The Toronto Stock Exchange is cutting its trading fees and introducing a volume-based system for stocks that are inter-listed on Nasdaq and the American Stock Exchange.

Effective October 1, the exchange will begin a one-year trial in which it use a volume-based trading fee structure for the 113 issues that are inter-listed on the Toronto Stock Exchange and either Nasdaq or Amex. Both these U.S exchanges use a volume-based system that sees them essentially pay for order flow, the NYSE does not.

“When liquidity is added to the central limit order book, each booked and subsequently executed passive order will receive a credit of 0.275¢ per share to a maximum of $50. When liquidity is removed from the central limit order book, each executed active order will be charged 0.4¢ per share to a maximum of $100,” it explains. Also, crosses are charged 0.4¢ per share (each side pays 1/2) to a maximum of $50.

“Trades under this new fee model are not eligible for existing discounts based on value or number of transactions, except with reference to the cross printing facility (qualification and credits for participation in this facility remain unchanged),” the TSX adds.

The change is designed to make the TSX more competitive and grab more order flow from its U.S. rivals.

Trading fees for all other issues remain under the current value-based fee system. But, those fees are going down in two phases. Effective October 1, the charge of 1/50th of 1% on the value of executed active orders will be reduced to 1/55th of 1%. And on January 1, 2006, a further reduction to 1/60th of 1% will be implemented. All other aspects of the value-based trading fee system remain unchanged, including the maximum charge of $50 per trade, cross fees and discount methodology.