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HFT speed bump gets green light as OSC approves Aequitas Neo Exchange

by Greg Klein | November 17, 2014

A new bourse that intends to block high frequency trading, Aequitas Neo Exchange received regulatory approval from the Ontario Securities Commission on November 17. With the go-ahead taking effect March 1, Aequitas Innovations says it’s on track to launch its trading and listing platforms during the first half of next year. “The private markets platform will then follow, subject to regulatory approval.”

HFT speed bump gets green light as OSC approves Aequitas Neo Exchange

The new exchange’s primary distinction will be processing delays, or “speed bumps,” as well as higher fees directed at HFT traders. The OSC lists Aequitas Innovations owners as Barclays Corp, CI Investments, IGM Financial, ITG Canada, OMERS OCM Investments II, PSP Public Markets and RBC Dominion Securities. “Before launching operations, the ownership structure will be further expanded, with the aim of reaching an optimal representation of all types of market stakeholders—both small and large,” Aequitas stated.

In a September Financial Post op-ed, David Beatty argued that “HFT firms buy and sell ahead of others, and sell or buy back milliseconds later at absolutely no risk and for great profit. When a traditional trader does this, he is illegally front-running the market.”

Beatty, an Aequitas supporter who holds board positions with a number of companies including Rubicon Minerals TSX:RMX, added: “For a number of dominant HFT market participants, these companies have simply become a commodity, traded not for their fundamentals, but for how they fit in an algorithm executed almost at the speed of light.”

In October the TMX Group announced it would apply a speed bump to its Alpha exchange. Speaking to the National Post, ITG Canada managing director Doug Clark called the plan “TMX Group’s attempt to compete with Aequitas.”

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