For many in the securities industry, complexity is the new norm. Whether because of technology infrastructure, regulatory compliance or simply keeping pace with innovation, there’s simply just more to manage – everywhere. And, wherever complexity seems to appear, cost seems to show up like a faithful wing-man.
It seems reasonable, therefore, that one promising strategy to lower costs would be to decrease complexity – especially at the trade execution level. At the Canadian Securities Exchange, it is precisely the idea of making the current Canadian securities landscape more efficient that underpins their latest move to simplify access for a key stakeholder in the market ecosystem: the dealer community.
Lower Trade Execution Fees: A Bold Step Forward
As announced in an earlier news release, the CSE is taking a bold step to simplify pricing and access for the dealer community by eliminating the ‘maker/taker’ model and, in its place, implementing equal pricing for both active and passive sides of the trade.
The table below summarizes the new trade execution fee structure as it applies to three tiers of securities trading price. Under this fee structure, both active and passive fees are priced at the same rate on each tier.
This announcement is a win for the dealer community and for the trading public for two important reasons.
First, with better pricing comes improved participation and better functioning marketplaces. Second, by eliminating the maker/taker price distinction, the playing field has been leveled for liquidity provider and liquidity consumer.
Ultimately, however, the change in fee structure is a natural consequence of the need for innovation. According to CSE CEO Richard Carleton:
As the exchange for entrepreneurs, we are committed to bringing innovative solutions to market operations. We understand that by simplifying the moving parts of the market, we’ve not only lowered industry costs but we’ve enabled wider participation and access to trading of junior public companies.
The message of “simpler is better” is gaining traction with many junior public companies. The number of listed issuers on the CSE is up substantially through the first quarter of 2014 and trading volumes are also at historical highs.
While there are still many hurdles to clear, a streamlined and more cost effective framework for dealers is an important step towards making simple the new normal.