UPDATE 2-Canadian exchange operator TMX Group to trim fees, rebates

Mon May 4, 2015 5:11pm EDT
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By Euan Rocha

TORONTO May 4 (Reuters) - TMX Group, owner of Canada's major stock exchanges, said on Monday it will gradually reduce its rebate and fee structure to address concerns about its incentives model and to tackle competitive threats.

The move by the operator of the Toronto Stock Exchange and other markets could push smaller rivals to lower their own fee structures and reduce the need for regulators to step in to cap fees.

Critics say the widely used fee and rebate system, called the "maker-taker" model, distorts stock-order routing practices as brokers are enticed to send orders to markets where they get the best incentives, instead of acting in clients' best interests.

The practice has come under renewed scrutiny as many have questioned offering incentives to brokers to entice liquidity. Canadian regulators began to investigate the issue a year ago.

Last year, Nasdaq Chief Executive Robert Greifeld joined the debate about fee-based incentives, urging U.S. regulators to reexamine the model.

The TMX contends a drastic reduction or outright removal of the maker-taker model could have a negative impact, causing an increase in volatility and loss of liquidity.

The company said it is instead introducing a program of phased reductions in maker-taker rates that is aimed at gradually lowering dealers' trading costs.   Continued...