TMX chief warns Canada of risk in blocking LSE deal

Tue Feb 22, 2011 5:50pm EST
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By Jonathan Spicer and Claire Sibonney

TORONTO (Reuters) - The head of TMX Group Inc warned that Canada would risk damaging its free-trade credentials if it blocked the Toronto exchange's proposed merger with the London Stock Exchange, as Canadian political opposition picked up steam.

Ontario, Canada's most powerful province and home to its financial center in Toronto, said on Tuesday it will launch a review of the planned deal. Politicians have questioned whether it would benefit the province and the country.

Growing resistance has thrown into question whether the deal -- one of three big exchange mergers under scrutiny globally -- will survive what could be a year-long review process.

TMX Chief Executive Thomas Kloet told Reuters in an interview he is taking political opposition to a deal "very seriously."

Even so, he said Canada was putting its reputation on free trade and competition on the line as it considers a proposal to create a transatlantic operator worth $7 billion in market capitalization and the world's fifth-largest exchange ranked by trading volume.

"One of the things Canada has to make sure to consider as it goes through this is what if it says no," Kloet said.

"What does that mean for its capital markets -- are they less competitive? Canada seems to want to seek a free trade agreement with the EU. If it says no to this transaction, does it send the right signal for that?" Kloet said.

"I'm not qualified to answer some of these questions, but I'm sure those are some of the questions that will have to be answered."   Continued...