Alpha says to launch "dark liquidity" pool in Q4

* Trading facility subject to regulatory approval

* Alpha aims to win up to 40 pct market share

* Move could take business from TMX Group

By Jennifer Kwan

TORONTO, July 16 (BestGrowthStock) – Canada’s Alpha Group, the
Toronto Stock Exchange’s (X.TO: ) main rival, plans to launch a
“dark pool” facility that enables buyers and sellers to match
trades anonymously, in its latest effort to win business from
competitors.

The country’s biggest alternative trading system, which has
captured 20 percent of the Canadian stock trading market since
its November 2008 launch, said on Friday it expects to open the
facility in the fourth quarter of this year. The plan is
subject to regulatory approval.

In dark pools, many of which are independent, buy and sell
orders are matched anonymously so that the intentions of the
traders aren’t broadcast to the wider market.

The move could put further pressure on TMX, which runs the
TSX and the junior TSX Venture Exchange. Its share of equity
trading has fallen to just over 70 percent in June from nearly
90 percent a year earlier, according to public data.

Dubbed “IntraSpread,” the Alpha dark pool will allow
dealers to seek trading matches within their firm at the best
prices.

Assuming it is approved by regulators, the new dark pool
could have a major advantage over many rivals given its
ownership structure. Alpha is owned by the investment dealer
arms of the country’s largest banks, who direct much of the
stock trading flow in Canada.

These include BMO Nesbitt Burns Inc (BMO.TO: ), CIBC World
Markets Inc (CM.TO: ), National Bank Financial Inc (NA.TO: ), RBC
Dominion Securities Inc (RY.TO: ), Scotia Capital Inc (BNS.TO: ),
and TD Securities Inc (TD.TO: ), as well as Canaccord Capital Inc
(CF.TO: ), Canada Pension Plan Investment Board, and Desjardins
Securities Inc.

Jos Schmitt, chief executive of Alpha, said the new trading
facility is expected to help the firm to expand its market
share to between 30 percent and 40 percent by 2012.

He said the trading alternative will benefit clients of
participating dealers by offering “a trade price better than
the NBBO (national best bid offer) of all transparent
marketplaces in Canada,” and lower fees than rivals.

Alpha’s move mirrors a trend seen in the United States,
where several big banks run in-house dark pools to shave
trading costs.

Banks that run their own dark pools, such as Goldman Sachs
Group Inc (GS.N: ), can avoid the fees associated with sending
orders to exchanges when they “internalize” orders from their
clients, their proprietary trading desks, and from elsewhere.

Much of the concern about dark pools is that their
anonymous nature means that stock pricing may not be
transparent.

But Schmitt said the facility will be offered to all Alpha
subscribers.

“This is a facility that all dealers who are subscribers of
Alpha — over 80 now — can use to provide their own clients
with price improvement while at the same time reducing the cost
of trading,” he said.

Two dark pools currently operate in Canada including Match
Now, owned by Investment Technology Group (ITG.N: ) and
Liquidnet, which caters to the buy side. Combined, the dark
pools make up just over 1 percent of total stock trading share,
according to public data.
(Reporting by Jennifer Kwan; Editing by Frank McGurty and
Jeffrey Hodgson)

Alpha says to launch “dark liquidity” pool in Q4