TMX pays the price

Reaction has been positive to the news a group of financial institutions plans to launch a second major stock exchange to challenge the monopoly status enjoyed the TMX Group Inc.

First, there is the realization Aequitas Innovations faces a daunting challenge: It’s not that easy taking on an entrenched party. Second, there’s the knowledge TMX Group, which controls both the Toronto Stock exchange and the TSX Venture exchange, has frustrated many of its clients, be they issuers or investors.

That frustration, which existed before the Maple Group acquired the TMX Group last year, comes in two ways. The TMX Group’s interest in catering to high-frequency traders — sure it generates revenue but it doesn’t level the playing field for all investors — and its seeming lack of concern for the public venture capital markets.

It took Aequitas a mere three paragraphs to mention “predatory highfrequency trading strategies.” It took it a bit longer to mention the second matter. But it did say “new solutions, focused on making the capital-formation process for small and mid-cap companies more viable, need to be developed to nurture those companies that will fuel the growth of the Canadian economy.”

And that emphasis is sweet music to the ears of darrin Hopkins, a Calgary-based investment advisor at Macquarie Private Wealth and a long-time practitioner in the public venture capital markets. Hopkins, who is too modest to say, “I told the TMX Group so,” is more than a practitioner, he gives his time to industry groups (as a member of both the local advisory committee and the national advisory committee for the TSX’s public venture markets committee) and as a member of an OSC committee looking at the exempt market. For all that work he receives a princely sum that’s not enough to buy a cup of coffee.

He has spoken out in the past, all part of his goal to ensure there is a continued role for the country’s public venture capital markets. Last year, for instance, in the final throes of Maple acquiring TMX, he criticized the plan to have “mirror boards” represent the TSX-V, TSX and TMX, a plan that was modified when status was given to the two advisory committees. “There is no logical reason to take the stewardship and control away from the pioneers of the Canadian public venture markets and put it in the hands of a previously disinterested few,” he wrote to the OSC.

But despite changes and assurances that the concerns would be addressed (late in the piece Hopkins received a call from Luc Bertrand, head of the Maple Group), nothing has really changed. The TSX’s public venture capital markets committee hasn’t had one meeting with the two advisory committees. And when the TMX road show rolled into Vancouver and Calgary recently, the concerns of the attendees — high-frequency trading and the structural change in the venture markets — were listened to, but the response seemed to be adapt or perish, a message not well received by those who were, and still are, looking for an action plan.

Hopkins argues the paradigm shift means major changes are required to ensure there is a future for the public venture capital market and the TSXVenture exchange. In short he would like the TSX to become the champion for the TSX-Venture exchange. After all, it owns it. And Hopkins, who has completed more than 100 capital pool company transactions, will help.