Thursday, January 12, 2006

TD Newcrest Top Dog in TSX Trades

The Globe and Mail, Andrew Willis, 12 January 2006

There's a new top trading house in the Canadian market.

Last year saw TD Newcrest, the institutional equity arm of TD Securities, move to the front of the pack on the Toronto Stock Exchange. TD Newcrest was the top block trader in 2005, measured by the value of the traffic it steered through the exchange, with an impressive 16 per cent of total trading.

Measured by the number of shares that changed hands, the honour belonged to GMP Securities, an incredible showing for an independent dealer that lacks a bank's balance sheet. GMP Securities accounted for 12 per cent of the shares bought and sold on a record-setting year for TSX volume.

The TD Newcrest move, from the middle ranks a few years back, reflects a multipronged effort on the part of the dealer. The parent bank paid top dollar to bring aboard the talent at Newcrest Capital in 2000, then worked hard at building research, serving traditional clients, and embracing new types of business such as the hedge funds and computer-driven trading community.

GMP Securities has been among the top traders, with a focus on resource and small- to mid-cap stock plays, since the dealer opened its doors in 1995. For one crew to stay together this long, with this level of success, is quite an achievement.

However, the true picture of who is doing what in Canadian equity trading only emerges when the buying and selling of Canadian stocks on U.S. exchanges is thrown into the mix. When interlisted trading in Canadian stocks is added to what plays out on the TSX, the true role of the global dealers in the Canadian market becomes clear, as does the success of CIBC World Market's U.S. platform.

CIBC World Markets moves more Canadian stock than any other dealer, when the value of its New York Stock Exchange and Nasdaq trading is added to its TSX volumes. There's an even split in trading on each side of the border, a tribute to the effort that's gone into bringing teams in the U.S. and Canada together following the 1997 purchase of New York-based Oppenheimer & Co.

CIBC World Markets has taken a few knocks for its U.S. expansion strategy, but on the trading front, the move has paid off.

UBS Securities jumps into second spot on this measure, from a 6th-place showing in the domestic market, and four other global dealers vault into the list of the top 10 Canadian equity traders. New York-based Lehman Brothers, without a presence in Canada, moves into 7th spot.

The ability to trade Canadian stock at the best possible price, on any exchange, is getting increasingly important to clients of all stripes. There's a legal and moral obligation to get the best possible execution on each trade. Institutional investors want the best possible price on increasingly complex transactions, and they don't care which exchange prints the trade.

On the corporate side, every Canadian CEO and CFO dreams of developing a strong following among U.S. investors. Building an American shareholder base means being able to access the largest and most liquid capital market in the world. It also tends to translate into higher share valuations. An NYSE or Nasdaq listing helps win over this crowd.

So from the banks and energy companies through the tech plays, listing on an American exchange is part of a growth strategy, as is winning the support of the global dealers. The Canadian dealers are masters of their own house, the TSX. The great challenge going forward is imitating what CIBC World Markets has done, by following its clients and establishing market leadership on U.S. exchanges.


2005 blockbusters

Top 10 dealers in TSX blocks of 10,000 shares or more in 2005


By value

TD Securities Inc. $117.00 16.10%
RBC Capital Mkts. 87.5 12.0
CIBC World Markets 81.3 11.2
BMO Nesbitt Burns 76.0 10.5
Scotia Capital 67.7 9.3
UBS Securities 39.0 5.4
Merrill Lynch 38.6 5.3
National Bank 37.5 5.2
GMP Securities 28.4 3.9
Desjardins Securities 21.5 3.0


By volume

GMP Securities 5.3 12.00%
TD Securities 5.1 11.7
BMO Nesbitt Burns 4.1 9.4
RBC Capital 3.9 8.8
CIBC World Mkts. 3.6 8.2
Scotia Capital 2.8 6.3
Nat'l Bank Finan. 2.4 5.5
UBS Securities 1.7 3.9
Merrill Lynch 1.5 3.5

Source: TSX Datalinx, & Autex