Ottawa raises "serious concerns" about TMX-Maple deal

Wed Nov 30, 2011 1:59pm EST
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By Pav Jordan and Euan Rocha

TORONTO (Reuters) - Canada's competition regulator has "serious concerns" about a C$3.8 billion ($3.7 billion) proposal to take over TMX Group, a deal that would bring most of the country's financial exchanges under one roof.

Maple Group's bid would unite the Toronto Stock Exchange and the TSX Venture Exchange for small-cap stocks with their largest competitor, Alpha Group, a so-called alternative trading system. Maple is also seeking to put the exchanges under the same umbrella as CDS, which clears and settles all trades in Canada.

The Competition Bureau's main concerns are the impact the proposal would have on equities trading as well as clearing and settlement services. The news pushed TMX shares down 2.8 percent by midday on Wednesday.

A source close to the deal said the regulator's concerns did not mean the merger plan was dead. Still TMX and Maple - a consortium of 13 Canadian financial institutions - would have to make concessions for the watchdog to bless the deal.

"This is not a deal breaker," said the source, who was not authorized to speak on the record. "But it tilts the scales against the deal in a way it did not a month ago."

The TMX deal is one of a wave of proposed acquisitions in the exchange industry as bourses seek to gain scale in a bid to reduce costs. Competition concerns have emerged as a hurdle in other jurisdictions as well.

Earlier this month, Deutsche Boerse and NYSE Euronext offered to sell some businesses and give rivals access to a major derivatives clearing house to win support for their $9 billion combination.

Possible concessions the Competition Bureau might exact from Maple could revolve around greater powers to the Ontario Securities Commission to regulate. The body may also place controls on trading fees to ease concerns about pricing.   Continued...