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Canadian Retail Equity Flow Flies South, Says TABB

In a new research report, TABB Group research analysts warn that erosion of order flow in Canada’s capital markets may have far reaching impact. Although Canadian retail investors are better off today than in the past, their brokers are facing increased trading costs amidst a climate of limited liquidity and regulatory change.

Compliance with ever-changing regulation has taken its toll. Fixed costs associated with Order Protection Rule (OPR) mandates for connectivity, market data and membership costs have risen as revenues have declined. Regulatory changes on multiple markets and broker-dealers themselves have increased costs, which have overwhelmed smaller independent brokers, whose exits are increasing and, in turn, contributing further to the lack of liquidity.

As a result, as trading in Canada becomes more expensive, dealers tell TABB they are turning to the US for order execution. “Since US wholesalers already offer greater liquidity, that stokes fears that as brokers continue moving interlisted order flow south, liquidity in the Canadian markets will shrink further,” says Sayena Mostowfi, a TABB senior research analyst, co-author of “Canadian Equity Retail Trading: Smart Order Routing and Regulation,” with contributing analyst Lydia Preyma.

The 18-page report with 7 exhibits can be downloaded by TABB Group Research Alliance Equity clients and media at For more information or to purchase the report, write to [email protected].

About TABB Group

Based in New York and London, TABB Group is the research and consulting firm focused exclusively on capital markets, based on the interview-based, “first-person knowledge” research methodology developed by Larry Tabb. In 2010, TABB launched TabbFORUM, the online capital markets community for peer-to-peer, contributed opinion and analysis covering current industry issues, now tracked daily by 21,000 professionals. In October, 2013, QuantFORUM, a new online channel for the global quantitative investing community, went live.

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