Economy & Markets

The introduction of these orders for certain stocks last year led to improvements in the stability and reliability of quotes

By James Langton |

 

The Toronto Stock Exchange (TSX) will allow all securities on both its senior exchange and the TSX Venture Exchange (TSXV) to utilize the new "long life" order type that was introduced in a bid to combat the effects of high-frequency trading.

TSX Equities Trading announced that as of Oct. 23, long life orders will be allowed for all TSX and TSXV-listed symbols. Currently, only about one-third of the listings are eligible for long life orders.

The TSX reports that since the new order type was expanded to a third of its listings in March 2016, it has seen improvements in the stability and reliability of quotes, particularly for highly liquid stocks.

The TSX first proposed the new order type in 2015 as part of a broader effort to reform the trading landscape to address recent changes in market structure.

The TSX introduced a long life order type to "empower" so-called "natural investors" and other non-speed sensitive traders by "rewarding those willing to commit liquidity to the book for a minimum period of time."

In returning for committing to a minimum one second fixed resting time, long life orders receive execution priority over orders at the same price that are not long life orders.

"Our observations of long life preferencing rates indicate that those using long life are receiving valuable priority benefits," the exchange reports.

In addition, the TSX reports that it's seeing "reductions in the frequency of orders being cancelled in under one second for long life eligible symbols as compared to non-long life eligible symbols" in highly liquid stocks.

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