TORONTO — A merger of the Toronto and London stock exchanges would not mean a loss of regulatory control in Canada, according to the head of the TMX Group (TSX:X).
CEO Thomas Kloet also told a committee of the Ontario legislature on Wednesday that the proposed deal would be of net benefit to the Toronto, Ontario and Canadian economies.
“We believe it will offer issuers a significantly broader base to raise capital and thereby make it more efficient to add support to the Ontario economy,” Kloet said.
Meanwhile, Kloet told the committee, which was set up to review the merits of the proposed merger, that the current regulatory framework is an essential part of the discussions between the two exchange operators.
Ontario Finance Minister Dwight Duncan and other officials have questioned whether the deal would help the province or whether it would lose regulatory control.
But Kloet said the Toronto Stock Exchange and all others it operates would remain separately regulated from the London Stock Exchange.
“The regulatory structure of exchanges that operate in Canada remains the same.”
In addition to the TSX, the TMX Group also operates the TSX Venture Exchange and the Montreal derivatives exchange, among others.
Kloet says the merger will also mean more jobs in Toronto — the city that will become the global centre for all listings in the combined group’s exchanges.
Publicly listed companies on the TSX would see no change to their status or regulatory requirements and thus will not see any new costs, he added.
On the contrary, listing and other costs for Canadian-listed companies would fall, while they would also benefit from new financing opportunities, better access to capital and increased interest from around the world.
Revenues would be taxed in the jurisdiction they are realized, while the yet to be named holding company for the merged exchanges would be listed on both the TSX and the LSE, he said.
The committee, comprised of members from each of Ontario’s sitting political parties, also heard from Jos Schmitt, CEO of TMX rival Alpha Group.
Schmitt said the merger would reduce the impact of Canadian investors and issuers and the financial industry as the decision-making process ceases to be focused on Canada.
The plan lacks detail and but raises questions about competition and regulations, he said.
“I think people who really need answers to these questions are the issuers and the investors. ”
Schmitt said the TMX Group already holds a monopoly on Canadian exchange services and asked for regulation of market data fees to ensure the TMX can’t maintain a prohibitive fee structure.