Aequitas NEO Exchange

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Aequitas NEO Exchange
Founded 2015
Headquarters Toronto, Canada
Key People Jos Schmitt, Chief Executive Officer
Products stock market
Website www.aequitasneoexchange.com

The Aequitas Neo Exchange is an alternative stock market launched on March 27, 2015 aimed at deterring high-frequency trading strategies.

Aequitas has said it plans to use high fees and a time delay to deter HFT strategies, which have been criticized for leaving traditional investors at a disadvantage.[1]

The exchange launched with 45 TSX-listed stocks and said it would roll out more securities before launching its own listing service.[2] The exchange signed its first listed security, Invesco Canada’s PowerShares DWA Global Momentum Index ETF, trading under the ticker DWG, on April 1, 2016. It was also the first ETF listed on a Canadian exchange other than the TSX.[3]

Market data for NEO-listed securities is free for everyone at the outset, the exchange said in a release.[4]

History

In June 2013, Aequitas Neo's parent exchange, Aequitas Innovations Inc., announced its intention to create a new Canadian stock exchange to rival the Toronto Stock Exchange, backed by a number of Canadian institutions and corporations. Its aim is to challenge “certain predatory high frequency trading strategies which have impacted the quality of existing equity markets.”[5] Aequitas also plans to operate as a listing venue and build a centralized platform for private securities that will focus on capital raising and liquidity for small and mid-sized issuers.

On September of 2013, the Ontario Securities Commission (OSC), published for a 45-day public comment on discussions about the proposed trading structure of the new exchange.[6][7] After a thorough review of the proposal and related comments, the OSC informed Aequitas that it could not support the proposal as published. In particular, the proposal included restrictions on access to visible orders which do not conform to existing requirements of the regulatory framework, including fair access.[8][9][10]

The company received approval from the Ontario Securities Commission in November 2014 to operate the exchange.[11][12]

In June of 2014, Aequitas entered an agreement with Millennium IT, a subsidiary of the London Stock Exchange Group, as the technology provider for its platform.[13]

In preparation for its expected opening, the exchange named several designated market makers: Barclays, Royal bank of Canada, BMO, National Bank and TD Securities, as well as several independent firms, including BBS Securities, Independent Trading Group; Jitneytrade, National Bank Financial and W.D. Latimer. To compete with the dominant Canadian exchange TMX Group, which currently sees 60 to 70 percent of all Canadian equity trading volume, the DMMs have been assigned to create liquidity in almost all TSX and TSX-V listed securities as well as Neo-listed stocks.[14]

Exchange Backers

The proposed exchange is backed by the following Canadian institutions and corporations:

Products and Services

Aequitas aims to offer:

  1. Trading models designed to impede "predatory" HFT strategies, favor execution by long-term investors and challenge the current “maker/taker” fee model
  2. Smart Order Routing Services designed to thwart predatory HFT strategies, which will be available to investors and dealers at a low cost
  3. Liquidity through market making
  4. A listing offering for corporations that are ready to go public in order to prevent the pitfalls of premature listing
  5. A centralized platform for private securities focused on capital raising for small and mid-cap issuers
  6. Fee competition across all exchange offerings to help reduce the burden on investors, issuers and dealers[16]

Key People

Position Paper

The position paper explaining the rationale for Aequitas Neo, its proposed structure and the proposed implementation timeline, is embedded below.


References

  1. New stock exchange aims to challenge TSX. TheRecord.com.
  2. Top trader sees hope for better market conditions amid Aequitas NEO Exchange launch. Financial Post.
  3. First Listed Security Trades on NEO Exchange. Traders Magazine.
  4. Aequitas Neo Exchange Offers Free Market Data At Grand Opening. Traders Magazine.
  5. 'Out of sync' markets built on ‘predatory’ trades prompt group to pitch TSX rival. Financial Post.
  6. OSC launches public consultation on new stock exchange. Financial Post.
  7. OSC STAFF NOTICE AND REQUEST FOR COMMENT REGARDING PROPOSED STRUCTURE OF TRADING FACILITIES FOR A NEW EXCHANGE PROPOSED TO BE ESTABLISHED BY AEQUITAS INNOVATIONS INC.. OSC.
  8. OSC NOTICE REGARDING PROPOSED STRUCTURE OF TRADING FACILITIES FOR A NEW EXCHANGE PROPOSED TO BE ESTABLISHED BY AEQUITAS INNOVATIONS INC.. Financial Post.
  9. Aequitas Letter of Support Summary related to OSC Requests for Comment. Aequitas Innovations.
  10. Aequitas Questionnaire Summary related to the OSC Request for Comments. Aequitas Innovations.
  11. Aequitas Aims for 20% Share After Exchange Wins Approval. Bloomberg.
  12. Bay Street may have to make some room for second stock exchange. Vancouver Sun.
  13. New Canadian exchange Aequitas chooses MillenniumIT for tech platform. Finextra.
  14. Aequitas Neo Exchange Names Designated Market Makers. Traders Magazine.
  15. Vernon and Park Invests in Aequitas NEO Exchange. Traders Magazine.
  16. Aequitas' Solution. Aequitas Innovations.