Earlier today, Reuters Canada and others reported that Maple Group has accepted the Ontario Securities Commission’s (OSC) conditions for its proposed $3.8 billion bid for the TMX Group (the OSC’s conditions are subject to a 30-day comment period – see: proposed recognition orders).
In Maple Group’s news release, it said:
“These draft and final orders are the result of extensive consultation by the OSC and AMF with Maple, TMX Group, CDS, market participants, and other regulators – including the Bank of Canada and the Competition Bureau. If these orders are finalized as published, Maple will accept them.
The OSC’s proposed recognition order for Maple also confirms and clarifies the OSC’s extensive ongoing regulatory oversight of equities trading and clearing and settlement activities, including provisions with respect to equities trading fees. These provisions include prohibitions, obligations and approval requirements that are designed to ensure that the Canadian capital market remains open and competitive for all participants, and that the interests of all participants in Canada’s capital markets are respected. As well, the AMF’s recognition orders confirm and clarify the AMF’s extensive ongoing regulatory oversight of derivatives trading and clearing and settlement activities.
The draft and final orders provide important changes in areas such as: independent governance of Maple (as successor parent to TMX Group) as well as fair, meaningful and diverse representation on the Board of Maple; restrictions designed to ensure competitive equities markets; independent governance of CDS; and access to and fees for CDS clearing and depository services. Maple believes the binding commitments to the structure of the transaction and the regulatory landscape, as reflected in the orders, represent substantial changes to the initial proposal in respect of which the Competition Bureau expressed serious concerns.”
With respect to clearance by the Bureau, Maple said that the Bureau has advised it that the draft OSC orders (if finalized) may “materially change” and mitigate its previous concerns:
“As disclosed on April 27, 2012, Competition Bureau staff have provided an update to Maple and TMX Group regarding the status of the Competition Bureau’s review of the Maple transaction.
Staff advised Maple and TMX Group that, while the Competition Bureau has an independent mandate and will complete its own review, it has provided views and input to the OSC for its consideration relating to the potential impact of the Maple transaction on competition. In that context, Competition Bureau staff advised that it is possible that measures contained in the draft OSC recognition orders, if finalized and enforced, may materially change the regulatory environment such that the Competition Bureau’s previously articulated serious concerns may be substantially mitigated. Staff of the Competition Bureau have emphasized that the Bureau would consider both the published draft orders and any finalized orders, and that a final decision would not be made until it had completed its process.”
In the OSC’s news release, OSC Chair and CEO Howard Wetston said:
“The Commission has thoroughly reviewed the regulatory issues raised by Maple’s proposal and developed measures necessary to ensure that the public interest is protected. … Public consultation has been a fundamental part of our review process and we will carefully consider the further input we receive on these orders when making our final determination.”
The proposed behavioural remedy (or rather remedies) in the transaction would include access for market participants, pricing commitments and regulatory oversight of CDS.
Some of the specific proposed terms and conditions in relation to the TMX Group, TSX and CDS include: (i) board composition and independence requirements for the TMX and TSX (with independent director, non-Maple shareholder director and independent investment dealer director requirements), (ii) fee models for trading-related services (including OSC approval of new fees or fee models and prohibitions on discriminatory pricing), (iii) share ownership restrictions on Maple’s voting securities (imposing a 10% ownership cap without OSC approval), (iv) OSC consent requirements for changes in CDS ownership, (v) board composition and independence requirements for CDS, (vi) non-discriminatory access requirements for CDS and (vii) fee models for CDS’ core services (including clearing, settlement and depository services).
It will be interesting to see whether these and the other proposed terms in the TMX/TSX and CDS recognition orders, once finalized, will be accepted by the Bureau, given that standalone behavioural remedies are both rare in Canada and generally resisted by the Bureau.
For example, the Bureau’s position in its Merger Remedies Bulletin, which remains its leading articulation of its merger remedies policies (though the Bureau has recently announced that it plans to update the Bulletin), is that it will seldom accept standalone behavioural remedies. Having said that, in its more recent 2011 Merger Remedies Study Summary, the Bureau makes a number of observations as to when behavioural remedies may be effective.
For the OSC’s Notice and Request for Comment see: OSC.
____________________
For more information about our regulatory law services contact: contact
For more regulatory law updates follow us on Twitter: @CanadaAttorney
Templates/precedents and checklists to run promotional contests in Canada
Templates/precedents and checklists to comply with Canadian anti-spam law (CASL)
