In that environment, he has pulled off two very difficult tasks. When he arrived in Toronto, the banks that were the biggest users of TMX’s services were so fed up with what they saw as overcharging and underperforming that they were in the process of starting a competing stock market called Alpha. It would go on to eat into TMX’s revenue.
“The institution, for better or for worse, had been at odds with its best clients for way too long,” he says, tucking into rock-shrimp rolls and panko-crusted chicken. “I didn’t like that. We didn’t like that. Nobody liked that.”
Now, with the Maple deal, Alpha is part of TMX and the banks are on his side. “Peace in the valley is very important.”
On top of that, Mr. Kloet finally got an asset coveted for years by TMX but long believed unattainable: the country’s stock clearinghouse. It is a utility that handles the actual exchange of cash and shares after a trade has been agreed to. The clearinghouse had been controlled by the banks, but as part of Maple has been rolled into TMX.
Clearing is a boring business, but hugely strategic. TMX now owns not only all the country’s main stock, derivatives and energy trading marketplaces, but the clearinghouses for each of those assets. Regulators are demanding more and more products be centrally cleared to make the financial system safer, an evolution that is a “sea change” and will create big opportunities for TMX, Mr. Kloet argues.
As a bonus, TMX got Maple to pay up with a premium takeover offer. Was it all a grand plan? That’s unlikely, even though some who work with him say Mr. Kloet does think a few moves ahead. Still, there is no denying the LSE deal that he championed led the banks to create Maple, when it appeared the LSE deal might get the thumbs-up from TMX shareholders.
Now TMX is probably in the strongest competitive position it has occupied in a decade.
Stock trading, the company’s traditional business, has gone into a slide that nobody’s sure it will pull out of again. But the Alpha threat is neutralized, and other areas such as the newly acquired clearing business are there to pick up the slack. TMX even owns cables that connect traders in London to stock markets in Moscow, thanks to a recent acquisition.
Mr. Kloet’s focus is on creating new products that tie together trading and clearing to make more money. What are they? He won’t say, but he looks to Apple Inc.’s iPod and iPad for inspiration.
“I wasn’t smart enough to know that I wanted my whole music collection on something you could hold like that,” he says, showing the palm of his hand. “I didn’t know I wanted a device about the size of this plate that I can access the Internet from virtually anywhere in the world. They are delivering to me things I didn’t know I needed. They are leading the customer. I hope we do it.”
I ask whether it’s doubly hard to run a business that is constantly in the public eye and upon which so many people depend. For more than a year, the TMX-Maple-LSE saga and the resulting debate rarely left the headlines.
Mr. Kloet laughs, noting that during the LSE merger process, even the doorman at his condo tower on Toronto’s lakeshore had an opinion.
“It’s just amazing to have something where when you walk through the door to have someone say, ‘Mr. Kloet, I want to talk to you about something,’” he said. “It’s fascinating because you get views from all walks of life. And it’s really interesting. I actually kind of like that.”
Chuckling, he tacks on an addendum: “They could care less about me. But it’s the institution that matters.”
Born in Minneapolis, but grew up mainly in Peoria, Ill., home of Caterpillar, where his father was an executive. Also lived in Belgium for five years as a child.
Trained as an accountant.
Bachelor’s degree in business administration from the University of Iowa, where he took classes in futures and options and market regulation that gave him a taste for the exchange business.
Married for 32 years to Margaret, whom he met at university. His son Mark works in the markets business at CME Group; daughter Megan is with PricewaterhouseCoopers in London.
Since starting work at the Chicago Mercantile Exchange, he has never left the markets. He has flipped from the broker side to the exchange side and back, with senior roles at trading firms such as ABN Amro Inc. and markets such as Singapore Exchange Ltd., where he was the first CEO, serving from 2000 to 2002.
Golf, tennis, theater, travel and the Blue Jays.
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