Nasdaq adds former high-ranking TMX IT staffer

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A former high-ranking TMX Group Ltd. staffer has resurfaced in a senior role at Nasdaq Inc. at a time when the massive U.S. stock exchange company is rumoured to be on the verge of making a major acquisition in Canada.

A Nasdaq spokesperson confirmed that Brenda Hoffman joined the company last month as head of global technology, U.S. markets systems and global information services. Ms. Hoffman, former group head of information technology with the TMX, left after a management shakeup during the summer. (Kevan Cowan, former president of TSX Markets, also parted ways with the TMX around the same time.)

Ms. Hoffman is the second high-profile ex-TMXer to land at Nasdaq this year. Former TMX chief executive officer Tom Kloet joined Nasdaq's board of directors in March. The beefing-up of the Canadian contingent gives Nasdaq deep expertise in the Canadian market at a curious juncture. Last week, Bloomberg reported that Nasdaq was in talks to buy Chi-X Canada, an alternative trading system (ATS) that competes fiercely against the TMX.

At one point, TMX had the market to itself in Canada. But over the past 10 years, competitors have sprung up, with some, such as Chi-X and Aequitas Innovations Inc., chipping into the incumbent's legacy business. Chi-X has about 19 per cent market share in stock trading in Canada, according to the latest data from the Investment Industry Regulatory Organization of Canada (IIROC) – by far the most of any ATS. Exchanges operated by TMX have about a 65 per cent share. Chi-X is a much leaner operation than TMX Group and is said to be extremely profitable.

Robert Young, head of Liquidnet Canada, a Canadian ATS, and a staffer with the TMX until 2005, said Nasdaq likely sees Chi-X as an opportunity to make quick inroads into the lucrative listings business in Canada.

"There's $200-million up for grabs here in listings fees," Mr. Young said in an interview.

Stock exchanges earn listings fees when companies first list on an exchange and through maintenance listing fees – akin to an ongoing gym membership. Currently, TMX Group has a lock on listings, with 100 per cent market share in Canada. The company took in $45.6-million in listings revenue during the third quarter, which represented about a quarter of its top line. One reason TMX is so dominant is that it has little competition. Only two other companies – Aequitas Innovations Inc., which owns the Aequitas Neo stock exchange, and Canadian Securities Exchange – are allowed to do listings, but neither has made any inroads yet. Chi-X Canada is not licensed to do listings.

"Nasdaq would need to upgrade Chi-X from an ATS to an exchange. But that's a well worn path now," Mr. Young said. "Aequitas did it. Canadian Securities Exchange did it."

The business has proven a tough nut to crack.

"The listings business is about brand association" said Mr. Young, who predicts Chi-X could eventually be rebranded as "Nasdaq Canada." He says the appeal of a listing with a giant in the stock exchange industry would command a whole new level of cachet that even the TMX would struggle to keep up with.

"Nasdaq Canada" would also be in the advantageous position to pitch issuers a dual listing option – one in Canada and another in the United States – under one banner. Something the TMX is not able to do.

"We can't comment specifically on rumours," Carolyn Quick, a spokesperson with TMX Group, said of reports of Nasdaq taking over Chi-X.

"The fact is, we compete across all aspects of our business with both domestic and international competitors every day – TMX is a tough competitor."

Last year, TMX appointed a new CEO, Lou Eccleston, who has been concentrating on making the company more nimble, cutting costs and zeroing in on the firm's strength in technology as ways to reinvigorate the business.