New exchange set to launch

A new stock exchange aimed at deterring high-frequency trading strategies will launch and celebrate its first trade today.

Royal Bank (TSX:RY) is among the supporters of the new Aequitas Neo Exchange, along with U.K.-based Barclays banking group, Canadian pension fund PSP Investments, telecom BCE Inc. (TSX:BCE) and several brokerages.

Named Aequitas after the Latin word for equality and fairness, the new exchange hopes to rival the Toronto Stock Exchange and other markets owned by the TMX Group (TSX:X), which cater to high-volume traders in order to generate revenue.

Aequitas has said it plans to use high fees and a time delay to deter high-frequency trading (HFT) strategies, which have been criticized for leaving traditional investors at a disadvantage.

These practices have been blamed for inserting artificial volatility into the markets by using superfast computers to engage in activities such as exploratory trading, or making small orders to see if there is interest in a stock.

The computers can also engage in up to 5,000 trades per minute, clogging bandwidth and delaying trades by ordinary investors.