In working in direction of that objective of world listings integration, Schmitt needs to see Canada enhance entry to consolidated market information. Canada lacks the form of consolidated market information that buyers in the US have by way of the Securities Data Processor (SIP), which is co-owned by the assorted US exchanges. The SIP consolidates information from all of the exchanges as a result of securities are traded throughout a mess of venues. The SIP makes that consolidated information obtainable to all business stakeholders, giving US funding advisors a consolidated view of the total US market. It doesn’t matter the place your safety is traded, a US advisor could have a full view of the bid/ask unfold on that safety, its final sale worth, and the quantity traded. Advisors in Canada don’t have that view of our markets.
Schmitt explains that in Canada, each advisors and low cost channels are restricted to information from the alternate on which the safety is listed. Whereas these securities can commerce in several kinds on different exchanges, if a safety is listed on the TSX advisors and buyers can solely entry its worth, unfold, and quantity from the TSX, whatever the manner it has traded on one other alternate. Canada lacks consolidated information, Schmitt says, as a result of the fee may be very excessive to the exchanges. Nonetheless, with out that consolidated information buyers and advisors have solely a partial view of the market. They could possibly be making selections primarily based on a perceived lack of liquidity in a safety, solely to search out out that its TSX quantity solely comprised 20 per cent of the full quantity traded that day.
Essentially, Schmitt sees consolidated information as a difficulty of knowledgeable resolution making. With out this shift, he thinks that Canadian buyers and advisors can not make totally knowledgeable selections.
Past the problem of consolidated information, Schmitt sees different subjects that have to be addressed on Canadian capital markets. Amongst them is a shift in Canadian brief promoting practices. Whereas he isn’t against brief promoting and sees it as a part of the value discovery course of, he describes some elements of Canadian brief promoting as “predatory,” as rules haven’t been strengthened the way in which they’ve within the US or Europe. The reticence to alter these rules, Schmitt says, typically include a way of ‘why would we modify what we’ve all the time accomplished.’ Schmitt argues that there must be change as a result of with out stronger rules buyers are extra uncovered to potential hurt.
Schmitt additionally highlighted the necessity for a extra sturdy Canadian derivatives market as he mentioned the challenges nonetheless forward for Canadian capital markets. Derivatives, he says, are a key element in good portfolio administration, however Canada lacks a significant derivatives market. Evaluating Canada to the US, and accounting for every nation’s relative market measurement, Schmitt nonetheless sees Canada underperforming. Schmitt needs to see higher quantity traded in Canadian derivatives markets, and their yield enhancement and capital safety traits made extra extensively obtainable to Canadian buyers.
