TMX Group, operator of several exchanges in Canada, is getting ready to open another exchange to foster trading and capital formation in the shares of private companies.
The move into the private market business was announced by the bourse on March 25. Toronto-based TMX said the new business dubbed TSX Private Markets will serve companies throughout their evolution from the start-up stage, and further down the road, as originally reported by Reuters.
The TSX Private Markets platform will be run by TMX subsidiary Shorcan Brokers, and is expected to launch in the third quarter of 2014, subject to regulatory approval.
The new business launch follows the recent news that Aequitas, another exchange operator in Canada that is currently seeking regulatory approval, is going after the private markets business segment too.
“We are always looking for ways to facilitate companies and this is one more tool in that toolbox,” Kevan Cowan, president of TSX Markets and group head of equities at TMX Group, told Reuters in an interview.
TMX Group currently operates the Toronto Stock Exchange and TSX Venture Exchange.
Traders has previously reported that Aequitas, backed by several companies including Barclays Plc, Royal Bank of Canada and other firms, has filed with Canadian regulators a plan to launch an exchange that will foster the trading of small and mid-cap stocks, similar to TSX Venture. One unqiue feature of Aequitas is that high-frequency traders are not welcome to trade on it.
Aequitas is preparing itself for launch in late 2014 or early 2015.
Aequitas was first announced last June and has been gathering interest with both the buyside and sellside since. Aequitas is still subject to the formal approval of the Ontario Securities Commission, Canada’s largest equity market regulator.
Aequitas’ stated mission is to curb predatory trading strategies; address capital raising issues; and introduce competitive fees across trading, listings and data. According to the venues’ backers, 90 percent of all orders in Canada stay active for less than one minute, 50 percent of them for less than one second, and 20 percent for less than 10 milliseconds.
Aequitas worked with both the buy- and sellside to get the exchange through Canada’s regulatory approval process. In August 2103, the OSC published for comments a number of key features of the intended Aequitas exchange offering. Based on the comments received and related dialogue with both industry participants and the OSC, Aequitas amended its initial proposal to address several market structure problems in Canada.
“The way I look at it this is a pre-emptive move to secure TMX’s monopoly position in the listing business,” CIBC World Markets analyst Paul Holden said in an interview, according to Reuters.
This follows Nasdaq’s announcement in February that it was planning its own private market exchange for U.S. small- and mid-cap companies. The exchange had originally planned to launch Nasdaq Private Markets by the end of March, but has yet to make a formal announcement.
Read About Nasdaq Private Markets
He said the segment is appealing in part because of signs policymakers are opening the door to alternative funding for small enterprise, pointing to proposed rules by the Ontario Securities Commission earlier this month that would allow smaller businesses to raise equity online.
