Wednesday, April 7, 2010 7:00 PM

Rival upstarts continue to steal TSX's thunder

Gordon Edall

What are we looking for?

We're going to continue our look at what makes the market tick today by focusing on where those ticks are actually taking place.

When it comes time to look up a Canadian stock price, it's fairly likely that you turn to the gold standard in Canada – the Toronto Stock Exchange – or at least a data provider that's relying on information from the TSX. After all, it is Canada's Big Board and that's where all the action is, right?

Number Cruncher isn't so sure any more.

Earlier this year, Alison Crosthwait, head of research at ITG Canada, sent us a snapshot of the fourth-quarter for the Canadian market that captured all of the shares changing hands across all of the trading systems in the country, including the TSX and rival exchanges like Alpha Group, Pure Trading, Chi-X and the like. That snapshot was eye opening, showing us that for Bombardier, more than half the shares traded were being traded somewhere other than the TSX proper (you can see that at tgam.ca/LUu).

With the book on the first quarter's trading closed, we wanted to revisit the issue and see if the upstarts were continuing to encroach on the TSX's terrain.

More about today's screen

The universe of stocks here make up the S&P/TSX composite index as it existed in the first quarter of 2010.

What we're really looking at here are the volumes of shares trading hands and whether or not a specific trade happened on the TSX itself.

Ms. Crosthwait has crunched the trading data from all of the alternative exchanges to come up with a statistic called “per cent fragmented” that shows what percentage of the total volume for any stock is changing hands off the TSX.

Unlike last time out, when we tried to show you where those trades were actually taking place, this time around we are looking for the most and least fragmented names in the index.

What did we find?

When we looked at the data for the fourth quarter, only one name had crossed that 50 per cent threshold where more shares are trading off the TSX than on it. In the first quarter of this year, however, the top five all moved past that particular post.

And, at the other end of the scale, there are no names left in the S&P/TSX composite that don't have meaningful volume moving on an alternate venue.

For an investor that's worth noting because if you are looking at a quote (which is probably based on TSX data), you might not be looking at a price that reflects the real interest in the market or the price you might have to pay. Anecdotally, at least, Number Cruncher has heard that some brokers are even admitting this to clients when asked why a trade didn't go through at a particular price – the answer has been that the trade was executed on an alternate exchange and the client wasn't looking at the price there.