Prelaunch test fizzles for TSX challengerArticle from today's Globe & Mail:
Prelaunch test fizzles for TSX challenger
Pure Trading scraps start date next week
BOYD ERMAN AND ANDREW WILLIS
An upstart challenger to the TSX Group Inc.'s lock on stock trading in Canada won't be up and running next month as planned, after a final prelaunch test on the weekend went awry.
Pure Trading, which planned to open for business with stock trading March 9, ran into trouble when its computers had difficulty communicating with customers' computers, said Pure chief executive officer Ian Bandeen.
"It's frustrating," said Mr. Bandeen, who has already had to put back the launch of Pure once. "The functionality of the whole thing from a practical point of view is nowhere near what I would have wanted."
The main part of the trading system had originally been set to go live in January before Pure decided that more testing was necessary. This latest delay could add weeks or even months to the process.
"This is a bit of a disaster," said one senior equity trader. "I feel badly for the Pure team."
Saturday's problems arose when Pure's computers tried to send information on premarket orders to the dealers' computers. Because of different speeds of systems, the computer connections started to lock up, forcing many participants to drop out of the test.
"A lot of people gave up their Saturday morning, and ended up sitting around doing nothing while they ran around trying to fix the Pure system," said one brokerage executive who had colleagues at the meeting.
Pure, backed by some of the street's biggest trading houses, is designed to trade stocks super quickly, enabling brokerages and institutional investors to use more computer-driven trading. The market is also designed to push the TSX to increase its own capabilities and lower its prices, by virtue of adding competition to a virtually monopolistic market.
The mere prospect of Pure, even if it's not yet up and running, may be doing the job. The TSX has rolled out a number of improvements to its trading system and has lowered its prices.
The company last summer replaced its system of charges based on the value of trades with one based on the amount of stock exchanged, which is the standard in the United States. The TSX said at the time that trading revenue, which accounts for about half of total revenue at TSX Group, could fall by as much as 12 per cent to 15 per cent a year if the lower prices don't spur more trading to offset the cuts.
Mr. Bandeen said that while fixing the data-transmission problem may take only a few weeks, it may take longer to arrange another testing day with market participants.
"We're then going to be able to know exactly what our time frames are," he said. "I'm quite confident that our fixes will be short and to the point." Still, he declined to give a specific date for a launch.