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TORONTO (Reuters) - Royal Bank of Canada, the country's biggest bank, wants regulators to tighten rules on trading, clearing and settlement fees as part of any deal to approve the Maple Group's proposed C$3.8 billion ($3.66 billion) takeover of the Toronto Stock Exchange operator.
RBC, one of only two leading Canadian banks that is not a Maple Group member, said it supports the deal to take over TMX Group Inc largely in the form the consortium negotiated with the Ontario Securities Commission. Even so, it supports further scrutiny of pricing models proposed for fees charged by the enlarged exchange operator.
Maple, which comprises most of Canada's biggest banks as well as pension funds, Canada's largest insurer and other financial groups, wants to combine TMX with bank-owned Alpha Group, Canada's second-biggest stock trading venue.
It also wants to wrap in the Canadian Depository for Securities Ltd, the clearing system for securities trades.
"Our key concern is that the Maple transaction will require a significantly different approach to the regulation of fees and fee models in Canada in order to compensate for the removal of effective competition for trading venues and the transformation of CDS into a profit-making venture," said Greg Mills, RBC's global co-head of equity trading, in a signed submission to the OSC dated June 4.
Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and National Bank of Canada are Maple members.
RBC is the only one of the Canada's big six banks that has no ties to the Maple Group. Bank of Montreal is not part of Maple because it is advising TMX Group on the proposed deal.
In early May, the OSC published draft rules on how a combined Maple-TMX Group entity would operate. At the time, Maple said it could live with the draft orders, while Canada's Competition Bureau has said the draft orders could, depending on what they finally look like, substantially mitigate their serious concerns
The OSC published 13 public letters on its website on Tuesday.
RBC said in its submission that the OSC should specifically review the existing fee model of the TSX, as well as market data pricing schedules. In both cases, pending a detailed review of the fee models, Maple should use Alpha Group's fee levels.
Alpha, now owned by some of the same Maple owners, was launched in 2007 to cut trading fees, force upgrades in technology and ramp up competition in Canadian trading. If the deal goes through, Maple would be eliminating Alpha as its competitor and thereby leaving the door open for a less competitive environment.
RBS also said fee changes for the TSX should be subject to public comment periods. As well, the OSC should ensure its staffing is "commensurate with the new role that it will be undertaking," the bank said.
"To provide comfort and certainty to the market, more clarity is needed on how the commission will exercise its new role as a fee regulator," Mills said.
Regulators in British Columbia, Alberta and Quebec are also reviewing the proposed deal, as well as the federal competition authorities. Last week, Maple extended its offer to July 31 and said it was confident it would complete the deal by that deadline.
Reporting By Jennifer Kwan; Editing by Tim Dobbyn