Canada's TMX Group and Aequitas Connect have announced plans to launch their own mutual fund trading platform in Canada. The TSX NAVex and the Aequitas PTF Connect platforms will enable actively managed mutual funds to be traded and settled via a centralised mutual fund solution. Both platforms are building out and are expected to begin operating in the first quarter of 2016.
"The NAVex platform can be leveraged for any product with end of day pricing, including structured products," said Deana Djurdjevic (pictured), senior vice president, equities trading, TMX Group. "The TSX NAVex Platform will facilitate purchases and redemptions of mutual funds using TMX's proven equities trading, clearing and settlement infrastructure. Mutual funds posted on the platform will be visible to all current participating organizations who currently trade TSX-listed equities and exchange traded funds (ETFs)."
Through the TSX NAVex platform fund manufacturers will be able to offer actively managed products to discretionary and fee-based advice channels. Investment Industry Regulatory Organization of Canada (IIORC) dealers will be able to purchase and redeem eligible mutual funds through the infrastructure of TSX. The Aequitas PTF Connect platform will be available to all mutual fund companies and IIROC dealer members in Canada.
The platforms will allow investment advisors to bulk trade mutual funds from existing order management platforms and provide greater product options via access to low-cost actively managed products. Fund manufacturers will benefit from open distribution to discretionary and fee-based advice channels and reduced fund management costs via an omnibus account structure.
Platform Traded Funds (PTFs) are actively managed mutual funds that transact and settle like ETFs, but do not need to list or trade on a stock exchange and have no bid-ask spread. Introduced by Invesco Canada in October, PTFs are designed for fee-based investors who work with either discretionary or non-discretionary advisors. The PTFs are similar to ETFs in that they have a unique ticker symbol and can be traded directly through a dealer's existing equity-trading system.
The TSX NAVex Working Group was established to ensure the new platform meets industry needs and reflects best practices according to Djurdjevic. The group includes representatives from 29 of Canada's largest fund manufacturers, including AGF Investments, BMO Asset Management, Fiera Capital, First Trust Portfolios Canada, Manulife Investments and Vertex Once Asset Management, among others. "The goal here is to create an industry-neutral solution that will benefit the entire market and we felt that the best way to go about that was to partner with key players and stakeholders," said Djurdjevic.
Mutual funds in Canada are regulated by securities commissions in each province, and individual investors' interest are guarded by three self-regulatory organizations, the Canadian Securities Administrators (CSA), the Mutual Fund Dealers Association of Canada (MFDA) and the IIORC.
The industry is in the final stages of implementing a regulatory initiative called Client Relationship Model Phase 2 (CRM2), to enhance the range of rules and requirements that apply to every aspect of the relationship between investors and dealers/advisors. Through the initiative the industry will provide investors with clear, easy to understand information on fees and performance, hoping to lead to better informed investors.
According to SRP data there are currently 541 products in Canada linked to exchange traded funds. National Bank of Canada is the most prolific issuer with 417 products linked to ETFs. Following are BMO Financial with 37 products and CIBC trailing closely behind with 34 products.
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