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Canadian Buy-Side Takes Control of their Trades – Use of DMA Projected to Reach 75% Within the next Six Months

As 2008 draws to a close, market research and communications specialists at Forefactor Inc. have completed an update to their seminal tracking study entitled “Perspectives on Algorithm and Electronic Trading in Canada: Are We There Yet?”. Traders representing both buy-side and sell-side firms participated in the on-line survey between May 30th and September 2nd, 2008.

Forefactor President, Renée Colyer states that DMA use currently accounts for over 50% of the buy-side’s executions. Algorithmic trading strategies operate in tandem with DMA and comprise a significant proportion of the buy-sides’ DMA trades. This trade behaviour is indicative of the buy-side exerting greater control over the entire trade cycle and, given that the economic climate continues to encourage the use of less expensive electronic trading methods, it is key that broker-dealers have an electronic offering. Overall, the research points to the fact that Canadian bank owned broker-dealers have yet to make significant inroads in the algorithm arena. “CIBC is the notable exception”, she added. “It is 10th with a 14% share of the algorithm market.”

The study reports that Algorithmic trading is on the rise and has likely continued to increase in concert with the market downturn. “There is still significant opportunity to be tapped in the electronic trading space in Canada and very strong interest in anonymously accessing a broker’s pool of dark liquidity. Canadian broker-dealers are well positioned to take advantage of market opportunities.”

Jeannette Tanguay, the report author, highlights the fact that the greatest use of algorithmic trading resides at broker-dealers either on their execution or proprietary trading desks. “Algorithmic trading is embraced most enthusiastically on proprietary desks followed by direct market access as a percentage of all trades executed within each of those channels. Broker-dealers are increasingly using algorithms to trade a wide variety of strategies and there is a clear preference for developing algorithm strategies in-house.”

Forefactor Inc. greatly appreciates the participation of the Traders who responded to “Perspectives on Algorithm and Electronic Trading in Canada: Are We There Yet?” allowing a tracking update of this important trend.

For more information about this study or to inquire about Forefactor’s capabilities, please contact:

Justin Canivet
Chief Operating Officer

(416) 907-0431 x2

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