Canadian COMPETITION LAW

TMX News Release (November 29, 2011)

“The Commissioner advised Maple and TMX Group that she has serious concerns about the likely competitive effects of the proposed transactions in the current environment, primarily in connection with equities trading and clearing and settlement services in Canada.

The Commissioner indicated that she has not reached a final conclusion and that her current views may be affected by further factual information and developments, which may include changes in the applicable securities regulatory regime, and any commitments or other remedial measures that Maple may be prepared to take to address her concerns.

Maple and TMX Group intend to continue to work closely with staff of the Competition Bureau to address the Commissioner’s concerns, including by identifying appropriate remedial measures. As Maple has stated previously, it is committed to working constructively with all of the relevant regulators, including Canadian securities regulators, to address any questions they may have so that the proposed transactions can proceed in the best interests of TMX Group, its shareholders and the Canadian capital markets. Maple and TMX Group continue to strongly believe that the proposed transactions will substantially benefit all capital market participants.”

CTV

“’The Commissioner has serious competition concerns regarding the proposed acquisitions, primarily in two areas: equities trading, and post-trade services,’ the Competition Bureau said in an email. …

‘Generally, if the Commissioner of Competition determines that the merger is likely to substantially affect competition, she may negotiate a mutually agreeable solution via a consent agreement, where it is possible to resolve the competition concerns,’ it said.

‘However, when remedies cannot sufficiently address the Bureau’s concerns, it may apply to the Competition Tribunal for an order to prevent, dissolve or alter the merger.’”

Reuters Canada

“A source close to the deal said the regulator’s concerns did not mean the merger plan was dead. Still TMX and Maple – a consortium of 13 Canadian financial institutions – would have to make concessions for the watchdog to bless the deal.

‘This is not a deal breaker,’ said the source, who was not authorized to speak on the record. ‘But it tilts the scales against the deal in a way it did not a month ago.’

Possible concessions the Competition Bureau might exact from Maple could revolve around greater powers to the Ontario Securities Commission to regulate. The body may also place controls on trading fees to ease concerns about pricing.”

CBC

“Smaller players in Canada’s investment industry have been concerned that they won’t have equal treatment with Maple members, which are major users of the TMX stock exchanges. Many are also part-owners of Alpha and CDS.”

Wall Street Journal

“The transaction would give TMX a market share of more than 80% of Canadian stock trading, measured in terms of value and volume. Chi-X Canada would be the next biggest stock-trading platform, with less than 10% market share.”

Bloomberg Businessweek

“Regulators from Europe and the U.S. to Japan and Australia have scrutinized more than $30 billion in global exchange mergers announced since October last year amid concern over who gets to control national capital markets. NYSE Euronext and Deutsche Boerse AG must wait until Jan. 23 to find out if they’ve made enough concessions for Europe to allow them to form the world’s biggest exchange, NYSE Group Executive Vice President Garry Jones reiterated today.”

Bloomberg

“’The CDS thing is the stumbling block, and it will require a commitment for open accessibility and also a flat structure in costs,’ [Thomas Caldwell] said. ‘To my mind, that’s going to be the challenge.’

‘The banks already achieved their end: they blew off London and the possibility of introducing new sources of capital and financing for Canadian industry, and that was the major victory,’ Caldwell said. ‘If they have to wander home grumbling that they didn’t get this thing, I don’t think that will be too big a hurt.’”

Market Watch

“The disclosure significantly clouds the prospects for the deal going through, though both TMX and Maple said they were committed to working with Canada’s Commissioner of Competition to satisfy the agency’s concerns. They said the agency was still open to new information that might change its mind about the deal.”

Financial Post

“Together, TMX and Alpha, a rival trading system launched by the banks three years ago, control more than 85% of trading volume in Canada. Opponents of Maple’s plans have also expressed concerns that CDS will be transformed from a utility-like clearing and settlement operation with low fees into a profit-seeking unit with high barriers to competition.”

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