TMX Group CEO Thomas Kloet, left, and London Stock Exchange CEO Xavier Rolet , right, and before they talk to an all-party committee of the Ontario provincial legislature in Toronto, March 2, 2011.
Facing an uncertain political climate and sharp criticism from some of Canada's biggest banks, TMX Group Inc. 's top executive moved to shore up support on Bay Street for a proposed merger of the holding companies of the Toronto and London stock exchanges.
Chief executive officer Tom Kloet's latest efforts to blunt criticism of the deal come just weeks before the TMX Group and London Stock Exchange PLC Exchange Group PLC submit their formal proposal to various Canadian regulators.
While he declined to give a firm timeline for filing the proposal, Mr. Kloet said Monday it would outline the "many benefits" the merger would bring to Canada and its financial sector.
In a speech to the Toronto Board of Trade, Mr. Kloet emphasized that Canada would not lose "regulatory authority" over its capital markets if the merger were to go ahead.
"A great deal of Canada's stability and success is owed to a regulatory regime that strikes a careful balance between protection and opportunity," he said. "Therefore, regulatory power will remain 100-per-cent Canadian with absolutely no foreign oversight of our exchanges or the Canadian public companies listed on them."
He also stressed that Canadian leadership would figure prominently at the new merged group, while the deal would also expand Toronto's financial services sector and benefit Canadian businesses.
In particular, giving more global investors access to Canadian markets would bring in more liquidity and narrow the bid-ask spread, he said. "That will have the knock-on effect of making it cheaper for issuers to raise capital in our markets."
Opponents of the deal have argued the merged entity would be incorporated in Britain and subject to that country's regulatory and governance regulations.
Another key concern is that LSE shareholders would end up owning 55 per cent of the combined company.
The proposed merger, worth more than $7-billion, remains subject to various regulatory and other approvals.
Not only does the deal have to pass muster with the federal government, it is also being scrutinized by regulators in Ontario and Quebec. It has already attracted some high-profile critics, including Ontario Finance Minister Dwight Duncan.
Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and National Bank of Canada oppose the merger. Royal Bank of Canada and Bank of Montreal each support the deal; those banks are also acting as advisers to the various parties on the proposed merger.
Rita Trichur