- By Region
The Canadian banks and funds looking to take over the country’s largest stock exchange denied they were creating a “regulated monopoly”, and extended the deadline for their deal once again as official approval looms.
The C$3.8bn offer by 13 banks and pension funds to buy out shareholders of TMX Group, operator of the Toronto Stock Exchange, has been bogged down by regulatory scrutiny since its inception last year.
Regulators have been worried about decreased competition if some of the exchange’s biggest customers also own it, along with the other assets that make up part of the deal, an electronic trading platform and Canada’s securities clearing house.
But in the past month, provincial securities regulators made last-second proposals ahead of previous deadlines for the deal, promoted by some of Canada’s biggest institutions, including the Ontario pension fund, TD Bank and CIBC.
The proposed remedies, such as requiring approval for fee changes, have not been deemed too onerous by the consortium of banks, known as Maple.
On Thursday at The Empire Club in Toronto, Luc Bertrand, vice-chairman of National Bank Financial Group and a spokesman for Maple, said the deal “will not create a so-called regulated monopoly”.
He cited competitors such as Chi-X Canada, Pure Trading, Omega ATS and the US exchanges, including Nasdaq and the New York Stock Exchange.
The Toronto Stock Exchange’s share of equity trading was 65 per cent on May 30, and Alpha traded 14 per cent. Chi-X Canada had a share of 15.7 per cent and Pure Trading 1.6 per cent.
Mr Bertrand said the rationale for the deal was to create an “integrated exchange” that was unique globally, to better promote Canada as a destination for capital raising.
Few exchanges that are not national monopolies, such as Brazil’s BM&FBovespa, own securities clearing and settlement services.
Deutsche Börse is one exception, and investors value it more highly than competing groups, such as NYSE Euronext. The pair tried to merge last year, citing synergies similar to what Maple is describing, but were blocked by regulators in the EU because it would have created a futures monopoly.
The remedies proposed by the Ontario Securities Commission in May included requirements of independent board members, plus an independent body that would consider conflicts of interest, and pre-approval of any new fees or trading types that might advantage some exchange customers over others.
The national Competition Bureau subsequently said the Ontario regulator’s remedies, if adopted, might allay its fears about the antitrust implications of the deal.
The merger had originally come about when the banks sought to block the London Stock Exchange from buying TMX. The exchange has since agreed to be acquired by Maple, but must receive shareholder approval.
The deal expiry, after which Maple and TMX shareholders could walk away from the proposal, is now July 31, having been previously extended from the end of April to the end of May.
Ontario will end a public comment period for its proposal on June 4, as will the Quebec regulator. Alberta said that it would likely approve the deal. There is no timeline for approval after the comment periods end.