TSX Group Inc., the company that controls the Toronto Stock Exchange, unveiled the details of two new programs that will enhance the growing market for algorithmic trading.
Algorithmic trading is driven by computer programs that buy or sell based on set criteria, such as the best price for EnCana Corp., on both U.S. and Canadian exchanges. The programs use mathematical formulas to allow institutional investors to electronically copy different trading strategies that are otherwise done over the phone.
This form of trading lowers investors' transaction costs and allows them to complete trades faster. Investors can also enjoy greater liquidity and lower risk, the TSX said. Algorithmic trading now drives a third of U.S. stock trading and is expected to soar in popularity in Canada.
The TSX hosted an algorithmic conference in Toronto on Wednesday, where it unveiled the details of the two new products, TSXPress and ATX, which are designed to ensure the Canadian indexes remain competitive with their U.S. counterparts.
The ATX, or alternative trading execution system, is designed to offer investors greater anonymity and liquidity in trying to match trades electronically.
“ATX will redefine what an exchange delivers to its participants and will further differentiate TSX from its North American competitors,” Rik Parkhill, president of TSX Markets.
The TSXPress product will reduce the time it takes to electronically respond to an investor's order by 50 per cent, Mr. Parkhill said. It is scheduled to be in completely in place by the third-quarter of 2006.
“Subsequent TSXPress enhancements will be designed to result in market-wide improvements in messaging, execution and data feed speed,” according to the release.
TSX Group also operates the TSX Venture Exchange and the Natural Gas Exchange, a platform for swapping natural gas and electricity contracts.
© The Globe and Mail
