April 28, 2010 / 10:26 AM / in 7 years

UPDATE 3-TMX profit rises 14 pct as new listings jump

* EPS 66 Canadian cents vs 58 Canadian cents year ago

* TMX vows to defend listings business aggressively

(Adds TORONTO dateline, details, quotes from conference call)

By Jennifer Kwan

TORONTO, April 28 (Reuters) - TMX Group Inc (X.TO), the operator of the Toronto Stock Exchange operator, said on Wednesday quarterly profit rose 14 percent as growing investor confidence drove financing and trading activity higher.

In one of the strongest indications of the improved market sentiment, new stocks listings on the TSX and TSX Venture Exchange for small caps jumped during the quarter.

Cash equity trading volume almost doubled on the Venture Exchange. Volume of securities traded on the TSX fell 16 percent, in part because newcomer Alpha Group has wrested market share from its rival over the past year.

"Economic conditions in Canada and around the world have begun to show signs of recovery. As a result of that we are beginning to see a significant improvement in investor confidence, which in turn has positively affected performance on our diversified markets," Kloet said in a conference call with analysts.

TMX, which also operates the Montreal Exchange derivatives market, said net income climbed to C$49.1 million ($48.6 million), or 66 Canadian cents a share, from C$42.9 million, or 58 Canadian cents, a year earlier.

Analysts on average expected earnings of 65 Canadian cents, according to Thomson Reuters I/B/E/S.

Revenue rose 2 percent to C$139.7 million, held back by lower revenue from U.S. derivatives market trading and market data. Operating expenses fell slightly.

All told, 49 new issues were added to the TSX and 38 to the TSX Venture Exchange. That represents increases of more than 200 percent and 58 percent, respectively.

Shares of TMX were little changed at C$29.29 midday on Wednesday.

FOCUS ON ALPHA

TMX's franchise faces a growing threat from Alpha, which operates an alternative trading system backed in part by the dealer units of Canada's biggest banks. Last week Alpha said it was asking regulators to grant it full exchange status, allowing it to offer listing services.

Kloet told analysts on a conference call on Wednesday it would vigorously defend its listings business.

"Our resolve should not be underestimated. Nor should our position as a leading listing markets be underestimated," he said.

Alpha has taken some 20 percent of share in Canadian stock trading since it was launched in the fall of 2008.

Kloet repeated his concern over the ownership of Alpha, saying: "The owners of Alpha who control the institution are conflicted," he said, implying the potential for a conflict of interest for Alpha's backers, which are also in the business of investment banking.

When asked by analysts if TMX would be interested in any merger and acquisition activity with Alpha, Kloet said: "We would look at anything that is both strategic and accretive and makes sense for both our shareholders and for the progress of the Canadian capital markets."

($1=$1.01 Canadian)

Additional reporting by Aftab Ahmed in Bangalore

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