Deal collapse may clear Maple’s way

The collapse of TMX’s deal with the London Stock Exchange improves the chances – but by no means guarantees – that a rival consortium of domestic banks and pension funds will gain control over the Canadian exchange group.

The 13-member Maple group expressed the hope on Wednesday that it “may now engage in a positive dialogue with the TMX board”. TMX has up to now spurned Maple’s advances.

Luc Bertrand, vice-chairman of Quebec-based National Bank of Canada, representing the consortium, added that Maple’s plan, which involves the creation of so-called “vertical silo” encompassing trading and clearing operations, “represents the best way forward for TMX Group and the Canadian capital markets”.

However, the Maple bid still requires approval not only of TSE shareholders but, more important, of the federal competition bureau.

Mike Bignell, president of Omega ATS, an alternative trading system, said that the status quo was an increasingly likely outcome.

However, he said that the banks leading the Maple group might address competition concerns by closing down Alpha, another alternative trading system in which they are the dominant players. Under Maple’s current proposal, Alpha would be folded into TMX together with CDS Canadian Depository Services, the main securities clearing house.

Tom Kloet, TMX chief executive, said that “our business is strong. Our business plan is successfully progressing.”

However, several outsiders raised questions about how long Mr Kloet would remain in his job following the collapse of the LSE merger plan.

Robert Young, president of Liquidnet Canada, a so-called dark pool operator, expressed concern that the protracted uncertainty over TMX’s fate was distracting management from its core business.

“While they’re distracted, they’re not focused on issuers or investors,” Mr Young said.

Although the collapse of the LSE deal was due to lack of shareholder support rather than government intervention, concern surfaced in some quarters on Wednesday that the process could fuel uncertainty among prospective foreign investors in Canada.

The domestic consortium has cloaked itself in the mantle of a “national champion”, winning support from political leaders in the provinces of Ontario and Quebec.

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