Pure et al. accused of coddling "trader terrorists"
Canadian National Stock Exchange (C:*CNSX)
Monday June 07 2010 - Street Wire
by Stockwatch Business Reporter
During the week ended June 4, 2010, Canada's top three alternative trading systems -- Pure Trading, Alpha Trading Systems and Chi-X Canada -- captured 24.4 per cent of Canadian stock trading, including all listings on the Toronto Stock Exchange, the TSX Venture Exchange and the Canadian National Stock Exchange. Alpha, the established leader amongst the ATSs, traded an average of 144.3 million shares per day, while Chi-X Canada traded 36.2 million. The third most active ATS was Pure Trading with an average of 13.0 million shares per day.
The TMX Goup has released its May trading statistics, breaking some previous records. The Toronto Stock Exchange set an all-time transaction high on May 6, with 1.60 million trades. The TSX set its previous record, 1.4 million trades, on Sept. 18, 2008. Also, the Montreal Exchange hit a monthly average daily volume record at 218,846, surpassing the 216,626 it set in February, 2007.
At this past weekend's 2010 World Resource Investment Conference in Vancouver, newsletter writer John Kaiser spoke of his dislike for high frequency traders, or what he calls "trader terrorists." He is just one of the chorus of market commentators noting the problems with high frequency trading. Mr. Kaiser compared it to Halo, the multiplayer on-line war game. He says his children are always complaining that their internet connection is slow, and a millisecond delay in data transfer results in the player's death. Mr. Kaiser warns that high frequency trading is creating dangerous and chaotic conditions. He says technology is hijacking the long-term price discovery process, which is necessary for a free market. The newsletter editor warns that ordinary traders are beginning to back out of the market because they cannot compete with high-speed computers.
High frequency traders are attracted to ATSs because they process orders quickly and cheaply and offer rebates. Chi-X Canada, for example, can process more than 30,000 orders a second with an average latency of under one millisecond. This is important for high frequency traders who take advantage of delay times to make many little bits of money in less than seconds. The bits add up. Opposition to these traders is increasing, and in the United States, lobbyists are asking the government to impose a wee tax on high frequency trades, which would neatly tax away their profits and make them think twice about a trade.
Meanwhile, in Brazil, Chi-X Global and Chi-FX Brazil have arranged to provide foreign investors with streaming quotations from the Bolsa de Valores, Mercadorias e Futuros (BVMF). Chi-FX Global will provide the quotes in offshore currencies based on foreign exchange rates so Canadian investors will see the stock quotes in Canadian dollars. The service will also allow foreign investors to place orders in their home currency, which will increase market liquidity and decrease the intraday risk involved when accessing the Brazilian market. Chi-X Global's Tal Cohen, chief executive officer of the Americas, said, "There is tremendous and growing interest from the global investment community in participating in the Brazilian marketplace."
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