Ontario lawmakers plow through risks of TMX-LSE tie-up

Thu Mar 3, 2011 3:54pm EST
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By Claire Sibonney

TORONTO (Reuters) - A major corporate failure or sovereign debt crisis in Europe could spread to Canada more easily if the London Stock Exchange is allowed to join forces with its Toronto counterpart, a critic of the LSE's plan to take over the TMX Group said on Thursday.

Jon Aikman, a lecturer of finance at the University of Toronto's Rotman School of Management, said TMX Group should look to partners in China and other emerging markets if its goal in agreeing to the LSE's C$3.1 billion ($3.2 billion) takeover is to give Canadian listed companies greater access to capital.

Aikman, a member of the bar in both Canada and Britain, spoke at the second day of hearings before a special committee of the Ontario legislature.

Alpha Group, a bank-backed competitor of TMX Group's Toronto Stock Exchange, echoed some of Aikman's concerns at hearings on Wednesday, questioning "who is going to call the shots" should another financial crisis happen.

The Ontario panel's review, while not legally binding, will help securities regulators in the province decide whether the deal is in the public interest.

Aikman also questioned the minority 45 percent stake that TMX shareholders would get under the deal. That would leave the TMX vulnerable if a new phase of consolidation sweeps through the global exchange business, as expected.

"If we understand that the move is toward market harmonization, and toward a global network, then it would seem that we should not be a junior partner at the table," he said.

If the end game is the formation of three or four global exchanges, Aikman asked, why would Canada want to be in the first step of that process?   Continued...