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Letter Summary:
The CAC does not believe that order priority based on size rather than timing is a disadvantage for retail investors. As a starting point, it is not certain that larger orders are always placed by institutions rather than retail clients. However, even if it is assumed that larger orders are placed by institutions, giving priority to such orders means that the market is reflecting the best price information rather than simply reflecting the pricing dictated by parties that are able to utilize speed advantages to obtain priority in the order queue.
Overview of the Council’s Comments:
The presence of market makers is intended to increase liquidity and this is particularly beneficial where securities have low trading volumes. This liquidity will help to tighten spreads and reduce the costs of trading. As long as market makers are limited to only a a reasonable share of the volume of any security (as is the case with the Aequitas market maker program, where market makers are limited to 15% of the volume), there should not be any significant risks.