What are we looking for?

Stocks that might have a different price than the one you are seeing.

Like most investors, Number Cruncher tends to look at the prices on the Toronto Stock Exchange when it comes time to make decisions about individual stocks. It is Canada’s Big Board after all and it’s where the action is. Or so we thought.

The rise of alternative trading systems in Canada has happened largely off the radar screens of most individual investors.

You may have heard of rival exchanges Alpha Group, Pure Trading, Chi-X and the rest. You may even be aware that on any given day the upstarts are taking more than a quarter of the trades away from the 157-year-old TSX.

What may be less obvious, however, is that when it comes to individual names, the upstarts in some cases are taking a much bigger slice of the pie.

More about today’s screen

The hard data comes from Investment Technology Group and the work is being done by head of research Alison Crosthwait. She has been crunching through reams of data from all of the Canadian market participants.

With all of the data from the fourth quarter in hand, Ms. Crosthwait was able to identify stocks that saw a significant portion of their shares trade hands off the TSX proper. Volume is the key metric here.

What did we find?

Look no further than the first name on the list for the best example of why this all matters.

More than 50 per cent of the shares in Bombardier that changed hands in Canada last quarter traded somewhere other than the TSX. You were likely looking at the wrong price if you were eyeing a quote – the buyers and sellers, they were elsewhere.

Looking at the bid-ask spread variation yesterday drives the point home: despite the price you see quoted, that 39-per-cent difference between Bombardier quotes may be there when the trade is executed.

For those of you with a mind for technical analysis, note the issues run even deeper. Technical analysis is built upon a foundation provided by reliable data. In a fragmented market, you can’t get the data you need to make fully informed decisions.