offer the rest of the Street an alternative with the other, more expensive, maker taker books.”
Lynx will launch early next year. In the meantime, Omega Securities welcomes suggestions from the trading community on aspects of the platform, such as pricing strategy, order types, and matching priority, Debotte said.
In 2011, Omega ATS switched from a maker-taker pricing structure to taker-maker, removing fees on orders that take liquidity, essentially allowing these investors to trade for free.
In Canada, in addition to the best execution obligations, marketplaces are subject to a trade-through obligation, known as the order protection rule, which applies to the full depth of book, as opposed to the top-of-book requirement in the U.S.
Aequitas, a proposed exchange that’s backed by RBC and several other prominent companies, is founded on the premise that differentiated marketplace competition will enhance confidence in Canada’s capital markets.
Aequitas employs trading models that restrict predatory trading strategies while challenging the maker‐taker fee model, by providing liquidity through committed and sustainable market making.
The Aequitas proposal encapsulates the core issues around the Canadian marketplace, including multiple markets and the attendant fragmentation, maker taker fees, and high-frequency trading. It’s also rekindled debate about the major regulatory initiatives that have transformed the markets, such as the order protection rule, dark pool rules and marketplace rules.