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(Adds interview with Aequitas CEO, further detail)
By Alastair Sharp
TORONTO, Nov 17 (Reuters) - Aequitas Innovations Inc, aventure backed by some of Canada's biggest financial entities,won approval from the country's main securities regulator onMonday to launch a new stock exchange seeking to challenge TMXGroup Ltd's dominant Toronto Stock Exchange.
The regulator, the Ontario Securities Commission, said theexchange, called Neo, can start operating on March 1.
Aequitas - a Latin term denoting fairness and the origin ofthe English word equity - is backed by Royal Bank of Canada, Barclays Plc, pension fund OMERS CapitalMarkets, mutual fund managers CI Financial Corp and IGMFinancial Inc, telecom company BCE Inc andothers.
Aequitas says it is entering the industry to help issuersand long-term investors plagued by the ill-effects of predatoryhigh-speed trading, costly data and lack of liquidity. It says these trends now so dominate trading that room has opened up fora market that will offer fair and transparent trading for all.
"Things have become so tilted towards one constituency thatyou can make money by doing the right thing for everyone,"Aequitas Chief Executive Jos Schmitt told Reuters in aninterview.
Schmitt, an industry veteran who ran the Alpha exchangebefore it was acquired by TMX, said that, typically, exchangesencourage greater trading volume "even if it is superfluousvolume," so they can collect fees. He said this extra volume hasnot improved liquidity.
The Aequitas model, which also includes plans for a privatemarketplace to fund early stage companies, will attempt to limitcontroversial high-frequency trading strategies by implementingextra costs and speed bumps for them.
High-frequency traders use sophisticated algorithms to tradeshares in milliseconds. Many players, including some large fundmanagers, criticize their market impact.
TMX, which operates the Toronto Stock Exchange and othermarkets, has moved to counter the threat posed by Aequitas. Itplans a market for privately-held companies and trading optionsfor investors who fear speed-based computer strategies undercutthem.
Schmitt said Aequitas had hoped for between five and 15financial institutions to act as market makers, which pledge tooffer bid and ask prices for securities.
He said expressions of interest to play that role arealready near the top end of that range. (Editing by Chizu Nomiyama; and Peter Galloway)
