TMX advances plans to launch US equities ATS

Canadian exchange group TMX has advanced plans to launch a US equities alternative trading system (ATS), CEO John McKenzie told shareholders during the exchange’s Q4 earnings call on Tuesday.

The trading initiative is “aimed at improving execution quality for buy-side clients south of the border,” McKenzie said. 

Technology development for the platform is “well underway,” and the exchange is looking to launch it as soon as the end of the year, pending regulatory approvals.

The launch will follow TMX’s November announcement of the release of Alpha-X and Alpha DRK, two order books that are part of a Canadian trading platform and were also designed to enhance execution quality.

Alpha-X is a visible order book that has all the same order types and trading functionalities currently available on TSX Alpha Exchange, while Alpha DRK is a fully dark order book with a comprehensive suite of pegged (primary, market, minimum price improvement, midpoint) market and limit order types.

“In each of those cases, what we are building is a higher-quality execution capability very much for both the buy side and the sell side, both supporting and dealing with larger blocks, where you’re looking to minimize execution impact [and] maximize execution quality,” McKenzie said. “Some of this capability we’ve been building in Canada already, and we see the opportunity in the US to provide similar services there” to the US buy side and sell side, as well as Canadian organizations that have activity on both sides of the border, he said.

McKenzie added that the exchange is working toward being ready to launch the platform by the end of the year, but anticipates that regulatory approvals, revenue production, and full operability will more realistically happen in 2025.

Data endeavor

In addition to its plans to launch another trading platform, TMX is investing heavily in its market data products and services, which include TMX Datalinx, to drive further growth. Revenue from Datalinx grew more than 11% year-over-year due to higher revenue from datafeeds, co-location, benchmarks and indices, and enterprise agreement renewals.

Data-heavy growth strategies have become increasingly popular for exchanges as they seek to position themselves as technology providers and partners, a role that extends far beyond, and is even reshaping, their original purpose to serve as marketplaces.

Also contributing to TMX’s bid to grow its data business are its recent acquisitions of VettaFi, a US-based data, analytics, and indexing provider; and Wall Street Horizon, a Boston-based events data vendor that the exchange purchased in 2022.

“Further to our global benchmarking and indices strategy, TMX played an important role in Canada’s transition to a new commercial interest rate, participating in the creation and delivery of the new Term Corra benchmark,” McKenzie said. Term Corra (Canadian Overnight Repo Rate Average) has replaced the former survey-based interbank offered rate benchmark Cdor (Canadian Dollar Offered Rate).

“The investments we have made in our burgeoning global information business will enable us to better serve our growing client base and range of stakeholders around the world,” McKenzie said.