Competition issues loom over Maple Group’s TMX bid

TMX operated as a monopoly for years, and at one time included Canada’s big banks among its owners. Over the past decade, it became a for-profit operation with a broad shareholder base and began to lose trading share as a handful of new competitors led by bank-owned Alpha entered the market.

Together, TMX Group and Alpha account for nearly 90% of trading volume in Canada.

Even those who favour the Maple deal acknowledge it raises competition issues.

Dwight Duncan, Ontario’s minister of finance who was an early and vocal critic of the initial proposal to merge the Canadian exchanges including the Toronto Stock Exchange with the London Stock Exchange group, cheered the all-Canadian Maple deal’s potential on the weekend. But he acknowledged the “twist” of a likely review by Ottawa’s Competition Bureau.

Alison Crosthwait, director of global trading research at TMX competitor Instinet LLC, said Canadian authorities are bound to focus on the diminished competition in the trading space that would result from merging Alpha and TMX.

“We’d get to have a local exchange, but it’s going to lessen competition,” she said Saturday.

Luc Bertrand, vice-chairman of National Bank of Canada, a member of the consortium, said yesterday that despite the need for a Competition Bureau review he believes there are key differences between the Maple proposal and failed Nasdaq bid for NYSE.

Among them are the different anti-trust regimes in Canada and the United States, and stiff competition from the United States for trading inter-listed Canadian stocks such as Barrick and Potash Corp., he said. In addition, he said Alpha is a “relatively limited” competitor in its current form as a trading system that does not yet compete with TMX in the company listings business.

He noted that there are also checks and balances on competitive issues, including fees, laid out by the “public interest” mandate of securities regulators.

“We don’t think NYSE and Nasdaq is a comparable transaction to our transaction,” Mr. Bertrand said.