Queue position is a form of risk, not just a time delay, and that market makers react to that risk by withholding liquidity. A queueing model applied to a price-time priority market finds losses to depth of as much as 8%. This inefficiency does not exist in pro-rata systems (though they have their own problems).
The COVID ‘dash for cash’ turned fixed‑income markets into a stress test of a system where asset managers demand liquidity but banks manufacture money. The bottleneck became the dealer balance sheet, not bank solvency. It recommends connecting up asset managers with the clearing, settlement and central banking systems.
High-frequency traders in Canadian bond futures mainly act as tiny, fast liquidity buffers for big institutions, not as predators pushing their costs up.
High-frequency traders on Canada’s Alpha exchange end up looking more like Cournot quantity competitors than razor‑thin price undercutters. Their rivalry makes markets smoother and cheaper for everyone else, as expected in Cournot competition.
Government of Canada bonds, bills, and real‑return bonds form a tightly interconnected ecology: they fund the federal government, anchor Canadian yield curves and pricing, and sit at the core of trading, collateral, and risk management across the financial system.
NYSE’s Retail Liquidity Program segmented its retail flow from the main venue. This is a theoretical worry but, for NYSE, a modest win. The program separated retail trades into a special dark segment makes prices easier to read and trading slightly cheaper for everyone.
Securities‑financing markets in Canada (repos and securities lending) are the plumbing that lets a relatively small stock of government bonds support ever‑rising trading volumes.
At the time, Canadian bond dealers were still mostly principal traders, using their own balance sheets to take the other side of client trades, with pure agency ‘riskless principal’ activity remaining relatively small and concentrated among smaller firms.
Decimalizing options on the Montréal Exchange (moving sub‑$3 options from 5‑cent to 1‑cent ticks) tightened spreads, improved depth near the top of book, and made prices more efficient, with the biggest gains in out‑of‑the‑money names.
Equity-market fragmentation in Canada brought cheaper, more innovative trading, and did not clearly help or hurt market quality, while raising technology costs and operational complexity.