Toronto-based TMX Group Ltd. (TSX:X) is transforming from a traditional stock exchange operator to a technology-driven “solutions provider” with a focus on clients’ needs, said the company’s new CEO, Lou Eccleston, at the 2015 Sandler O’Neill Global Exchange and Brokerage Conference in New York on Thursday.
Eccleston further detailed a strategic realignment the company had announced earlier this week as it embarks on a new growth-driven strategy. To help drive that growth, TMX Group has united its technology operations and created a new position to focus on commercializing its services and meeting client needs. The goal, he says, is to transform the company into a solutions provider that happens to own exchanges rather than the other way around.
“In a competitive market, like [the one] we’re in, you’ve got to think about what are your clients’ problems first and then figure out how your capabilities help those problems,” he said, “versus, saying, ‘We’re an exchange, what does an exchange do?'”
As a result, the entire company will be focused on figuring out how it can help its clients solve problems, he said. In some cases, this will involve expanding its existing businesses to better serve clients; in others, it will involve integrating them. There are also smaller aspects of TMX Group’s business that face being sold off, wound down, or otherwise shed, as it focuses on this new strategy.
“We want to optimize what we do with our core businesses, but then we also really have to start to drive growth,” he said. To do that, TMX Group will be moving from its broad, diversified approach to a more targeted one. Specifically, Eccleston explained that TMX Group sees four main areas of potential growth: capital formation; derivatives; market data; and market solutions, such as reducing uncertainty in certain over-the-counter markets.
For example, TMX Group hopes to expand the TSX Venture Exchange beyond its traditional focus on resources to become a more natural home for technology companies looking to raise capital. In addition, the company wants to do more to create a public market alternative to private equity and venture capital as a way for small, fast-growing firms to fund their growth.
Eccleston also discussed TMX Group’s potential to deploy its capabilities in areas such as payment and processing and facilitating the physical delivery of commodities to “Uberize” large, legacy businesses that, he believes, could benefit from TMX Group’s services. He promised that the company’s first offering in this area will be announced later this month and that TMX Group will be taking steps throughout the year so that by 2016, “we will be in full execution mode.”
On the financial front, TMX Group will also continue to pay down the debt accumulated in the Maple Group Acquisition Corp. transaction, he said. Whether the firm can accelerate that process, will be a function of how successful it is in terms of delivering on its growth goals.