(July 28 – 17:45 ET) – The Toronto Stock Exchange admits the very survival of stock markets around the world is in question.
John Carson, senior vice president, corporate strategy and market development, gave stock exchanges the sober warning in a speech at the Exchanges for the Millennium conference in New York.
“Some exchanges have already fallen by the wayside and more will. In the words of my broker friends: If you snooze, you lose.”
The chase among all intermediaries, including exchanges and brokers, is for liquidity. And Carson says the same technology that has been blamed for fragmentation is now consolidating liquidity. “In fact, the stock exchange proprietary network is already dead. We’re moving to a global platform provided by the Internet.”
There are still roles for exchanges in this new world order, Carson says, indicating they could become the actual liquidity pool, the integrator, the portal to liquidity pools, integrators of information, standards setters, or listings agents. “It’s also possible they could play no role at all, if the competitive challenges are not met proactively.”
To survive, to have some role, he says exchanges must centralize liquidity and market information. “In my view, globalization of liquidity will happen either virtually – through dealer networks and third party network providers – or through mergers and alliances of exchanges. The latter approach must be the winner if central regulated markets are to be a significant force in the future. Of course, whichever model delivers global liquidity most efficiently will be the winner.”
In light of today’s latest proposal to integrate ATS into Canada, the TSE is building a trading link product and will be bidding to fill the consolidator role. Carson also stressed the need to eventually move onto the global trading platform. “The standard should be international best bid and offer.”
-IE Staff