A Canadian buy-side push to scrutinize brokers still show that the sell-side matters.

The holy trinity of Canadian market participants rage on in debate today. Canadian buy side, sell side, and regulators are constantly revamping market structure in a domestic market that is growing increasingly complex.

One controversial topic for 2012 remains the uncertainty over whether there will be an increasing emergence of dark venues for Canadian buy-side traders. For now, market sentiment remains mixed, with only a couple dark vendors currently owning Canadian market share, according to research provider, Linedata. The country’s main dark providers continue to be Liquidnet, with less than 1%, and Match Now with 2.5% of market share.

“There’s always been a priority for lit versus dark liquidity regarding an order is at the same price,” said Chris Sparrow, a Canadian capital markets observer.

Perhaps one of the main reasons for slow dark pool growth in Canada is that buy-side traders are increasingly concerned over information leakage, and gathering more granular data on trades.

“As trades become more complex, such as the emergence of parent-child orders, or ‘high-touch’ orders, buy-siders increasingly have shown concern over knowing the ins-and-outs of the dispersion of their orders—where they were routed, executed and in which sequence,” said a source.

Due to the increasingly electronic nature of trading today, market participants might think that the role of brokers will dwindle. In actuality, the role of brokers—as we know it—will dwindle, but the buy-side should expect more broker activity will surge as an attempt to provide value in an ever-changing market environment.

“Brokers ultimately bear the responsibility for their client’s access to the market and there are policies in place, by the Canadian regulators, to shut down a strategy if it goes wrong,” Sparrow said. “And since regulators are at the forefront of market structure talk in Canada, people should expect that the sell-side will incur great costs to implement tools for their clients not to be a regulatory liability.”

Per usual, one group that benefits from change is technology and compliance providers. Transaction cost analysis (TCA), or the process of analyzing spreads on exchange transactions and broker fees continues to be an in-demand service offered by vendor to buy-side trader.

“TCA goes a long way towards helping buy-side traders understanding the quality, liquidity, or character of a particular venue,” said the source.

Reducing trading costs will remain paramount in the year ahead for buy-side traders, according to Milos Vukovic, vice president of investment strategy at RBC Asset Management.