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Canada's newest planned stock exchange is a step closer to reality, as regulators laid out the grounds under which the Aequitas exchange could be approved and sought comments from market users on some of the more controversial aspects.

Aequitas's Neo Exchange is designed to appeal to traders who are concerned that their trades might be bait for predatory high-frequency trading strategies (a la those detailed in the book Flash Boys), and so has been carefully constructed to try to ensure any such strategies won't work. However, some of the tweaks that Aequitas is planning to use challenge the conventional ways in which markets are run. The Ontario Securities Commission is looking for feedback on some of those issues.

For example, the Neo exchange will apply a so-called "speed bump" to traders deemed to be relying on a speed advantage. That is designed to nullify any advantage. Staff at the OSC said they are of the view that a speed bump is not an unreasonable limitation on access, but they want to get the market's views. They also wonder if those speedy traders then should be required to route orders to that market if they are going to be treated differently.

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Currently, the so-called order protection rule requires brokers to connect to all markets that display stock orders for all to see, to ensure that trades always take place at the most advantageous price, no matter on which market it occurs.

Aequitas originally had another idea to ban certain types of traders from certain types of strategies on its Neo market. After talks with regulators, it moved to the "speed bump" system, hoping to create the same effect without having to bar access. Regulators were not keen on having markets that weren't open to all.

Aequitas is owned by a group of investors that spans brokers and investors, including Barclays, Royal Bank of Canada, BCE Inc., CI Investments, ITG Canada, and OMERS.

"We encourage every market participant to comment on our application, make their voice heard and influence the future of Canadian capital markets," said Jos Schmitt, the chief executive officer of Aequitas.

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