Canadian exchange group TMX and the Maple Group Acquisition Corporation, a consortium of 13 Canadian financial institutions, have set out the arguments in favour of creating an integrated exchange group.
A key component of the Maple-TMX plan is the integration of clearer CDS’ cash clearing and depository services with TMX Group, which proponents of the plan claim will provide benefits such as cross-margining, capital re-deployment and risk management. The argument runs that brokers will be able to view a consolidated report of the market on a single screen, with integration of information and risk management helping to make capital allocation easier for market participants.
“It is our belief that an integrated exchange and clearing group across the full spectrum of equity and derivative products offers significant efficiencies, creates the right conditions to drive increased economic activity and international investment in Canada and contributes to the ongoing stability of Canada’s financial system,” said Luc Bertrand, vice-chairman, National Bank Financial Group.
Closer integration of trading, clearing and settlement of equities and derivatives will also allow regulatory authorities to better monitor markets, improving overall efficiency, according to Bertrand.
Maple also promised to maintain fees at fair and reasonable levels and guarantee open access to all participants of CDS – a pledge clearly aimed at assuaging widespread fears among market participants that the Maple deal could lead to monopolistic anti-competitive behaviour. Maple also plans to acquire Canadian alternative trading system Alpha Group, if the takeover of TMX is successful.
Speaking on behalf of TMX, Tom Kloet, CEO, said cross-margining would free up capital for clearing members and encourage trading activity, leading to increased volumes and higher levels of liquidity. “To succeed in the long-term and drive value and growth across our capital markets, we must seek ways to adjust, enhance our offer and expand rapidly and decisively,” he said. “The Maple proposal affords us an opportunity to do just that.”
Canadian regulators are currently reviewing the Maple transaction, with a final decision from the country’s provincial regulators in Ontario, Quebec, Alberta and British Columbia expected in early 2012.
Financial institutions backing Maple include Alberta Investment Management Corporation, Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board, CIBC World Markets, Fonds de solidarité des travailleurs du Québec, National Bank Financial, Ontario Teachers’ Pension Plan Board, Scotia Capital and TD Securities.