The Toronto Stock Exchange is the most-efficient exchange in the world, according to a recent study of the market impact costs of trading.

According to the survey, done for Institutional Investor magazine, by mid-2004 the average Canadian market impact cost had decreased to a world-leading 5.45 basis points. Market impact is measured in basis points, as the volume weighted price change per trade, as a percentage of the total dollar volume, for a given period.

Canadian market impact costs were the lowest of 44 countries that were surveyed. For comparison, market impact costs on the NYSE totalled 7.71 basis points and, on Nasdaq, 12.98 basis points.

“Our progress did not come about by accident. Addition of impact-lowering features such as icebergs, anonymity and other features contributed to making our marketplace a world leader. As a result, TSX is an increasingly efficient and cost effective market for our participants and our issuers,” said Richard Nesbitt, CEO of TSX Group, in a release.

After adding fees and commissions to get total costs, TSX was second only to Japan: in the 12 months up to June 30, 2004, Canadian all-in cost per trade was measured at 25.35 basis points. TSX costs were down nearly five basis points from 2003, and it compared to 25.87 for the New York Stock Exchange and 34.50 for NASDAQ.

As well, trading liquidity at the TSX continues to grow. In 2002, the exchange was ninth in the world by the same survey; in 2003, it was sixth.