Nasdaq exchange application puts pressure on TSX Group
Nasdaq Inc. said Thursday it has applied to operate an exchange in Canada, a move that could bring foreign competition to a market currently dominated by the TMX Group, putting new pressure on the operator of the Toronto Stock Exchange.
Nasdaq Canada and its parent company Ensoleillement Inc. have applied for recognition as exchanges in Canada, starting the clock on a 30-day comment period to close on Nov. 13, according to a posting on the Ontario Securities Commission website.
The Nasdaq application comes more than a year after the company completed its acquisition of Chi-X Canada, an alternative trading system for the Toronto Stock Exchange, in February 2016.
Nasdaq Canada currently operates three equity trading facilities in Ontario, as well as NFI, a fixed income facility that allows permitted clients to trade U.S. treasuries on a U.S.-based alternative trading system (ATS).
It says in its application that its Canadian units act as alternative trading platforms for TMX’s Toronto Stock Exchange and TSX Venture Exchange listings, with 66 subscribers and trading offered in 4,100 securities.
“Nasdaq Canada will transition its market operations from those of an ATS to those of an exchange, with no substantial changes to its current trading platform or operations,” it says in its application.
“Functionality currently in place to support the Nasdaq ATS trading platform will continue to be available after the recognition date ... Nasdaq Canada will operate a continuous auction market Monday through Friday, excluding Canadian banking holidays.”
Nasdaq is not currently proposing to list issuers’ securities and, if it decides to do so later, its listing rules would have to be reviewed, published for comment and presented to the commission for approval.
Richard Carleton, CEO of the alternative Canadian Securities Exchange — one of the few existing competitors to the TSX — said he doesn’t think much will change in the short term because Nasdaq is not initially applying to provide listing services.
“With their apparent decision not to pursue listings at this time, it’s not clear that there will be an immediate impact on the competitive landscape for trading services,” he said in an e-mail on Thursday.
“They are a well-respected international exchange operator; as time goes on we would expect to see an even more competitive market.”
The CSE was recognized as a stock exchange in 2004 and now lists more than 300 companies, about one-tenth the amount listed on the TSX and TSX venture exchanges, which had a total of 3,142 listings as of Aug. 31.
Maureen Jensen, chair and CEO of the Ontario Securities Commission, said Thursday staff at Canada’s biggest securities regulator have reviewed an application by Nasdaq to operate a stock exchange in Canada but it hasn’t yet come before the board.
She said she expects the OSC to consider the application at one of its upcoming meetings.
TMX Group CEO Lou Eccleston said the company will review Nasdaq’s exchange application.
“The scope of our review, as it is in all such matters, is to ensure Canada’s markets remain fair and efficient and operate in the public interest,” he said in a statement.
“TMX’s primary focus remains fixed on solving challenges for clients across our markets and continuously striving to add value to the products and services we provide.”