By Ben Dummett
A new Canadian stock exchange spearheaded by Royal Bank of
Canada said Thursday it had secured investments from U.S. money
manager Invesco Ltd. and one of Canada's biggest pension funds, as
it ratchets up pressure on the country's main stock exchange.
Invesco and B.C. Investment Management Corp. are the largest of
a group 11 new investors betting on the upstart Canadian exchange
to compete for trading volumes and listings with Toronto Stock
Exchange operator TMX Group Ltd.
Aequitas NEO Exchange Inc. has raised close to 30 million
Canadian dollars (US$23.5 million) from new and existing investors,
Chief Executive Jos Schmitt said in a phone interview. The exchange
said the offering was oversubscribed.
Invesco oversees $809.4 billion in assets and offers a family of
more than 140 U.S. and international exchange-traded funds. B.C.
Investment Management, with C$114 billion in pension assets, also
offers the new exchange a potential source of significant trading
activity.
The other institutional investors in Aequitas include Davis Rea
Ltd., a Toronto-based money manager; and Vernon & Park Capital
L.P., a Chicago private-equity firm. Aequitas said it also signed
on Canadian brokers Jones Gable & Co., Maison Placements Canada
Inc. and BBS Securities Inc. as new investors, in addition to four
individuals.
The varied representation from main exchange users--brokers,
investors and issuers--ensures that Aequitas "at all times complies
with...making sure that we bring investors and capital-raising
companies together in the most efficient possible way," Mr. Schmitt
said.
More brokers and money-management companies are backing trading
platforms to compete with established stock exchanges as a way of
cutting trading costs and weeding out high-frequency traders. In
January, Fidelity Investments, the large Boston-based money
manager, teamed up with eight other firms including BlackRock Inc.,
Bank of New York Mellon Corp., J.P. Morgan Chase & Co. and T.
Rowe Price Group Inc. to create a private trading venture to trade
big blocks of stocks without using Wall Street brokers.
Aequitas plans to launch the exchange on March 27. As well as
RBC, Canada's largest bank and owner of one of the country's
biggest dealers, its founding backers include brokers Barclays
Corp. and ITG Canada; institutional and pension fund investors CI
Investments Inc., IGM Financial Inc., PSP Public Markets Inc. and
OMERS; and Canadian telecom giant BCE Inc.
The initiative stems from frustration among some investment
firms about TMX's power over listing, trading and clearing equities
and derivatives in Canada.
"TMX works to provide excellent market-driven products and
services to meet the diverse needs of all participants in the
Canadian capital markets," a spokeswoman said.
Aequitas is focused on lowering investor costs to access
stock-quote data for its listed companies and for companies listed
on the TMX's Toronto Stock Exchange and junior TSX Venture Exchange
as one way to differentiate itself from rivals. It will offer free
market data for securities listed on its exchange and do the same
for retail investors to access real-time market data of listings on
the Toronto Stock Exchange and the TSX Venture market.
Other initiatives include plans to offer market-making services
to facilitate trading of illiquid stocks and the adoption of tools
to guard against high-frequency traders using their speed advantage
at the expense of retail and other types of investors to profit
from buy and sell orders.
Aequitas is focused on "trying to eliminate all of the different
types of predatory trading strategies that we see," Mr. Schmitt
said.
Write to Ben Dummett at ben.dummett@wsj.com
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