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The top executive of TMX Group's (X.T) derivatives exchange unit is working to attract more U.S.-based high-frequency trading shops to Canada's options and futures markets.

The push is intended to bolster volume in Canadian derivatives, which trail U.S. and European counterparts in terms of trading activity, according to Alain Miquelon, president and chief executive of the Montreal Exchange.

"Canadians tend to be more risk-averse and conservative in terms of their investing approach," Miquelon said in an interview with Dow Jones Newswires.

Brokerages in Canada have also been less aggressive in developing the country's domestic options market, Miquelon said, alongside a generally lower awareness of how futures and options work.

While U.S. gross domestic product is 11 times larger than Canada's, on-exchange derivatives trade in the U.S. is 157 times bigger, according to a report from Equity Research Desk. That puts Canadian futures and options trading activity well below international levels.

While Miquelon and other TMX executives are redoubling educational efforts aimed at Canadian clients, the exchange operator is making a particular effort to recruit U.S.-based proprietary traders to boost liquidity in the company's derivatives markets.

Using sophisticated computer programs, so-called high-frequency traders are able to move in and out of markets in a matter of milliseconds, pursuing a variety of arbitrage and market-making strategies.

Such firms now drive a huge amount of the business done on exchanges, accounting for about 44% of average daily volume on CME Group Inc.'s (CME) futures markets and as much as two-thirds of U.S. cash equities trading.

For the average investor, high-frequency trading shops can mean tighter spreads and faster execution times, though critics charge their speed may give proprietary traders unfair advantages over other participants.

Miquelon said TMX is pitching a technology and regulatory environment similar to that of the U.S. and U.K., where high-frequency traders are already entrenched, alongside a distinct market that is under-penetrated by competitors.

While activity at TMX has shown signs of a rebound in recent months, Miquelon said that investors have been generally slower to return to Montreal's derivatives markets compared to much-larger exchanges operated by CME and NYSE Euronext's (NYX) Liffe.

"The crisis has been a bit steeper for MX, because we are not a primary derivatives market," Miquelon said.

Banks and hedge funds, key customer groups for exchanges, have scaled back trading activity around the world as they deleveraged in the wake of the global financial crisis.

Exchange executives have seen signs of stabilization in trading over the last few months, though worldwide volumes remain about 20% below year-ago levels.

-By Jacob Bunge, Dow Jones Newswires; (312) 750 4117; jacob.bunge@dowjones.com