06.26.2012
By Terry Flanagan

TMX Looks To Extend Global Footprint

TMX Group is making a concerted push to establish a bigger global footprint as the Canadian exchange operator says it is hopeful that its proposed merger with Maple, a consortium of Canada’s biggest banks and pension funds, will reach a successful conclusion in little more than a month’s time.

In a bid to attract more interest towards Canada’s capital markets, TMX, parent of the Toronto and Montreal stock exchanges as well as TSX Venture, a public venture capital marketplace for emerging companies, held a conference in London yesterday acting, as TMX chief executive Tom Kloet put it, as an “unofficial ambassador” and “cheerleader” for Canada.

TMX wants to bring in more overseas listings on to its Canadian marketplaces and build its presence in Europe, having opened an office in London in late 2010.

“[The London office] may not be terribly big in terms of size, but it is symbolically and strategically significant for TMX Group,” said Kloet. “It provides us with an important presence here that will help us explore and capitalize on new business opportunities. And, more importantly, it will help us serve our U.K. clients more effectively.”

Kloet said that TMX’s exchanges list more than 4,000 securities, including 33 from Europe, representing, he said, “a lot of choice for U.K. investors”. Half of the trading that occurs on TMX markets comes from outside of Canada, said Kloet. TMX also opened a Beijing office in November last year in a bid to enhance TMX’s international profile and presence, while earlier this year the Montreal Exchange expanded its sales and customer service team into the New York market.

Maple’s $3.8 billion acquisition of TMX, meanwhile, has been ongoing for almost a year now with Maple extending its offer for TMX for an eighth time, to July 31, last month.

Canadian regulators have also yet to rubber stamp the deal over concerns that the deal could potentially create an unfair monopoly in Canadian securities trading and clearing.

As part of its proposal, Maple wants to buy the Canadian Depository for Securities, which clears and settles all trades in Canada, and fold it into TMX, the operator of most of the country’s securities exchanges. There are fears that clearing and settlement of transactions would favor Maple shareholders.

Another potential problem is Maple’s plan to acquire Alpha Group, TMX’s biggest domestic competitor. Alpha, which until recently operated as a so-called alternative trading system but has since upgraded to full exchange status, is owned by some of the members of the Maple consortium. Critics are worried that the combined TMX-Alpha entity would control around 85% of all stock trades in Canada.

The potential TMX-Maple deal has “put everything into a state of suspended animation, if you will, since last summer”, Richard Carleton, chief executive of the Canadian National Stock Exchange, an alternative trading venue owned by CNSX Markets, told Markets Media earlier this year.

However, Kloet is confident that the TMX-Maple deal may now proceed as planned on July 31, following Maple’s decision to change its corporate governance structure to appease regulators.

“We’re hopeful it will be the end of July,” Kloet told the Financial Times. “The key is when the Competition Bureau [the Canadian antitrust regulator] will do it. We’re working on getting ready for the end of July.”

Almost a year ago to the day, the London Stock Exchange’s proposed $3.6 billion “merger of equals” with TMX fell by the wayside after TMX shareholders turned down the deal, opening up the way for Maple’s hostile bid.

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