Jos Schmitt is the president and CEO of the Aequitas NEO Exchange. (Courtesy NEO)

Starlight Capital’s CFO and COO Graeme Llewellyn wanted to be able to pick up the phone and speak with a real live person when it came to dealing with its stock exchange listings business.

Toronto’s burgeoning Aequitas NEO Exchange (NEO) provided just that kind of personalized and “entrepreneurial service,” Llewellyn told RENX in a recent interview.

Starlight Capital is a relatively new division of Starlight Investments, the private real estate investment and asset management company.

Starlight Capital made its first Canadian exchange-traded fund (ETF) listings with the NEO in October 2018: the Starlight Global Infrastructure Fund (SCGI) which invests in a global portfolio of publicly listed global infrastructure companies, and the Starlight Global Real Estate Fund (SCGR) which invests mostly in real estate investment trusts and equity securities of companies focused on residential and commercial property.

About two months later, NEO listed Starlight Hybrid Real Assets Trust (SCHG.UN.CF), Llewellyn said.

He said NEO doesn’t really focus on real estate assets, so that wasn’t much of a factor in selecting the upstart Toronto exchange for the listings (any exchange is capable of listing real estate products). It was NEO’s “entrepreneurial culture and client focus” that attracted Starlight Capital.

Starlight and NEO fit well in terms of company personalities, he said.

“They have been extremely client-focused, right from the beginning from pre-launch to after (and) their support is excellent,” he said. “If I need them, I pick up the phone and I get someone.”

NEO has also offered transparency, including with data, pricing and quotes, he said.

NEO a response to exchange consolidation

Those are all talking points touched on heavily by Jos Schmitt, NEO’s president and CEO.

NEO officially launched in mid-2015. Its creation was spurred by the consolidation of the TSX, TSX-Venture Exchange and TSX Alpha Stock Exchange following the 2012 merger of the TSX with the London Stock Exchange, Schmitt told RENX.

He said the exchange consolidation led to scant competition in the Canadian exchange landscape.

In general, Schmitt said, stock exchanges have become too supportive of high-frequency trading (HFTs) which have developed strategies that disadvantage other investors.

“(There were) lots of elements that were really leading to a realization that stock exchanges were really no longer fulfilling their purpose the way they used to in the past.”

Schmitt said NEO’s primary goals are to generate and maintain investor confidence, list only senior companies, maintain an equal trading model that ranks HFTs behind other investors, and to provide more fulsome data to investors and companies than is available on other exchanges.

For example, small or natural investors get a priority in their trades over HFTs in the trading system. “They trade ahead of the HFTs,” Schnmitt said. “It is (about) creating a level playing field.

“We’re the only exchange in Canada doing that.”

So far so good: Schmitt

“Today, on average, we represent 10 per cent of all volume traded in Canada, across all Canadian-listed securities. We are about 10 per cent of all ETFs listed in Canada,” Schmitt said. He noted the largest corporate issuer listed to date on NEO has a near-$2-billion market cap.

Schmitt said the benefits of listing on NEO are not specific to real estate. “The benefits that we put in place, we put them in place in a way that can really benefit everyone.”

Also among its property or infrastructure listings are the CMI Mortgage Investment Corporation – Series PTF (available on the NEO Connect fund distribution platform), and AGFiQ Enhanced Global Infrastructure ETF (QIF).

“Right now, we are not (listing on other exchanges),” Llewellyn said of Starlight Capital’s products. But he noted parent company Starlight Investments does have listings elsewhere, including the TSX.

“On the investment structure side, (NEO) has made inroads with adding new issuers and ETF funds on their exchange, resulting in their market share on that side of the business growing over the last couple of years,” he said.

The exchange has helped Starlight get the word out with effective communications and advertising, he added.

“I think NEO has done a good job with that.”