The Competition Bureau has formally announced that it does not intend to disrupt Maple Group Acquisition Corp.’s proposed acquisition of TMX Group Inc., Alpha and CDS.
The Bureau, which had previously indicated that it had serious concerns with the proposed transactions, said Wednesday that it doesn’t intend to challenge the deal before the Competition Tribunal, and that it is issuing a “no action letter” concerning the proposed deals, essentially clearing it from a competition perspective.
Earlier, the regulator suggested that it had serious competition concerns, primarily in two areas: equities trading, and post-trade services, including clearing, settlement and depository services.
However, it now says that final orders, which were published Wednesday by the Ontario Securities Commission (OSC) that recognize Maple TMX, TSX Inc., Alpha Trading Systems LP and Alpha Exchange Inc. as exchanges, and also recognize Canadian Depository for Securities Ltd. and CDS Clearing and Depository Services Inc. (CDS) as clearing agencies, has largely satisfied those concerns.
Those orders set the terms that the integrated exchange and clearing group will operate under, imposing conditions that deal with a variety of issues, including access, fairness, fees, conflicts of interest in listing regulation, governance, and the conversion of CDS to a for-profit model, among other things; and establishing a framework for enhanced oversight.
Since the draft recognition orders were published a few changes have been made, including amendments to: provide some clarity around the treatment of discounts and incentives offered by the exchanges; clarify governance requirements for both the exchanges and CDS; and, enhance transparency.
The OSC order notes that it will not be responding to some of the other issues raised in the comment period — specifically, reviewing the maker-taker pricing model, or fees for market data — as part of the Maple recognition process. “These issues are separately under review and are not appropriately imposed as terms and conditions on only the Maple entities,” it says.
It also addresses concerns regarding the complexity of the operating and oversight regime created by the orders, and the possible added costs of enhanced oversight. It notes that the commission will require an increase in capacity and capability to effectively manage the increased demands of oversight, and it says that to the extent that this results in increased costs, it expects that these costs will be borne by Maple, not the market generally.
The Competition Bureau notes that it has an independent mandate to review mergers, and that it provided input and advice to the OSC on the potential impact on competition that could result from the proposed transactions. It says that while it conducted its own review of the proposed transactions, the measures contained in the OSC’s final recognition orders “materially change the regulatory environment sufficient to substantially mitigate the Bureau’s competition concerns.”