Growth in 2014 and beyond will require the help of the investment industry and regulators to turn Canada’s capital markets into a major global player, says Tom Kloet, CEO of TMX Group Ltd.
“As a result of technological advances, our customers are now in Mumbai, Moscow and Sao Paolo, as well as Montreal, Toronto and Vancouver,” says Kloet, who spoke at the Investment Industry Association of Canada 2013 annual conference in Toronto on Thursday. “We can compete with global players from around the world to the extent of the competitiveness of our capital markets, and attract new activity.
In order to renew confidence and drive growth, Kloet is focused on shaving costs, driving innovation and building new products. This includes looking at the opportunity to offer post-trade services, new collateral risk management tools and implementing a more streamlined transaction process to help participants take costs out of their individual operations.
“This will improve the overall effectiveness of our markets, since we cannot be bigger than New York, London or Hong Kong, we have to be better and more efficient,” says Kloet.
In order for this growth strategy to be successful, Kloet says there needs to be a focus on maintaining a careful balance between investor protection and providing access to capital with regulatory policies that enhance Canada’s competitiveness internationally.
Whether or not that would be better implemented under a new national regulator, Kloet doesn’t say. He isn’t advocating for or against federal finance minister Jim Flaherty’s most recent proposal, rather only that the framework put in place allows for growth and drives business and capital to Canada.
“We need less duplication and a more streamlined approach to market evolution,” says Kloet. “We need a more efficient process for issuers to attract capital that is cost effective.”
But regulatory progress alone cannot pave the way, says Kloet, as there are a number things that the investment industry can do to expand Canadian markets and the economy they support.
Kloet suggests the following:
> Implement programs that will encourage market activity in Canada
The current regulatory framework discourages some U.S investors from buying Canadian stocks on Canadian exchanges and Kloet says this needs to change.
“We believe that the free trade in securities is an area that needs renewed focus as we work together to attract more U.S investor activity to a broader segment of Canadian securities'”
> Maximize the use of existing products and tools by Canadians investors
Information and education sessions on products could help investors make better use of derivate products in their portfolios, says Kloet.
> Support Canadian small cap companies so they can expand into large cap companies;
> Encourage research & development investment to drive productivity;
> Expand the size of Canada’s financial hubs and promote Canada around the world.
“We need to continue to grow the pie,” says Kloet. “The opportunity that exists outside of Canada’s borders is truly tremendous.”