When Richard Nesbitt resigned last January as CEO of TSX Group Inc., analysts confidently predicted he would be replaced by Montreal Exchange Inc.’s Luc Bertrand. After all, Bertrand had made a strong showing as the MX’s CEO, transforming a withering regional exchange into a growing force in the derivatives world with an important foothold in the U.S. market.

And Bertrand was already slated to become deputy CEO to Nesbitt after helping to negotiate the TSX’s $1-billion friendly takeover of the MX, which took effect May 1. Fluently bilingual and well connected in both Toronto and Montreal, Bertrand seemed a natural.

It didn’t work out that way. The TSX board passed over Bertrand, and its own top executives, to appoint American Thomas Kloet to head the merged company, TMX Group Inc. When assessing Bertrand’s chances, the analysts had forgotten to take into account one thing: bad blood at the TSX from the long, bruising fight over the merger.

One incident was particularly galling to members of the TSX board. Last October, Radio-Canada reported that the TSX board had blocked a merger agreement that would have seen Bertrand as CEO and Nesbitt as chairman of the combined companies. TSX chairman Wayne Fox was singled out in the report as having balked at the prospect of a Montrealer heading up the company. Quebec Finance Minister Monique Jérôme-Forget called it another example of “Toronto being a little haughty toward Montreal” — a comment that sparked outrage at the TSX amid suspicions that Bertrand had a hand in the minister’s intervention.

Richard Ness, former CEO of Penson Financial Services Canada and now managing director of consulting firm Tactico in Montreal, says he suspects Bertrand was blocked by TSX board members with a lingering dislike for a Montrealer involved in entanglements that may have predated the merger negotiations: “It’s the only explanation. If you could pick anyone in the world, in my opinion, you could not find a better person to run the merged TSX and ME.”

If the top TMX job wasn’t going to Bertrand, then it had to go to a foreigner to make the pill go down easier for the Quebec government. In the end, it was Kloet, a Chicago resident who has spent the past five years as chief operating officer of the U.S. division of international derivatives brokerage Newedge Group, formerly known as Fimat USA LLC. Before that, Kloet ran the Singapore Exchange.

Now the question is: will Bertrand stay put as No. 2 to Kloet at the TMX?

“A critical first step for Mr. Kloet will be placating the internal candidates who were in contention for the job,’’ Dundee Capital Markets analyst John Aiken writes in a research note. “While this list includes [TSX executives] Rik Parkhill and Michael Ptasznik, we believe that the near-term retention of Mr. Bertrand will be very important.’’

Certainly, money seems unlikely to be a crucial factor for Bertrand. His large personal holdings of MX shares left him a wealthy man after the takeover closed. Ness thinks he will jump ship for other opportunities. Bertrand’s name has been floated as a possible replacement for Henri-Paul Rousseau at the top of the Caisse de dépôt et placement du Québec, although Bertrand has denied any interest in that job.

But he might have reasons to stay. He remains a large shareholder of TMX Group, with more than 726,000 shares worth about $30 million. And he has a lot of responsibility at the new company: heading the MX, now a subsidiary of TMX, including its substantial stake in the Boston Options Exchange, and overseeing the TMX’s technology operation.

Certainly, Bertrand was making all the right sounds at the TMX’s recent annual meeting, talking with gusto about the integration of the companies, the new opportunities ahead and working with Kloet.

Perhaps, given the recent history of rivalry, an outside candidate was just what the doctor ordered to heal wounds and put the combined company on a healthy footing. IE