The companies behind a proposal to fundamentally restructure the Canadian trading landscape are calling on the rest of the industry to support their bid.
TMX Group Inc. and Maple Group Acquisition Corp., which represents a collection of 13 large investment dealers and pension funds, Thursday released a letter that they sent to Canadian capital markets participants rallying support for their proposal to allow Maple to acquire TMX, its main trading rival, Alpha Group, and the clearing and settlement firm, CDS Ltd. — consolidating the trading business and integrating trading and clearing.
In the letter, Maple and TMX say their plan “will deliver value and tangible benefits to all users and market participants.” The firms argue the proposal will deliver cost savings and operational efficiency to all market participants, thereby creating a more efficient market, with globally competitive pricing, which will “help attract new investment to Canada’s markets, repatriate inter-listed company trading activity and contribute to continued growth in a highly competitive global marketplace.”
The proposal faces regulatory hearings in Quebec on Nov. 24-25 and in Ontario on Dec. 1-2. The deal also needs approval from securities regulators in Alberta and British Columbia, and the Competition Bureau; along with shareholder approval. Regulatory concerns about the deal include the erosion of competition, conflicts of interest, access and fairness, fees, and worries about the appropriate governance of a consolidated, integrated trading and clearing firm.
In their letter, the TMX and Maple pledge to act “in the best interests of the Canadian capital markets”. They note that the Maple’s board will have an independent chair and at least 50% independent directors as well as representation from the independent dealer community, along with a minimum proportion of directors from Quebec, as well as directors with specific expertise in derivatives and in venture markets.
“We have made a clear commitment to open-access to all TMX Group operated markets for all Canadian market participants. We are also committed to maintaining existing regional headquarters and presence, which we intend to grow significantly, such as Montreal as the national centre for derivatives, Toronto for our equities business, Calgary for energy and Vancouver and Calgary for our venture equity business,” it says.
They also promise “equitable pricing for all products and services”, with all participants paying the same price for CDS services, and that fees will remain subject to regulatory review.
They have also committed to retaining the 10% ownership limits on TMX Group, and standstill agreements for the bank-owned dealers to prevent control of TMX Group by any sub-group of shareholders.
“This is a unique opportunity to enhance TMX Group’s global competitiveness and strengthen our financial markets. Ours is a proposal that serves Canadian capital markets. We encourage you to learn more about our proposal and hope you will support this important and beneficial transaction,” they conclude.