Fighting For Fairness, Even In The Dark
From inception, when our exchange was a mere vision of industry stakeholders brainstorming around a boardroom table, NEO has had a singular focus: do what is right for investors and capital raising companies. This continues to be our mantra and it continues to guide the decisions we make today.
One of the main pillars of our business is innovative trading solutions that level the playing field for natural investors – both institutional and retail. By offering unique matching priorities in our trading books, our aim is to curb predatory trading practices and reduce unnecessary intermediation. And we have been successful – over 60% of our trading volume is between natural investors.
The concept of reduced unnecessary intermediation is simple: whenever possible, let natural investors trade with each other and let market makers be the ones to fill liquidity, as required. If you provide liquidity, over 90% of the time there is natural investor on the other side of your trade. If you are taking liquidity on NEO, 90% of the time you will trade with a natural investor or one of our designated market makers. How do other markets in Canada fare? We don’t know…they don’t publish their metrics.
We’ve seen the benefit of reduced intermediation and we know it works. The industry has benefited. Canadian capital markets are healthier for it. But it has only been available in displayed books.
Today we launched NEO-D. A different Canadian dark venue. A dark book was always part of our original business plan, postponed only to get our displayed books up and running first. Now it’s time to bring competition to the dark.
Dark trading is a reality in capital markets, whether in Canada or in other capital markets around the world. In the third quarter of 2018, close to 10% of all Canadian trade volume occurred ‘in the dark’. Natural investors, who tend to use dark markets to reduce information leakage can now access a dark facility that puts their needs first. Like our displayed books, our matching priorities in NEO-D will reduce intermediation, improve execution quality and promote natural-to-natural trading.
We want to hear from you. How do you like trading in the dark?