O Canada – the LSE’s new ally brings a jolt of energy

Even if you knew little about the Toronto Stock Exchange before last week, the announcement of a planned merger between the London Stock Exchange Group (LSE) and TMX Group, which runs the Toronto exchange, is almost certain to change that.

If approved by shareholders and competition regulators, the all-share merger of the two exchanges will create the largest market in the world by number of listings, with particular importance for the natural resources, mining and energy sectors.

The merger being recommended by the boards of both LSE and TMX will create a combined transatlantic group, currently dubbed LSE-TMX, which will be jointly headquartered in London and Toronto.

The group created by the merger will be listed on both exchanges, and will, the two claim, be a more diversified business with more than 6,700 listed companies with an aggregate market capitalisation of approximately £3.7 trillion (Ca$5.8 trillion).

Chris Gibson-Smith, chairman of LSE, said: “Building on our own shared long histories of excellence in capital markets, financial strength and cultures of internationally respected governance, I believe that together we will be able to offer shareholders and customers a business significantly greater than the sum of our parts.”

The consolidation comes in the wake of US and EU competition regulation brought in over the past three years to put an end to national stock exchanges’ monopolistic positions.

In Europe, the EU Markets in Financial Instruments Directive (MiFID) allowed multilateral alternative venues to set up cheaply and easily, while the US National Market System regulation forced exchanges to pass equity trades through the cheapest provider.

The boom in trading venues has put market share and pricing under intense pressure by dramatically fragmenting where equities are traded.

“The LSE/TMX deal is merging two companies that have been badly affected in their domestic markets by such competitive pressures,” said Alasdair Haynes, chief executive of Chi-X Europe.

The fact that TMX is being treated as an equal of the mighty London Stock Exchange in the terms of this deal shows just how far the Toronto exchange has come in 160 years.

The Toronto Stock Exchange was no more than a glint in the eye of Canadian investors when a group of Toronto businessmen met on 26 July 1852 with the intention of forming an “Association of Brokers”.

No records of the group remain, but nine years later – on 25 October 1861 – a resolution was passed at the City’s Masonic Hall and the Toronto Stock Exchange was born.

The cost of membership at that time was just Ca$5, trading hours were limited to half an hour a day and the number of stocks that could be traded was only 18.

However, by 1936, the Toronto exchange had become the third largest in North America.

And now it is set to become part of the largest exchange group in the world by number of total listings, incorporating some 20 trading market and platforms across North America and Europe.

MAJOR TORONTO STOCK EXCHANGE LISTINGS

BARRICK GOLD
Barrick Gold Corporation is a gold industry leader, with 25 operating mines and a pipeline of large, long-life projects located across five continents, in addition to large land positions on some of the most prolific mineral districts. The company has reserves of 139.8m ounces of gold as well as 6.1bn pounds of copper reserves and 1.06bn ounces of contained silver within gold reserves as at 31 December 2009.

ENCANA
Encana is a leader in natural gas production, focused on the successful exploration and development of unconventional natural gas, which it argues is an abundant, affordable and clean source of energy for generations to come. The company has more than 5,000 employees and contractors worldwide.

SHOPPERS DRUG MART
With fiscal 2009 sales of approximately Ca$10bn, Shoppers Drug Mart is the leading Canadian provider of pharmacy products and services. Founded in 1962, the company has grown to a network of more than 1,181 Shoppers Drug Mart/Pharmaprix stores across the country. The Company also licenses or owns more than 58 medical clinic pharmacies operating under the name Shoppers Simply Pharmacy.

TORONTO STOCK EXCHANGE: FACTS AND FIGURES

LOCATION
Toronto, Canada.
The Toronto Stock Exchange moved to its current location in the Exchange Tower at 130 King Street West in 1983.

OPENING AND CLOSING TIMES
Opens: 9.30am
Closes: 4pm Monday to Friday
NB: There is also an extended session on the Toronto Stock Exchange for participating organisations from 4.15pm to 5pm each trading day. Days on which the exchange is closed include New Year's Day, Good Friday and Canada Day, which falls on 1 July this year. The US companies listed on the exchange are also affected by US holidays such as Martin Luther King, Jr. Day on 17 January and Independence Day on 4 July.

CURRENCY
Canadian dollar

NUMBER OF LISTINGS
1,498 (November 2010)

VOLUME
10,272,787,459 (January 2011)

MARKET CAPITALISATION
Ca$2,105,570,021,017 (November 2010)