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TMX Group Unveils Two New Order Books to Democratise Speed and Improved Execution Quality

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TMX Group has introduced two new equities order books on its Alpha trading platform, Alpha-X and Alpha DRK, in a move that aims to democratise speed of access and improve execution quality for natural order flow on the Canadian market.

The launch of the two new order books promises a more optimised trading environment that addresses the challenges of adverse selection in fast markets. Both Alpha-X and Alpha DRK are designed to cater to all market participants, allowing them to refine their trading strategies and achieve better execution outcomes.

“Traditionally, marketplaces have focused on either speed or price to set themselves apart,” Rizwan Awan, President of Equity Trading & Head of TMX Markets, Products and Services at TMX Group, tells TradingTech Insight. “However, there’s a discerning clientele out there looking for a third dimension, which is execution quality. We saw that as an opportunity for TMX because there’s currently no marketplace in Canada that goes after that niche.”

Alpha-X, a lit order book, and Alpha DRK, a dark pool, run on the same trading platform as TSX Alpha, TMX’s order book that imposes a randomised order processing delay of between 1 and 3 milliseconds on all orders that have the potential to take liquidity. This is designed to discourage opportunistic liquidity taking strategies, says Awan.

“As with the existing TSX Alpha Exchange, the speed bump on Alpha-X and Alpha DRK slows down trading to give more participants the opportunity to participate and trade in fast-moving markets,” he says. “A key innovation we’ve now introduced on top of the speed bump is the introduction of two new order types.”

Alpha-X offers the Smart Limit order type, an innovative feature designed to assist clients in navigating volatile market conditions by rapidly adjusting orders in real time. “The Smart Limit order type dynamically reads prices and detects if a quote is about to decay,” says Awan. “We have a proprietary AI model, which constantly detects whether a quote is stable or not. If it’s unstable, the system pulls the orders back on behalf of the client. Building out functionality that detects and moves orders based on decaying quotes is a complex undertaking that has traditionally been the domain of liquidity providers. Smart Limit orders democratise that ability for everyone.”

Alpha DRK, in addition to a range of pegged order types such as Primary, Market, Minimum Price Improvement, and Midpoint, also features the new Smart Peg order type, an undisclosed order type pegged to the passive side of the NBBO (national best bid and offer) with the discretionary capability of trading at more aggressive prices up to the midpoint.

Both markets are now live.

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