Canada’s equity traders are getting a new pricing scheme at one of the country’s alternative trading venues.
Lynx ATS, operated by Omega, has gotten approval for a new dynamic pricing model that could be a country-wide alternative to maker-taker, without all of the negative elements of banning it altogether – the biggest of which could be the potential loss of trade volume on dual-listed stocks to the US.
The new pricing system offers subscribers’ original, per symbol, tiered pricing as an alternative to the traditional maker-taker model. After successfully completing a 120 day implementation preparation period, it has become the first and only ‘pay as you trade’ venue in the country with no market data fees, no subscription fees, and no connectivity fees.
“The standard maker/taker pricing model has recently fallen under scrutiny from marketplace participants and regulators alike, and a few innovative marketplaces have taken a holistic approach to addressing the concerns raised, said Sean Debotte, chief executive of Omega securities and Lynx ATS.
Lynx said that its data revealed that less liquid stocks may still require additional intermediation while more actively traded stocks do not. The Lynx Dynamic Pricing model has been designed to pass savings on to active participants that trade highly liquid symbols while still rewarding market makers that potentially close spreads on less actively traded equities, Debotte added.
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The goal of the new pricing is to remove the unnecessary charges applied to the active trading of highly liquid stocks. This would encourage trading of domestic liquid names, while not removing the rebate that brings liquidity providers to less liquid names. OSI will also be introducing two new fixed tags on both Lynx ATS and Omega ATS, which will allow subscribers to track their commissions in real-time, on all trades completed on both systems.
Debotte told Traders that the premise is that less liquid stocks may still require additional intermediation whereas more actively traded stocks will not, so by giving rebates as low as .0006 mils (by contrast TMX’s is 35 mils) active participants trading highly liquid symbols will enjoy cost savings and market makers with tight spreads on less actively traded equities will still be rewarded.
Trading prices are calculated from the 16th of the month to the 15th of the following, and published immediately. Prices become effective the 1st of the following month.
Lynx will also offer real time pricing for the first time meaning brokers don’t have to reconcile at the end of the month or guesstimate what their fees should be.
Lynx ATS was launched in February.
