By Lynne Olver
TORONTO (Reuters) - Financial-market turmoil will not derail a closely watched alternative Canadian stock-trading system from its planned launch next September, the head of Alpha Trading Systems said this week.
Alpha Trading, backed by subsidiaries of Canada's biggest banks and other investors, is gearing up to challenge the Toronto Stock Exchange and various electronic trading platforms that have set up shop in Canada in recent years.
Its actual launch date will depend on regulatory approval, technological development and plenty of software and connectivity testing.
But volatile stock market activity will not be an issue, Alpha's chief executive, Jos Schmitt, told Reuters on Monday, when Canadian and global stock markets posted severe slides.
"I would not see any reason to delay it," Schmitt said in an interview.
"All the reasons to put it in place are there, regardless of the market conditions and the market environment."
ATS operators say they bring more efficiency and greater liquidity to markets, but alternative systems have been slower to take root in Canada than elsewhere.
Alpha's pitch is that its system will provide industry participants, especially high-frequency traders, with quick operating speed using the latest technology.
"We're looking at (providing) a trading service, a data service, and some added functionality like a trade-through management service, in the most cost-efficient way," Schmitt said.
"If I were to put a catch-phrase on it, I would probably say it's an initiative by the industry, for the industry."
Alpha will be designed to make trades on the best market available -- whether an existing exchange or other trading platforms. Plans call for pre-open and extended sessions outside of the regular 9:30 a.m. to 4:00 p.m. trading day.
Down the road, Alpha may offer additional services or expand trading to other instruments such as derivatives or bonds, but those are not immediate priorities, Schmitt said.
Alpha executives are meeting investment dealers in Canada, and will head to New York next month, to explain their business model, technology and pricing approach. Actual pricing will not be finalized until closer to launch.
Nine domestic shareholders are backing Alpha: the
investment-dealer subsidiaries of Canada's Big Six banks, along
with Canaccord Capital Inc
Alpha is not looking for additional investors at this point, Schmitt said. It is already fully funded, and bringing new investors on board would take management time and attention away from launch planning, he said.
A number of ATS players are trying to carve out niches for
themselves in Canada and lure market share from the dominant
Toronto Stock Exchange and junior TSX Venture Exchange, both
owned and operated by TSX Group Inc
They include: Liquidnet Canada, Perimeter Financial's BlockBook and Omega ATS, TriAct's Match Now, Pure Trading, and eventually Instinet's Chi-X Canada and Alpha Trading.
Instinet, a unit of Japan's Nomura Holdings <8604.T>, delayed the launch of Chi-X Canada until the first quarter this year. It previously planned to start in late 2007.
"Everyone's still jockeying for position and wondering what Alpha's going to do to the marketplace," said Bob Smythe, vice-president of Stratix Consulting in Toronto, which advises financial services companies on information technology.
"It's getting very active, but I guess the real issue is how much share volume they're going to take from the TSX," Smythe added.
So far, alternative systems are taking only a tiny fraction of Canadian equities trading.
"It's a very active area still, and we'll see what shakes out at the end of this year," Smythe said, adding that he expects some consolidation to start in 2009.
(Reporting by Lynne Olver; Editing by Rob Wilson)
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