May 31, 2007
Mr. Rik Parkhill
President, TSX Markets
The Exchange Tower
130 King St. West
Toronto, ONT M5X 1J2
Dear Mr. Parkhill,
In response to the TSX Group proposal to move the TSX opening 30 minutes forward to 9am ET, please be advised that the Vancouver Security Traders Association (VSTA) is opposed to this initiative. On behalf of our membership, we appreciate the opportunity to comment, and raise the following concerns with regard to extending official trading hours:
- As we are all aware, the majority of the volume takes place in the first and last hour of the day, and average bid/ask and trade size is well under 1000 shares. An earlier open would stretch volumes over a greater time period, further reducing average bid/ask sizes during the day, thereby increasing volatility.
- A 9am open in Ontario is a 6am open in British Columbia. This proposal directly affects thousands of people involved in the securities industry, including traders, operations staff, fund and portfolio managers, compliance and settlement personnel, advisors, and individual investors. The day for many of these people already begins at 4:30am in order to settle previous day’s problems, digest overnight news, attend eastern time-zone conference calls, and prepare for the upcoming day. The human impact of moving the opening 30 minutes forward cannot be dismissed as trivial.
- The lack of widespread and timely public transportation available at 5am is already a very significant challenge facing participants in the British Columbia lower mainland. Many employees would have to start their day at 4am and earlier. Western based employers would be forced to cover the increased expenses of private transportation
- An earlier opening will burden firms with very significant staffing issues and increased costs, with no corresponding increase in revenue or liquidity. Ultimately, one would have to assume these costs would to be passed along to investors.
- This move would misalign the Canadian markets with official US market hours. A change in the official opening hours of the TSX would create liquidity and price discovery issues that are misaligned with the official opening of the NYSE and NASDAQ.
- The NYSE and NASDAQ have both looked at this in the past yet have abandoned the idea amid member opposition and lack of compelling rationale supporting the move. As the premier Canadian exchange, the TSX should maintain open and close harmony with the premier US exchanges, namely the NYSE and NASDAQ. The TSX should not be distracted into battling for minimal pre-open liquidity. An optional pre-opening execution service would be a significantly more effective alternative to moving the entire official market opening.
- While there may be a belief that non-interlisted stocks would not be affected by moving the opening, we feel that many are highly correlated to inter-listed stocks, and as such may have to endure a staggered open which in particular would disadvantage retail clients with less knowledge and tools available to them.
- Moving official opening hours forward has been extensively studied by trader organizations and exchanges in the US and it was concluded that the economic and human impact would be decidedly negative. For further information on any of these studies, including reports from the STA and their affiliates in Boston, San Francisco, St Louis, Seattle, Los Angeles, Denver, Florida, Portland, and Dallas, please contact us.
- An earlier open will negatively impact western portfolio managers due to lack of time to digest and participate in overnight deals. This would draw capital away from western based capital management firms, towards firms in the east, reducing the breadth of competition in our nation.
In closing, we quote the NASDAQ in its April 2006 filing to the SEC, National Register (Vol. 71, No. 75 4/19/06) “It is clear an earlier open would increase costs across the board, create greater price volatility with greater risk, while enabling east coast investor’s easier access to pertinent market information. This proposal clearly falls below the benchmark for competitive market practices.”
On behalf of the members of the VSTA, we thank you for considering our point of view on this very important matter.
Regards,
Spencer MacCosham
President, VSTA
The Directors and Members of the VSTA