Off-exchange US equity trading volumes have increased in recent years, and upstart alternative trading systems such as IntelligentCross, PureStream, and OneChronos have captured material market share.
Effective January 22, there’s a new player in the space: AlphaX US, operated by Toronto-based exchange group TMX. The venue was announced today.
“We’ve been seeing a very small number of standalone ATS venues emerge and we’ve watched that piece of the pie grow,” said Heidi Fischer, President of TSX Alpha US, which operates AlphaX US. “We believe it will continue to grow, and we’re offering a good addition to what’s out there.”
In an interview with Traders Magazine, Fischer said AlphaX US differentiates itself as an auction model that incorporates counterparty segmentation, whereas most ATS venues that do counterparty segmentation are not auctions.
“How we’re looking at counterparty tiering within segmentation is also different from others,” Fischer said. “In today’s marketplace, tiering is primarily one size fits all. We are allowing participants to customize tiering to the duration that matters to them from a performance perspective.”
“A Participant might care about their markouts at 15 minutes, or one second, or two seconds,” she continued. “We want to present that customization for the sell side in our venue.”
Fischer said there will still be monthly tiering, but the contra-tiers will be based on what execution duration the participant cares about and tailored to how they view performance. Tiering will not be available on day one; it will be introduced after sufficient trading data is generated.
She also said AlphaX US’s pricing model is different, as it prices trades at the midpoint of buyer and seller prices, whereas most auctions price at the midpoint of the National Best Bid and Offer (NBBO).
AlphaX US is the first venue expansion outside of Canada for TMX Group’s Markets division and it will trade US-listed securities only (Reg NMS). Fischer said the launch is a culmination of two to two and a half years’ planning.
“We’ve seen independent ATSs coming into the market with innovation and improving execution quality, and they have been growing,“ she said. “We fit into that bucket and we have a strong parent company with over 150 years’ experience in building markets, strong funding, and great technology. We’re focused on not only improving execution quality, but also partnering with our participants and providing a custom and tailored execution experience.”
