CANADA FINANCE-Highly active electronic traders shop in Canada
(This story is part of a special Reuters News package highlighting Canada's financial sector. For a complete listing of stories, click on [nN19445229].)
* High-frequency trading set to grow rapidly
* Canada set to follow trend in U.S., Europe
* Alternative venues could reap benefit
TORONTO, June 24 (Reuters) - High-frequency electronic traders and alternative trading systems are changing the rules for Canada's staid markets and encroaching on the near-monopoly long held by the Toronto Stock Exchange.
High-frequency traders, including hedge funds, independent proprietary trading desks and trading desks at broker-dealers, have already changed the U.S. and European stock trading landscape.
Now experts expect Canada to follow that trend. High-frequency players will boost trading volumes, narrow bid-ask spreads and spark fiercer competition for business now dominated by the TSX, which is owned by TMX Group Inc (X.TO).
"There's no doubt it (high-frequency trading) is the hottest topic right now in Canada," said Joe Gawronski, president and chief operating officer at agency broker Rosenblatt Securities.
The high-frequency trend, where firms use computer programs to profit from tick-by-tick price moves and carry out thousands of trades a day, raises the potential for market share losses by the TSX. It typically brings price wars, smaller lot sizes and new products, market watchers say.
In the United States, high-frequency traders account for an estimated two-thirds of stock trading volume, Gawronski said. In Canada, that figure is closer to about 15 percent.
"We expect a pretty rapid evolution in Canada," he said, forecasting a 25 percent share by the end of the year. "We have six months left. A quarter is not a crazy expectation."
Familiar high-frequency names include Getco, a privately held electronic trading firm, as well as the Citadel hedge fund.
BOOST TO NEWCOMERS
Alternative trading systems are set to be a big winner as the high-frequency players lay down roots in Canada, said Martin Piszel, head of alternative execution services at CIBC World Markets. The brokerage this year overtook TD Securities as top equities trader by volume on the Toronto Stock Exchange.
"You'll see people start embracing these alternative marketplaces in Canada," he said. "I think it's early days, really early days." Continued...
