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TMX Group to change equity fee schedules under 'maker-taker' model

TORONTO – TMX Group (TSX:X) will begin making changes next month to equity trading fee schedules under what is known as the “maker-taker” model.

The operator of Canada’s major exchanges announced Monday that it will gradually reduce fees and rebates under the model at the Toronto Stock Exchange, the TSX Venture Exchange and TSX Alpha Exchange.

The maker-taker model involves paying rebates to participants who add liquidity (maker) and charging a fee to those who remove liquidity (taker).

This model was introduced to Canada more than a decade ago to increase liquidity, tighten price spreads and increase the competitiveness of the Canadian capital markets.

However, over time the model has raised concerns about market efficiency, fairness and quality.

“TMX is leading the way with a market-driven solution that will address the issues head-on, while taking care to preserve Canada’s competitiveness,” Kevan Cowan, president TSX Markets and group head of equities, said in a statement announcing the change.

The TMX said it fears a drastic reduction or outright removal of the maker-taker model might have a negative impact on the market, including increased spreads, a rise in volatility and a loss of liquidity.

Instead, it plans to introduced a program of phased reductions designed to “gradually lower dealer active trading costs, minimize unnecessary intermediation and increase investor confidence.”

The first phase of reductions, effective June 1 subject to regulatory approval, will differentiate between fees for interlisted and non-interlisted securities to maintain the competitiveness of the Canadian market relative to the U.S. market.

Taker fees will be reduced up to 34 per cent with an average reduction of 26 per cent across all securities and participants, while maker rebates will be reduced by an average of 31 per cent.

Subsequent changes will be implemented in six- to nine-month intervals over the next 18 to 24 months, the TMX said.