The Montreal Exchange remains determined to strengthen its position and grow its business as Canada’s financial derivatives exchange, regardless of any future ambitions by the TSX.

But ME chairman Jean Turmel did not completely rule out an arrangement with the TSX in the future. “There is not like a wall; there’s not a definite ‘no’”, Turmel said before the ME’s board meeting in Toronto on Thursday. “But our strategy is to keep growing, keeping making money at a faster rate than others. But past 2009, anything can happen.”

Recent comments by TSX Group Inc. CEO Richard Nesbitt that his exchange intended to begin its own equity options market in 2009 when the TSX’s non-compete agreement with the ME ends did not appear to faze the Quebec-based exchange.

“We’ll be very well prepared and positioned to compete with a newcomer – if there is a newcomer – after 2009 in the Canadian market,” said ME president and CEO Luc Bertrand.

Bertrand cautioned that fragmenting the Canadian market with two derivatives exchanges in 2009 would be a bad idea.

“Given the size of the Canadian capital market on one hand and given the fact that we’re next door to the largest capital market, and the most competitive one, [specialized Canadian exchanges] still makes a lot of sense,” he said. “And it has gone a long way to servicing the needs of Canadian capital markets.”

Bertrand said that the ME is accustomed to competing with other global derivatives exchanges and is flourishing.

The ME posted total revenues for 2004 of $57 million, up 36% from the previous year, excluding a one-time $5 million revenue. Operating earnings reached $14 million (including the non-recurrent revenue) vs $5 million in 2003. Net earnings increased to $9 million in 2004, representing a 38% gain.

Looking at 2005 and beyond, Bertrand said that the ME would focus on growing on its successes as a derivatives exchange, a clearing service and a provider of trading technology solutions. He pointed to the success of the Boston Options Exchange, the U.S. derivatives exchange the ME operates and partially owns, as a model for future growth and expansion.

Bertrand and Turmel both felt that increasing proficiency in derivatives among brokers was a key strategy for growth of the Canadian derivatives market and thus, the ME. The exchange itself offers education courses through the Derivatives Institute and it would like to see more industry-wide education.

“The approach we’re taking now is to talk to the regulators, talk to the industry, partner with the industry, to develop a new securities course that will include equity options in one comprehensive course,” Bertrand said. “To be quite honest, I think the only way to approach this is the way they do it in the U.S. with the Series 7 [the American equivalent of the Canadian Securities Course]. When the students passes it, he’s licensed to sell options as well.”

Bertrand also said the ME was going to offer in the coming months a new currency option product for the market that would allow retail investors to hedge the Canadian dollar against the U.S. dollar and the Euro, respectively.