Economic nationalism should not get in the way of the multinational consolidation of stock exchanges, as seen in the almost simultaneous announcement of proposed mergers of TMX Group and the London Stock Exchange, and of NYSE Euronext and Deutsche Börse AG. The age of national stock exchanges is coming to an end.
Tony Clement, the Minister of Industry, is right to doubt that the Investment Canada Act applies to the TMX-LSE transaction, which on its face is a merger, not a takeover; it is not clear whether it would bring about a change of control in favour of non-Canadian interests. If the ICA is indeed relevant, then the case for a net benefit to Canada is convincing. Canadian investors and companies would have readier access to a wider field, particularly in mining and natural resources, industries in which both the LSE and TMX are strong.
The only real conundrum is about the potential surplus of regulators for the merged TMX-LSE entity. As it is, Canada is having trouble establishing a national securities regulator - merely reducing the number of Canadian securities commissions from 13 to perhaps four is a struggle.
The future TMX-LSE runs the risk of being subject to too many layers of regulation, as does the proposed Germano-American company. The world's economic institutions are not well prepared for stock-exchange multinationals. Though there is an International Organization of Securities Commissions, it is simply an association, not a super-regulator.
For the foreseeable future, the notion of a single planetary regulator of stock exchanges would seem to be a particularly dismal science-fiction premise. There is just too much diversity in the world's national economies. But it now does appear that multinational regional stock-exchange regulators will be needed, before long.
Meanwhile, Dwight Duncan and Raymond Bachand, the Finance Ministers of Ontario and Quebec, are making discontented noises about the TMX-LSE merger. Serious questions need to be asked and satisfactorily answered. But on the face of it, politicians ought to be open to letting Canadian investors have more scope.
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