The Investment Industry Regulatory Organization of Canada has published the first two phases of a comprehensive report on high-frequency trading in Canadian equity markets.
The high order-to-trade study is part of an ongoing analysis, which will help regulators and market participants better understand the nature and impact of faster trading.
Read: IIROC to implement revised electronic trading rules
“This study leverages the rich set of consolidated regulatory data from IIROC’s real-time multi-market surveillance technology,” says Susan Wolburgh Jenah, IIROC’s president and CEO.
She adds, “The study supports IIROC’s mandate to foster fair and efficient markets and bolster investor confidence in their integrity. The results of this study will help to inform IIROC’s work with other Canadian regulators to determine the most appropriate response in the context of global regulatory developments.”
So far, the study finds 11% of all traders are high-frequency traders, and that this group accounted for 22% of the total share volume traded in Canada. It also finds these traders are responsible for 36% of Canadian share volume traded in US inter-listed securities.
Read: Should regulators rein in high-speed traders?
The study objectively identifies a study group of traders and offers a detailed, statistical analysis of their activity. It focuses on the activity of traders who were responsible for a high number of orders, compared to the number of trades they actually completed between August 1, 2011 and October 31, 2011 on Canadian equity markets.
Its third phase will assess the impact of high-frequency trading on Canadian market quality and integrity from multiple perspectives, such as liquidity, price formation, volatility and overall market confidence.
Read: High-speed traders take profits from investors
To assist in the third phase, IIROC has issued for comment a request for assistance for a 30-day period to obtain feedback from all interested stakeholders.
The research is expected to complement other initiatives already adopted by IIROC and the CSA to govern electronic trading. Examples include revised electronic trading rules and guidance, proposed third-party electronic access rules and guidance, and proposed guidance on manipulative and deceptive trading.
See the below related documents:
• IIROC Notice – Provisions Respecting Electronic Trading, December 7, 2012
• IIROC Notice – Guidance Respecting Electronic Trading, December 7, 2012
• IIROC Notice – Proposed Provisions Respecting Third-Party Electronic Access to Marketplaces, October 25, 2012
• IIROC Notice – Proposed Guidance on Certain Manipulative and Deceptive Trading Practices, July 17, 2012
Also read:
Can investors keep up with electronic markets?
New systems will speed trading