Managing Risk

Terry Flanagan

As regulatory scrutiny continues to affect the markets, risk management has become more important than ever for market participants.

With the collapse of broker-dealer MF Global and the scandal at Pipeline Financial Group putting a black eye on the trading community, market participants are taking the initiative when it comes to bolstering risk management.

TMX Group recently announced that they have acquired Sydney, Australia’s Razor Risk Technologies, which provides credit risk software to clearing houses, stock exchanges, financial institutions and brokerages. In addition, 91.2% of the shares in Razor were tendered, allowing TMX to acquire the company in full. It intends to complete the acquisition by Feb. 28.

“Risk management is absolutely critical in today’s markets,” Richard Simon, director of corporate development at TMX Group told Markets Media. “Exchanges that own clearing houses, like TMX Group, are the natural central point of risk management for a market place, and as such we are a keystone in supporting the risk checks and risk management requirements of our customers.”

“The acquisition of Razor will provide a point of entry into the attractive risk management technology sector,” said Thomas Kloet, TMX chief executive officer, on a conference call with reporters.

A key strategic focus for TMX Group over the last several years has been to diversify its revenue streams. There has been an increased emphasis on exchanges leveraging their core capabilities as a provider of technology solutions to the capital markets. TMX Group has participated in this trend by providing the Boston Options Exchange and the London Stock Exchange Group’s Pan-European derivatives markets with technology for their respective market places. “We intend to grow this aspect of our business by continuing to invest in existing and new technological solutions,” said Simon.

TMX’s offer price for Razor was $0.0349 per share. Razor has appointed TMX’s Brenda Hoffman, Michael Ptasznik, Sharon Pel and Mark Licciardo to the Razor board of directors, joining Ellis Bugg. Andrew Wood, Ralph Pickering, Simon Yencken and Jane Yulie have retired from the board.

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