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Frustration spawned by the demands of regulators threatens to split the Maple Group, the consortium of big banks and investors that came together a year ago to bid for TMX Group Inc.

The group of 13 banks, brokerages, investors and one insurer, which came together a year ago to push aside a competing offer for Canada's main stock market operator, must decide by Monday whether to forge ahead with the $3.8-billion bid. That's when the merger agreement between Maple and TMX lapses. And unless it is renewed, the Maple players can walk away.

With that key deadline looming, several people familiar with the transaction say momentum is dwindling as Maple struggles to satisfy federal Competition Bureau concerns about the takeover. Maple also now faces new demands from securities regulators in British Columbia.

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Over the past year, Maple's plan has exacted a steep toll, in cash to pay the legions of lawyers and in time as senior staff at the members of Maple have devoted thousands of hours to the plan. There are weekly teleconferences and daily updates. Yet the Competition Bureau in particular remains a hurdle, sources say.

As a result, when asked to rate the odds of the transaction actually succeeding, some who are familiar with the situation say the chances are 50-50, at best. Given that, there are those in the group considering walking away now.

However, there is also a common refrain among those who spoke about the deal: Though the takeover's slow pace is exasperating and its prospects uncertain, nobody wants to be the one to kill it. Maple's members are aware that backing out would tar their reputations as deal makers, so even for pessimists there is an argument for at least one more extension of the pact.

"No one wants to be the one that pulls the plug," said a person familiar with the situation. All of the people spoke on condition of anonymity because the talks are private.

A Maple spokesman declined to comment.

Maple's plan has two phases. The first is to take control of TMX, which owns the Toronto Stock Exchange and other markets. Step 2 would combine TMX with the bank-backed Alpha alternative trading system, TSX's biggest competitor, and the CDS clearinghouse, to create a dominating markets company.

Should some members pull out, especially smaller ones, Maple could survive. On a simply financial level, given the size of its main members such as Toronto-Dominion Bank and Canada Pension Plan Investment Board, Maple could surely handle the loss of any one of its number.

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However, the group's construction is carefully calibrated to ensure that many parts of Canada's financial community are represented, and to keep any one member of Maple from owning too large a share of TMX after the deal.The loss of partners could upset that balance, and could crack the solidarity that so far has held the consortium together through seemingly endless talks.

The main roadblock remains the Competition Bureau. Ontario's securities regulator is moving ahead with draft rules as part of the approval process, and Quebec's regulator has already signalled it will approve the deal.

From the moment Maple appeared on the scene a year ago, it was clear the competition watchdog would be key. Maple's membership means that if the deal goes ahead, some of the biggest users of TMX services would also be its owners. The plan to merge TMX with Alpha and CDS would also create a company with a monopoly on clearing and a huge share of the equity trading market in Canada. All raised red flags.

Competition Commissioner Melanie Aitken signalled late last year that she had "serious concerns." Since then, she has been publicly mum. Some believed all along she would not oppose the deal outright, but would impose so many conditions that the transaction wouldn't be palatable.

One of the demands from the Competition Bureau is said to be a compliance system put in place by the various members of Maple to track trading activity to ensure that the group would not favour TMX's stock markets at the expense of rivals, according to two people familiar with the situation. For the big banks in Maple, it's not considered a large obstacle, because they already have large compliance departments, and the costs of adding more layers to satisfy Ms. Aitken would be small relative to the investment in Maple.

However, the pension funds such as CPPIB and Ontario Teachers' Pension Plan do not have compliance systems that could be adapted easily. And for the small brokerages that are part of the group, such as Dundee and GMP Capital, the expense would be large relative to their investment in Maple.

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Another sudden hurdle is the British Columbia Securities Commission, which is said by two people to be asking for promises from Maple to keep TMX jobs and business in B.C.

Maple had already made similar promises to Quebec to secure approval from the securities regulator there, but the demands from B.C. are said to be unexpected. A spokesman for the B.C. Securities Commission declined to comment.

Even tasks that those within Maple thought would be relatively simple have proved much slower than anticipated. The negotiations to take over CDS and Alpha, in which Maple members and the TMX together already control large stakes, have dragged on longer than planned.

So Maple's members are set to spend the next few days evaluating the progress of their plan. The deliberations are likely to go right down to the wire. It is, as one source said, "crunch time."

TMX Group (X)

Close: $43.86, down 48¢

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