The Alpha Exchange’s Dark Order Proposal may seem harmless if viewed narrowly — simply adding order types that exist elsewhere.

But the public consultation process for marketplace proposals continues to be perfunctory without clear economic cost/benefit analysis.

Canada’s market structure has evolved through incremental approvals of new venues, order types, functionality layered over time. This incrementalistic approach to adapting Canada’s market structure, has led to a proliferation of undifferentiated venues. “Competitive offerings” or “me too” order types seem to lead to a proliferation of more order types, and less distinction between order books. Many overlapping order types and redundant systems have fragmented the central auction market, practically discouraging competition.

Given the pending TMX acquisition of CBOE Canada, which would result in control of at least nine venues with overlapping functionality, it is prudent to pause the proposal and conduct a holistic post-acquisition review.

See full CFFiM analysis here.