With an election looming south of the 49th parallel and unprecedented numbers of Americans searching Canadian real estate online, we suspect that interest in Canadian market structure is approaching all-time highs. What observers will find is that the evolving Canadian market is becoming increasingly complex. This quarter’s update finds three key takeaways:
- Significant regulatory changes for investment advisors and fund managers threaten to significantly disrupt existing fund distribution practices.
- Canadian markets continue to propose new mechanisms of participant segmentation, using both market-maker participation and/or complex order types to assist liquidity providers in the quest to trade against the most profitable flow. We strongly urge Canadian regulators and markets to address segmentation and set the goal line once and for all.
- The level of ultra-fleeting orders in Canada continues to rise. Of particular note, 15% of passive orders on Alpha which persist for less than the 1 millisecond is both alarming and confusing (see chart, below). Such orders are disruptive, and virtually unattainable. Firms routing in the Canadian market need to appreciate the impact such fleeting liquidity can have on both router and algo performance. We question why such orders exist at all.