today I managed to watch large portions of the SEC’s market structure advisory committee’s inaugural meeting. So much of it was an exercise soft pushing of each members own business model and commercial interests, but there was one portion of the proceedings that disturbs me more than the rest. That is when the committee late in the day decided it was time to shit on my home country, Canada.
Ladies and gentlemen I was born in Canada. I grew up in Canada. I got drunk for the first time in Canada. I got laid in Canada for the first time. Those of you that wish to insult my homeland had better have your facts in check. So let me clear some things up.
The main provocateur of the shit On Canada choir was Jamil Nazarali from Citadel. Mr. Nazarali claims that the Canadian market is so in tatters that almost all the retail flow gets sent south for a U.S. Based execution. This is utter, complete and total bullshit. The Canadian market share of interlisted volumes has actually grown over the past 10 years ( ex GM, which is a special that clouds reality). So why would J to the N make such a claim? Well it turns out the Canadian regulators have a well-deserved disinterest in the US wholesaler model. A model that allows for opportunistic liquidity providers to compete for aggregated flow, and prevents natural participants who actually contribute to price discovery, from competing for this flow on a trade by trade, or order by Order basis. Jamil, and his buddies at Schwab, Ameritrade and the like will sing from the same “retail has never had it better” song sheet. Now I have long argued that the bilateral agreement wholesaler model is nothing but a wealth transfer away for real risk warehousing institutional investors to active trading retail investors, retail dealers and the wholesalers. With the retail investors getting exactly 1/3 of the square root of fûck all of the upside.Edit
For the wholesale community to badmouth my home country just because they wisely chose against this idiocy is intellectually dishonest, if not slanderous. The pile on that followed from every US market participant that hopes to avoid a US trade at rule was both poorly informed and incredibly self-serving. Comments about spread widening in Canada post the dark rules are totally erroneous.
The Canadian market in many ways is more advanced than the U.S. one. Their access rules for venues prevent the internalizes that dominate much of US equity trading. Marketplace attribution avoids the need to ping a dozen dark markets when you see a size print hit the tape. The IIROC fee model disincents quote stuffing or abuse. In fact the largest dark market in Canada is the template IEX borrowed heavily from to design their own offering….slower engine than feeds, take take pricing and mid point matching. Can it is not perfect. Option clearing fees make that market functionally untradable. The fragmentation of regulators is a global joke. Circuit breakers are at least five years behind the US limit up limit down model.and market data fees are priced at levels even Satan would be ashamed of.
But the Canadian market is vibrant fair and understandable. Mr. Nazarali and his peers on the committee needs spend some time in the land of maple syrup and figure out what our friends to the north can teach us. And the SEc needs to reconsider stocking the pool with a bunch of self interested ass hats who are largely incapable of not talking thier own book 24/7.
Kev of the North