TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
The Canadian Security Traders Association (CSTA) held its annual conference in Quebec City on August 15-18.
Dan Kessous, CEO of Nasdaq Canada, spoke on an August 16 panel entitled Marketplaces in the Hot Seat, which also featured senior executives from TMX Group, Canadian Securities Exchange, Cboe Global Markets and Tradelogiq Markets.
Traders Magazine caught up with Kessous to learn more.
What were the key themes of the panel?
We covered many topics on the panel, but the two areas where we spent the most time and garnered the most attention were innovation and competitiveness of the Canadian markets.
We discussed innovation at the exchange and marketplace level. How do we innovate, and how can we innovate? Where do we get our ideas, and how does it fit and work within the regulatory framework?
With respect to the competitiveness of the Canadian marketplace, the conversation discussed proximity to the U.S., cross-border trading and Canadian market participants.
How was the topic of innovation framed?
Innovation is only possible with the needs of our clients in mind. It’s always flattering when clients come to us first and say, we trust you; let’s work together to solve this problem.
On account of many years of successfully servicing clients and building products and solutions to meet their needs, we’ve gotten to a stage where most of the low-hanging fruit in terms of innovation at the marketplace level has been picked, and now we are thinking about more creative and complex problems and solutions that exist.
Nasdaq has a long history of harnessing cutting-edge technology to drive innovation, so our current thought process is no different; the technologies have changed. We spend a lot of time thinking about cloud technologies and AI and how best to employ these to create the markets of the future.
Finally, you can’t please everyone, but any innovation needs to add value to most market participants, so they are excited about it and working toward readiness. Client feedback and partnership during idea development are critical.
How about innovation that comes from the industry?
One innovation we have brought from outside Canada is PureStream, which launched an ATS in the U.S. with a new and innovative model to trade block liquidity for the buy side and institutions. It has successfully brought together block liquidity while minimizing leakage and the number of trade counterparties. Nasdaq Canada has licensed the prototype, and it’s been growing since late last year. We are also working in partnership with two other U.S.-based block liquidity trading partners, OptimX and Luminex.
We don’t necessarily have to launch an innovative or new marketplace ourselves, as sometimes the size of the Canadian market doesn’t justify the investment. Sometimes, a partnership makes the most sense for us and our partners.
What was discussed about making Canada a more competitive marketplace?
For trading in Canada, being close to the U.S. is a double-edged sword, with the ease of access both creating options for Canadian market participants while simultaneously challenging and creating competition for our own markets.
All dealers in Canada offer trading in the U.S., which is as easy as trading in Canadian stocks, with access to the whole U.S. market. There are also dual-listed stocks, with a split of 60% U.S. and 40% Canada, that trade seamlessly. So, the U.S. has a majority of the trading on what are mostly originally Canadian stocks due to the ease of cross-border trading and the sheer size and liquidity of the U.S. market.
How do we bring back some liquidity to Canada? How do we try to make the market more attractive? As far as answers to these questions, there were a few thoughts around being a little bit more protectionist without going full-way protectionist – for example, if a new retail broker is approved to operate in Canada, they should be reminded to offer Canadian trading first.
Also, it would be helpful to make the tax environment a bit more friendly. Our corporate tax rates are slightly higher than those of the U.S. and some other jurisdictions. So, when establishing a business that might eventually have an IPO, many founders prefer to set up shop somewhere other than Canada.
Overall, it’s important to remind people that we’re all here to promote and preserve Canadian capital markets while providing all investors access to global liquidity.
Creating tomorrow’s markets today. Find out more about Nasdaq’s offerings to drive your business forward here.
