Citing concerns about market fragmentation, the Toronto Stock Exchange (TSX) says it’s time to consider imposing a cap on trading fee rebates.

In a notice published on May 31, the exchange said that a recent price war among marketplaces has led to an increase in the rebates that trading venues pay for active retail order flow.

It proposes rolling back those recent increases and capping rebates at their prior levels.

Specifically, it proposes capping active rebates within the range of 10 cents to 17 cents per share.

“Setting a cap on active rebates at this level would help to better balance between the cost reduction benefits of active rebates and the costs for natural liquidity providing orders to participate against that flow,” it said.

“It would also continue to allow marketplaces a reasonable degree of room to compete and continue to provide differentiated offerings to their diverse client base,” the exchange added.

The exchange said that, if regulators can’t impose a cap “within a reasonable timeframe,” it plans to try and get a voluntary agreement in place among the various markets.

The move to cap rebates comes amid growing industry concerns about “the potential for the increased segmentation of cost-sensitive retail active order flow (which receives a rebate) away from natural resting orders that might also be sensitive to paying fees to post.”

Given the competitive environment, the exchange noted that, without some action to address the recent run up in rebates, more increases are possible, “further exacerbating the concerns about segmentation.”