In a world where trends loom large, there’s an ominous tone to the continued market share bleed at TMX Group (TMXGF.PK).
The owner of the venerable Toronto Stock Exchange is expected to see its share of domestic stock trading slip below 80 per cent in August. The technical analysts would term that a ‘breakdown,” the breach of an important psychological barrier. The folks who follow charts would also tell you that once a breakdown occurs, there’s likely to be a further sharp decline.
The 157-year-old TSX enjoyed a monopoly from most of its history, but regulators opened up the market in recent years. Rival exchanges such as Alpha Group, Pure Trading and Chi-X Canada were launched, each with a strategy based at least in part on winning clients away from the incumbent. And these rivals are achieving that goal.
On Thursday, the TSX accounted for 73.8 per cent of domestic trading, by volume, and 71.5 per cent of the traffic, measured by value.
Alpha, jointly owned by a number of big investment dealers, held 20.5 per cent of trading by volume, and 17.6 per cent by value. It was the first time Alpha, founded two years ago, had hit its oft-stated goal of 20 per cent share.
Chi-X Canada, an arm of Instinet Group, did 4.1 per cent of trading by volume and 8.6 per cent by value.
Alpha pumped out what’s best described as a cautiously congratulatory press release to mark the occasion. CEO Jos Schmitt said:
We are very pleased with achieving this major new milestone in our journey. We need of course to confirm, in the coming days and weeks, the persistence of this new level of activity.
Competition among exchanges has been good for markets, as trading costs have fallen dramatically. And the overall volume of traffic is up, which is also good for all concerned, including TMX Group.
But the steady growth of rivals has to be a concern to TMX Group chief executive officer Thomas Kloet, who is attempted to expand the company from its equity focus into new marketplaces, such as derivatives and commodities.