The screens at the TMX Broadcast Centre in Toronto show the closing numbers of the TSX at + 252.19 on Tuesday, July 3, 2012.
The consortium of banks and investors trying to buy TMX Group Inc. has only one, surprisingly tricky, obstacle left to clear after winning two key approvals for the plan to create a powerful national financial market operator.
Even after getting long-awaited approval from the Ontario Securities Commission and the federal Competition Bureau, which pushes the deal closer to completion after more than a year, it is still caught up in Canada's fragmented securities regulation system.
The British Columbia Securities Commission, late in the game, unveiled a list of demands that the so-called Maple Group of banks and investors is not happy with, sources said. The parties have been talking for weeks, but have yet to reach a deal.
B.C.'s commission regulates the TSX Venture exchange, home to thousands of small capitalization companies. The B.C. regulator wants at least a quarter of the members of the Maple board to have experience running small companies, and is also demanding that Maple commit to keeping senior jobs in Vancouver.
Luc Bertrand, the National Bank of Canada executive who is the face of Maple, would not comment specifically on the issues with B.C. However, he did say that when the provincial regulator started making demands this year, it was a surprise to Maple, which was not allowed much input into the process of formulating B.C.'s proposed rules around the Venture exchange. Those were published in May.
"It's the nature of the beast," Mr. Bertrand said. "At the 11th hour, or near the 11th hour, if someone weighs in with concerns and they want to revisit things, we don't have a choice but to sit down and work with that regulator, which is what we have been doing."
Most investors following the transaction had focused on the key approvals from the
The Competition Bureau especially had been viewed as the linchpin of the transaction, which involves giving Maple Group a very dominant position in key areas of financial markets such as stock trading and clearing.
Few expected B.C. to be an issue. Also outstanding is approval from Alberta's securities commission, which also regulates the Venture exchange.
Alberta's decision is likely to hinge on the outcome of the B.C. talks.
Mr. Bertrand said the Venture exchange is a key part of the Maple strategy, and all Maple wants to do is preserve the status quo when it comes to governance.
"Our view is the way it is currently structured has worked marvelously well. I could see where the regulator would have a concern if the structure had not delivered good results, but that's not the case at all."
Mr. Bertrand said there's no reason the situation with British Columbia should derail the transaction, which has been in the works for more than a year and is slated to close by month's end if all approvals are in place.
"We're in the last leg here," he said. "We'll work things out."
Maple came on the scene after the London Stock Exchange Group PLC and TMX agreed to merge in February 2011.
Concerned that the merger plan would lead to a diminution of Canada's financial markets, a group of banks and pension funds – including Toronto-Dominion Bank, National Bank and Canada Pension Plan Investment Board – began pushing the Maple proposal.
One of Maple's concerns was that the LSE transaction would hurt Canada's successful small-cap markets.
To stop LSE, Maple made a hostile bid. After TMX shareholders rejected the LSE offer, Maple and TMX agreed to a friendly deal.
Much of the past year has been taken up with negotiations with regulators to try to deal with the competition issues presented by the Maple plan.
Maple wants to buy TMX, which operates the Toronto Stock Exchange and TSX Venture, and merge it with the
Maple also wants to buy the CDS clearing system and fold it in, turning it from a non-profit utility to a for-profit company. Those transactions are largely done and waiting for regulatory approval.
The Competition Bureau said in a release that it was satisfied with the work done by the OSC, which on Wednesday published the final version of its rules governing Maple.
Those rules include constraints on what Maple can charge, and a profit-sharing plan that gives CDS users some of the cash that would have gone to Maple.
"While the Bureau conducted its own review of the proposed transactions, the measures contained in the OSC's final recognition orders materially change the regulatory environment sufficient to substantially mitigate the Bureau's competition concerns," the release said.