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TORONTO (Reuters) - The Canadian group bidding for the country's biggest stock exchange extended its offer for another month on Tuesday and said it has made suggestions to ease regulatory concerns about any lack of competition that would result if its bid succeeds.
Maple Group, comprised of 13 financial institutions, said it has spoken to regulators about several ways it could refine its $3.8 billion ($3.8 billion) bid for TMX Group (X.TO), operator of the Toronto Stock Exchange and several other markets.
The bid still requires a raft of regulatory approvals and a key area of concern is pricing and governance for the Canadian Depository for Securities (CDS), which clears and settles all stock trades in Canada, and which Maple would take control of under its plan.
CDS currently operates under a cost-recovery model and Maple would change that to a for-profit model.
Another key area is the impact of Maple's proposal to put Alpha Group, TMX's biggest competitor, under its umbrella. Maple is part-owned by some of the same banks that already own Alpha.
The consortium's extension of its deadline to February 29 is its fourth such extension as regulatory oversight continues.
"We are in ongoing discussions with the regulators and have made numerous submissions to them, including recently submitting a proposed CDS pricing model and proposing remedies to address concerns regarding equities trading," Maple's Luc Bertrand said in a statement.
The TMX bid is contingent on it getting regulatory approval to buy both Alpha and the CDS.
These aspects of the deal have spurred fears that the new entity will have a near monopoly on stock trading, but Maple has signaled it is ready to compromise to get the deal done.
Peter Block, spokesman for Maple, said the group's recent submissions on pricing for CDS should allay concerns raised by regulators and market participants.
"It deals with pricing on clearing, settlement and depository and other core CDS services," he said.
"We certainly believe that it is possible to have a competitive, fair CDS that is still profitable in a for-profit model without it coming at the expense of market participants just paying more for the same thing. That's never been our intent."
A study last year commissioned by CDS showed that its clearing and settlement pricing were ranked as No. 2 in competitiveness in the world behind the Depository Trust & Clearing Corp in the United States, which also operates on a cost-recovery basis.
In equity exchange clearing and settlement, CDS charges US$0.024 per trade, before discounts, compared with US$0.01 charged by DTCC and US$0.78 for European central securities depositories, according to the findings by an industry committee struck by Investment Industry Regulatory Organization of Canada (IIROC) to advise its board on the issue.
IIROC is a self-regulatory organization that oversees investment dealers and trading activity on debt and equity marketplaces in Canada.
Nick Thadaney, chief executive of the Canadian arm of research broker ITG, said the longer the deal remains in limbo the higher the chances that investor confidence in it will slip.
"I'm not going to read too much into this (extension) because I think if they want to get the deal done they have to keep doing extensions until they can organize themselves to get the appropriate approvals," he said.
"That being said, they don't seem to be moving all that quickly. That's just the optics."
Maple stressed in its statement that it is doing all it can to win the necessary approvals. It also said it would not accept changes to deal terms that were of "material detriment" to its business plan.
Maple first announced its proposal to take over TMX in May 2011, trumping a friendly proposal from the London Stock Exchange (LSE.L). LSE abandoned its bid after it failed to win adequate shareholder support.
In October, TMX's board agreed to support the Maple bid and it has recommended that shareholders accept and tender their shares under the Maple offer.
TMX Chief Executive Tom Kloet said the exchange operator continues to support the deal and it would work closely with Maple to achieve the required approvals.
TMX shares were up 48 Canadian cents at C$42.68 on Tuesday afternoon on the Toronto Stock Exchange. The stock has traded below the C$50 a share bid price for months, a clear sign of investor doubts about whether the deal will go through.
Reporting By Jennifer Kwan, Pav Jordan and Euan Rocha; Editing by Janet Guttsman and Peter Galloway